Monash IVF Group Ltd
Annual Report 2023

Plain-text annual report

Annual Report 2023 What it takes, together. About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Brave and Innovative With a clear mission to bring life into the world and a brave and innovative approach to reproductive healthcare, Monash IVF Group is leading the way in providing best-in-class fertility solutions. We believe everyone who wants to start a family should have the opportunity to do so - when they are ready to and at whatever stage of their life they are at. We are committed to changing societal perceptions and behaviours in relation to reproductive health. With 50+ years of scientific and clinical excellence and 50,000+ babies to our name, we have spent years evolving our business to meet the modern-day needs of our patients. We have invested in strong doctor partnerships and state-of-the-art clinical infrastructure and scientific technology to give our patients the best possible chance of starting, or extending their families. In FY23 we became the first fertility provider to operate in every mainland capital city of Australia, while at the same time extending into more locations across South-East Asia. Across almost 40 clinics, 16 ultrasound sites, 12 pathology laboratories and 2 genetic laboratories, our team of more than 100 fertility specialists work alongside our scientists, sonographers, genetic experts, counsellors, nursing and support staff to provide integrated, holistic and inclusive care to patients in Australia, Malaysia, Singapore and Indonesia. From pre-conception fertility assessments and genetic carrier screening to egg and sperm freezing, preimplantation genetic testing and counselling to ultrasound, donor and surrogacy services and assisted reproductive treatments, our patients can rest assured we will support them at every stage of their fertility journey. Together with our patients, we will do what it takes to help them achieve their family dreams. Contents About Us Year in Review Chairman’s Report Managing Director & CEO’s Report Chief Financial Officer’s Report Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team Directors’ Report Remuneration Report – Audited Lead Auditor's Independence Declaration Corporate Governance Statement Acknowledgement of Country In the spirit of reconcilitation, Monash IVF Group acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their Elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 2 4 6 8 10 12 14 16 18 26 28 30 44 62 63 77 78 79 80 116 117 121 126 2 | Monash IVF Group Annual Report 2023 | 3 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview New Patient Registrations increased by ↑ 12% compared to FY22 Domestic acquisitions 2 Total Medical Specialists ↑ 44% On FY18 (FY23, 153) New patient domestic stimulated cyles ↑ 7.2% On FY22 (FY23; 5,251) Total domestic stimulated cycles ↑ 5.5% On FY22 (FY23; 10,323) Bali clinic Opened 15.9.2022 Average patient NPS score ↑ 71 FY2023 A Year in Review Monash IVF Group places great importance on partnering with doctors committed to delivering market-leading success rates & best-in-class patient experience. In FY23, 25 new fertility specialists joined us through recruitment and business acquisition. Success rates increased by ↑ 6.1%4 since 2019 Employee Engagement Culture of Success +64% Revenue $213.6m ↑ 11.1% on FY22 Underlying NPAT 1 ,3 Underlying EBITDA1,2 $25.5m ↑ 14.7% on FY22 $53.4m ↑ 11.0% on FY22 Underlying EBIT 1,2 $38.1m ↑ 14.2% on FY22 Reported NPAT 3 $22.0m ↑ 18.9% on FY22 4 | Monash IVF Group Annual Report 2023 | 5 1. Non-IFRS measure2. Refer to page 32 for reconciliation of Reported EBITDA, EBIT and NPAT to Adjusted EBITDA, EBIT and NPAT3. NPAT including minority interest4. 2023 Jan-MarAbout Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Chairman's Report In looking to the future, the Board is confident that Monash IVF Group is well positioned to maintain our strong financial position and deliver sustained shareholder value creation. Monash IVF Group delivered a strong result in FY23 with revenue growth of 11.1% and Underlying1 NPAT growth of 14.7% to $25.5m. We are proud of this result considering economic conditions and financial pressures in parts of our community, reaffirming that IVF is an essential service. In recent years we have invested significantly in our infrastructure, services and people, and the benefits from these initiatives started to become evident in the second half of FY23. These recent investments provide the foundation to deliver above market growth and maintain best-in-class experiences for our patients and doctors. Whilst the COVID-19 pandemic drove significant volatility in the IVF market in Australia, we believe the industry has settled at a new base that is well above pre-pandemic levels. Importantly the market rebounded in 2H23 recording 5.6% growth in stimulated cycles compared to prior comparative period after a 6.6% decline during 1H23. We believe the Australian IVF market is entering a period of sustained growth, driven by traditional and new demand drivers. The traditional drivers of rising maternal age, improving success rates and continued Government funding are just as compelling as ever. New and emerging growth drivers are expected to supplement growth, including rising awareness of egg freezing and flow on referrals to IVF from the significant increase in genetic carrier screening that is expected following the introduction of a Medicare rebate in November 2023. If a couple receives an abnormal result from genetic carrier screening, the best way to minimise the risk of their children being affected is to have Assisted Reproductive Services and genetically test their embryos. We also continue to focus on growing our People and culture, with recent surveys demonstrating people and doctor engagement are at record highs. We have also been busy building on our diverse and inclusive workplace practices, and our learning and development framework. In looking to the future, the Board is confident that Monash IVF Group is well placed to maintain our strong financial position and deliver sustained shareholder value creation. Our strong patient pipelines leading into FY24, recent investments in future growth, and the dedication of our People, together provide a positive growth outlook for FY24 and beyond. On behalf of the Board of Directors, I thank our People and Clinicians for their ongoing commitment, which together are driving us towards our Vision to be the most admired reproductive care provider in the world. I would also like to thank you, our Shareholders, for your continued support for Monash IVF Group. We look forward to continuing our strong momentum in the year ahead. Mr Richard Davis Independant Chairman We are also passionate about servicing the growing LGBTIQA+ population in assisting them achieve their dreams of starting and extending their family. We offer a bespoke solution to this growing patient segment, including a world class donor program. Our Australian IVF business grew in FY23, with stimulated cycles up 5.5% on the prior year and market share increasing 1.4% to 22.7%. Organic growth was supplemented by contributions from the ART Associates and PIVET acquisitions that were completed during the year, making us the only IVF provider with a presence in every Australian mainland capital city. Our Australian Ultrasound business turned the corner in FY23, following a lengthy industry-wide recovery from the pandemic. Both the Sydney and Melbourne ultrasound businesses are now performing well, delivering scan growth of 12.7% in the second half of FY23. Whilst our South-East Asia business recorded solid FY23 growth in stimulated cycles of 19.9%, earnings were impacted by a slower ramp up in volumes in the new Singapore fertility clinic. Our recent investment in science, nursing and marketing provides a platform for growth across all our clinics in the South-East Asia region. As well as delivering on our financial and operational objectives, we are committed to improving and enhancing our Corporate Governance. During FY23, the Company established an Environmental, Social and Governance (ESG) Committee to ensure our business is run as an environmentally and socially sustainable business, capable of generating long term value for stakeholders. As Monash IVF Group strives to become the most admired reproductive care provider in the world, we acknowledge that we are in a privileged position to actively drive positive societal change in relation to how our community thinks and behaves in reference to their reproductive health, and to protect the environment and natural resources for the benefit of the generations of children that will be born as a result of our efforts. 6 | Monash IVF Group Annual Report 2023 | 7 1. Refer to page 32 for reconciliation of Reported EBITDA, EBIT and NPAT to Adjusted EBITDA, EBIT and NPATAbout Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Managing Director & CEO’s Report I have great confidence in the outlook for Monash IVF Group, with our businesses performing well and our Company in a strong financial position. Monash IVF Group had a very successful year in FY23, driven by our commitment to market leading success rates, our recent investment in best-in-class infrastructure and patient experience, and the dedication of our People and Clinicians. This success was reflected in our strong financial results, market share gains across most of our businesses, and most importantly, a further increase in success rates ensuring we give every patient the best opportunity to create or grow their family. In FY23, Monash IVF Group delivered revenue growth of 11.1% to $213.6m, and Underlying EBITDA growth of 11.0% to $53.4m. The strong performance was driven by the domestic Assisted Reproductive Services and Women’s Imaging business, partly offset by a weaker result from the International IVF business. A very exciting part to the FY23 result was the promising second half performance, where 2H23 Underlying NPAT increased by 46.6% on prior comparative period. This compelling ramp up in activity across the year reflects a return to positive industry momentum and tangible benefits starting to flow from the significant recent investment in growth, which together provides confidence leading into FY24. Key highlights of FY23 People: Our most important asset • During FY23 we welcomed a further 25 fertility specialists into the Monash IVF Group family. Our attractive doctor value proposition ensures that Monash IVF Group is the destination of choice for clinicians. Our highly engaged doctor group are strong advocates for the Group, and this is instrumental in our successful recruitment of new clinicians. • Our Australian IVF business grew market share by a further 1.4% to 22.7%, driven by organic growth and the ART Associates and PIVET acquisitions. • We have continued to drive better outcomes for our patients, with clinical success rates improving 1.0% to 38.0% in calendar year 2022, with a further 0.7% improvement in the March 2023 quarter to 38.7%. We continue to invest in research and partner with innovative organisations, ensuring we remain at the forefront of scientific developments in the fertility space. • We have completed new fertility clinics in Cremorne (Victoria), Penrith, Darwin, Rockhampton and Gold Coast, whilst there are another three clinics in various phases of design and construction, including Brisbane, Sunshine and an ultrasound clinic in St Leonards. In addition, a new day hospital has opened in Gold Coast during 1H24, with Cremorne's Day Surgery Unit opening at the end of 2023. • We are positioning ourselves to benefit from growth in new services such as egg freezing and genetic carrier screening, and we are investing in new channels such as sport and corporate channels so we can reach and educate patients earlier in their fertility journey. • Our Women’s Imaging businesses in Sydney and Melbourne returned to growth in the second half of FY23. With industry headwinds now behind us, we are confident of consolidating this improved performance in FY24. • In South-East Asia, whilst we experienced a slower ramp up in volumes in Singapore, our other clinics performed well, and we are committed to growing our presence in this attractive region. Our current focus is on improving doctor engagement and recruiting more fertility specialists in existing clinics, driving clinical and scientific leadership in the region and exploring new partnership opportunities. Monash IVF Group is a people-centric business, with our People at all levels of the organisation working together to deliver life changing outcomes to our patients at a very sensitive and emotional stage in their lives. We place great importance on learning and development, workplace health and safety, and inclusion and diversity. Our commitment to our People is reflected in Monash IVF Group reporting our highest ever engagement score of 64%, well above industry benchmarks. I would like to thank all our People and Clinicians for their tremendous efforts during the year and their unrelenting patient- first mindset. It is their dedication that has ensured we deliver exceptional experiences and outcomes for our patients and clinicians and create value for our shareholders. This focus on our People and their commitment to our vision, are key reasons we have such an optimistic outlook for the future. FY24 Outlook A return to industry growth in 2H23, recent market share gains and strong new patient registrations provides a positive growth trajectory for Monash IVF Group heading into FY24. We are continuing to focus on attracting and onboarding new and experienced fertility specialists and we continue to invest in the medium to long term future through new and upgraded clinic infrastructure. This reflects our commitment to driving improvement to our Patient and Doctor Experience whilst also representing the strong belief we have in future industry growth. I have great confidence in the outlook for Monash IVF Group, with our businesses performing well and our company in a strong financial position. We have a clear Vision 2026 strategy to deliver sustainable growth and create value for our shareholders. Mr Michael Knaap Managing Director & CEO 8 | Monash IVF Group Annual Report 2023 | 9 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Chief Financial Officer & Company Secretary's Report Monash IVF Group had a very positive year in FY23, with strong performance in our domestic IVF business and improvement in the women’s imaging business driving Underlying NPAT1,2,3 growth of 14.7%. This result was particularly pleasing given the challenging macro conditions including cost of living pressures, high inflation and monetary policy. Both the IVF industry and Monash IVF Group demonstrated great resilience which has created a good platform going into FY24. Monash IVF Group delivered revenue growth of 11.1% to $213.6m. Growth gathered momentum across the year, with 2H23 revenue growth of 22% on prior comparative period compared to 1H23 revenue growth of 2% on prior year. The first three months of FY23 were challenging as COVID-19 and influenza in the community impacted activity in IVF and ultrasound, resulting in the IVF industry declining by 6.6% in 1H23 compared to prior comparative period. Following the first half decline, the industry grew in 2H23 by 5.6% vs prior comparative period. The ramp-up in second half growth indicated the current macroenvironment is not materially impacting patients' willingness to afford and access fertility treatment. The domestic assisted reproductive services, women's imaging and international IVF businesses all achieved double-digit revenue growth in FY23. Revenue growth was driven by market share gains (both organic and from the ART Associates and PIVET acquisitions) and price increases. Second half performances in our domestic businesses were compelling, including 23% growth in 2H23 new patient registrations in our domestic IVF business, providing a robust growth platform heading into FY24. The Group achieved Underlying EBITDA1,2 growth of 11.0% to $53.4m in FY23, driven by the domestic assisted reproductive services and women's imaging businesses, partially offset by a decline in earnings from international IVF business. Our domestic assisted reproductive services and women's imaging business benefited from solid market share gains and price increases, partially offset by increases in certain costs including salaries and wages and supplier costs (largely reflecting the high CPI environment). In our international IVF business, the Singapore greenfield clinic was impacted by key doctor availability in 2H23, which offset positive performances from our other clinics in the South-East Asia region. The Underlying Group EBITDA1,2 margin was maintained at 25%, which was a reasonable outcome given the high inflationary environment. This demonstrates our ability to balance our commitment to maintaining access to our services, whilst addressing cost pressures by adjusting patient prices across all services and markets. Monash IVF Group delivered strong cash flow outcomes during the year, with EBITDA to pre-tax cashflow conversion of 100%. Capital expenditure during FY23 was $28 million, which included new IVF clinics opening in Melbourne, Gold Coast, Penrith and Darwin. Our new Gold Coast day hospital was commissioned in September 2023, with the Cremorne (Victoria) day surgery unit progressing towards completion during 1H24. The finalisation of these sites will further expand the day surgery unit revenue stream and diversify Group revenue. The Group expects further capital expenditure at elevated levels during FY24 due to completion of the day hospitals and new IVF clinics in Sunshine (Victoria) and Brisbane (Queensland). We anticipate return to historical replacement capital expenditure levels beyond FY24 subject to new strategic growth initiatives. Monash IVF Group spent $12.7m on business acquisitions in FY23. The ART Associates QLD acquisition was completed in late September 2023, delivering strong market share gains in Queensland in FY23. The PIVET acquisition was completed in late May 2023 with clinics in Perth and Cairns, resulting in Monash IVF Group having true national mainland presence. Despite the major investments we have made in future growth across our businesses in recent years, our balance sheet remains in a strong position. Net debt was $31.0m as at 30 June 2023 and balance sheet capacity remains strong to fund domestic and South East Asia market growth where Monash IVF Group is under-represented. In closing, I would like to thank our People and Clinicians for their hard work and dedication, and to thank you, our shareholders, for your continuing support. We are energised about the journey ahead for Monash IVF Group, as we move closer to achieving our strategic objectives. Malik Jainudeen Chief Financial Officer & Company Secretary FY23 Profit & Loss Overview Underlying ($m) Group Revenue Underlying EBITDA 1, 2 Underlying EBIT 1, 2 Underlying NPAT 1, 2, 3 Reported ($m) Reported EBITDA 1 Depreciation & amortisation Reported EBIT Net finance costs Reported Profit before tax Income tax expense Reported NPAT 3 FY23 Cash flow Overview FY23 FY22 % Change 213.6 192.3 11.1% 53.4 38.1 25.5 48.5 (15.4) 33.1 (3.3) 29.8 (7.8) 22.0 48.1 33.4 22.2 43.2 (14.8) 28.4 (2.1) 26.2 (7.7) 18.5 11.0% 14.2% 14.7% 12.3% (4.1%) 16.5% (57.1%) 13.7% (1.3%) 18.9% ($m) FY23 FY22 % Change Reported EBITDA Movement in working capital Income taxes paid Net operating cash flow (post tax) Capital expenditure Payments for businesses /minority interest 48.5 (0.0) (9.4) 39.1 (27.8) (12.7) 43.2 (1.5) (9.8) 31.9 (11.8) (3.4) 12.3% 100.0% 4.1% 22.6% (135.6%) (273.5%) Cash flow from investing activities (40.5) (15.2) (166.4%) Free Cash flow 4 Dividends paid Interest on borrowings 5 Payments of lease liabilities Proceeds of borrowings Cash flow from financing activities Net cash flow movement Closing cash balance (1.4) (17.1) (1.2) (9.2) 29.0 1.5 0.1 8.0 16.7 16.7 (0.6) (8.6) 8.4 (17.7) (0.9) 7.9 (108.4%) (108.4%) (100.0%) (7.0%) 245.2% 108.5% 111.1% 1.3% 10 | Monash IVF Group Annual Report 2023 | 11 1. Non-IFRS measure. 2. Refer to page 32 for reconciliation of Reported EBITDA, EBIT and NPAT to Underlying EBITDA, EBIT and NPAT. 3. NPAT including minority interest. 4. Free Cash Flow is Net Operating cash flow (post-tax) less Cash Flow from investing activities. 5. Including capitalised bank feesAbout Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview VISION 2026 The most admired reproductive care provider in the world. Best in class fertility solutions, diagnostics, genetics and pathology. Our Pillars Doctor Partnerships Patient Experience Scientific Leadership International Expansion People Engagement Digital Transformation Brand & Marketing Clinical Infrastructure Our Outcomes Engagement Patients, Doctors, People, Regulators Local & International Market Share Market Leading Success Rates Value Creation Our Principles Care Commitment Communicate Collaborate Create 12 | Monash IVF Group Annual Report 2023 | 13 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Industry Growth Drivers Attractive industry drivers In FY23, demand for Monash IVF Group services and treatments remained well- above pre-COVID levels. Underpinning this demand are a number of attractive industry drivers that point to strong future market growth. Maternal Age A notable societal trend is rising maternal birth age, which increased by two years in the past 20 years. As more people delay starting a family for personal or professional reasons, there has been a subsequent increase in demand for assisted reproductive treatment. Today the number of babies born through IVF in Australia is one in 18. At Monash IVF, the average maternal age is 37. Government Support New government financial support is helping drive demand by making reproductive treatments more accessible and affordable to more patients. The NSW Government introduced a $2000 cash rebate for patients for treatments dating back to 1 October 2022 and payable from 1 January 2023. This is on top of a $250 fertility health assessment rebate. Nationally, the Federal Government will provide increased support for testing and diagnosis of genetic diseases from November 2023. The Government has also announced funding for 20 specialised endometriosis clinics that could help the early identification of people who will benefit from fertility treatment. Greater Fertility Options With Monash IVF Group’s help, more people are becoming aware of their fertility health and reproductive options, including freezing their eggs to preserve their fertility. As a result, our egg freezing cycles rose by 14% in FY23. In FY23, donor cycles remained strong, driven by solo mums and same sex couples using donated sperm in their quest to become parents. Increasing fertility awareness is also leading to more people having pre- conception health testing to assess their chances of achieving a healthy pregnancy now or in the future and to take immediate or early steps to increase their chances of starting a family should any red flags be identified. Genetics Genomics guides treatment and helps us improve the health of the next generation. Advances in genetic screening have played a crucial role in improving our pregnancy rate. In FY23, the number of patients at Monash IVF Group using Preimplantation Genetic Testing (PGT) increased by 11.2%. The number of complex cases for patients with a high chance of having a child with a genetic condition increased by 29.9%, reflecting our growing impact in this space. PGT is used to select embryos with a low chance of a genetic condition and a high chance of implantation for patients with a wide range of genetic and fertility concerns. In FY23, revenue from the sale of Monash IVF Group's Genetic Carrier Screening test rose by 46%. Launched in December 2021, the saliva swab can be taken by any prospective parent in the comfort of their own home and is used to identify potential genetic disorders or conditions that may be passed on to their offspring, allowing people to make informed pre-conception choices. 14 | Monash IVF Group Annual Report 2023 | 15 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview 4 Year Metrics Over the past four years, the reproductive healthcare industry has undergone a significant period of growth and expansion due to increased acceptance of and demand for fertility services from a wider range of people. Throughout this time, Monash IVF Group has remained at the forefront of our field and achieved consistently strong results across numerous key metrics. No. of Specialists who joined MVF Group No. of specialists at MVF Group Average NPS score Employee Engagement Culture of Success Group clinical pregnancy rate for women aged <43 years (per embryo transferred) New Patient Registrations Market Share Key markets: VIC, NSW, QLD, SA & NT Group Revenue Underlying 1,2,3 NPAT Underlying1,2,3 EBITDA Underlying1,2,3 EBIT Reported4 NPAT 25 153 71 64% 38.7% 2023 Jan-Mar 8,241 +12% 22.7% $213.6m +11.1% $25.5m +14.7% $53.4m +11% $38.1m +14.2% $22m +18.9% 7 11 6 130 66 61% 38% 7,376 +4% FY21 21.3% $192.3m +4.7% FY21 $22.2m -4.7% FY21 $48.1m +0.8% FY21 $33.4m -5% FY21 $18.5m -28% FY21 123 121 57 54 61% 37% 7,098 +35% FY20 21.0% $183.6m +26.3% FY20 $23.3m +61.5% FY20 $47.8m +37.4% FY20 $35.1m +43.9% FY20 $25.7m +117.8% FY20 53% 36.4% 5,261 -11% FY19 20.4% $145.4m -4.3% FY19 $14.4m -31.2% FY19 $34.8m -8% FY19 $24.4m -25.3 FY19 $11.8m -40.8% FY19 3 2 0 2 Y F 2 2 0 2 Y F 1 2 0 2 Y F 0 2 0 2 Y F 16 | Monash IVF Group Annual Report 2023 | 17 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX1. Non-IFRS measure. 2. Refer to page 32 for reconciliation of Reported EBITDA, EBIT and NPAT to Underlying EBITDA, EBIT and NPAT. 3. NPAT including minority interest. 4. Free Cash Flow is Net Operating cash flow (post-tax) less Cash Flow from investing activities. 5. Including capitalised bank feesAbout Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Doctor Partnerships Our focus on building strong partnerships with highly-credentialled and experienced fertility specialists has seen Monash IVF Group become the place of choice to practice over the past four years. Patient Experience Monash IVF Group recognises the importance of making patients feel nurtured, informed and empowered throughout their fertility journey. Doctor engagement continues to be high with our Doctor Engagement Survey results showing continued year-on-year improvement, an outcome from our focused initiatives. A key focus for the future is to continue to attract and partner with new and experienced fertility specialists with the right cultural fit, clinical competencies, and outstanding industry reputations to assist us deliver the highest quality best-in-class care and the highest possible success rates for our patients. The key focus in the domestic business is to continue the momentum in recruiting the very best clinicians in New South Wales practicing in the world class treatment facilities as part of our Vision 2026 Strategy. In FY23, we welcomed a record 25 new doctors across Australia and South-East Asia, taking the total number of new clinicians joining us since FY19 to 61. Since FY19, there has been a net gain of 48% in new fertility specialists which has helped us to achieve our growth and succession planning objectives. In FY23, the biggest rise in our doctor numbers came in Queensland, where 9 specialists joined Monash IVF Group through the acquisition and integration of ART Associates Queensland. The positive contribution of these highly engaged clinicians to the business has been above expectations. Cycle numbers have risen by 34% in Queensland in FY23. Another highlight of FY23 has been our entry into the Western Australian market, making us the only fertility provider with a presence in every mainland capital city. The completion of our acquisition of PIVET Medical Centre in May 2023 added 7 new specialists to Monash IVF Group and has laid the foundation for future growth in market share in WA in partnership with our new Medical Director Dr Tamara Hunter. We now have 137 clinicians in IVF and Women’s Ultrasound in Australia and an additional 16 partnerships with specialists in Malaysia, Singapore and Indonesia. • • • • • • Aligned sperm donor processes across the Group, and in Victoria, removed waiting times for sperm donors. Developed a holistic education program for employers on how to support employees experiencing infertility. Implemented a Group Nursing Advisory Committee and framework to drive quality improvements and consistency in the patient experience. Refined the ultrasound appointment booking process by implementing a separate Phone Booking department across all sites. Introduced a Nurse Educator role to enhance consistency of training and professional development of nurses. Developed scripting for all critical points along the patient journey to ensure patient expectations are well managed through accurate and comprehensive communication. We are committed to providing an exceptional patient experience across all our clinics, with an unwavering focus on delivering our high- quality services through patient-centred care and empathy-driven interactions. Implementation of the following initiatives during the last 12 months underscores our commitment to nurturing positive patient experiences and achieving not only clinical excellence but also the holistic well-being of our patients. • • • Developed Best-in-Class Patient Experience training for all of our patient care teams focusing on empathy, trust, engagement, empowerment, and expectation. This comprehensive training program recognises that infertility can be an extremely emotional experience. Relocated clinics in Cremorne (Vic), Albury, Brisbane and Gold Coast bringing more services together and providing more people within the community access to best-in-class care while improving the overall experience. Brisbane Integration and colocation of Monash IVF with Eve Health - this has given Eve Health and Monash IVF Group patients a one stop location which includes their clinician, IVF provider and Day Hospital. 18 | Monash IVF Group Annual Report 2023 | 19 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Scientific Leadership Monash IVF Group invests in cutting edge technology and ground-breaking research to ensure we remain at the forefront of assisted reproductive technology service provision. In FY23, the Group Scientific Advisory Committee comprising of the Scientific Directors from across Australia and Asia have focused on providing our patients with market-leading success rates through our commitment to scientific excellence, the trialling and application of new technologies, as well as innovation via the translation of research outcomes to clinical practice. Key highlights of achievements undertaken in FY23 include: • • Being awarded the Medical Research Future Fund Mitochondrial Donation grant ($15 million) in partnership with Monash University and Murdoch Children’s Research Institute to deliver a pilot clinical trial and notably to establish Australia’s first and only mitochondrial donation program. The successful completion of three research studies investigating PIEZO microinjection technology that demonstrate improved patient outcomes, followed by the subsequent clinical rollout of PIEZO technology across our laboratory network, making Monash IVF Group the first Australian IVF provider offering this technology. • Greater expansion of Embryoscope+ timelapse technology across Monash IVF Group, with 11 incubators now installed across the country. In addition, the introduction of single step medium across numerous sites, maximising the utility of the Embryoscopes, reducing embryo handling and therefore reducing the risk associated with the culture systems. • • Facilitating the recruitment of patients for a nationwide multi-centre clinical trial in partnership with Memphasys (ASX: MEM) and the University of Newcastle to investigate the efficacy of a novel sperm separation device (FELIX) to improve fertilisation results and embryo quality and viability. Publication of 38 peer-reviewed studies in leading fertility journals and the presentation of numerous research award-winning abstracts and invited talks at international and national forums by Monash IVF Group clinical and science teams. Collectively, our scientific achievements reinforce our emphasis on research and evidence-based practice to drive optimal patient care and outcomes. International Expansion Since FY20, Monash IVF Group has expanded strategically in South-East Asia (SE Asia), increasing our international footprint from one clinic in Malaysia to five clinics across Malaysia, Singapore and Indonesia. Monash IVF further invested in its brand regionally, through increased marketing activities of Monash IVF Singapore, and Monash IVF – KPJ. Furthermore, Bali Fertility Centre was co-branded with Monash IVF. Our recent investment in clinicians, science, marketing and nursing in SE Asia provides a strong platform to capitalise on the attractive growth opportunities in the region. We continue to focus on optimising our existing clinics and building the pipeline of potential future acquisitions, partnerships and greenfield sites. Our expanded South-East Asia footprint and consistent focus on clinician engagement in FY23, provides Monash IVF Group with a solid international foundation heading into FY24. In FY23, Monash IVF Group strengthened our regional leadership processes by further integrating embryology and introducing a Medical Advisory Committee consisting of leading experts in Singapore, Malaysia, and Indonesia. A special event that took place during the year was the Monash IVF Singapore Inaugural Reproductive Medicine Update 2023 with participation from across South- East Asia and beyond. The Symposium attracted clinical and embryology experts from world renowned organisations across Europe, Asia and Australia. The event was widely attended with over 250 delegates, and specialties included Fertility, Embryology, Onco-fertility and IVF nursing. The conference was supported by numerous leading equipment and pharmaceutical manufacturers. 20 | Monash IVF Group Annual Report 2023 | 21 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview People Engagement Monash IVF Group has focused on developing a value proposition that ensures we are able to offer dynamic workplaces for those driven to make a difference. Digital Transformation The index stands as the definitive national benchmark on LGBTIQA+ workplace inclusion and comprises the largest and only national employee survey designed to gauge the overall impact of inclusion initiatives on organisational culture as well as identifying and non-identifying employees. The Index drives best practice in Australia and sets a comparative benchmark for Australian employers across all sectors. Our commitment to our People through our Learning & Development strategy continues to be focused on empowering individual career ownership through transformational learning opportunities, developing strong leadership for the future. In 2023 we concentrated on enabling this value proposition to further come to life by enhancing the employee experience through each stage of the employee life cycle, creating more effective and efficient processes, and ultimately differentiate us in the talent market. Our People are known for their confidence and kindness, advancing science and specialised services, improving care and enhanced communication. These attributes are something we are especially proud of. We are also proud that our engagement journey continued in FY23 with the highest recorded engagement score at Monash IVF Group of 64%, a 3% improvement on FY22 and well above the industry benchmarks. This continues to demonstrate our commitment to driving change in our workplace. Along with our focus on the employee life cycle, our commitment to achieving change through Diversity and Inclusion was also recognised in FY23 by receiving the Bronze Employer recognition by AWEI (Australian Workplace Equality Index). Our New Patient Management System. Monash IVF Group clinics are at the forefront of healthcare transformation, with plans for the integration of digital consent forms playing a pivotal role in our new patient management system. This innovation replaces paperwork with streamlined, digital workflows, offering a more efficient, patient-centric experience in the complex journey of IVF. We have partnered with a leading vendor in digital workflows and signatures to create advanced, mobile-friendly digital forms. These forms, equipped with links to explanatory videos, diagrams, and information, offer unparalleled clarity over the treatment process, with the flexibility for patients to access resources on their own schedule or whenever required during their journey. However, embracing digitisation isn't without challenges. Security and data privacy are paramount and we have invested in robust cybersecurity measures and strict adherence to health information privacy regulations. Monash IVF Group takes every necessary step to protect our patients' privacy throughout their entire fertility journey. With plans to integrate digitisation of overall workflows and processes, we are shaping a future where patient interactions are marked by convenience, understanding and trust. This journey isn't just about reshaping the fertility treatment landscape, it's about ensuring every patient is empowered in their unique treatment journey. "With plans to integrate digitisation of overall workflows and processes, we are shaping a future where patient interactions are marked by convenience, understanding and trust." 22 | Monash IVF Group Annual Report 2023 | 23 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Brand & Marketing In FY23, Monash IVF Group continued to expand on the positive social impact it contributes to the Australian community by entering into an exciting partnership with the Australian Athletes Alliance. Clinical Infrastructure Monash IVF Group has undertaken an extensive clinical infrastructure program to create modern, state-of-the art facilities in key locations across Australia and South-East Asia. Our integrated marketing programs delivered a robust patient pipeline during FY23, and resulted in increases in market share in key markets of 1.4%. Marketing drivers of growth › Brand Differentiation › Patient Acquisition › Lifecycle Engagement › Marketing Effectiveness Outcomes 1.4% growth in market share across our key markets 12% growth in new patient acquisition 4.3% growth in returning patients Through this partnership, we are providing reproductive care, education and support to existing and former athletes from AFL, cricket, soccer, basketball, netball, rugby league and hockey. We are extremely proud to be able to help our Australian athletes and provide this much needed support and care. During the year, we also continued to deliver professional education and advice to thousands of other prospective patients in the comfort of their home through our virtual patient webinars and retreats. FY23 also saw Monash IVF launch its latest brand campaign - What it Takes, together. This campaign was a wonderful opportunity to bring together our real patients, employees and doctors and showcase why patients should choose Monash IVF Group as their fertility provider. We also launched our egg freezing campaign which performed exceptionally well, resulting in an 14% growth in egg freezing cycles over the 12 months. With the help of our specialists and patients, we also captured 64% of Australian media mentions in FY23 against our competitors across TV, radio, print and online news, and reached a cumulative audience of 120 million people. In June, our fertility doctors and other speciality surgeons moved into our new Gold Coast facility which is co-located with the Broadwater Day Hospital. Stage one of our Brisbane transformation has been completed with a relocation to Spring Hill to be co-located with the recently acquired ART Associates and Brisbane Day Hospital. This development has enabled us to integrate ART Associates’ significant volumes. Internationally in FY23, we successfully launched our new Bali Fertility Centre in the Kasi Ibu Hospital. Our focus for FY24 will be to complete Stages 2 and 3 of the Brisbane transformation, open our Sunshine IVF unit in Victoria and renovate our recently acquired Perth clinic. We will continue to initiate projects in line with our Vision 2026 strategy, prioritising those with a significant return on investment. From warm and welcoming reception areas to cutting-edge laboratories and state-of-the- art day hospital facilities, we have carefully designed and crafted these sites to ensure we remain at the forefront of reproductive healthcare. Our flagship Sydney CBD clinic, which opened in November 2020, set high standards and the positive feedback we have received from patients and doctors alike gave us the confidence to move forward with similar projects in Melbourne, Gold Coast and Brisbane. In September 2022 we opened our new full- service clinic in Penrith, further consolidating Monash IVF Group as the leading provider of fertility services in Greater Western Sydney. In March, we opened the doors of our flagship Cremorne facility in central Melbourne, bringing together personnel from multiple sites and creating a collaborative workplace for our shared services staff, including our corporate, nursing, patient services, ultrasound, counselling and donor teams. By the end of 2023, this location will be transformed into a full-service reproductive healthcare facility, with the opening of a world-class laboratory and on-site day surgery unit. 24 | Monash IVF Group Annual Report 2023 | 25 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Board of Directors Mr Richard Davis Mr Josef Czyzewski Mr Neil Broekhuizen Ms Catherine West Independent Chairman Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Mr. Richard Davis joined the Group in June 2014 and is currently serving as a non-executive director of ASX listed companies, InvoCare Limited and Australian Vintage Limited (Chairman). Richard worked for InvoCare for 20 years until 2008. For the majority of that time he held the position of CEO and managed the growth of that business through a number of ownership changes and over 20 acquisitions, including offshore in Singapore. Prior to InvoCare Limited, Richard worked as an accounting partner of Bird Cameron. Richard holds a Bachelor of Economics from the University of Sydney. Mr. Josef Czyzewski joined the Group in June 2014 and has over 30 years experience in senior finance positions and significant experience in the health industry. Josef has held the positions of CFO at Healthscope Limited, and more recently CFO/ General Manager Strategy and Development at Spotless Group Limited following its takeover by private equity interests in 2012. Prior to that time, Josef had held various senior finance positions with BHP Billiton including VP Finance and Corporate Treasurer. He holds a Bachelor of Commerce from the University of Newcastle and is a Graduate Member of the Australian Institute of Company Directors. Mr. Neil Broekhuizen is the Joint Chief Executive Officer of Ironbridge. Neil has over 30 years experience in the finance industry, including 28 years in private equity with Investcorp and Bridgepoint in Europe and Ironbridge in Australia. He has sat on the Ironbridge Investment Committee since inception. Neil is qualified as a Chartered Accountant and holds a BSC (Eng) Honours degree from Imperial College, University of London. Ms Catherine West was appointed Non-executive Director to Monash IVF Group on 8 September 2020. She is an experienced ASX listed non-executive director and has over 25 years of legal, business affairs and strategy experience in customer focused businesses in the media, entertainment, telecommunications and medical sectors in Australia, the UK and Europe. Catherine is a non-executive director of ASX listed Nine Entertainment and Peter Warren Automotive Group. In addition, she is a director of the Sydney Breast Cancer Foundation Limited, a director of the National Institute of Dramatic Art (NIDA), a director of the NIDA Foundation and a Chair of the Board of Governors of Wenona School. Catherine was also on the Board of ASX listed Endeavour Group until April 2021. Catherine holds a Bachelor of Laws (Hons) and a Bachelor of Economics from the University of Sydney. She is also a Graduate Member of the AICD. Dr Richard Henshaw Executive Director Dr Richard Henshaw MD FRANZCOG FRCOG has practiced in the field of reproductive medicine since 1995. Richard works as a Fertility Specialist for the Group. Richard has served on many national bodies, including RANZCOG Council, the IVF Medical Directors Group of Australia and New Zealand, and the Reproductive Technology Accreditation Committee. Ms Zita Peach Independent Non-executive Director Ms Zita Peach has more than 25 years of commercial experience in the pharmaceutical, biotechnology, medical devices and health services industries, and has worked for major industry players such as CSL Limited, Fresenius Kabi and Merck Sharp & Dohme, the Australian subsidiary of Merck Inc. Ms Peach is Chair of Pacific Smiles Group Limited and Non- Executive Director of two private equities – Nucleus Network and Icon Group. Zita is also a member of the Hudson Institute of Medical Research Board. Ms Peach is a Fellow of the Australian Institute of Company Directors and a Fellow of the Australian Marketing Institute. Mr Michael Knaap Managing Director & CEO Mr Michael Knaap was appointed to the role of Chief Executive Officer and Managing Director for Monash IVF Group on 15 April 2019. Following his tenure as MVF Group’s Chief Financial Officer and Company Secretary since August 2015, Michael was appointed to Interim CEO in October 2018. Mr Knaap has nearly 30 years experience in executive positions with a strong financial, operational, strategic and leadership background in Healthcare and FMCG industries. Prior to joining MVF Group, Michael was with Patties Foods Limited where he held a number of executive positions over six years, including the role of Chief Financial Officer and Company Secretary. He holds a Bachelor of Accounting from Monash University and is a Certified Practicing Accountant. 26 | Monash IVF Group Annual Report 2023 | 27 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Management Team Fiona Allen Chief Marketing Officer Sarah Bollom Regional Donor & Surrogacy Manager Nicolette Curtis Regional Manager VIC & NSW Denise Donati Fertility Solutions Queensland Manager Claire Ellem Regional Manager QLD Tedd Fuell Chief Governance & Risk Officer Hamish Hamilton Chief Operating Officer Malik Jainudeen Chief Financial Officer & Company Secretary Sloane Karlson General Manager Projects Jan Lagerwij Asia Managing Director May Q, Loke Centre Manager KL Fertility Centre Peggy North Chief People & Culture Officer Thierry Panthier Chief Information Officer Rebecca Redden Regional Manager Ultrasound & SA/NT Prof Luk Rombauts Group Medical Director Kate Robertson Regional Manager WA Prof Deirdre Zander-Fox Chief Scientific Officer 28 | Monash IVF Group Annual Report 2023 | 29 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report for the year ended 30 June 2023 for the year ended 30 June 2023 The Directors present their report together with the consolidated financial report of Monash IVF Group Limited ('the Group'), being the Company (Monash IVF Group Limited), its subsidiaries, and the Group's interest in associated entities as at and for the year ended 30 June 2023, and the auditor's report thereon. Directors The Directors of the Company at any time during or since the end of the year are: Mr Richard Davis Mr Josef Czyzewski Ms Catherine West Ms Zita Peach Mr Neil Broekhuizen Dr Richard Henshaw Mr Michael Knaap Principal activity The Group is a leader in the field of human fertility services and is one of the leading providers of Assisted Reproductive Services (ARS) which is the most significant component of fertility care in Australia and Malaysia. ARS encompass a range of techniques used to assist patients experiencing infertility to achieve a clinical pregnancy. In addition, the Group is a significant provider of specialised women’s imaging services. Operational and Financial Review The Group reported Underlying NPAT of $25.5m(1)(2)(6), as compared to $22.2m in pcp. $m Group Revenue Underlying EBITDA(1)(2) Underlying NPAT(1)(2)(6) Reported EBITDA(1)(2) Reported EBIT Reported NPAT(6) EPS (cents) DPS (cents) Net Debt (m)(3) Net Debt to Equity ratio(4) Return on Equity (pa.)(5) FY2023 FY2022 % Change 11.1% 11.0% 14.7% 12.3% 16.5% 18.9% 19.1% -% $213.6 $53.4 $25.5 $48.5 $33.1 $22.0 5.6 4.4 30 June 23 $31.0 11.3% 9.3% $192.3 $48.1 $22.2 $43.2 $28.4 $18.5 4.7 4.4 30 June 22 $2.1 0.8% 8.2% Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Group Underlying Results (continued) Domestic clinical pregnancy rates per embryo transfer in CY2022 increased to 38.0% from 37.0% in CY2021 and is 5.4% higher than CY2018. Pregnancy rates increased by 38.7% in Q1CY23 compared to pcp. Improvements to clinical pregnancy outcomes are driven by highly trained and skilled scientific workforces across our vast number of clinics, upgrades to technology and equipment and standardisation of processes and protocols across the Network. The Ultrasound business returned to scan growth during FY23 with Sydney Ultrasound for Women growing scan volumes by 8.5% compared to pcp whilst Monash Ultrasound for Women returned to growth in 2H23, delivering 2H23 growth of 28% compared to pcp. The Group progressed its new clinical infrastructure program and upgrades including completion of relocated IVF premises in inner Melbourne (Cremorne), Darwin, Penrith and Gold Coast. New complementary day hospital operations in Gold Coast and Cremorne will be available and commissioned during 1H24 providing the Group with higher and more diversified day hospital revenue streams including servicing clinicians performing ophthalmology, dentistry and gynaecology procedures, in addition to IVF. The new Singapore IVF clinic commenced in June 2022 and continues to ramp up to profitability. Anticipated activity in 2H23 was delayed due to key doctor availability however this is anticipated to be resolved during 1H24 and generation of profitability in 1H24 is anticipated. The new Bali IVF clinic performed its first procedure in January 2023 and has largely reached breakeven in Q4FY23. The existing Kuala Lumpur IVF clinic has largely recovered post the height of the Pandemic, generating stimulated cycle growth of 3.1% compared to pcp but was impacted by inflationary and supplier pressures, offsetting the benefit from higher activity. The existing Johor Bahru IVF clinic generated growth in both revenue and EBITDA(1) during FY23 and is well placed to continue growth in FY24. Net Finance Costs increased to $3.3m, $1.2m higher than pcp which included $0.4m impact for non-cash interest on Lease Liabilities (under IFRS16) and $0.8m increase from a combination of a higher BBSY rate (+3%) and average borrowings ($39m at 30 June 23) during the period. Underlying NPAT(1)(3) was $25.5m whilst Reported NPAT was $22.0m. Reported NPAT includes certain non-regular items relating to acquisition costs, new premise and commissioning costs. Refer to page 6 for further information. Segment analysis $m Revenue Underlying EBIT(1)(2) Underlying NPAT(1)(2) Reported NPAT Australia Australia International FY2023 200.8 36.2 24.5 21.1 FY2022 % change 10.3% 18.3% 21.3% 24.1% 182.1 30.6 20.2 17.0 FY2023 12.8 1.9 1.0 0.9 FY2022 % change 25.5% (32.1%) (50.0%) (40.0%) 10.2 2.8 2.0 1.5 (1) (2) (3) (4) (5) (6) EBITDA and Underlying NPAT are non-IFRS measures Refer to earnings reconciliation on page 6 for Underlying vs Reported EBITDA, EBIT and NPAT. FY22 included non-regular items that increased Adjusted EBITDA, EBIT and NPAT by $5.0m pre-tax Debt less cash balances Net debt to equity is net debt divided by equity Return on equity is Underlying NPAT for the twelve-month period to 30 June 2023 divided by closing equity Attributable to ordinary shareholders and non-controlling interest page 32 3 Australia revenue increased by $18.7m or 10.3% to $200.8m due to the following: • $13.8m Domestic ARS revenue growth ($5.4m from patient price increases across all domestic markets and $10.6m growth from market share gains in QLD, SA and WA (including acquisitions), partially offset by exiting the Tasmanian IVF market in October 2022); 30 | Monash IVF Group 5 Annual Report 2023 | 31 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Statement of Financial Position and Capital Metrics Balance Sheet $m Cash and cash equivalents Other current assets Current lease liabilities Other Current liabilities Net working capital Borrowings Goodwill & Intangibles Right of use assets Lease liabilities Plant & Equipment Other liabilities Net assets Capital Metrics Net Debt ($m)(1) Leverage Ratio (Net Debt / EBITDA(2)) Interest Cover (EBITDA(2) / Interest) Net Debt to Equity Ratio(3) Return on Equity(4) Return on Assets(5) 30 June 23 30 June 22 % change 8.0 21.9 (6.3) (40.2) (16.6) (38.9) 280.4 59.0 (54.8) 50.4 (4.4) 275.1 7.9 17.7 (7.1) (31.0) (12.5) (9.8) 258.9 64.7 (60.3) 30.4 (1.5) 269.9 30 June 23 30 June 22 31.0 0.70x 42.6x 11.3% 9.3% 6.0% 2.1 0.05x 113.2x 0.8% 8.2% 5.8% 1.3% 23.7% 11.3% (29.7%) (32.8%) (296.9%) 8.3% (8.8%) (9.1%) 65.8% (193.3%) 1.9% +/- 28.9 0.65x (70.6x) 10.5% 1.1% 0.2% Significant headroom remains available in key banking covenants. The key Net Leverage Ratio is at 0.70x and well within the 3.5x covenant requirement. The Interest Cover Ratio is at 42.6x and well above the 3.0x covenant requirement. Key capital metrics increased with Return on Equity increasing from 8.2% to 9.3% and Return on Assets increasing from 5.8% to 6.0%. (1) (2) (3) (4) (5) Net debt is debt less cash balances (excluding capitalised bank fees) EBITDA is based on normalized EBITDA excluding AASB16 lease impact for covenant purposes as defined in the Syndicated Debt Facility Agreement. EBITDA is not an IFRS measure Net debt divided by equity at the balance date NPAT for the previous 12-month period divided by closing equity at the balance date NPAT for the previous 12-month period divided by closing assets at the balance date Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Segment analysis (continued) • • $2.0m Ultrasound revenue growth due to 4.9% growth in scan volumes and 3% price increase across all scan types. Scan activity grew by 8.5% in Sydney and 5.1% in Melbourne, partly offset by Gold Coast which was closed during 2H23 and $3.0m Day Surgery & Other revenue growth including volume growth in Sydney CBD DSU, volume contribution and genetics income. The Australia CGU achieved FY23 Underlying EBIT of $36.2m. The domestic IVF business was solid in growing EBIT and Margin% despite a challenging macro environment. International The International segment comprises of the existing Kuala Lumpur and Johor Bahru clinics and Bali and Singapore clinics which opened in January 2023 and June 2022 respectively. International Revenue increased by $2.6m or 25.5% to $12.8m and stimulated cycles increased by 19.9% compared to pcp following commencement and ramp up of Singapore operations and volume growth in KL and Johor Bahru. Underlying EBIT declined by $0.9m or 32.1% to $1.9m compared to pcp and Underlying NPAT declined by $1.0m or 50.0% to $1.0m compared to pcp. NPAT was impacted by commencement of new greenfield clinics in Singapore and Bali. Earnings reconciliation The table below provides a reconciliation of FY2023 Underlying EBIT and NPAT to the reported statutory metrics: $m Reported Statutory Acquisition transaction costs Commissioning costs Acquisition Earn-out fair value adjustment Underlying (1) (1) Non-IFRS measures EBITDA EBIT NPAT 48.5 1.9 3.1 - 53.4 33.1 1.9 3.1 - 38.1 22.0 1.3 2.2 - 25.5 FY22 NPAT 18.5 1.5 1.8 0.4 22.2 A total of $5.0m in pre-tax items are included in the reconciliation of Reported Statutory to Underlying, which fall under three main categories. $1.9m relates to pre-tax acquisition related transaction costs including completion activities for the PIVET Medical Centre and ART Associates Queensland acquisitions and stamp duty provision for the Pivet acquisition; $3.1m relates to pre-tax commissioning costs for new fertility clinics and day hospitals in Melbourne, Penrith, Gold Coast, Darwin and Bali. These costs include lease expenditure under IFRS 16 lease accounting for the specific premises; FY22 included non-regular items that increased Reported EBITDA, EBIT and NPAT by $5.0m pre-tax and $3.5m post-tax. 6 32 | Monash IVF Group 7 Annual Report 2023 | 33 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Statement of Cash Flows Cash Flows $m EBITDA(1) Movement in working capital Income taxes paid Net operating cash flows (post-tax) Capital expenditure Payments for businesses Cash flows used in investing activities Free Cash flow(1) Dividends paid Interest on borrowings Payments of lease liabilities Proceeds of borrowings Cash flows used in financing activities Net cash flow movement Closing cash balance (1) EBITDA and Free Cash Flow are non-IFRS measures. FY2023 48.5 0.0 (9.4) 39.1 (27.8) (12.7) (40.5) (1.4) (17.1) (1.2) (9.2) 29.0 1.5 0.1 8.0 FY2022 43.2 (1.5) (9.8) 31.9 (11.8) (3.4) (15.2) 16.7 (16.8) (0.6) (8.6) 8.4 (17.7) (0.9) 7.9 Change % 12.3% 100.0% 4.1% 22.6% (135.6%) (273.5%) (166.4%) (108.4%) (1.8%) (100.0%) (7.0%) 245.2% 108.5% 111.1% 1.3% • • • • • • • Pre-tax conversion of EBITDA to operating cash flow was 100%, compared to 97% in the prior comparative period; $27.8m capital expenditure including new fertility clinics (Cremorne in VIC, Gold Coast and Brisbane WIP, Penrith, Bali and Darwin completed), IT infrastructure including cyber security assets and medical equipment; $12.7m payments for business includes $3.9m for up-front cash consideration of ART Associates Qld, $7m payment for Pivet acquisition, $0.4m payment for Fertility Solutions contingent consideration relating to FY22 and $1.3m payments for non-recurring acquisition costs (completion activities for ART Associates QLD and PIVET including legal and accreditation costs); Interest on borrowings increased by $0.6m due to higher average borrowings compared to pcp and increases in the BBSY during F23; $29m debt drawdown primarily for committed infrastructure projects and acquisition payments; Payment of lease liabilities increased by $0.6m driven primarily by rental payments for new completed IVF clinics (Penrith, Darwin and Singapore) and rental payments for yet to be completed clinics (Cremorne DSU (VIC) and Gold Coast IVF & DSU). $17.1m dividend payments comprised of the final FY22 fully franked dividend and the interim FY23 fully franked dividend. Dividends On 22 August 2023, a fully franked final FY2023 dividend of 2.2 cents per share was declared. The record date for the dividend is 8 September 2023 and the payment date for the dividend is 11 October 2023. Commitments & Contingencies As announced to the ASX on 23 December 2020, Monash IVF Group became aware that it and certain number of its subsidiaries have been named as defendants in proceedings filed in the Supreme Court of Victoria in relation to, or in connection with, the Group’s non-invasive pre-implantation genetic screening technology (Ni-PGT or cell-free PGT-A). The proceedings filed makes a series of allegations against 8 34 | Monash IVF Group Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Commitments & Contingencies (continued) Monash IVF Group in relation to the Ni-PGT testing including that those patients who had embryos classified as aneuploid as a result of Ni-PGT testing may have had embryos destroyed or did not proceed to embryo transfer. Ni-PGT testing was suspended in October 2020. As announced to the ASX on 21 August 2023, an amended statement of claim was filed in the Supreme Court of Victoria which, amongst other things, seeks aggravated damages and exemplary damages from the Group. The Group filed its initial defense on 19 August 2022 in accordance with the Court’s directions and expects to file its defense for the amended statement of claim in the coming months. The discovery process is continuing and the Group has notified its insurers of the claim noting the cost of Monash IVF’s defense of the Class Action are currently funded by its insurer. The claim does not specify an amount of damages and it is not currently possible to determine the ultimate impact of this claim, if any, on the Group. The aggravated damages and exemplary damages claim, and the costs of defending that, are uninsured. Legal costs and damages, if any, in excess of insurance proceeds will be funded by Monash IVF. Outlook We continue to believe and are optimistic that there is a fundamental shift in the Community and the mindset of our patient cohort with greater focus on family, health and wellbeing resulting in re-direction of priorities towards family extension and creation. This was highly evident during the Pandemic whereby FY2023 Stimulated Cycle Industry(2)(3) activity was higher than FY2019 by 22.3%. Based on Monash IVF’s new patient registration pipeline going into FY24, we are confident that current Industry activity is sustainable and will continue to grow in FY24. Whilst macroeconomic conditions in Australia including cost of living and monetary policy is impacting affordability of certain services and goods, it is not currently impacting Monash IVF new patient registrations (NPR) to date, with NPRs up strongly on prior year between January and July 2023. The Group is confident revenue and underlying NPAT(1) will grow in FY24 noting the following: • Full Year contribution from ART Associates QLD No.2 Pty Ltd and PIVET Medical Centre acquisitions; • Commencement of new fertility clinics and day hospital operations in Cremorne (VIC) and Gold Coast (QLD) during 1H24, in addition to relocation of existing IVF clinics in Sunshine (VIC); • Conversion of strong new patient registrations generated in FY23; • Domestic IVF and Ultrasound patient pricing will increase by 5%-8% during 1H24 across all State based markets which is anticipated to offset cost base increases; • New fertility specialists attracted in FY23 will drive further volume growth in FY2024 and the Company will continue to focus on recruitment of suitable fertility specialists; • Capitalising on growth opportunity in Reproductive Genetic Screening (RGS); • Continued optimisation of Ultrasound operations, particularly in Melbourne, following operating • challenges during the Pandemic; Further progress in South East Asia growth strategy including ramp up of activity in the Singapore and Bali fertility clinics. (1) Underlying excludes certain non-regular items relating to acquisition costs, new clinic commissioning costs and AASB3 fair value adjustment (2) QLD,NSW,VIC,SA,NT Markets (3) 13200/1 MBS items 9 Annual Report 2023 | 35 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Business Strategies and Prospects for Future Financial Years Business Strategies and Prospects for Future Financial Years (continued) Monash IVF Group’s mission is to help bring life to the World by providing Best-in-Class fertility solutions to all, including diagnostics, genetics and pathology. This is supported by our Vision to be the most admired fertility solutions provider in the world by Patients, Doctors, our People and other industry stakeholders. Our Mission and Vision will be delivered through Our Pillars as illustrated below: Our Pillars will drive achievement of Our Outcomes to Engage with our Key Stakeholders, continually improve our Patient outcomes, grow our market share and create value for our Key Stakeholders including Patients, Doctors, People and Shareholders. Business risks The Monash IVF Group continually considers the benefits of implementing a risk management framework, all of which contributes to the increased likelihood that the Group will be able to achieve its organisational objectives. Accordingly, the Group has a risk management framework and has implemented systematic processes for: Better identification of opportunities and threats; Prevention of potential risks from being realised; Reduction of the element of chance; Increased accountability and transparency for decisions; • • • • • More effective allocation and use of resources; • • • • • Improved incident management and reduction in loss and the cost of risk; Improved stakeholder confidence and trust; Improved compliance with relevant legislation and accreditation processes; Proactive rather than reactive management; Enhanced governance. Our Pillars are defined as follows below: Patient experience - We are committed to providing best in class clinical care across the fertility and pregnancy journey, delivering through a patient experience that is empathetic, empowering and personalised. Doctor partnership - We will develop mutually beneficial long term partnerships with our Doctors that benefits our patients through excellence in clinical care and to drive growth in our Doctors’ businesses. Scientific leadership - Our focus in world-class research and science will deliver market leading success rates, innovative services and attract partnership opportunities. Clinical infrastructure – Provide high quality, fit-for-purpose infrastructure to support our best in class offering through investing in new and existing facilities and businesses. People engagement - Through passion, pride and capability our People are leading the way in helping bring life to the world. Brand & marketing – Our brand and marketing conveys our leadership in reproductive health and develops strong brand salience through progressive, empathetic and empowering engagement with the Community, Patients and our People. Digital transformation – Investing in next generation technology, platforms and systems to enhance interactions with our Patients, Doctors and People. Grow and diversify revenue streams through enhanced digital capabilities and partnerships. International expansion - Export our expertise in fertility services to Asia and beyond through effective partnerships. The risk management framework together with the risk assessments and mitigation strategies are regularly reviewed both individually and collectively by the Executive Team, the Audit and Risk Committee and the Board. A simple prioritisation system has been adopted to scale the relative importance of all the identified risks. From review of the Group’s key business, operational and financial risks, processes are in-place to reduce the inherent nature of these risks to an acceptable and manageable level. This includes high inherent risk presented by the COVID-19 Pandemic and is a key priority when managing risk. The Group considers the below as important risks that require continued management to ensure the Group meets its objectives. Relationships with People in key roles, including clinicians The relationships between Monash IVF Group, its People and Clinicians are key to our recruitment and retention strategies, ability to grow the businesses and replacement of retiring clinicians. The loss or disengagement of Clinicians or inability to attract new Clinicians to the organisation would likely impact the revenue and profitability of the organisation. There are similar risks to the organisation relating to the departure or disengagement of the Executive and Leadership Teams and People in key roles, defined by regulatory requirements. Comprehensive training and development programs, competitive remuneration frameworks, commitment to patient centred care and opportunities to participate in world class research activities all contribute to attracting and retaining the very best talent in the Industry. Change in Government funding arrangements for Assisted Reproductive Services There is a risk that the Commonwealth Government will change the funding (including levels, conditions or eligibility requirements) it provides for Assisted Reproductive Services (ARS). Patients receive partial re-imbursement for ARS treatment through Commonwealth Government Programs, including the Medicare Benefit Schedule (MBS) and Extended Medicare Safety Net (EMSN). If the level of re- 36 | Monash IVF Group 10 11 Annual Report 2023 | 37 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Change in Government funding arrangements for Assisted Reproductive Services (continued) imbursement were to be reduced or capped, Patients would face higher out-of-pocket expenses for ARS potentially reducing the demand for services provided by the Group. The Group is not aware of any changes to Commonwealth Government funding for ARS in the short to medium term. Risk of increased competition In each of the markets the Group operates in, there is a risk that: • Existing competitors may undertake aggressive marketing and Patient acquisition campaigns, product innovation or price discounting; • New market entrants may participate in the Sector and gain market share; • Further growth in low cost offerings provided by competitors may reduce the Group’s market share; • An increase in publicly provided ARS services may reduce the Group’s market share. The Group continues to strategically position its ARS service as a specialised premium offering as a point of differentiation against low cost competitors. In addition, the Group has previously partnered with State based governments in the provision of publicly provided ARS services and will look to continue to partner with governments to provide greater access to ARS services to the community. Occupational Health and Safety Monash IVF employees are at risk of workplace accidents and incidents. In the event that a Monash IVF employee is injured in the course of their employment, Monash IVF may be liable for penalties or damages. This has the potential to harm both the reputation and financial performance of Monash IVF. Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Information on Directors Director Mr Richard Davis Independent Chairman Experience Mr. Richard Davis joined the Group in June 2014 and is currently serving as a non-executive director of ASX listed companies, InvoCare Limited and Australian Vintage Limited (Chairman). Richard worked for InvoCare for 20 years until 2008. For the majority of that time he held the position of CEO and managed the growth of that business through a number of ownership changes and over 20 acquisitions, including offshore in Singapore. Prior to InvoCare Limited, Richard worked as an accounting partner of Bird Cameron. Richard holds a Bachelor of Economics from the University of Sydney. Mr Josef Czyzewski Independent Non-executive Director Mr. Josef Czyzewski joined the Group in June 2014 and has over 30 years experience in senior finance positions and significant experience in the health industry. Mr Neil Broekhuizen Independent Non-executive Director Josef has held the positions of CFO at Healthscope Limited, and recently CFO/General Manager Strategy and more Development at Spotless Group Limited following its takeover by private equity interests in 2012. Prior to that time, Josef had held various senior finance positions with BHP Billiton including VP Finance and Corporate Treasurer. He holds a Bachelor of Commerce from the University of Newcastle and is a Graduate Member of the Australian Institute of Company Directors. Mr. Neil Broekhuizen is the Joint Chief Executive Officer of Ironbridge. Neil has over 30 years experience in the finance industry, including 28 years in private equity with Investcorp and Bridgepoint in Europe and Ironbridge in Australia. He has sat on the Ironbridge Investment Committee since inception. Neil is qualified as a Chartered Accountant and holds a BSC (Eng) Honours degree from Imperial College, University of London. 38 | Monash IVF Group 12 13 Annual Report 2023 | 39 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report continued Directors’ Report for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Directors’ Report continued Directors’ Report for the year ended 30 June 2023 for the year ended 30 June 2023 Director Ms Catherine West Independent Non-executive Director Ms Zita Peach Independent Non-executive Director Experience Ms Catherine West was appointed Non-executive Director to Monash IVF Group on 8 September 2020. She is an experienced ASX listed non-executive director and has over 25 years of legal, business affairs and strategy experience in customer focused businesses in the media, entertainment, telecommunications and medical sectors in Australia, the UK and Europe. is Chair of Catherine is a non-executive director of ASX listed Nine the People and Entertainment where she Remuneration Committee and a member of the Audit and Risk Committee. Catherine is also a non-executive director of Peter Warren Automotive Group where she is also Chair of the People and Remuneration Committee and a member of the Audit and Risk Committee. In addition, she is a director of the Sydney Breast Cancer Foundation Limited, a director of the NIDA Foundation, the National Institute of Dramatic Art and a Chair of the Board of Governors of Wenona School. She was previously on the board of Southern Phone, a regional telecommunications company, before its successful sale to AGL. Catherine was also on the Board of ASX listed Endeavour Group until April 2021. Catherine is also a consultant to the healthcare sector and to media companies internationally. Catherine holds a Bachelor of Laws (Hons) and a Bachelor of Economics from the University of Sydney. She is also a Graduate Member of the Australian Institute of Company Directors. Ms Zita Peach has more than 25 years of commercial experience in the pharmaceutical, biotechnology, medical devices and health services industries, and has worked for major industry players such as CSL Limited and Merck Sharp & Dohme, the Australian subsidiary of Merck Inc. Zita’s most recent executive position is Managing Director for Australia and New Zealand and Executive Vice President, South Asia Pacific for Fresenius Kabi, a leading provider of pharmaceutical products and medical devices to hospitals. Previously, Zita was Vice President, Business Development, for CSL Limited, a position she held for ten years. Ms Peach is Chair of Pacific Smiles Group Limited (ASX listed) and Non-Executive Director of two private company boards, Icon Group Pty Ltd and Nucleus Network Pty Ltd. Zita is also a member of the Hudson Institute of Medical Research Board. Ms Peach is a Fellow of the Australian Institute of Company Directors and a Fellow of the Australian Marketing Institute. 40 | Monash IVF Group 14 Director Dr Richard Henshaw Executive Director Experience Dr Richard Henshaw MD FRANZCOG FRCOG has practiced in the field of reproductive medicine since 1995. Richard works as a Fertility Specialist for the Group. Richard has served on many national bodies, including RANZCOG Council, the IVF Medical Directors Group of Australia and New Zealand, and the Reproductive Technology Accreditation Committee. Mr Michael Knaap Chief Executive Officer Managing Director Mr Michael Knaap was appointed to the role of Chief Executive Officer and Managing Director for Monash IVF Group on 15 April 2019. Following his tenure as MVF Group’s Chief Financial Officer and Company Secretary since August 2015, Michael was appointed to Interim CEO in October 2018. Mr Knaap has nearly 30 years experience in executive positions with a strong financial, operational, strategic and leadership background in Healthcare and FMCG industries. Prior to joining MVF Group, Michael was with Patties Foods Limited where he held a number of executive positions over six years, including the role of Chief Financial Officer and Company Secretary. He holds a Bachelor of Accounting from Monash University and is a Certified Practicing Accountant. Company Secretary Mr Malik Jainudeen was appointed to the role of Monash IVF Group Chief Financial Officer and Company Secretary on 15 April 2019. Malik joined Monash IVF Group in 2014 as a senior finance leader and has continued to progress his career with Monash IVF Group. Malik has more than 19 years experience in the finance sector including 10 years at KPMG as a Manager in Audit and Assurance where his client portfolio included ASX listed organisations Origin Energy Limited, AusNet Services and Dulux Group Limited. Malik was also the External Audit Manager for the Monash IVF Group for 6 years prior to its listing on the ASX in 2014. Director Meetings The number of directors’ meetings and number of meetings attended by each of the directors of the Company during the financial year are: Member Mr Richard Davis (Chair) Mr Josef Czyzewski Ms Catherine West Ms Zita Peach Mr Neil Broekhuizen Dr Richard Henshaw Mr Michael Knaap Attended 16 16 16 15 15 16 16 Eligible to Attend 16 16 16 16 16 16 16 15 Annual Report 2023 | 41 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Committee meetings Member Mr Richard Davis (Chair) Mr Josef Czyzewski Ms Catherine West Ms Zita Peach Mr Neil Broekhuizen ARC REM Attended 4 4 - - 4 Held 4 4 - - 4 Attended 4 4 4 4 - Held 4 4 4 4 - Matters subsequent to the end of the financial year On 22 August 2023, a fully franked dividend of 2.2 cents per share was declared. The record date for the dividend is 8 September 2023 and the payment date for the dividend is 11 October 2023. Refer to the Commitments and Contingencies section on a previous page for developments in contingent liabilities arising after the reporting date. Except as disclosed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial periods. Environmental, Social and Governance Global challenges, such as climate risk, increased regulatory pressures, social and demographic shifts and privacy and data security concerns, represents new or increasing risks for organizations. Through our existing corporate governance policies, our Strategic Framework, Quality Policy and Code of Conduct, Monash IVF Group has demonstrated a strong commitment to responsible and ethical conduct. In exploring Monash IVF’s sustainability actions and steps forward, the Company has considered various ESG reporting frameworks available and the UN Sustainability Development Goals. The following page provides a summary on a page on the Group’s Sustainability Strategy which will form the basis of Monash IVF’s inaugural Group Sustainability Report expected to be released in October 2023. During FY2023, the Company established an ESG Committee, with Monash IVF Group Board representation and key stakeholders within the Group to ensure the implementation of a proposed plan, embedded in daily routine activities to achieve tangible results. Establishment of ESG Metrics provides accountability for change and creation of long term value through strategies that incorporate ESG. Monash IVF Group Limited Directors’ Report continued Directors’ Report for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group FY24 Sustainability Strategy Monash IVF Group FY24 Sustainability Strategy We have developed our Sustainability Strategy on a page to summarise the key areas of focus where Monash IVF Group can achieve the maximum impact in delivering safe, effective healthcare services, that give every person the best opportunity to create or grow their family. We have developed our Sustainability Strategy on a page to summarise the key areas of focus where Monash IVF Group can achieve the maximum impact in delivering safe, effective healthcare services, that give every person the best opportunity to create or grow their family. Environment Climate change Environment Climate change Waste management Waste management Our People Our People Employee attraction, retention & development Employee attraction, retention & development Providing a safe workplace that Providing a safe celebrates diversity workplace that celebrates diversity Communities Communities Providing safe and effective care that Providing safe and meets the needs of our effective care that stakeholders meets the needs of our stakeholders Governance Governance Ethics and compliance Ethics and compliance Privacy and data security Privacy and data security Upholding Upholding human rights human rights Understand and minimise our impact on the environment Understand and minimise our impact on the environment Provide an inspiring Provide an and fulfilling inspiring workplace where and fulfilling everyone feels workplace where safe to be their everyone feels true self safe to be their true self Supporting people making Supporting informed people making decisions informed about their decisions reproductive about their plans reproductive plans Maintain confidence Maintain and trust confidence and trust Measure and reduce greenhouse gas emissions Measure and reduce Reduce waste, re-use greenhouse gas and recycle emissions Include sustainability in Reduce waste, re-use procurement decisions and recycle Include sustainability in procurement decisions Drive employee engagement through every stage of the Drive employee employee life cycle engagement through every stage of the Empower employee life cycle individual career ownership through Empower individual career transformational ownership through learning opportunities transformational learning opportunities Maintain accreditation Maintain Invest in research accreditation with potential Invest in research for direct clinical with potential or laboratory for direct clinical application or laboratory application Safeguard data entrusted to us Safeguard data entrusted to us Comply with all ASX Reporting Comply with all and Disclosure ASX Reporting Requirements and Disclosure Requirements Measure carbon footprint and develop strategy towards Measure carbon net zero footprint and develop Measure waste and strategy towards implement strategy to net zero reduce landfill waste per Measure waste and patient episode implement strategy to reduce landfill waste per patient episode Engagement Scores (Employee and Clinician) Engagement Scores Turnover (voluntary (Employee and Clinician) and non-voluntary) Turnover (voluntary Learning modules and non-voluntary) introduced / completed Learning modules Workplace safety, introduced / completed measured through Lost Workplace safety, Time Injuries measured through Lost Time Injuries Patient Satisfaction Success Rates Patient Satisfaction Adverse Event Rate Success Rates Number of transfers Adverse Event Rate from Day Surgery Unit Number of transfers to another facility from Day Surgery Unit to another facility Publication of Annual Modern Slavery Report Publication of Annual Modern Slavery Report Audit of Cybersecurity Audit of Cybersecurity Monetary losses as a result of Medicare false Monetary losses as a claims or fraud result of Medicare false claims or fraud Reportable Privacy Breaches Reportable Privacy Breaches 42 | Monash IVF Group 16 17 Annual Report 2023 | 43 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 The Company’s Directors present the 2023 Remuneration Report prepared in accordance with Section 300A of the Corporations Act 2001, for the Company and the Group for the year ending 30 June 2023 (“FY23”). The information provided in this Remuneration Report has been audited by KPMG as required by Section 308(3C) of the Corporations Act 2001. The Remuneration Report forms part of the Directors’ Report. The Remuneration Report outlines the remuneration strategies and arrangements for the Key Management Personnel (KMP) who have authority and responsibility for planning, directing, and controlling the activities of Monash IVF Group. FY23 Highlights Employee commitment, strength and focus enabled a strong FY23 result.  Our investment in future growth continues to set Monash IVF Group apart in the market with compelling employer, patient, and doctor value propositions.  A continued drive to achieve Vision 2026 strategic objectives additionally demonstrates Monash IVF Group capability to deliver robust market growth, despite challenging macro environmental factors.  Sustained achievements over the 4-year period also demonstrates stable and capable Executive Leaders who continue to position Monash IVF Group to capitalise on growth.  Linking remuneration outcomes with performance In FY23 our remuneration outcomes aligned to the performance of Monash IVF Group relative to FY23: • Maximum remuneration (fixed and at-risk remuneration combined) for KMP continued to be adjusted in line with external benchmarking guidance. As advised in FY22, this benchmarking considered organisations of comparable size at that time. In FY23 the Company has continued to grow from a profitability, market capitalisation and key strategic non-financial outcomes to deliver longer term sustainable growth. In FY23, the Board agreed to continue to increase the total remuneration for the CEO, CFO and COO through step changes, bringing these closer to comparable peers. The CEO 3-year fixed remuneration CAGR is 6% and 11% for total maximum remuneration aligning with more at-risk remuneration. The adjustments to the CEO, CFO and COO maximum remuneration remains at or below the industry benchmark. The Board continue to recognise that KMPs & Executive are critical to the achievement of Vision 2026 and therefore the remuneration and retention strategy ensures they remain incentivised to deliver this strategy. Further adjustments may be considered and applied to the at-risk component to ensure greater comparability to peers. The FY23 STI gateway was achieved, being Scientific Success Rates. This measure continues to be the most critical focus of the organisation and will remain as a STI gateway. The STI financial component was below target, but above threshold, resulting in 48% of financial target being met. For the LTI component, the Earnings Per Share (EPS) component of the FY2021 Performance Rights granted was achieved on 30 June 2023 due to performance targets being met during FY21 to FY23. The Total Shareholder Return (TSR) on the FY20 Performance Rights granted did not vest during FY23. the TSR component of the FY21 Performance Rights granted will be tested in September 2023. • • • • In FY24 our remuneration outcomes planned for FY24 align to the performance of Monash IVF Group relative to FY23: In FY24 the Total Fixed Remuneration for CEO, CFO and COO increased by 6%, with increases of 10% to the At-Risk component for the CEO, CFO & COO. Following a review of the Incentive Plan structure there is no change to the LTI Plan with the Relative Total Shareholder Return (TSR) peer group of ASX 300 Healthcare continuing to exclude CSL. The Short-Term Incentive (STI) plan for FY24 will also retain the opportunity for reward where performance exceeds target. A stretch target for financial measures being 120% aligned to a further 150% of financial objective of Short-Term Incentive (STI) available. Additionally, recognising that Earnings Per Share (EPS) has been a measure in both Short-Term Incentive (STI) and Long-Term Incentive (LTI) in prior years, the Short-Term Incentive (STI) financial measure for FY24 has been changed to Underlying Net Profit After Tax (NPAT) whilst the Long-Term Incentive (LTI) related measure will continue to be Earnings Per Share (EPS), in part. Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 Non-Executive Director remuneration arrangements in FY2023 Fees payable to Non-Executive Directors were reviewed regarding fee adjustments effective 1 July 2022 and 3% increase was applied to Director base and committee fees. This increase is inclusive of 0.5% increase to superannuation contribution. 1.0 Remuneration Snapshot 1.1 Remuneration Governance The Board is responsible for the overall governance and decisions relating to remuneration. The Remuneration and Nomination Committee (Committee), underpinned by the Remuneration and Nomination Committee Charter enables the Board to discharge their governance responsibilities in all matters relating to remuneration and engagement of all Executive and Non-Executive members. The Committee as stated by the Remuneration and Nomination Committee Charter must have at least 3 members, the majority of whom (including the Chair) must be independent Directors and all of whom must be non-executive Directors. The Monash IVF Group Remuneration and Nomination Committee comprises of 4 independent Directors. Ms Zita Peach, Chair who was appointed on 23 June 2020. Mr Richard Davis, Mr Josef Czyzewski and Ms Catherine West. During FY23, the Committee met 4 times with full attendance by all members. The Committee at times invites the CEO, CFO/Company Secretary, Chief People & Culture Officer and other non-executive directors (non-members of the Committee) to attend Committee meetings to assist in deliberations (excluding matters relating to their own employment). The Remuneration and Nomination Committee sought no recommendations as defined in section 9B of the Corporations Act throughout FY23. The Committee is responsible for reviewing and making recommendations to the Board in relation to: • Group remuneration principles, strategy and practices; • Non-executive director fee frameworks, policy regarding fee allocation, and fee pools sufficient for appropriate fee levels, Board renewal, Board roles, market practice, and director workload; Director Succession Planning Appointment of new directors, including the review of Board and Board committee membership Appointment of CEO Board effectiveness and performance, • • • • • Overall remuneration framework for Executives; • Terms and conditions underpinning Executive & Doctor Service Agreements (ESA), including terms such as restraint and notice period; Eligibility for, and conditions of, incentive plans, including equity-based incentive plans; Remuneration packages for all Senior Executives including structure and incentives; • • • Metrics and associated targets for Incentive plans; • Terms and conditions associated with incentive plans including equity plan rules, escrow and other restrictions on disposal; Structure and quantum of Senior Executive termination payments; Treatment of outstanding incentives in case of cessation of employment; Exercise of malus or clawback if relevant to incentive plan payments. • • • The Remuneration and Nomination Committee are also responsible for monitoring and reporting to the Board on other matters including: • • • • Remuneration relative to industry benchmarks; Achievement of performance requirements for the payment of incentives; Succession Planning; Diversity, inclusion objectives and pay equity including the WGEA annual report. 44 | Monash IVF Group 18 19 Annual Report 2023 | 45 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 The Remuneration and Nomination Committee Charter is available on the Company’s website at Corporate Governance | Monash IVF Group. The Charter is reviewed annually. Further information on the Remuneration and Nomination Committee is provided in the Corporate Governance Statement in this Annual Report. 1.2 Principles of Remuneration Framework Our continued approach to remuneration has maintained a consistent approach to remuneration that meets our remuneration objectives and aligns with our principles. The following summarises these key principles that underpin the structure of Executive Remuneration arrangements across the Group. Remuneration Principles Principle Design and operational implications of Remuneration Framework Aligned to organisations strategy and business priorities ▪ Remuneration framework will ensure alignment with the overall business strategy and ensure all policies and processes are observed to enable the attraction and retention of key personnel who create value for shareholders ▪ Operates in support of Our Principles and aligns to the organisations Market Competitive Rewards Performance Simple and Transparent Effective Governance Alignment to Patient, People & Doctor Outcomes ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ desired culture Ensure employees including Executive KMP and management are rewarded fairly and competitively according to role accountability, market positioning, skills, experience and performance Remuneration decisions will be informed by utilising relevant market benchmarking Encompass long term and short-term variable performance elements for those who have the ability to impact overall organisation performance Short term and long-term remuneration incentives and outcomes Performance targets to be met for payment (at threshold or target) are set after considering previous performance, forecast and budget A simple, flexible, consistent and scalable remuneration framework is to be used across the organisation allowing for sustainable business growth The structure must be easily communicated and can reinforce the organisations mission, principles and culture The Remuneration and Nomination Committee and Board will ensure that remuneration outcomes reflect both risk and performance and is reviewed regularly to ensure employees act ethically and responsibly Comply with all relevant legal and regulatory provisions Ensure Patient, People and Doctor engagement outcomes remain a critical measure for all KMP and management relating to at-risk remuneration. 2.0 Remuneration Structure 2.1 Executive Remuneration Structure Our Executive Remuneration structure is designed to attract, engage and retain a highly qualified and experienced group of Executives. Our remuneration is structured to align Executives to long term sustainable shareholder value through the execution of Vision 2026 by combining Total Fixed Remuneration, Short and Long-term incentives to form an overall Total Remuneration position. The Board reviews the structure and effectiveness of the remuneration arrangements annually to ensure their alignment to business performance and strategy. Monash IVF Group Limited Remuneration Report Remuneration Report (Audited) continued for the year ended 30 June 2023 for the year ended 30 June 2023 Purpose of each remuneration component Total Fixed Remuneration (TFR) Short Term Incentive (At Risk) Long-Term Incentive (At Risk) To attract and retain, paying competitively, reflecting the individual’s accountability, position requirements and experience. TFR is determined as base salary and inclusive of all standard leave provisions and superannuation guaranteed contributions. Rewards performance for achieving stretch targets and further rewards the achievement of both financial and non- financial goals. Achievement is measured using an annual balanced scorecard of measures aligned to the organisations strategic vision and objectives. Rewards and retains key contributors by creating alignment with long term shareholder interests and reward the creation of sustainable shareholder wealth. Monash IVF Group has remained consistent with the remuneration framework in FY23 for the CEO, CFO and COO with the framework retaining these three components, with short-term incentives and long-term incentives at risk. The remuneration structure aligns the remuneration opportunity with the level of position accountability. 2.2 Executive Remuneration Structure for FY23 The diagram below summarises the framework for FY23. The framework continues to be reviewed each year. Performance Driven Alignment with Shareholder Interests Total Available Remuneration Market Competitive Remuneration Total Fixed Remuneration (TFR) At Risk Remuneration TFR is determined on the basis of market rates (where applicable, the size and complexity of the role and the individual’s skill and experience relative to position requirements). TFR Comprises of: • Cash salary • Salary sacrifice items • Employer superannuation contributions in line with statutory regulations TFR levels are reviewed annually by the Committee through a process that considers market rates and individual experience in the position. TFR is also reviewed on promotion. There are no guaranteed increases in executive remuneration. Short Term Incentive (STI) Long Term Incentive Plan (LTI) • EPS growth hurdles based on predefined growth rates over a 3 year period (70%) • TSR hurdles based on Group’s relative TSR performance against ASX300 Healthcare Index (excluding CSL) (30%) • Comprise performance rights which vest in accordance with 3 year EPS growth and relative TSR above threshold performance requirements. • Balanced Scorecard Model that includes a Non-Financial Gateway (ANZARD Success Rate Average) • 70% financial Measure based on EPS performance • Non-financial Measures (30%) are linked to key strategic initiatives built around a balanced scorecard focused on long-term sustainable growth including but not limited to: • • • • • Engagement (People, Patient, Doctor) Market Share growth Scientific Success Rates Doctor attraction Non organic growth initiatives. 46 | Monash IVF Group 20 21 Annual Report 2023 | 47 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 3.0 At Risk Remuneration Framework At the beginning of each year the Remuneration and Nomination Committee determine a set of targets for the forthcoming year with reference to the strategic objectives and financial results from prior year. The Remuneration and Nomination Committee can subsequently adjust targets for any significant changes including but not limited to, significant events, capital structure, material acquisition or divestments, in accordance with any ASX Listing Rules if applicable. The Board may exercise its discretion to adjust where it considers appropriate considering the purpose and intent of the incentive plan and the performance standards. This may include adjustments to ensure that the interests of the relevant participant are not, in the opinion of the Board, materially prejudiced or advantaged relative to the position reasonably anticipated at the time of the assessment. No discretion was applied to any KMP Incentive outcomes for FY23. The following table summarises the short-term incentive and long-term incentive reward components for certain KMP including the performance measures and delivery mechanism applicable for the performance period ended 30 June 2023. 3.0 At Risk Remuneration Framework Short Term Incentive (at risk) Long Term Incentive (at risk) Incentive Opportunity Threshold Target Threshold Target Short and Long – Term Incentive opportunities are expressed as a percentage of TFR and refer to section 4.1 CEO CFO COO Performance Measures 30% 30% 30% 100% 100% 100% 20% 20% 20% 100% 100% 100% • • • LTI KPIs are earnings per share growth (EPS)(70%) and Total Shareholder Return (TSR)(30%) TSR measures returns made against the performance of a comparator group with hurdles based on predefined growth rates over a 3 year period EPS compound annual growth rate (CAGR) provides a tangible measure of shareholder value with hurdles based on predefined growth rates over a 3 year period • • • • • STI scorecard KPIs include financial and non-financial measures A non-financial gateway is in-place whereby no STI is payable if the Group’s clinical pregnancy rates (success rates) is below the ANZARD average 70% of STI is based on the EPS financial measure. EPS may be adjusted for certain individual significant, non-regular, abnormal or unusual gains or losses 30% of STI is based on qualitative non- financial measures which include Patient engagement, People engagement, doctor engagement, scientific success rates and domestic market share Pro-rata payment of STI is made if achievement is between threshold and target Delivery Mechanisms STI awards for the CEO, CFO and COO are paid as cash and subject to continued employment LTI awards are granted as performance rights, are subject to testing against the above performance measures and continued employment. The CEO, CFO and COO were not required to pay any money to be granted performance rights 3.1 FY23 Short Term Incentive A non-financial gateway is in-place whereby no Short-Term Incentive (STI) is payable if the Group’s clinical pregnancy rates (success rates) is below the ANZARD average for the period 1 July 2022 to 31 April 2023. This period is applicable due to the availability of pregnancy outcomes information at the time of reporting. The available ANZARD 22 48 | Monash IVF Group target average applicable is 40.1%. The Group’s clinical pregnancy rates for the period between July 2022 to April 2023 was 44.2% and accordingly, the non-financial gateway to STI was achieved. The quantitative financial measure defined for the CEO, CFO and COO in FY23 was as follows: Strategic Objective Weighting Measure FY23 Outcome Earnings per Share (EPS) 70% EPS Target was set at FY23 Group Budget (7.05 cents per share normalised) and threshold set at 90% (6.35 cents per share normalised) of FY23 Group Budget. Normalised EPS achieved was 6.53 cents per share and did not meet the 7.05 cents per share target. Threshold was achieved with a 48% of financial measure met. Short Term Incentive (STI) Non – Financial The qualitative non-financial measures defined for KMP in FY23 included the following: Strategic Objective Weighting Measure FY23 Outcome Patient Engagement 6% (CEO, CFO) 5% (COO) Deliver an ongoing improvement in Patient Engagement as measured by the patient Net Promoter Score (NPS) Survey targeting engagement improvements. Patient Engagement NPS was measured in the IVF and Ultrasound businesses separately. People Engagement 6% (CEO, CFO) 5% (COO) To foster a culture of Engagement with all Monash IVF Group employees as measured by an annual employee survey. Doctor Engagement 6% (CEO, CFO) 5% (COO) Foster a culture of engagement with all Monash IVF Group Clinicians. This is measured by a clinician NPS Survey targeting engagement improvements. Scientific Success Rates 6% (CEO, CFO) 5% (COO) Deliver a focused improvement in success rates in line with Your IVF success rate measure 4 by ANZARD which is(% implantation. Domestic Market Growth 6% (CEO, CFO) 5% (COO) Market share growth in all IVF Key markets. Market Share target was set at 23.9% for the period from July 2022 to June 2023 Threshold was set at 21.5%. Patient Engagement NPS achieved for the IVF business was above stretch target by +.37 of NPS. Payout for the Patient Engagement measure was 100%. The Patient Engagement NPS achieved for the Ultrasound business was +1.84 above stretch. Payout of Patient Engagement NPS was 100%. Employee Engagement Percentage achieved above threshold and below target. Payout for the People Engagement measure was 90%. Doctor Engagement is based on 2 Key NPS measures with both results meeting target by +4.4 and +3.4 respectively. Payout of Doctor Engagement was 100%. Success Rates for the period of July 2022 to May 2023 for measure 4 were 41.90%. Payout of Scientific Success Rates was 99% Market share for the period from July 2022 to June 2023 was 22.7% which was above threshold but below target. Payout for the Market Share measure was 68%. 23 Annual Report 2023 | 49 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 Doctor Acquisition & Retention 5% (C00) In line with Vision 2026 and successfully growing the Monash IVF Group network, this measure relates to growing and retaining doctor network nationally through the execution of the Monash IVF Group Doctor Value Proposition. Target was set at 148 number of fertility specialists and threshold at 141 number of fertility specialists. As a result of 9 clinicians (excluding trainees and acquisitions) joining Monash IVF Group in FY23 this metric did not meet threshold. 3.3 FY23 Long-term Incentive grant The LTI plan is a performance rights plan with vesting rights dependent upon the satisfaction of pre-determined performance hurdles and continuous employment. LTI grants are made on a rolling annual basis to ensure Executives maintain a continuous focus on sustainable long-term growth and returns and provides an appropriate balance with short- term incentives which are focussed on annual returns. The terms and overview of the FY2023 LTI grant to KMP and other eligible employees, including the CEO, CFO and COO are summarised below. Performance Rights Granted EPS Compound Annual Growth Rate ("EPS Hurdle") 70% of allocation subject to the hurdle Relative Total Shareholder Return ("TSR Hurdle") 30% of allocation subject to the hurdle Vesting Framework The EPS component of the allocation will be measured at the end of the 3-year performance period. 20% will vest at threshold performance. 100% will vest at maximum performance, with pro rata vesting between threshold and mazimum. EPS threshold performance is 10% growth per annum over the three year period. Vesting Framework The TSR component of the allocation will be masured at the end of the 3-year performance period relative to the ASX300 Healthcare Accumulation Index (Index) excluding CSL performance. 20% will vest at threshold performance when TSR equals index returns, 100% vest at maximum performance if TSR equals index returns +5 percentage points on an annualised basis, with pro- rata vesting between threshold and maximum. The LTI award opportunity is based on a percentage of the participant’s total fixed remuneration as at the grant date. The number of performance rights issued is determined by dividing the long-term incentive component of the participant’s fixed remuneration by the volume weighted average price of Monash IVF Group Limited shares traded on the Australian Stock Exchange over the 10 trading days immediately following the release of the FY2022 full-year results announcement. The VWAP applied to the FY2023 performance rights issue was $1.00515. 24 Performance rights were granted in two tranches during FY2023, with each tranche subject to separate vesting conditions. Executives did not pay any money to be granted the performance rights and the expiry date of the rights will be on the fifth anniversary of their grant. Details of the FY2023 LTI grant to KMP is set out below: KMP % of TFR Performance Rights granted Allocation # of performance rights Mr. Michael Knaap (CEO) 90% Mr. Malik Jainudeen (CFO) 45% Mr. Hamish Hamilton (COO) 45% EPS TSR EPS TSR EPS TSR 70% 30% 70% 30% 70% 30% 372,819 159,780 111,846 47,934 111,846 47,934 The performance periods and vesting schedules for the FY2023 performance rights are set out in the following table: Performance Measure Earnings per share Performance Period 1 July 2022 to 30 June 2025 Performance % of rights that will vest Less than 10% per annum 10% per annum 0% 20% Between 10% to 12% per annum 20% to 100% pro rata Greater than 12% per annum 100% Performance Measure Relative TSR Performance Period 11 days after FY2022 results announcement to 11 days after FY2025 results announcement Performance % of rights that will vest Less than Index return Equal to index return 0% 20% Between Index return and Index return +5% 20% to 100% pro rata Equal to or greater than Index return +5% 100% The graduated vesting scale in the LTI plan was designed to minimise the likelihood of excessive risk taking as a performance threshold is approached. The Board believes this vesting framework strengthens the performance link over the long-term and accordingly encourages Executives to focus on long term performance. The Board also acknowledges that the value of certain strategic initiatives may take several years to deliver. Further terms and conditions of the LTI plan are as follows: 50 | Monash IVF Group 25 Annual Report 2023 | 51 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report for the year ended 30 June 2023 Remuneration Report (Audited) continued for the year ended 30 June 2023 • • • The invitations issued to eligible persons will include information such as award conditions and, upon acceptance of an invitation, the Board will grant awards in the name of the eligible person. Awards may not be transferred, assigned or otherwise dealt with except with the approval of the Board. Awards will only vest where the conditions advised to the participant by the Board have been satisfied. An unvested award will lapse in a number of circumstances, including where conditions are not satisfied within the relevant time period, or in the opinion of the Board, a participant has committed an act of fraud or misconduct or gross dereliction of duty. If a participant’s engagement with the Company (or one of its subsidiaries) terminates before an award has vested, the Board may determine the extent to which the unvested awards that have not lapsed will become vested awards or, if the award offer does not so provide and the Board does not decide otherwise, the unvested awards will automatically lapse. Awards are subject to malus and clawback conditions whereby the Board may, in its discretion, and subject to applicable laws, determine the performance rights or shares already allocated following the vesting or exercise of a performance right are forfeited, recovered or the conditions modified. The Board’s decision in regard to unfair benefits obtained by the participant is final and binding. • Where there is a takeover bid or a scheme of arrangement proposed in relation to the Company, the Board may determine that the participant’s unvested awards will become vested awards. In such circumstances, the Board shall promptly notify each participant in writing that the awards have become vested awards, or that he or she may, within the time period specified in the notice and where applicable in accordance with the class or category of award, exercise such vested awards. A participant is not entitled to participate, in their capacity as holder of awards, in any new issue of shares in the Company, nor in any return of capital, buyback or other distribution or payment to shareholders, unless the Board determines otherwise. In the event of a bonus issue or rights issue, the rights of the award will be altered in a manner (if any) determined by the Board, consistent with the ASX Listing Rules. • • • In the event of any reorganisation of the issued ordinary capital of the Company before the exercise of an award, the number of shares attached to each award will be reorganised in the manner specified in the LTI plan and in accordance with the ASX Listing Rules or, if the manner is not specified, the Board will determine the reorganisation. In any event, the reorganisation will not result in any additional benefits being conferred on participants which are not conferred on shareholders of the Company. Participants who hold an award issued pursuant to the LTI plan have no rights to vote under the LTI award at meetings of the Company until that award has vested (and is exercised, if applicable) and the participant is the holder of a valid share in the Company. Shares acquired upon vesting of the award will, upon issue, rank equally in all respects with other shares. No award or share may be offered under the LTI plan if to do so would contravene the Corporations Act, the ASX Listing Rules or instruments of relief issued by ASIC from time to time. 4.0 Executive and Non-Executive Remuneration 4.1 KMP Remuneration The respective total reward mix for KMP in FY23 is as follows, assuming business performance results in target vesting for STI and maximum grant value for LTI. KMP Mr. Michael Knaap Mr. Malik Jainudeen Mr. Hamish Hamilton Dr. Richard Henshaw Fixed Pay 39.2% 52.6% 52.6% 100.0% STI 25.5% 23.7% 23.7% 0.0% LTI 35.3% 23.7% 23,7% 0.0% At Risk 60.8% 47.4% 47.4% 0.0% Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 KMP Component Commentary Mr. Michael Knaap – Chief Executive Officer & Managing Director TFR STI LTI (performance rights) Notice period Term of Agreement 1 July 2022 to 30 June 2023- $594,825 per annum The CEO has the opportunity to earn an annual incentive of 65% of total fixed remuneration based on meeting certain defined criteria. The FY2023 STI criteria were subject to both financial (70%) and non-financial (30%) outcomes. STI is only applicable if the clinical pregnancy rate is at or above the ANZARD mean. 532,599 performance rights were granted in FY2023 which is equivalent to 90% of TFR. These rights vest at the end of the 3 year performance period subject to meeting certain EPS and TSR outcomes. 6 months No Fixed Term KMP Component Commentary Dr. Richard Henshaw (Executive Director) TFR STI $318,675 per annum Dr. Henshaw was the only doctor during FY2023 who served as a director. He was paid a salary for his clinician duties and medical leadership roles. Not eligible for a STI payment LTI (performance rights) Notice period Term of Agreement Not eligible for a LTI offer 6 months No Fixed Term KMP Component Commentary Mr. Malik Jainudeen (Chief Financial Officer & Company Secretary) TFR STI LTI (performance rights) Notice period Term of Agreement 1 July 2022 to 30 June 2023 - $356,895 per annum The CFO has the opportunity to earn an annual incentive of 45% of total fixed remuneration based on meeting certain defined criteria. The FY2023 STI criteria were subject to both financial (70%) and non-financial (30%) outcomes. STI is only applicable if the clinical pregnancy rate is at or above the ANZARD mean. 159,780 performance rights were granted in FY2023 which is equivalent to 45% of TFR. These rights vest at the end of the 3 year performance period subject to meeting certain EPS and TSR outcomes. 3 months No Fixed Term 52 | Monash IVF Group 26 27 Annual Report 2023 | 53 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 KMP Component Commentary 5.0 Details of Remuneration for Key Management Personnel Mr. Hamish Hamilton (Chief Operating Officer) TFR STI LTI (performance rights) Notice period Term of Agreement 1 July 2022 to 30 June 2023 - $356,895 per annum 5.1 Key Management Personnel (“KMP”) The COO has the opportunity to earn an annual incentive of 45% of total fixed remuneration based on meeting certain defined criteria. The FY2023 STI criteria were subject to both financial (70%) and non-financial (30%) outcomes. STI is only applicable if the clinical pregnancy rate is at or above the ANZARD mean. 159,780 performance rights were granted in FY2023 which is equivalent to 45% of TFR. These rights vest at the end of the 3 year performance period subject to meeting certain EPS and TSR outcomes. 3 months No Fixed Term KMP have authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including directors of the Company and other Executives. KMP comprise the directors of the Company and the senior Executives for the Group named in this report. Name Position Period Covered Under this Report Non-Executive Directors Mr Richard Davis Mr Josef Czyzewski Mr Neil Broekhuizen Ms Zita Peach Ms Catherine West Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Full Financial Year Full Financial Year Full Financial Year Full Financial Year Full Financial Year Name Position Period Covered Under this Report 4.2 Non-Executive Director (NED) Remuneration Policy Executive Directors Under the Constitution, the Directors decide the total amount paid to all Directors as remuneration for their services as Directors. However, under the ASX Listing Rules, the total amount paid to all Directors for their services must not exceed in aggregate in any financial year, the amount fixed by the Company in a general meeting. This amount has been fixed by the Company at $950,000. For the 2023 financial year, the fees payable to the current NEDs are $605,144 in aggregate reflecting a $17,551 increase compared to FY2023. Role Fees Chair Other Non-Executive Directors Additional Fees Audit & Risk Committee – Chair Audit & Risk Committee – Member Remuneration & Nomination Committee – Chair Remuneration & Nomination Committee – Member 2023 $ 150,469 93,625 17,833 8,902 17,833 8,902 2022 $ 146,086 90,898 17,313 8,643 17,313 8,643 Mr Michael Knaap Chief Executive Officer & Full Financial Year Dr Richard Henshaw Other KMP Mr Malik Jainudeen Mr Hamish Hamilton Managing Director Executive Director Full Financial Year Chief Financial Officer & Company Secretary Chief Operations Officer Full Financial Year Full Financial Year 54 | Monash IVF Group 28 29 Annual Report 2023 | 55 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Remuneration Report (Audited) continued for the year ended 30 June 2023 Remuneration Report (Audited) continued for the year ended 30 June 2023 0 3 1 3 d e s a b e r a h S s t n e m y a p s t i f e n e b t l n e m y o p m e - t s o P s t i f e n e b e e y o p m e m r e t l t r o h S $ l a t o T $ s t h g R i $ s t i f e n e b n o i t a n i m r e T $ s t i f e n e b m r e t - g n o l r e h t O $ $ n o i t a u n n a r e p u S l a t o T $ t i f e n e b r e h t O $ h s a C I T S e v i t n e c n i $ s e e F & y r a a S l . r a e y l a i c n a n i f r o i r p d n a t n e r r u c e h t r o f P M K s ’ p u o r G e h t y b d e v i e c e r n o i t a r e n u m e r e h t f o s l i a t e d l e b a t g n i w o l l o f e h T ) d e u n i t n o c ( l e n n o s r e P t n e m e g a n a M y e K r o f n o i t a r e n u m e R f o s l i a t e D 0 5 . 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i m i L p u o r G F V I h s a n o M t r o p e R n o i t a r e n u m e R 3 7 2 , 8 6 1 , 0 0 4 3 6 1 0 6 3 , 0 2 1 , 8 6 8 6 1 1 7 2 5 , 2 0 1 5 5 5 9 9 , 7 5 4 , 1 1 1 , 5 1 2 8 0 1 7 2 5 , 2 0 1 5 5 5 9 9 , 4 4 1 , 5 0 6 , 3 9 5 7 8 5 - - - - - - - - - - - - 9 3 5 8 3 0 , , 1 8 2 6 , 5 0 2 , 2 1 1 4 9 7 7 6 9 , 3 4 3 , 1 3 3 6 2 3 6 0 5 2 8 3 , , 1 , 3 4 4 0 2 1 1 , , 9 4 0 0 7 1 - - 8 2 6 , 5 0 2 , 9 4 0 0 7 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0 9 9 , 5 1 5 5 8 4 1 , 7 3 4 , 1 1 4 2 6 0 1 , - - 1 9 5 , 0 1 8 3 8 9 , 2 4 7 , 9 0 5 0 9 , 0 6 7 , 7 4 7 6 3 4 4 , 6 4 0 , 7 2 8 6 5 3 2 , 2 9 2 , 5 2 8 6 5 3 2 , 8 3 3 , 2 5 6 3 1 7 4 , 3 8 2 , 2 5 1 , 5 4 5 8 4 1 3 2 9 , 8 0 1 , 4 4 2 6 0 1 7 2 5 , 2 0 1 5 5 5 9 9 , 6 6 8 , 0 0 1 7 7 3 8 9 , 5 8 7 , 2 9 5 0 5 0 9 , 4 8 3 , 7 5 5 , 6 2 2 3 4 5 5 6 8 , 5 0 8 , 5 9 4 0 0 6 5 7 6 , 8 1 3 , 3 6 7 2 0 3 , 8 5 2 3 0 9 0 4 5 4 2 1 , , 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5 5 0 , 9 3 2 0 1 5 8 4 , - - 5 5 0 , 9 3 2 0 1 5 8 4 , 3 8 2 , 2 5 1 , 5 4 5 8 4 1 3 2 9 , 8 0 1 , 4 4 2 6 0 1 7 2 5 , 2 0 1 5 5 5 9 9 , 6 6 8 , 0 0 1 7 7 3 8 9 , 5 8 7 , 2 9 5 0 5 0 9 , 4 8 3 , 7 5 5 , 6 2 2 3 4 5 0 1 8 , 6 6 5 , 5 8 9 1 5 5 5 7 6 , 8 1 3 , 3 6 7 2 0 3 5 8 4 , 5 8 8 , 8 4 7 4 5 8 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 s r o t c e r i D e v i t u c e x E - n o N s i v a D d r a h c i R r M i k s w e z y z C f e s o J r M n e z i u h k e o r B l i e N r M t s e W e n i r e h t a C s M h c a e P a t i Z s M s r o t c e r i D e v i t u c e x E - n o N l a t o T s r o t c e r i D e v i t u c e x E p a a n K l e a h c i M r M w a h s n e H d r a h c i R r D s r o t c e r i D e v i t u c e x E l a t o T d e s a b e r a h S s t n e m y a p s t i f e n e b t l n e m y o p m e - t s o P s t i f e n e b e e y o p m e m r e t l t r o h S ) d e u n i t n o c ( l e n n o s r e P t n e m e g a n a M y e K r o f n o i t a r e n u m e R f o s l i a t e D 0 5 . 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i m i L p u o r G F V I h s a n o M t r o p e R n o i t a r e n u m e R 7 6 7 , 1 1 5 , 4 5 4 8 0 4 2 4 4 , 4 0 5 , 2 1 7 0 0 4 5 7 2 , 6 5 0 9 6 3 4 , 5 7 2 , 6 5 1 0 9 6 3 , 9 0 2 6 1 0 , , 1 0 5 5 , 2 1 1 , 6 6 1 9 0 8 1 9 5 0 8 , 9 5 8 3 0 0 , , 3 , 2 0 2 7 1 5 2 , 8 7 1 , 8 1 3 , 0 4 6 0 5 2 - - - - - - - - - - - - - - - - 6 4 0 , 7 2 8 6 5 3 2 , 6 4 0 , 7 2 8 6 5 3 2 , 2 9 0 , 4 5 6 3 1 7 4 , 0 9 1 , 4 5 1 , 9 3 6 8 3 1 6 4 4 , 8 2 4 , 6 9 1 1 4 3 1 2 1 , 1 2 4 , 3 4 2 0 4 3 7 6 5 , 9 4 8 , 9 3 4 1 8 6 1 9 4 1 3 5 , , 2 , 3 2 9 7 2 1 2 , $ l a t o T $ s t h g R i $ s t i f e n e b n o i t a n i m r e T $ s t i f e n e b m r e t - g n o l r e h t O $ $ n o i t a u n n a r e p u S l a t o T t i f e n e b r e h t O $ - - - - - - - - $ h s a C I T S e v i t n e c n i 0 0 3 , 9 9 5 7 9 , 1 9 4 0 4 9 1 , 1 5 4 8 1 , 5 5 8 7 3 , 5 7 2 , 1 9 1 0 3 3 , 0 3 4 5 6 3 6 8 , $ s e e F & y r a a S l 6 4 1 , 9 2 3 , 2 9 7 1 2 3 6 4 1 , 9 2 3 , 2 9 7 1 2 3 2 9 2 , 8 5 6 , 4 8 5 3 4 6 1 6 1 1 0 1 , , 2 , 8 5 5 1 4 0 2 , ) P M K ( l e n n o s r e P t n e m e g a n a M y e K r e h O t 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 n o i t a r e n u m e R P M K r e h t O l a t o T n o i t a r e n u m e R P M K l a t o T n e e d u n i a J k i l a M r M n o t l i m a H h s i m a H r M 56 | Monash IVF Group Annual Report 2023 | 57 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Remuneration Report (Audited) continued for the year ended 30 June 2023 $ 6 4 0 . 2 3 0 . 1 6 0 . 9 4 0 . 3 9 0 . 0 6 0 . 2 0 1 . 6 4 0 . 2 3 0 . 1 6 0 . 9 4 0 . 3 9 0 . 0 6 0 . 2 0 1 . 2 3 0 . 1 6 0 . 9 4 0 . 3 9 0 . 0 6 0 . 2 0 1 . - - , 0 4 1 1 5 3 - - - - - - 4 0 6 3 8 , - - - - - - - - - 4 0 6 3 8 , - , 9 8 4 0 5 1 , 0 4 1 1 5 3 , 0 5 8 9 3 1 , 6 1 3 6 2 3 , 0 8 7 9 5 1 , 9 1 8 2 7 3 - 1 3 8 5 3 , 4 0 6 3 8 , 5 5 9 1 4 , 5 9 8 7 9 , 4 3 9 7 4 , , 6 4 8 1 1 1 1 3 8 5 3 , 4 0 6 3 8 , 5 5 9 1 4 , 5 9 8 7 9 , 4 3 9 7 4 , , 6 4 8 1 1 1 - - - - - - ) , 5 0 2 7 4 1 ( ) 1 0 8 6 3 , ( - - - - - - - - - - - - 8 4 3 , 8 1 5 4 2 5 8 3 3 , , 2 , ) 6 0 0 4 8 1 ( - - - - - - - - - - - - - - - - - - - - - l e u a V r i a F y t i r u c e S r e p t a e l b a s i c r e x E f o e c n a a B l 3 2 0 2 n u J 0 3 y t i u q E d e t s e v n U r o d e s p a L d e t i e f r o F d e t s e V 3 2 Y F n i d e t n a r G 3 2 Y F n i 3 2 0 2 n u J 0 3 r e b m u N r e b m u N r e b m u N r e b m u N r e b m u N - - - - - , 0 8 7 9 5 1 , 9 1 8 2 7 3 - - - - - - - 4 3 9 7 4 , , 6 4 8 1 1 1 - - - - 4 3 9 7 4 , , 6 4 8 1 1 1 - - 1 0 8 6 3 , 1 3 8 5 3 , 4 0 6 3 8 , 5 5 9 1 4 , 5 9 8 7 9 , - - 1 3 8 5 3 , 4 0 6 3 8 , 5 5 9 1 4 , 5 9 8 7 9 , 9 5 1 , 2 5 8 1 7 3 0 7 6 , , 1 r e b m u N , 5 0 2 7 4 1 , 9 8 4 0 5 1 , 0 4 1 1 5 3 , 0 5 8 9 3 1 , 6 1 3 6 2 3 d e t s e v n U f o e c n a a B l 2 2 l u J 1 y t i u q E d o i r e P e t a D d n E e c n a m r o f r e P e t a D t n a r G s e l d r u H e p y T 2 2 g u A 0 3 9 1 t c O 6 1 3 2 g u A 0 3 0 2 t c O 6 1 3 2 n u J 0 3 0 2 t c O 6 1 4 2 p e S 0 1 1 2 v o N 9 1 4 2 n u J 0 3 1 2 v o N 9 1 5 2 p e S 1 1 2 2 v o N 3 2 5 2 n u J 0 3 2 2 v o N 3 2 2 2 g u A 0 3 9 1 t c O 6 1 3 2 g u A 0 3 0 2 t c O 6 1 3 2 n u J 0 3 0 2 t c O 6 1 4 2 p e S 0 1 1 2 v o N 9 1 4 2 n u J 0 3 1 2 v o N 9 1 5 2 p e S 1 1 2 2 v o N 3 2 5 2 n u J 0 3 2 2 v o N 3 2 3 2 g u A 0 3 0 2 t c O 6 1 3 2 n u J 0 3 0 2 t c O 6 1 4 2 p e S 0 1 1 2 v o N 9 1 4 2 n u J 0 3 1 2 v o N 9 1 5 2 p e S 1 1 2 2 v o N 3 2 5 2 n u J 0 3 2 2 v o N 3 2 R S T R S T S P E R S T S P E R S T S P E R S T R S T S P E R S T S P E R S T S P E R S T S P E R S T S P E R S T S P E s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i p a a n K l e a h c i M r M e m a N n e e d u n i a J k i l a M r M n o t l i m a H h s i m a H r M : w o e b l d e l i a t e d s i r a e y l a i c n a n i f e h t g n i r u d t n e m e v o m e h t d n a s t h g i r e c n a m r o f r e p d e t s e v n u f o s l i a t e D ) d e u n i t n o c ( l e n n o s r e P t n e m e g a n a M y e K r o f n o i t a r e n u m e R f o s l i a t e D 0 5 . 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i m i L p u o r G F V I h s a n o M t r o p e R n o i t a r e n u m e R 58 | Monash IVF Group Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 5.0 Details of Remuneration for Key Management Personnel (continued) 5.2 Analysis of incentives included in remuneration 2 3 Details of the vesting profile of the STI cash incentives awarded as remuneration to each director of the Company and other KMP are detailed below: Cash Incentive (2023) Cash Incentive (2022) % of Available Incentive % of Available Incentive Payable and Paid Payable and Paid Not Payable Paid Paid Not Paid Executive Directors Mr Michael Knaap Dr Richard Henshaw $239,055 - 62% - 38% - $48,510 - 14% - Other Key Management Personnel Mr Malik Jainudeen Mr Hamish Hamilton $99,300 $91,975 62% 57% 38% 43% $19,404 $18,451 14% 14% 86% - 86% 86% 5.3 Loans to Key Management Personnel No loans were issued to KMP during 2023. 5.4 Key Management Personnel Shareholdings The following details Monash IVF Group ordinary shares held by Directors and KMP as of the date of this Report: Balance at start of year Granted as remuneration Net Change Balance at end of year Name Non-Executive Directors Mr Richard Davis Mr Josef Czyzewski Mr Neil Broekhuizen Ms Zita Peach Ms Catherine West Executive Directors Mr Michael Knaap Dr Richard Henshaw 182,067 241,382 350,000 92,803 37,100 150,655 1,358,842 Other Key Management Personnel Mr Malik Jainudeen Mr Hamish Hamilton Total 19,231 123,835 2,555,915 - - - - - - - - - - - - - - - - - - - - 182,067 241,382 350,000 92,803 37,100 150,655 1,358,842 19,231 123,835 2,555,915 33 Annual Report 2023 | 59 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Remuneration Report (Audited) continued Remuneration Report for the year ended 30 June 2023 for the year ended 30 June 2023 6.0 Link to Group Performance 6.1 Group Performance The revenue and earnings of the Group for the five years to 30 June 2023 are summarised below: Measure Revenue Underlying EBITDA (3) Reported EBITDA Underlying NPAT (3) Reported NPAT STI Payable Total Shareholder Return (1) Closing Share Price ($) Dividend Per Share (cents) Earnings per Share (cents) (1) 2023 $’000 213,590 53,431 48,461 25,469 21,966 49.1% 27% 1.15 4.4 5.6 2022 $’000 192,294 48,145 43,157 22,232 18,502 16.7% 21% 0.94 4.4 4.7 2021 $’000 183,605 47,749 51,281 23,418(2) 25,687(2) 81.1% 61% 0.85 4.2 6.5 2020 $’000 145,417 34,797 32,833 14,353 11,726 24.1% -59% 0.53 2.1 4.6 2019 $’000 151,980 37,815 37,242 20,871 19,852 29.4% 34% 1.40 6.0 8.4 During the period, Revenue, EBITDA, NPAT, TSR and EPS were key performance measures. EBITDA is a major component of the STI plans for KMP including the CEO, CFO and COO whilst TSR and EPS growth are long term metrics used to measure the CEO, CFO and COO’s remuneration via the Executive Long Term Incentive Plan. CEO, CFO and COO remuneration varies with the outcomes of these measures above a required threshold performance level. 1) 2) The Net Profit after Tax, total shareholder return and earnings per share are not comparable for certain years due to the capital structure and discontinued operations. The 30 June 2021 amounts have been restated due to the IFRS Interpretations Committee decision in relation to accounting for Software as a Service. 3) Underlying EBITDA and NPAT are non-IFRS measures that are utilised for internal reporting purposes. Monash IVF Group Limited Directors’ Report Directors’ Report continued for the year ended 30 June 2023 for the year ended 30 June 2023 Environmental regulations The Group is not subject to any significant environmental regulations under Commonwealth or State legislation. Likely developments The Group remains committed, prudent and focused on profitably growing the Business through leveraging its scientific capabilities and scale across the clinic network both domestically and internationally. Indemnification and insurance of officers and auditors Since the end of the previous financial period, the Group has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an officer or auditor of the Group. Lead auditor’s independence declaration The lead auditor’s independence declaration is set out on page 36 and forms part of the directors’ report for the year ended 30 June 2023. page 62 This report is made in accordance with a resolution of the directors. Richard Davis Chairman Michael Knaap Chief Executive Officer and Managing Director Dated in Melbourne this 22nd day of August 2023 60 | Monash IVF Group 34 35 Annual Report 2023 | 61 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Monash IVF Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Monash IVF Group Limited for the financial year ended 30 June 2023 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Chris Sargent Partner Melbourne 22 August 2023 Monash IVF Group Limited Corporate Governance Statement Corporate Governance Statement This statement, approved by the Board, reports on the Group’s key governance framework, principles and practices as at 30 June 2023. These principles and practices are subject to regular review and when necessary revised to reflect legislative changes or corporate governance best practice. The Board of Directors is committed to maintaining the Group’s pre-eminent status as a leader in the fields of Assisted Reproductive Services (ARS) and specialist women’s imaging. This commitment will lead to sustainable growth and shareholder returns. The Board is a strong advocate of good corporate governance and its fulfilment of these practices and obligations will enhance the ability for shareholders to be appropriately rewarded. Monash IVF Group Limited complies in all material respects with the fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The details of this compliance and reasons for any non compliance are set out in this statement. A separate Appendix 4G has been lodged with the Australian Securities Exchange Limited (ASX). Principle 1 Lay solid foundations for management and oversight 1.1 Roles and responsibilities of the Board and Management and delegation The role of the Board is to oversee good governance practice in all aspects of the Group’s undertakings. This includes setting and approving the strategic direction of the Group and to guide and monitor Monash IVF Group management and its businesses in achieving their strategic objectives. The Board is committed to maximising performance through continued investment in all aspects of the business including research, education and innovation in clinical services to improve patient outcomes. The Board is committed to a high standard of corporate governance practice and fosters a culture of compliance which values ethical behaviour, integrity, teamwork and respect for others. The Monash IVF Group Limited Board Charter outlines the role and responsibilities of the Board along with direction on Board composition, structure and membership requirements. The Charter clearly outlines matters expressly reserved for the Board’s determination and those matters delegated to Management. The Company’s Chief Executive Officer and Managing Director, Michael Knaap, has responsibility for day-to-day management of Monash IVF Group Limited in its entirety. Michael was previously the Chief Financial Officer & Company Secretary and held the position of Interim Chief Executive Officer between October 2018 and April 2019. Michael was appointed to Chief Executive Officer and Managing Director on 15 April 2019 and is supported by the Executive Team which is responsible for implementation of Board directed strategies at an operational level. The Monash IVF Group Limited Board Charter is available on the Monash IVF Group Limited website Corporate Governance | Monash IVF Group 1.2 and 1.3 Board and Senior Executive Appointments In the event of a new appointment to a director or senior executive role, appropriate probity and integrity checks, such as experience, education, criminal record and bankruptcy history, are undertaken to ensure the individual has an appropriate background to hold the role with Monash IVF Group Limited. Should the role be for election of a director for the first time a comprehensive check of the candidates personal and professional history would occur including details of any other material directorships or non-executive roles. With the exception of the Managing Director & CEO, one third of all eligible Directors, and any other Director who has held office for over three years since their last election, must retire in rotation at the Annual General Meeting (AGM). This is in accordance with the Company’s Constitution. A retiring Director holds office until the conclusion of the meeting at which he or she retires. They may stand for re-election by security holders at that meeting. The Board may appoint a new Director to fill a casual vacancy and that Director will hold office until the close of the next AGM, unless elected at that meeting. 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. 3636 62 | Monash IVF Group 37 Annual Report 2023 | 63 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 1 Lay solid foundations for management and oversight (continued) Principle 1 Lay solid foundations for management and oversight (continued) The Board makes recommendations in respect of the election or re-election of each Director based on tenure, skills and experience of the Director in relation to Board composition. The Remuneration and Nomination Committee ensures that appropriate background checks take place for the appointment of a new Director. The details of those Directors who stand for re-election will be provided in the Notice of Meeting which is sent to security holders prior to the AGM. The Board provides security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director, in addition a statement by the Board as to whether it supports the election or re-election of the candidate and a summary of the reasons as to why the Board has taken this view. Additionally, each Director standing for re-election makes a short presentation to security holders at the meeting itself. All Board members have a written agreement outlining the terms of their appointment clearly articulating the expectations, roles and responsibilities and remuneration of their role. All employment agreements for senior executives clearly set out their terms of appointment, remuneration and requirements to adhere to company policies and procedures. Industry regulation and Company policy requires police checks for employees which are undertaken prior to commencement. Employment contracts require employees to disclose any offences that would result in an adverse police check. 1.4 Company Secretary Mr Malik Jainudeen was appointed in the role of Company Secretary and Chief Financial Officer with Monash IVF Group Limited in April 2019. The Company Secretary’s role and responsibility is for all matters to do with the proper functioning of the Board and is accountable to the Board, through the Chairman of the Board. 1.5 Diversity and Inclusion Policy Monash IVF Group recognises that its business success is a reflection of the quality of its people and is proud of its strong diverse and inclusive workforce. The Company’s workforce is made up of individuals with a diverse set of skills, values, experiences, backgrounds and attributes including those gained on account of their gender, age, disability, ethnicity, marital or family status, religious or cultural background and sexual orientation. Monash IVF Group is committed to supporting and further developing this through attracting, engaging and retaining diverse talent as supported by a Diversity & Inclusion policy. Monash IVF Group is a recognised employer under the Workplace Gender Equity Act 2012 and is compliant with the requirements of the Australian Government Workplace Gender Equity Agency. Monash IVF Group was awarded the Employer of Choice for Gender Equity Citation in March 2022 in recognition of the work undertaken in Gender Equity. The breakdown of gender diversity at Monash IVF Group is listed below: Organisational Level Non-Executive Directors Number of Women 2 % of Women 40% Senior Management Team Leader Total Staff (inc above) 12 103 867 66% 98% 92% Target no less than 40% male / 40% female / 20% any gender no less than 40% male / 40% female / 20% any gender 50% The Board recognises the high proportion of women in the workplace and acknowledges that this gender diversity is reflective of the nature of the organisation. The Remuneration and Nomination Committee sets measurable objectives to achieve gender diversity and Monash IVF Group achieves diversity above industry standard with no less than 40% female (and 20% any gender) representation of Executives reporting to the CEO. Board representation continues to be targeted at no less than 40% female (and 20% any gender) representation. These measures were met during the year. Senior Management is defined as Executive Directors and Management personnel in operational leadership positions generally specific to state leadership teams. 38 64 | Monash IVF Group Monash IVF Group has in place a Flexible Work Arrangements policy to promote work/life balance and to accommodate family care in line with the operational requirements of the Business. During FY23, 36 employees have taken primary and secondary parental leave, utilising the Group’s generous parental leave policy. Flexible hour working arrangements either formally and informally are widely used across Monash IVF Group. The Diversity and Inclusion Policy is overseen by the Remuneration and Nomination Committee. The Committee has no executive powers with regard to its findings and recommendations however is responsible for monitoring, reviewing and reporting to the Board on the Company’s performance in respect to diversity in accordance with the Company’s Diversity and Inclusion Policy. The Board is committed to targeting a board composition aligned to its workforce and patient base over time. The Diversity and Inclusion Policy is available on the Monash IVF Group Limited website Corporate Governance | Monash IVF Group. Monash IVF Group is committed to providing a diverse and culturally inclusive work environment to ensure that all employees are valued and safe in their workplace. Monash IVF Group provides an Equal Employment Opportunity policy framework in relation to harassment, bullying, discrimination and grievance procedures. The policies are available to all employees via the Company intranet. The Group also offers an employee assistance program that provides a confidential counselling service to support employee wellbeing in the workplace. To ensure a full understanding of respectful workplace obligations, the organisation utilises a Learning Management System, an online learning management portal to manage and track the full compliance of all respectful workplace topics. Monash IVF Group continued their partnership with Pride in Diversity, a national not-for-profit employer support program for LGBTI workplace and is specifically designed to assist employers and employees with all aspects of inclusion including awareness and education. 1.6 Director Performance Evaluation The Remuneration and Nomination Committee Chair undertakes the process of performance reviews of the Board, its Committees and the Chairman. Objectives of the review are to ensure the Board adheres to ASX governance principles and to identify opportunities to improve the functioning of the Board as a whole. The focus is on the performance of the Board as a whole and, to a lesser extent, the Board committees. The Chairman performs individual appraisals on each director. The annual review completed by Monash IVF Group Limited Board was undertaken in July 2023. It involved directors completing a confidential online questionnaire covering aspects outlined in the Board Charter. The results were aggregated and discussed by the Board to inform areas or opportunities for improvement. 1.7 Senior Executive Evaluations Monash IVF Group Limited has an annual Performance Review Policy for all senior executives and managers as stated in the Board Charter. Senior executive and manager performance is reviewed by the CEO against KPIs which are both financial and non financial in nature. The performance evaluation process has been undertaken in accordance with this policy for the current financial year. The Remuneration and Nomination Committee has oversight of this process. The Chairman of the Board performs the CEO performance review against annual key performance indicators. Michael Knaap’s performance was formally reviewed in August and recommendations as a result were taken to the Board. The Board oversees and monitors the key performance indicators and strategic plan for the Group which also allows the Board to monitor the performance of senior executives outside the annual review process. Principle 2 Structure of the Board to be effective and add value The Constitution of the Company provides that the number of Directors must at any time be no more than ten and no less than three members. The Monash IVF Group Limited Board currently consists of seven directors, five independent and two non independent members. The Board charter prescribes that the Chair of the Board must be independent and the Board should consist of individuals who contribute a mix of skills and a diversity of professional backgrounds. Further information on the Board members is available in the Directors Report. 39 Annual Report 2023 | 65 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 2 Structure of the Board to be effective and add value (continued) Principle 2 Structure of the Board to be effective and to add value (continued) 2.2 Board Skill Matrix On establishing the Board in 2014 the desirable skills, attributes and experience required was considered in searching for potential Board members. The below skill matrix outlines the Board of Director skill set during FY23: Monash IVF Group Limited believes the current Board of seven members adequately allows its members to carry out its responsibilities without unnecessarily debiasing its effectiveness with an excessive number that can hinder individual engagement and involvement of Board members. To add efficiency to the Board, two committees are in-place; the Remuneration and Nomination Committee and the Audit and Risk Committee. The Board Charter prescribes that all committee members be Independent Directors. 2.1 Remuneration and Nomination Committee The Remuneration and Nomination Committee is governed by the Remuneration and Nomination Committee Charter as found on the Monash IVF Group Limited website at Corporate Governance | Monash IVF Group. The Remuneration and Nomination Committee consist of four independent Directors of the Board: • Ms Zita Peach (Chair) • Mr Richard Davis • Mr Josef Czyzewski • Ms Catherine West The Committee met 4 times with all Committee members in attendance. The Committee assists the Board by reviewing and making recommendations to the Board in relation to: • • • • • • • • • • • • • the Company's remuneration policy; Board succession issues and planning; Board member and re-election of members to the Board and its committees; Director induction and continuing professional development programs for Directors; remuneration packages of senior executives; non-executive Directors and executive Directors, equity-based incentive plans and other employee benefit programs; Company superannuation arrangements; the Company's recruitment, retention and termination policies; succession plans of the CEO, senior executives and executive Directors; the process for the evaluation of the performance of the Board, its Board Committees and individual Directors; the review of the performance of senior executives; review of the Company's remuneration policies and packages; and the size and composition of the Board and strategies to address Board diversity and the Company's performance in respect of the Company's Diversity and Inclusion Policy, including whether there is any gender or other inappropriate bias in remuneration for Directors, senior executives or other employees. Monash IVF Group Limited believe the current Director skill set is adequate to ensure an appropriate and diverse mix of backgrounds, expertise, experience and qualifications exist to assist with being able to understand and effectively advice on Group strategy and growth. 66 | Monash IVF Group 40 41 Annual Report 2023 | 67 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 2 Structure of the Board to be effective and to add value (continued) 2.3, 2.4 and 2.5 Board members, roles and independence A summary of the Board members, their roles, independence and appointment dates are as follows: Director Mr Richard Davis Position Independent Chairman Independent Yes Mr Josef Czyzewski Independent non-executive Director Ms Zita Peach Independent non-executive Director Mr Neil Broekhuizen Independent non-executive Director Ms Catherine West Mr Michael Knaap Independent non-executive Director CEO and Managing Director Dr Richard Henshaw Executive Director Yes Yes Yes Yes No – CEO and Managing Director No – Fertility Specialist with Monash IVF Group Limited Appointment Date 4/6/2014 4/6/2014 12/10/2016 4/6/2014 8/9/2020 15/4/2019 30/4/2014 The Board Charter outlines that at least half of the Board should be independent directors, one of whom is the Chairman. A director is deemed to be “independent” if free of any business or other relationship with the Company that could materially interfere with, or could reasonably be perceived to interfere with, the exercise of unfettered and independent judgement. The Board has assessed, using the criteria set out in the ASX Corporate Governance Principles and Recommendation, the independence of non-executive directors in light of their interests and relationships and considers at least half to be independent. The independence status and length of service of each director is outlined in the table above. The percentage of Board members considered independent was 71%. Mr Richard Davis was appointed Monash IVF Group Limited Chairman in June 2014. He is a non-executive Independent Director. Mr Davis, in his role as Chair, provides leadership to the Board and advice and support to the CEO. The Chair of the Board is responsible for overseeing Board dynamics and ensuring all directors contribute effectively and constructively to Group meetings and strategic agendas. 2.6 Director Induction and Professional Development Monash IVF Group Limited has a comprehensive induction process for Directors and senior executives. This induction includes meetings with senior management and staff to gain an understanding of the core business, strategy, financial, operational and risk management matters and factors relevant to the sectors and environments in which the Company operates as well as visits to laboratories and clinics to gain a more in depth understanding of the business. The Chairman periodically reviews whether there is a need for Directors to undertake professional development to maintain the skills and knowledge needed to perform their role as Directors effectively. Directors are active in undertaking professional development opportunities for the purpose of development and maintenance of their skills. The Board and its Committees are provided with updates and information from both management and external experts on various topics relevant to the Company’s circumstances, including emerging business and governance issues relevant to the Company and material developments in laws and regulations. The Board and individual Directors attend at operational sites, meet staff in operations and receive presentations from management across the Group’s operations. Board members have been continuously informed via research papers and presentations, financial and business results and discussion involving market strategic initiatives contributing to the continued professional development of the Board. Principle 3 Instill a culture of acting lawfully, ethically and responsibly 3.1 Organisational values The Board and senior executives are firmly committed to ensuring that all employees observe high standards of lawful, ethical behaviour and conduct. Setting the cultural tone for the organisation, Monash IVF Group’s core values are as follows: Our Principles Care Promotes a team environment that values, encourages and supports differences Genuinely cares about people Is available and ready to help Demonstrates real empathy with the joys and pains of others Collaborate Build strong formal and informal, internal and external networks across a variety of functions and locations Partners with others to achieve quality outcomes and share in the successes Values, calls upon and utilises the experience and expertise of others Shares information for the benefit of individual, team, clinic and or organisation Communicate Provides the information people need to know, to do their jobs and to feel valued as a member of the team, clinic and organisation Utilises different types of communication to deliver timely and meaningful messages Has the patience to hear people out Commitment Is dedicated to meeting the expectations and requirements of patients, clinicians and internal stakeholders Persists in accomplishing objects despite obstacles and setbacks Pushes self and others to achieve Create Challenges the traditional way of thinking and adopts change where required Shows initiative and can spot and seize opportunities Empowers others to bring creative ideas and suggestions to life Monash IVF Group’s performance review process requires assessment of the extent to which personnel have demonstrated behaviour consistent with these values. The values also form the foundation for the monthly and annual employee CUDOS Awards, recognising and celebrating outstanding employee behaviour in line with these values. The principles are provided with sufficient guidance to enable personnel to make decisions consistent with the Board’s risk appetite and core values. 3.2 Code of Conduct and whistleblower program Monash IVF Group Limited recognises the need to observe the highest standards of corporate practice, business conduct and responsible decision making. Accordingly, the Board adheres to a formal Code of Conduct which outlines Monash IVF Group Limited policies on various matters including ethical conduct, business and personal conduct, compliance, privacy, security of information, financial integrity and conflicts of interest. This Code clearly states the standard of responsibility and ethical conduct expected of staff, directors or doctors engaged by the Company. The Code recognises the numerous legislative and compliance matters that affect the business. 68 | Monash IVF Group 42 43 Annual Report 2023 | 69 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 3 Instill a culture of acting lawfully, ethically and responsibly (continued) Principle 4 Safeguard integrity in corporate reporting (continued) The Code of Conduct promotes ethical and responsible decision making by directors, contractors and employees. The Code also gives direction in the avoidance of conflicts of interest and mandates high standards of personal integrity, objectivity and honesty in the dealings of all Monash IVF Group Limited Board members and staff, detailing guidelines to ensure the highest standards are maintained. Monash IVF Group holds all staff to act according to this code to maintain standards in confidentiality and general behaviour. The code is provided to all staff as part of the Group induction process and compliance is reviewed regularly. The Board or Audit and Risk Management Committee are informed of any material breaches of the entity’s code of conduct. 3.3 Whistleblower policy The Company has a Whistleblower policy which has been communicated to all Company personnel and published on the Company’s website. The Whistleblower Policy promotes and supports the reporting of matters of concern and suspected wrongdoing, such as dishonest or fraudulent conduct, breaches of legislation and other conduct that may cause financial loss or be otherwise detrimental to its reputation or interests. The Policy sets out the approach to disclosure, investigation and reporting and outlines the protection to be afforded to those who report such conduct against reprisals, discrimination, harassment or other disadvantage resulting from their reports. All disclosures received under the Whistleblower Policy are reported to the Audit and Risk Management Committee with details of investigations completed. Monash IVF Group Limited Code of Conduct policy and Whistle Blower policy can be found in full on our website under Corporate Governance | Monash IVF Group. 3.4 Anti-Bribery and Corruption policy The Company has an Anti-Bribery and Corruption policy which has been communicated to all Company personnel and published on the Company’s website. The Anti-Bribery and Corruption policy describes the standards of ethical conduct and behaviour required of all Individuals within the Monash IVF Group, noting that all representatives must act within the law and not engage in corrupt practices or acts of bribery that expose Monash IVF Group, its employees and clinical partners to the risks of prosecution, fines and imprisonment, as well as endangering Monash IVF Group’s reputation. Where these standards are not met, then appropriate disciplinary action may be taken. Monash IVF Group will apply a zero- tolerance approach to acts of bribery and/or corruption by any Individual or third-party representative. The Board or Audit and Risk Management Committee are informed of any material breaches of the entity’s Anti-Bribery and Corruption policy. Monash IVF Group Limited Anti-Bribery and Corruption policy can be found in full on our website under Corporate Governance | Monash IVF Group. Principle 4 Safeguard integrity in corporate reporting 4.1 Audit and Risk Management Committee The Audit and Risk Management Committee for Monash IVF Group Limited are responsible for supervising the process of corporate governance, financial reporting and risk management, internal control, continuous disclosure, non-financial risk monitoring and external audit. The Committee’s role, as outlined in the Audit and Risk Management Committee Charter, is to monitor the Group’s compliance with laws and regulations and adherence to the Group Code of Conduct and to promote discussion with regard to risk between Board, management and the external auditor. Monash IVF Group Limited engages the services of an external auditor; who’s independence and performance is monitored and reviewed by the Audit and Risk Management Committee. The external auditors and Audit & Risk Committee and Audit Chair met on a number of occasions independently of Management. The Audit and Risk Management Committee consists of three non-executive Independent Directors with experience and qualifications in financial management as outlined in the Audit and Risk Management Committee Charter. Current members of the Committee are: • Mr Josef Czyzewski (Chair) • Mr Richard Davis • Mr Neil Broekhuizen The Committee met four times during the year. Details of the Committee members’ experience and technical expertise are set out in the directors’ biographies which can be viewed on the Board of Directors pages in the latest Annual Report. The Audit and Risk Management Committee Charter is available on the Monash IVF Group Limited website at Corporate Governance | Monash IVF Group. 4.2 Financial Statement Approval Monash IVF Group Limited CEO and Managing Director, Mr Michael Knaap, and CFO and Company Secretary, Mr Malik Jainudeen, reviewed and verified that the half year and full year reporting statements as listed in reports to the ASX and shareholders are true and accurate. A declaration to that effect has been signed by both to declare that the financial records have been entered and maintained as per the Corporations Act (2001) accounting standards and they give a fair and true view of the financial position and performance of Monash IVF Group Limited. Further a detailed questionnaire is completed by senior operational, administrative and financial management attesting to the validity and integrity of the processes that they control prior to the approval of the financial statements. These questionnaires are reviewed by the Audit and Risk Management Committee. 4.3 Process for verifying Periodic Corporate Reports Monash IVF Group Limited is committed to providing security holders and other external stakeholders with timely, consistent and transparent corporate reporting. The process which is followed to verify the integrity of periodic corporate reports is tailored based on the nature of the relevant report, its subject matter and where it will be published. Monash IVF Group Limited seeks to adhere to the following general principles with respect to the preparation and verification of its corporate reporting: • • • • periodic corporate reports prepared by, or under the oversight of, the relevant subject matter expert for the area being reported on; the relevant report is in compliance with any applicable legislation or regulations; the relevant report reviewed (including any underlying data), with regard to ensuring it is not inaccurate, false, misleading or deceptive; and where required by law or by Monash IVF Group policy, relevant reports authorised for release by the appropriate approver required under that law or policy. Consistent with these principles, the non-audited sections of the Annual Report and Corporate Governance Statement for the reporting period were prepared by the relevant subject matter experts and reviewed and verified by relevant senior executives and senior managers prior to Board approval. ASX announcements (other than administrative announcements) during the Reporting Period were also reviewed and approved in accordance with the Continuous Disclosure policy, which includes review by the Board, CEO and CFO prior to publication. Principle 5 Make timely and balanced disclosure 5.1 Continuous Disclosure Monash IVF Group Limited is committed to effective communication with its investors and the wider community. The Company strives to ensure that all Stakeholders, market participants, patients and the wider community are informed in a timely manner of its activities and performance in line with its Continuous Disclosure Policy. 70 | Monash IVF Group 44 45 Annual Report 2023 | 71 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 5 Make timely and balanced disclosure (continued) This policy complies with the continuous disclosure obligations under the Corporation Act (2001) and the ASX Listing Rules and as much as possible seeks to achieve and exceed best practice to promote investor confidence in Monash IVF Group Limited. Continuous disclosure principles and requirements are well understood by the Monash IVF Group Limited Company Secretary and the Board of Directors and are in place to ensure all relevant information, especially of a sensitive nature, is made available in a timely manner. Any matters requiring disclosure are raised for consideration whenever necessary. The Monash IVF Group Limited website is structured to provide shareholders and the community with easy access to information. 5.2 and 5.3 Material market announcements and presentations The Company Secretary ensures that the Board receives copies of all material market announcements promptly after they have been made and ensures that any new investor or analyst presentation is released on the ASX before the presentation is given. The Continuous Disclosure Policy can be found on the Monash IVF Group website at Corporate Governance | Monash IVF Group. Principle 6 Respect the rights of security holders 6.1 Communication with Shareholders Monash IVF Group Limited ensures shareholders are fully informed of its governance processes and are notified of any major developments affecting the Group. In line with the Monash IVF Group Limited Communication Policy the Company's website is considered to be the primary means to provide information to all stakeholders. It has been designed to enable information to be accessed in a clear and readily accessible manner including: • • • • • • • • Company information including Board members; A ‘Corporate Governance’ landing page with documents including the Company's codes, policies and charters; all announcements and releases to the ASX; copies of presentations to shareholders, institutional investors, brokers and analysts; any media or other releases; all notices of meetings and explanatory material; annual and half yearly reports; any other relevant information concerning non-confidential activities of the Company including business developments. The Company website can be found at www.monashivfgroup.com.au where information can be clearly located under heading: Home – homepage with Company history and overview About – information on Our People, Collaborations and Career Opportunities • • • Our Business – information on brands and operating locations • • Innovations in Research – lists current and published research and our scientific firsts Investor Centre 6.2 Investor Relations In addition to the Company website, there is a dedicated Investor Relations page found at Corporate Governance | Monash IVF Group which provides investors and shareholders with information on Monash IVF Group Limited Board members, Announcements, Corporate Governance documents, Results presentations and webcasts. The Investor Centre also acts as a portal for two way communication between the Company and investors with links to a ‘Contact Us’ page which allows individuals to email enquiries and also provides postal address and contact number to allow access to the Company. The Communication Policy can be located at: Corporate Governance | Monash IVF Group Principle 6 Respect the rights of security holders (continued) 6.3 and 6.4 Attendance at Company meetings As cited in the Monash IVF Group Limited Communications Policy, the Company encourages full participation of Shareholders at the Annual General Meeting which provides an excellent opportunity for the Company to provide information to its shareholders and to receive Shareholder feedback. The next Annual General Meeting is planned to be held on 28 November, 2023. In the event Shareholders are not able to attend the meetings, questions can be directed to the Group for addressing at the Annual General Meeting and the presentations and webcasts are promptly added to the website. These can be found at Presentations and Webcasts | Monash IVF Group. All resolutions put to the Annual General Meeting will be decided by way of a poll. Shareholders are also able to direct any questions via the Group’s share registry provider, Link Market Services. 6.5 Electronic Communication The Company recognises that electronic communication is often a more efficient and more desired form of communication. Monash IVF Group Limited Communications Policy addresses this and accordingly Shareholders are given the option to communicate with the Company Share Registry electronically. The Company's email system allows staff and stakeholders to communicate with ease with Management and staff of the Company. Doctors, employees and other stakeholders have access to this system and are encouraged to use it to improve the flow of information and communication generally. The Monash IVF Group Limited Communications Policy can be located at Corporate Governance | Monash IVF Group. Principle 7 Recognise and Manage Risk The Monash IVF Group Limited Board, primarily through the Audit and Risk Management Committee, reviews and manages risk areas for the Group. Refer to section 4.1 for further information. 7.1 Audit and Risk Management Committee The identification and appropriate management of risks is an important priority for the Monash IVF Group Limited Board. ‘Risks’ are identified as any possible outcomes that could materially impact the Company's financial performance, assets, reputation, people or the environment. Risk recognition and management are viewed by the Company as integral to its objectives of creating and maintaining shareholder value, and to the successful execution of the Company's strategies. The Audit and Risk Management Committee oversees and governs risk management strategy and policy, to monitor risk management and to establish procedures which seek to provide assurance that major business risks are identified, consistently assessed and appropriately addressed. The Committee abides by the Audit and Risk Management Committee Charter to assist the Board in fulfilling its corporate governance and oversight responsibilities in actively identifying risks and developing appropriate mitigating actions. The Committee adheres to the Risk Management Policy for the business which highlights the risks relevant to Company operations and oversees that the entity is operating with due regard to the risk appetite set by the Board. Monash IVF Group Limited’s Audit & Risk Management Committee Charter can be found on the website at: Corporate Governance | Monash IVF Group. This Charter prescribes that the Audit and Risk Management Committee consist of at least three Board Directors that are non-executive independent Directors. 72 | Monash IVF Group 46 47 Annual Report 2023 | 73 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 7 Recognise and Manage Risk (continued) 7.2 Risk Management Monash IVF Group provides a framework for risk management which supports the achievement of our strategic and operational objectives. We are committed to maintaining an organisational philosophy and culture which ensures that effective risk management is integrated into day to day activities. The Group maintains a Risk Register that documents all identified risks, lists appropriate preventative actions to mitigate risks, reviews process of risk reduction and nominates responsible persons who take ownership of the risk strategy process. The Risk Register is reviewed by the Risk Owners, Leadership teams and Executive Team help determine whether risks are still current, controls are effective and identify any emerging risks, which are then flagged to the Audit and Risk Management Committee. A review of Risk Management is undertaken annually. Specialist software used to record adverse events and feedback ensures that exposures to risk are continually monitored to ensure they are adequately understood and managed. This system of reporting also allows for formal monitoring of patient safety, identification training needs and informs clinical policy decision making. 7.3 Internal Audit Monash IVF Group Limited does not have a designated Internal Audit Function at present but the Group performs internal audit activities from a clinical and operational perspective to ensure compliance with various external accreditation requirements. The CEO and CFO have key responsibility in ensuring that internal controls are in place, operating effectively and reviewed for continual improvement. As part of the various accreditation and licencing processes undertaken by the business, key internal audit functions are undertaken. These audits are then made available to accreditation and licensing bodies. Certain financial internal controls are tested by KPMG as part of their financial statement audit procedures. The Group believes internal controls implemented such as segregation of duties, delegation processes, treasury controls and structured approval processes counter many risks. The Group will continue to assess whether an independent third party internal audit function or designated in-house internal audit function is required. 7.4 Risk Exposure Monash IVF Group Limited provides assisted reproductive services in Australia and South East Asia and specialist women’s imaging services in Australia. The Group is committed to performing services in an open and transparent environment and in a manner that is honest and ethical. The Group embraces responsibility for corporate actions and encourages a positive impact on the environment and stakeholders including patients, employees, investors and the community. Since its early pioneering days in assisted reproductive treatment, resulting in the first IVF pregnancy in 1973, Monash IVF Group Limited has played an important role in the local communities it serves and society at large. Its focus on evidenced based fertility care provides the opportunity to commit resources to scientific research, clinical teaching and training. The Group’s services are offered to all and do not discriminate, including nature and complexities of infertility. From an ethical and social perspective, Monash IVF Group Limited and its subsidiary companies ensure national regulation and state legislation drives the standards of care to ensure it protects its patients, donors and any children born as a result of treatment provided by the Group. All Monash IVF Group facilities meet the appropriate standards for accreditation including: • • • Assisted reproductive treatment sites in Australia are accredited with the Reproductive Technology Accreditation Committee (RTAC) and the Group ensures appropriate documentation is held by sites, doctors, nurses and scientists. This accreditation incorporates components covering ethics and safety in practice and management of adverse events. Day surgeries are accredited with National Safety and Quality Health Service (NSQHS) standards which ensure quality standards are consistent with an exceptional standard of care expected by consumers in health facilities. Diagnostic laboratories are accredited to ISO 15189 and relevant NPAAC Guidelines. 48 74 | Monash IVF Group Principle 7 Recognise and Manage Risk (continued) • • Diagnostic imaging (ultrasound) facilities are accredited with the Department of Health Diagnostic Imaging Accreditation Scheme (DIAS). The Group’s South East Asian clinics whilst not legally requiring the same level of regulation, operates to the same standards having been externally accredited to the international RTAC standards. The Group recognises that its staff and Doctors are instrumental to the success of the Organisation. Comprehensive recruitment, credentialing, induction, training and development programs are designed to attract and retain staff equipped to deliver outstanding customer care. Staff actively participate in the continual improvement of the Group’s internal policies and processes and are encouraged to participate in innovation and research. The Monash IVF Group Workplace Health and Safety Policy framework covers policies on general safety in the workplace. Monash IVF Group Limited recognises protecting the environment is a critical issue and a key responsibility of the Business and corporate community. Monash IVF Group is an organisation that is not involved in manufacturing or resource extraction and hence it considers its environmental footprint to be small. The Group adopts a philosophy of clinical excellence in an environment of safe and supportive service provision. No material environmental or social sustainability risks have been identified. The Group adopts the approach of a responsible corporate citizen with regard to the management of waste and hazardous materials. The Group is not a significant consumer of electricity, water or gas and accordingly, the opportunities for material reductions in utility consumption are limited. The Quality Management System in place in each laboratory supports the review and monitoring of quality of product from suppliers. New consumables undergo a full quality screening process and products are thoroughly evaluated to review where and how products are manufactured before being used in the laboratories. All products are reviewed formally on an annual basis to ensure they maintain quality standards and informally on a day to day basis. Currently all Monash IVF Group clinics use predominantly products from the top two suppliers of laboratory products in Australia in order to maintain consistency in quality. The Group takes cyber security and its potential consequences extremely seriously. The Group has comprehensive security arrangements in place to isolate attacks on its systems and ensure that attempted intrusions are identified and viruses are not spread across the Group’s network or systems. The Group’s IT systems operate safely and securely as demonstrated by a recent cyber-attack that failed to propagate through our systems. Our preventative controls isolated the attack to a comparatively small subset of system resources, while we hardened our policies and settings to stop this and future attacks from coming through. Numerous levels of redundancy and backup are built into the IT systems providing a high degree of system availability and protection of data. The Group periodically engages an independent third party to review the Group’s cyber security risk exposure and has made the strategic decision to invest significantly in this field by forging a partnership with a leading player in the cyber industry. This alliance not only symbolizes our deep dedication to robust and sophisticated security protocols, but also provides us access to cutting-edge technology and expertise, ensuring our defences stay ahead of rapidly evolving threats. Economic risk continues to be potentially material to Monash IVF Group Limited. Our services in Australia are indirectly funded to a significant extent by the Australian Federal Government through the Medicare Benefit Schedule and Extended Medicare Safety Net. Any change to the funding arrangements could lead to a reduction in revenue affecting financial performance and sustainability of the Group. Market contraction and changes to market dynamics can significantly affect business outcomes and is a risk for the Group. Market competitiveness has heightened in recent years with the introduction of low cost providers and greater competition. One area where Monash IVF Group Limited has been integral in leading the industry has been in advocating for governing bodies to be more transparent in reporting outcomes of treatments to allow patients to be better informed before commencing treatment. Tightening industry standards on consistency of data gathering, outcome reporting and transparency of results to the community will lead to improved outcomes for patients and the industry generally. 49 Annual Report 2023 | 75 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Corporate Governance Statement continued Corporate Governance Statement Principle 8 Remunerate fairly and responsibly 8.1 Remuneration and Nomination Committee As outlined above under ‘Structure the Board to add value’ Monash IVF Group Limited has a combined Remuneration and Nomination Committee which assists the Board with discharging its responsibilities to Shareholders with regard to developing and monitoring remuneration policies and practices for Directors, Senior Executives and employees. The Committee works under the guidance of the Remuneration and Nomination Committee Charter and Remuneration Policy. All members of the Committee are non-executive independent Directors. Details of the Committee members’ experience and technical expertise are set out in the directors’ biographies which can be viewed on the Board of Directors pages in the latest Annual Report. Details of the number of times the Committee met throughout the period and individual attendances of the members can be viewed in the Directors Report in the latest Annual Report. 8.2 Remuneration of executive and non-executive directors Under the guidance of the Remuneration and Nomination Committee and the Remuneration Policy the Monash IVF Group Limited Board has established a framework for remuneration that is designed to ensure consistent and reasonable remuneration policies and practices are observed which optimise the attraction and retention of directors and management and fairly rewards Directors and senior management for positive performance. Monash IVF Group Limited remuneration practices for Executive appointments are expanded on in the Remuneration Report. The Monash IVF Group Limited Remuneration Policy can be found on the Group website at: Corporate Governance | Monash IVF Group. 8.3 Equity Based remuneration The Board may award incentive payments to the CEO, CFO and Senior Executives in the form of equity. The Corporations Act prohibits key management personnel (or closely-related parties) of an ASX-listed Australian company from entering into an arrangement that would limit their exposure to an element of their remuneration subject to a holding lock. Equity-based awards are made on the condition that Corporations Act requirements are complied with. Directors and officers cannot buy and sell securities when in possession of price sensitive information and during at minimum the certain periods, referred to as Prohibited Periods which include the period from the end of the Company’s financial year (30 June) until the announcement of the Company’s full year results to the ASX and the period from the end of the Company’s half year (31 December) until the announcement of the Company’s half year results to the ASX. Approval from the Chair is required prior to any transacting in shares contemplated by directors and Managing Director, and approval from the Managing Director for any transacting contemplated by the CFO and Company Secretary. A copy of the Securities Trading Policy is available on the Company’s website. Directors and senior executives are not permitted to hedge their exposure to Company securities. Employees, directors and senior executives are not permitted to use Company securities as collateral in any financial transaction, including margin loan arrangements. Consolidated Statement of Profit or Loss and Other Monash IVF Group Limited Consolidated Statement of Profit or Loss and Other Comprehensive Income Comprehensive Income for the year ended 30 June 2023 for the year ended 30 June 2023 Consolidated 93 Revenue from services Employee benefits expense Clinician fees Raw materials and consumables used IT and communications expense Depreciation expense Amortisation expense Property expense Marketing and advertising expense Professional and other fees Other expenses Operating profit Net finance costs Profit before tax Income tax expense Net profit after tax for the year Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss: Cash flow hedges Tax on cash flow hedges Exchange difference on translation of foreign operations Other comprehensive income/(loss) for the year, net of tax Total comprehensive income for the year Profit attributable to: Owners of the Company Non-controlling interests Profit for the year Total comprehensive income attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) Note 2.4,2.5 2.6 4.5 1.5 2023 $’000 213,590 (74,133) (38,305) (22,399) (5,891) (12,879) (2,464) (5,921) (6,920) (7,277) (4,283) 33,118 (3,279) 29,839 (7,873) 21,966 305 (92) 9 222 22,188 21,839 127 21,966 22,061 127 22,188 2022 $’000 192,294 (66,877) (33,621) (19,787) (4,464) (12,354) (2,434) (5,525) (6,434) (7,509) (4,920) 28,369 (2,147) 26,222 (7,720) 18,502 - - (194) (194) 18,308 18,406 96 18,502 18,212 96 18,308 1.4 1.4 5.6 5.6 4.7 4.7 The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 76 | Monash IVF Group 50 51 Annual Report 2023 | 77 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Consolidated Statement of Financial Position Monash IVF Group Limited for the year ended 30 June 2023 Consolidated Statement of Financial Position for the year ended 30 June 2023 Consolidated Statement of Changes in Equity for the year ended 30 June 2023 Current assets Cash and cash equivalents Trade and other receivables Inventory Total current assets Non current assets Equity accounted investment Trade and other receivables Plant and equipment Right of use assets Intangible assets Derivative financial instruments Deferred tax asset Total non current assets Total assets Current liabilities Trade and other payables Lease liabilities Current tax liabilities Contingent consideration Employee benefits Total current liabilities Non current liabilities Borrowings Lease liabilities Contingent consideration Employee benefits Deferred tax liability Total non current liabilities Total liabilities Net assets Equity Share capital Reserves Profits reserve Retained earnings Total equity attributable to Owners of the Company Non-controlling interests Total equity Note 4.6 2.1 2.2 2.1 2.4 2.5 2.6 4.4 1.5 2.3 5.4 3.1 4.3 5.4 3.1 1.5 4.1 Consolidated 2023 $’000 8,005 15,503 6,430 29,938 1,277 166 50,372 59,014 280,452 305 370 391,956 421,894 21,196 6,332 1,230 5,710 12,035 46,503 38,866 54,841 5,200 1,410 - 100,317 146,820 275,074 2022 $’000 7,874 12,516 5,254 25,644 1,052 169 30,394 64,666 258,893 - 355,174 380,818 19,237 7,131 457 483 10,867 38,175 9,764 60,335 488 1,432 731 72,750 110,925 269,893 506,786 (136,207) 65,357 (162,735) 273,201 1,873 275,074 506,786 (136,796) 60,662 (162,735) 267,917 1,976 269,893 The consolidated statement of financial position should be read in conjunction with the accompanying notes. 78 | Monash IVF Group 52 l a t o T y t i u q e - n o N t s e r e t n i g n i l l o r t n o c l a t o T ) 3 ( r e h O t s e v r e s e r d e n i a t e R i s g n n r a e 2 4 4 8 6 2 , 0 0 0 $ ’ 2 0 5 8 1 , ) 4 9 1 ( 8 0 3 8 1 , 6 9 - 6 9 0 0 0 $ ’ 6 5 2 2 , 2 7 2 ) 9 2 1 7 1 , ( 3 9 8 9 6 2 , 6 6 9 1 2 , 3 9 8 9 6 2 , 2 2 2 8 8 1 2 2 , - 6 7 9 1 , ) 4 ( ) 6 7 3 ( 7 2 1 6 7 9 1 , - 7 2 1 6 8 1 6 6 2 , 0 0 0 $ ’ 6 0 4 8 1 , ) 4 9 1 ( 2 1 2 8 1 , 2 7 2 ) 3 5 7 6 1 , ( 7 1 9 7 6 2 , 9 3 8 1 2 , 7 1 9 7 6 2 , 2 2 2 1 6 0 2 2 , 7 6 3 ) 4 7 3 7 1 , ( 4 7 0 5 7 2 , - 3 7 8 1 , ) 4 ( ) 0 3 2 ( 7 6 3 ) 4 4 1 7 1 , ( 1 0 2 3 7 2 , ) 3 6 ( 0 0 0 $ ’ - ) 4 9 1 ( ) 4 9 1 ( 2 7 2 - 5 1 - 5 1 2 2 2 2 2 2 7 6 3 - 4 0 6 0 0 0 $ ’ ) 5 3 7 2 6 1 ( , - - - - - ) 5 3 7 2 6 1 ( , ) 5 3 7 2 6 1 ( , - - - - - ) 5 3 7 2 6 1 ( , ) 6 ( ) 5 ( ) 2 ( s t i f o r P e v r e s e r 0 0 0 $ ’ 9 0 0 9 5 , 6 0 4 8 1 , - 6 0 4 8 1 , - 2 6 6 0 6 , ) 3 5 7 6 1 , ( 2 6 6 0 6 , 9 3 8 1 2 , - 9 3 8 1 2 , - 7 5 3 5 6 , ) 4 4 1 7 1 , ( ) 1 ( r e h O t y t i u q e e v r e s e r 0 0 0 $ ’ 0 0 0 $ ’ y t i u q e d e t u b i r t n o C ) 1 1 8 6 3 1 ( , 6 8 7 6 0 5 , ) ( 5 1 2 0 2 e n u J 0 3 t a e c n a l a b d e t a d i l o s n o C - - - - - - - - - - d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c r e h o t l a t o T ) s s o l ( / e m o c n i e v i s n e h e r p m o c r e h t o l a t o T d o i r e p e h t r o f t i f o r P s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S y t i u q e n i y l t c e r i d s r e n w o i d a p s d n e d i v i D ) 1 1 8 6 3 1 ( , , 6 8 7 6 0 5 2 2 0 2 e n u J 0 3 t a e c n a l a b d e t a d i l o s n o C ) 1 1 8 6 3 1 ( , 6 8 7 6 0 5 , 2 2 0 2 e n u J 0 3 t a e c n a l a b d e t a d i l o s n o C y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i m i L p u o r G F V I h s a n o M - - - - - - - - - - d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c r e h o t l a t o T ) s s o l ( / e m o c n i e v i s n e h e r p m o c r e h t o l a t o T d o i r e p e h t r o f t i f o r P s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T s n o i t c a s n a r t t n e m y a p d e s a b - e r a h S y t i u q e n i y l t c e r i d s r e n w o ) ( i 6 d a p s d n e d i v i D ) 1 1 8 6 3 1 ( , , 6 8 7 6 0 5 3 2 0 2 e n u J 0 3 t a e c n a l a b d e t a d i l o s n o C 6 2 n o d t L y t P s e s i r p r e t n E e g d i r b h t l a e H e r i u q c a o t i d a p n o i t a r e d i s n o c e h t d n a d t L y t P s e s i r p r e t n E e g d i r b h t l a e H n i l a t i p a C d e u s s I e h t n e e w t e b e c n e r e f f i d e h t s t n e s e r p e r e v r e s e r y t i u q e r e h t o e h T ) 1 ( . s d o i r e p e r u t u f n i s d n e d i v i d s a s n o i t u b i r t s i d r o f l e b a l i a v a s t i f o r p s e s i r e t c a r a h c d n a d o i r e p e h t r o f t i f o r p t e n f o r e f s n a r t e h t s e s i r p m o c e v r e s e r s t i f o r p e h T . ) K 6 7 3 $ : 2 2 Y F ( y t i l i t r e F L K n i s r e d o h l t s e r e t n i g n i l l o r t n o c n o n o t i d a p d n a d e r a l c e d d n e d i v i d K 0 3 2 $ . e v r e s e r g n i g d e h d n a n o i t a l s n a r t y c n e r r u c i n g e r o f , s t n e m y a p d e s a b e r a h s s e d u l c n i s e v r e s e r r e h t O . 4 1 0 2 e n u J . e c i v r e S a s a e r a w t f o S r o f g n i t n u o c c a o t n o i t l a e r n i n o i s i c e d e e t t i m m o C s n o i t a t e r p r e t n I S R F I e h t o t e u d d e t a t s e r n e e b s a h 1 2 0 2 e n u J 0 3 . d n e d i v i d l a n i f 2 2 Y F e h t d n a i d n e d v d m i i r e t n i 3 2 Y F e h t s e d u l c n i 3 2 0 2 Y F n i i d a p s d n e d i v i D ) 2 ( ) 3 ( ) 4 ( ) 5 ( ) 6 ( 3 5 . s e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u j n o c n i d a e r e b d u o h s l y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e h T Annual Report 2023 | 79 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows for the year ended 30 June 2023 for the year ended 30 June 2023 Monash IVF Group Limited Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements for the year ended 30 June 2023 for the year ended 30 June 2023 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Cash generated from operations Income taxes paid Net cash flows generated from operating activities Cash flows from investing activities Payments for plant and equipment and intangible assets Payments for business acquisitions (including transactions costs) Net cash flows used in investing activities Cash flows from financing activities Proceeds of borrowings Repayment of borrowings Interest paid on borrowings Payments of lease liabilities Dividends paid Net cash flows used in financing activities Total cash flows from activities Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on foreign currency cash flows and cash balances Cash and cash equivalents at end of the year Note 4.6 1.3 4.6 Consolidated 2023 $’000 2022 $’000 214,039 (165,497) 48,542 (9,420) 39,122 190,684 (148,963) 41,720 (9,831) 31,889 (27,789) (12,719) (40,508) (11,763) (3,399) (15,162) 42,000 (13,000) (1,170) (9,178) (17,144) 1,508 26,500 (18,129) (613) (8,634) (16,753) (17,629) 122 (902) 7,874 9 8,005 8,761 15 7,874 The consolidated statement of cash flows should be read in conjunction with the accompanying notes. Contents Section 1: Our financial performance Revenue and Expenses 1.1 1.2 Operating segments Dividends 1.3 Earnings per share 1.4 Taxation 1.5 Section 3: Our people 3.1 3.2 3.3 Employee benefits Share-based payments Key management personnel Section 2: Our operating asset base 2.1 2.2 2.3 2.4 2.5 2.6 Trade and other receivables Inventory Trade and other payables Plant and equipment Right of Use Assets Intangible assets Section 4: Our funding structure 4.1 4.2 4.3 4.4 4.5 4.6 Share capital and reserves Financial risk management Borrowings Derivative financial instruments Net finance costs Cash and cash equivalents Section 5: Our business portfolio Section 6: Other disclosures 5.1 5.2 5.3 5.4 5.5 Controlled entities Investments accounted for using the equity method Parent entity Acquisitions and disposals Deed of cross guarantee 6.1 6.2 6.3 6.4 6.5 6.6 Auditors’ remuneration Events occurring after the reporting period Commitment and contingencies Reporting entity Basis of preparation New standards and interpretations 80 | Monash IVF Group 54 55 Annual Report 2023 | 81 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 1 Our Financial Performance This section provides information that is most relevant to understanding the financial performance of the Group during the financial year and, where relevant, the accounting policies applied and the critical judgements and estimates made. 1.1 Revenue and Expenses 1.4 Earnings per Share 1.2 Operating Segments 1.5 Taxation 1.3 Dividends 1.1 Revenue and Expenses Revenue recognition consideration received or receivable. Rendering of services Revenue is recognised when performance obligations have been satisfied, recovery of the consideration is probable and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the Revenue from rendering of services is recognised on completion of services provided. Revenue is recognised when the customer has consumed the benefits of the service, whether on completion of a medical procedure, on supply of drugs, or on completion of analytical tests. If payments received from patients exceed the revenue recognised, the difference is recognised as deferred revenue. Fees for fertility treatment paid in advance of performing the service are recognised as deferred revenue until the time the service is rendered to the customer when the fees are recognised as revenue. Deferred revenue 1.2 Operating segments The Group determines and presents operating segments based on information that internally is provided to and used by the Chief Executive Officer, who is the Group’s Chief Operating Decision Maker (CODM). An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The financial results of each operating segment are regularly reviewed by the Group’s Chief Executive Officer in order to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment, as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill. The basis of inter-segmental transfers is market pricing. Results are calculated before consideration of net borrowing costs and tax expense. Our Pillars Board of Directors Management Team Identification of reportable operating segments The two geographic segments being Australia and International reflect Monash IVF Group’s reporting structure to the CODM. Monash IVF Group considers that the two geographic segments are appropriate for segment reporting purposes under AASB 8 “Operating Segments”. These segments comprise the following operations: Monash IVF Group Limited Notes to the Consolidated Financial Statements - Monash IVF Group Australia: provider of Assisted Reproductive Services, Ultrasound and other related services. for the year ended 30 June 2023 - Monash IVF Group International: provider of Assisted Reproductive Services in South East Asia. 1.2 Operating segments (continued) FY23 Financial Report Financial Overview Segment results 2023 Total revenue – external Underlying EBIT (before non-recurring items)(1) Acquisition costs (1) Commissioning costs (1) Fertility Solutions Earn Out(1) Reported EBIT Net finance costs Profit before income tax expense Income tax expense Profit for the year Depreciation and amortisation expense Segment assets Acquisition of plant and equipment and intangibles Segment liabilities 2022 Total revenue – external Underlying EBIT (before non-recurring items)(2) Acquisition costs (2) Commissioning costs (2) Fertility Solutions Earn Out (2) Reported EBIT Net finance costs Profit before income tax expense Income tax expense Profit for the year Depreciation and amortisation expense Segment assets Acquisition of plant and equipment and intangibles Segment liabilities Monash IVF Group Australia $’000 200,814 36,192 (1,879) (2,898) (40) 31,375 (3,252) 28,123 (7,075) 21,048 (14,337) 405,783 48,407 138,513 Monash IVF Group Australia $’000 182,098 30,578 (2,142) (1,855) (395) 26,186 (2,110) 24,076 (7,062) 17,014 (14,073) 365,305 11,759 104,235 Monash IVF Group International $’000 12,776 1,896 - (153) - 1,743 (27) 1,716 (798) 918 (1,006) 16,111 1,345 8,307 Monash IVF Group International $’000 10,196 2,831 - (648) - 2,183 (37) 2,146 (658) 1,488 (715) 15,513 499 6,690 Total 56 $’000 213,590 38,088 (1,879) (3,051) (40) 33,118 (3,279) 29,839 (7,873) 21,966 (15,343) 421,894 49,752 146,820 Total $’000 192,294 33,409 (2,142) (2,503) (395) 28,369 (2,147) 26,222 (7,720) 18,502 (14,788) 380,818 12,258 110,925 (1) Non-regular items include transaction costs on acquisition opportunities ($1,878,575 pre-tax), commission costs including lease expenditures ($3,051,416 pre-tax) and Fertility Solutions Earn Out Fair Value adjustment ($40,185). (2) Non-regular items include transaction costs on acquisition opportunities ($2,141,934 pre-tax), commission costs including lease expenditures ($2,502,703 pre-tax) and Fertility Solutions Earn Out Fair Value adjustment ($395,306). About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Monash IVF Group Limited Notes to the Consolidated Financial Statements continued Notes to the Consolidated Financial Statements for the year ended 30 June 2023 for the year ended 30 June 2023 Section 1 Our Financial Performance This section provides information that is most relevant to understanding the financial performance of the Group during the financial year and, where relevant, the accounting policies applied and the critical judgements and estimates made. 1.1 Revenue and Expenses 1.4 Earnings per Share 1.2 Operating Segments 1.5 Taxation 1.3 Dividends 1.1 Revenue and Expenses Revenue recognition Revenue is recognised when performance obligations have been satisfied, recovery of the consideration is probable and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable. Rendering of services Revenue from rendering of services is recognised on completion of services provided. Revenue is recognised when the customer has consumed the benefits of the service, whether on completion of a medical procedure, on supply of drugs, or on completion of analytical tests. If payments received from patients exceed the revenue recognised, the difference is recognised as deferred revenue. Deferred revenue Fees for fertility treatment paid in advance of performing the service are recognised as deferred revenue until the time the service is rendered to the customer when the fees are recognised as revenue. 1.2 Operating segments The Group determines and presents operating segments based on information that internally is provided to and used by the Chief Executive Officer, who is the Group’s Chief Operating Decision Maker (CODM). An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The financial results of each operating segment are regularly reviewed by the Group’s Chief Executive Officer in order to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment, as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill. The basis of inter-segmental transfers is market pricing. Results are calculated before consideration of net borrowing costs and tax expense. Identification of reportable operating segments The two geographic segments being Australia and International reflect Monash IVF Group’s reporting structure to the CODM. Monash IVF Group considers that the two geographic segments are appropriate for segment reporting purposes under AASB 8 “Operating Segments”. These segments comprise the following operations: - Monash IVF Group Australia: provider of Assisted Reproductive Services, Ultrasound and other related services. - Monash IVF Group International: provider of Assisted Reproductive Services in South East Asia. 1.2 Operating segments (continued) 56 82 | Monash IVF Group 57 Annual Report 2023 | 83 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 1.3 Dividends Dividends during the year Franking Interim dividend in respect of the current financial year Fully franked Payment Date 7 April 2023 Final dividend in respect of the prior financial year Fully franked 7 October 2022 Paid in cash during the year Dividend franking account Per share (cents) 2.2 2.2 2023 $’000 8,572 2022 $’000 8,571 8,572 8,182 4.4 17,144 16,753 Amount of franking credits available at 30 June to shareholders for subsequent financial years 11,085 11,010 Monash IVF Group’s dividend policy is to target a payout ratio of between 60% and 70% of Statutory NPAT. The level of payout ratio is expected to vary between periods depending on general operating conditions, operating cashflow and profit, funding, strategic growth opportunities and availability of franking credits. Subsequent to 30 June 2023, the Board has declared a fully franked 2023 final dividend of 2.2 cents per share. Total dividend declared for FY23 is 4.4 cents. The aggregate amount of the proposed dividend expected to be paid out of retained profits at 30 June 2023, but not recognised as a liability at year end is $8,571,966. 1.4 Earnings per share Earnings per share Basic earnings per share Diluted earnings per share Profit attributable to ordinary shareholders 2023 Cents per share 2022 Cents per share 5.6 5.6 2023 $’000 4.7 4.7 2022 $’000 Profit after income tax attributable to the ordinary shareholders used in calculating basic and diluted earnings per share 21,839 18,406 Weighted average number of shares Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share (1) 2023 Number 2022 Number 389,634,840 389,634,840 2,790,483 1,908,165 Weighted average number of ordinary shares used in calculating diluted earnings per share 392,425,323 391,543,005 (1) The calculation of the weighted average number of shares has been adjusted for the effect of share based rights granted from the date of issue. Refer to Section 3.2 for further details. Basic earnings per share The calculation of basic earnings per share has been based on profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 1.4 Earnings per share (continued) Diluted earnings per share The calculation of diluted earnings per share has been based on profit attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. 1.5 Taxation Income Tax expense Current tax Deferred tax Under/(over) provided in prior year Total income tax expense Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense Tax at the Australian tax rate of 30% (2022: 30%) Tax effect of amounts which are not deductible in calculating taxable income: Effect of tax rates in foreign jurisdiction Research and development Other items Under/(over) provision of previous year Income tax expense 2023 $’000 6,434 1,361 78 7,873 2022 $’000 7,782 (305) 243 7,720 29,839 8,952 26,222 7,867 (3) (823) (331) 78 7,873 (129) (250) (11) 243 7,720 Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or to items recognised directly in equity or in other comprehensive income (OCI). Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. 84 | Monash IVF Group 58 59 Annual Report 2023 | 85 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview y t i l i b a i l - - - - ) 2 9 ( ) 1 7 0 1 , ( ) 3 3 7 5 , ( - 6 6 2 7 , ) 6 9 8 6 ( , 0 6 - - t e s s a 8 0 6 4 9 0 2 , - 0 5 3 4 1 2 4 , 6 6 2 7 , 0 7 3 ) 6 6 2 7 , ( x a t d e r r e f e D x a t d e r r e f e D 3 2 0 2 e n u J 0 3 2 2 0 2 e n u J 0 3 1 2 0 2 e n u J 0 3 ) 1 ( d e t a t s e R - - - - ) 2 9 ( - ) 9 6 1 ( ) 1 6 2 ( - - - 5 0 2 6 7 1 1 , ) 5 9 1 5 7 1 1 ( , - - - 7 4 4 ) 1 7 2 ( 2 6 3 1 , ) 6 7 2 1 , ( ) 3 3 7 5 , ( - - - - - - - 8 7 2 6 , ) 1 3 7 ( ) 9 0 0 7 ( , 3 0 8 7 8 0 1 , - 1 2 6 7 6 7 3 , 8 7 2 6 , - ) 8 7 2 6 , ( - - 2 3 1 - - - - - - 2 3 1 . e c i v r e S a s a e r a w t f o S r o f g n i t n u o c c a o t y t i u q e n i y l t c e r i d d e s i n g o c e R s s o l r o t i f o r p n i d e s i n g o c e R x a t d e r r e f e D y t i l i b a i l d e r r e f e D t e s s a x a t y t i u q e n i y l t c e r i d d e s i n g o c e R d e s i n g o c e R r o t i f o r p n i x a t d e r r e f e D s s o l ) 3 4 7 ( - 1 2 2 8 0 2 - 1 3 ) 2 2 ( ) 5 0 3 ( - - y t i l i b a i l - - - - - ) 3 3 5 ( ) 3 3 7 5 , ( 8 0 7 5 , ) 8 5 5 ( ) 6 6 2 6 ( , d e r r e f e D t e s s a x a t - - - 4 3 7 5 9 5 - 0 9 5 9 8 7 3 , 8 0 7 5 , ) 8 0 7 5 , ( f f o t e s e r o f e b s t e s s a / ) s e i t i l i b a i l ( x a T s n o i s i v o r p d n a l s e b a y a p e d a r T s t i f e n e b e e y o p m E l ) s e i t i l i b a i l ( / s t e s s a x a t t e N x a t f f o t e S s e v i t a v i r e D r e h t O s e s a e L ) d e u n i t n o c ( n o i t a x a T 5 1 . x a T d e r r e f e D t n e m p i u q e d n a t n a P l 0 0 0 $ ’ s t e s s a l i e b g n a t n I n o i t l a e r n i n o i s i c e d e e t t i m m o C s n o i t a t e r p r e t n I S R F I e h t o t e u d d e t a t s e r n e e b s a h 1 2 0 2 e n u J 0 3 ) 1 ( s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C e h t o t s e t o N 3 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i m i L p u o r G F V I h s a n o M 86 | Monash IVF Group Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 1.5 Taxation (continued) Recognition and Measurement Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: • • The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Offsetting deferred tax Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their assets and liabilities will be realised simultaneously. Tax consolidation Monash IVF Group Limited and its wholly Australian owned controlled entities are part of a tax consolidation group under Australian taxation law. Monash IVF Group Limited is the head entity in the tax-consolidated group. Entities within the tax consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, Monash IVF Group Limited and each of the entities in the tax consolidated group have agreed to pay (or receive) a tax equivalent payment to (or from) the head entity, based on the current tax liability or current tax asset of the entity. Key estimate and judgement: Recovery of deferred tax assets Key estimate and judgement: Income taxes A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Group is subject to income taxes in Australia and foreign operations. it has jurisdictions where Judgement is required in determining the worldwide provision for income taxes and in assessing whether deferred tax balances are recognised on the statement of financial position. Changes in circumstances will alter expectations, which may impact the amount of provision for income taxes and deferred tax balances recognised. 61 Annual Report 2023 | 87 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 2 Our Operating Asset Base This section provides information relating to the Group’s Operating Base, highlighting the primary operating assets used and liabilities incurred to support the Group’s operating activities. 2.1 Trade and other receivables 2.4 Plant and equipment 2.2 Inventory 2.5 Right of use of assets 2.3 Trade and other payables 2.6 Intangible assets 2.1 Trade and other receivables Current Trade receivables Provision for expected credit losses Net trade receivables Other debtors Accrued income Prepayments GST receivable Total current trade and other receivables Non current Other debtors 2023 $’000 2022 $’000 5,733 (625) 5,108 2,371 878 4,978 2,168 15,503 5,067 (846) 4,221 2,290 559 4,063 1,383 12,516 166 169 Provision for expected credit losses The consolidated entity has recognised a decrease of $221,000 (2022: increase of $15,000) in respect of impairment of receivables for the year ended 30 June 2023. The decrease in provision for expected credit losses during the year was predominately driven by a reduction of outstanding balances over 120 days, which reflected counterparties that have been impacted by the economic environment in the prior year. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised costs using the effective interest method less provision for expected credit losses. A financial asset (including trade receivables) not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. AASB 9 replaced the ‘incurred loss model’ in AASB 139 with an ‘expected credit loss’ (ECL) model. Loss allowances for trade receivables are measured at an amount equal to 12 month ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience, debtor ageing and credit assessment including forward-looking information. Credit Risk Credit risk is the risk of financial loss to the Group if a patient or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables, being patients. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.1 Trade and other receivables (continued) Patient fees for most treatments are received in advance and recognised as deferred revenue if the procedure is yet to be performed. This reduces the risk of non-collectability. Outstanding receivables predominantly relate to amounts owing from Medicare and storage fee patient accounts. Payment reminder notices are issued to patients with outstanding balances at 30, 60 and 90 days. After which, collection of this debt may be handled by a collection agency. The Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the Group. Prepayments Payments made for the receiving of goods or services rendered in future years are recognised as a prepayment. 2.2 Inventory Consumables – at cost Total inventory 2023 $’000 6,430 6,430 2022 $’000 5,254 5,254 Inventories are recorded using the FIFO method and are valued at the lower of cost and net realisable value. Inventories include medical supplies to be consumed in providing future patient services. 2.3 Trade and other payables Current Trade payables Accrued expenses Deferred revenue Total trade and other payables 2023 $’000 1,855 10,096 9,245 21,196 2022 $’000 3,340 7,238 8,659 19,237 Trade and other payables are carried at amortised cost and are not discounted. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are paid in accordance with vendor terms. 2.4 Plant and equipment Cost Opening balance at 1 July Additions Disposal Closing balance at 30 June Accumulated depreciation and impairment losses Opening balance at 1 July Depreciation for the year Disposal Other including foreign exchange movements Closing balance at 30 June Carrying amount At 1 July (Opening balance) At 30 June (Closing balance) 2023 $’000 78,405 25,729 (1,667) 102,467 (48,011) (5,405) 1,370 (49) (52,095) 30,394 50,372 2022 $’000 68,202 10,203 - 78,405 (43,262) (4,749) - - (48,011) 24,940 30,394 63 88 | Monash IVF Group Annual Report 2023 | 89 62 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.4 Plant and equipment (continued) Capital commitments Expenditure contracted for but not recognised as liabilities: Capital plant and equipment 2023 $’000 7,970(1) 2022 $’000 13,598(2) (1) Capital plant and equipment includes the new Melbourne, Brisbane, Sunshine, St Leonards ultrasound practice and day hospital projects in development. (2) Capital plant and equipment includes the new Melbourne, Darwin, Penrith, Brisbane, Bali and Gold Coast fertility clinic and day hospital projects in development. Items of plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment. Gains and losses on disposal of an item of plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment and are recognised on a net basis within “other income” in profit or loss. The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied with the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day- to-day servicing of the plant and equipment are recognised in profit or loss as incurred. Key estimate and judgement: Depreciation The Group’s plant and equipment are depreciated over their useful economic lives between 2-10 years. Depreciation methods, useful lives and residual values are reviewed at each reporting date. Depreciation is recognised in profit or loss on a straight line basis over the estimated useful lives of each part of an item of plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.5 Right of Use Assets Leases as lessee $’000 Cost Opening balance at 1 July Additions / modifications Disposals Closing balance at 30 June Accumulated depreciation Opening balance at 1 July Depreciation for the year Disposals Closing balance at 30 June Carrying amount At 1 July (Opening balance) At 30 June (Closing balance) $’000 Cost Opening balance at 1 July Additions / modifications Disposals Closing balance at 30 June Accumulated depreciation Opening balance at 1 July Depreciation for the year Disposals Closing balance at 30 June Carrying amount At 1 July (Opening balance) At 30 June (Closing balance) Buildings 2023 Equipment Total 97,237 13,226 (20,720) 89,743 1,770 99,007 - 13,226 - (20,720) 91,513 1,770 (33,594) (7,128) 9,316 (31,406) (747) (346) (34,341) (7,474) - 9,316 (1,093) (32,499) 63,643 58,337 1,023 677 64,666 59,014 Buildings 2022 Equipment Total 68,322 30,394 (1,479) 97,237 (27,171) (7,429) 1,006 (33,594) 1,770 70,092 - 30,394 (1,479) - 99,007 1,770 (571) (176) (27,742) (7,605) - 1,006 (34,341) (747) 41,151 63,643 1,199 1,023 42,350 64,666 The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if the rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the lease liabilities and right-of-use assets recognised. 90 | Monash IVF Group 64 65 Annual Report 2023 | 91 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.5 Right of Use Assets (continued) The Group leases property and equipment. The leases typically run for a period of between one to ten years, with an option to renew the lease after this date. Lease payments are renegotiated at periods to reflect market rentals. The Group has elected not to recognise right of use assets and lease liabilities for short term and/or low value assets such as IT and office equipment. Amounts recognised in profit and loss Depreciation on right of use assets Interest on lease liabilities Expenses relating to low value assets Amounts recognised in statement of cash flows Payments of lease liabilities 2023 $’000 7,474 2,073 9 2022 $’000 7,605 1,720 73 9,178 8,634 Extension options Some 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 by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control. The Group has estimated that the potential future lease payments, should it exercise the extension option, would result in an increase in lease liability of $7.1 million. 2.6 Intangible assets $’000 2023 Net book value Balance at 1 July 2022 Additions Amortisation expense Balance at 30 June 2023 At 30 June 2023 Cost Accumulated amortisation and impairment losses Balance at 30 June 2023 2022 Net book value Balance at 1 July 2021(1) Additions Amortisation expense Balance at 30 June 2022 At 30 June 2022 Cost Accumulated amortisation and impairment losses Balance at 30 June 2022 Goodwill Software Trademark Total 233,169 21,963 - 255,132 255,132 - 255,132 233,169 - - 233,169 233,169 - 233,169 5,879 2,060 (2,464) 5,475 16,153 (10,678) 5,475 6,259 2,054 (2,434) 5,879 14,093 (8,214) 5,879 19,845 - - 19,845 19,845 - 19,845 19,845 - - 19,845 19,845 - 19,845 258,893 24,023 (2,464) 280,452 291,130 (10,678) 280,452 259,273 2,054 (2,434) 258,839 267,107 (8,214) 258,893 (1) 30 June 2021 has been restated due to the IFRS Interpretations Committee decision in relation to accounting for Software as a Service. 66 92 | Monash IVF Group Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.6 Intangible assets (continued) Software Software has a finite useful life and is carried at cost less accumulated amortisation and impairment losses. The cost of system development, including purchased software, is capitalised and amortised over the estimated useful life, being three to ten years. Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Software-as-a-Service (SaaS) arrangements SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such, the Group does not receive a software intangible asset at the contract commencement date. The following outlines the accounting treatment of costs incurred in relation to SaaS arrangements: - Costs recognised as an operating expense over the term of the service contract include fees for use of - application software and customization costs. Costs recognised as an operating expense as the service is received include configuration costs, data conversion and migration costs, testing costs and training costs. - Costs incurred for the development of software code that enhance or modifies or creates additional capability to an existing on premise system, and meets the definition of and recognition criteria for an intangible asset are recognized as intangible software assets. Trademark Trademarks are reported at historical cost less impairment. Trademarks have an indefinite useful life where there is no expiry and no foreseeable limit on the period of time over which these assets are expected to contribute to the cash flows of the Group. Similar to goodwill, these are tested for impairment annually. Goodwill Goodwill on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired entities at the date of acquisition. Goodwill on the acquisition of subsidiaries is included in intangible assets. Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Impairment testing Goodwill and other indefinite life intangible assets become impaired when their carrying value exceeds their recoverable amount. Recoverable amount is the greater of fair value less costs to sell or value in use. In determining the recoverable amount, judgments and assumptions are made in the determination of likely net sale proceeds or in the determination of future cash flows which support a value in use. Specifically, with respect to future cash flows, judgments are made in respect to the quantum of those future cash flows and the discount rates (cost of capital and debt) applied to determining the net present value of these future cash flows. The carrying amounts of the Group’s non financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows of other assets or groups of assets (the ‘cash-generating’ units). The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss is reversed only to the 67 Annual Report 2023 | 93 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 2.6 Intangible assets (continued) extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised. The following CGUs were tested for impairment during the year: Goodwill and trademark allocated to: Australia Ultrasound International 2023 $’000 240,993 28,232 5,752 274,977 2022 $’000 219,030 28,232 5,752 253,014 Impairment testing assumptions The recoverable amount of a CGU is based on value-in-use calculations. The following key assumptions were utilised for the impairment testing: - The respective discount rate was a pre-tax measure based on the rate of 10 year Government bonds issued by the Australian and Malaysian Government respectively in the relevant market, adjusted for a risk premium to reflect the increased risk of investing in equities generally and the systemic risk of the specific CGU. A pre- tax discount rate of 11.8% (FY22: 10.5%) for the Australian CGU, 11.8% (FY22: 10.5%) for the Ultrasound CGU and 15.0% (FY22: 11.5%) for the International CGU was applied in determining the recoverable amount. - Cash flow forecasts are based on the Board-approved FY24 budget, projected for four years plus a terminal value. The FY24 budget reflects management’s best estimate of forecast operating performance having regard to the IVF markets in Australia and Malaysia and anticipated ultrasound activity. - A long-term growth rate into perpetuity of 3.0% (FY22: 3.0%) has been determined based on an assessment of historical growth rates, expectations of future growth rates and market specific dynamics. Impact of possible changes in key assumptions All CGU’s in the Group have been tested for impairment and have met their required hurdle rates to support the current carrying values. Any reasonable possible change to relevant assumptions and inputs would not result in the recoverable amount being lower than the carrying amount, noting that recovery of the Ultrasound CGU to historical levels of activity is a key input in the Group’s assessment.. Result of Impairment testing The recoverable amount of all CGU’s are deemed recoverable. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 3 Our People This section provides financial insight into employee reward and recognition for creating a high performance culture and the Group’s ability to attract and retain talent. This section is to be read in conjunction with the Remuneration Report, as set out in the Directors Report. 3.1 Employee benefits 3.3 Key management personnel 3.2 Share-based payments 3.1 Employee benefits Current liability Long service leave Annual leave Total current employee benefits Non current liability Long service leave Total non current employee benefits Total employee benefits provision 2023 $’000 5,830 6,205 12,035 1,410 1,410 13,445 2022 $’000 5,305 5,562 10,867 1,432 1,432 12,299 Provision for employee benefits Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits are expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefits are measured at their present value of the estimated future cash outflow to be made in respect of services provided by the employees up to the reporting date. The discount rate is the yield at the reporting date on corporate bonds issued by the relevant markets that have maturity dates approximating the terms of the Group’s obligations. 3.2 Share-based payments Senior executives’ long-term incentive plan The Group will provide benefits to certain employees in the form of share-based payment options and/or performance rights. The fair values of these instruments granted under the plans are recognized as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognized over the period during which the employee becomes unconditionally entitled to the instruments. Fair value is measured at grant date using a combination of Binomial tree and Monte-Carlo Simulation models, for the respective performance hurdles. The valuation was performed by an independent valuer which models the future security price. The fair value of the instruments granted excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of instruments that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of instruments that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in profit and loss with a corresponding adjustment to equity. Under the Company’s Long Term Incentive (“LTI”) Plan, awards constituting share appreciation rights, performance rights or options, or any different class or category of award on such terms as the Board determines, may be 94 | Monash IVF Group 68 69 Annual Report 2023 | 95 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 3.2 Share-based payments (continued) offered to eligible persons selected by the Directors. Key management personnel and other senior management are eligible to participate under the LTI Program. The senior executive LTI are performance rights plans with vesting rights dependent upon the satisfaction of pre- defined performance hurdles and continuous employment. Current performance hurdles are based on achievement of pre-defined Earning Per Share (“EPS”) Hurdle and a Total Shareholder Return (“TSR”) Hurdle over a three year performance period. The Board may amend the performance hurdles or specify a different performance hurdle(s) if it considers it necessary. For further detail on the specific LTI plans, refer to the Remuneration Report. Long term incentive program (equity settled) A description of the equity plans applicable during the year are described below: Grant date Vesting conditions EPS - Subject to meeting certain EPS hurdles and 3 year service period to 30 June 2025 TSR - Subject to Total Shareholder Return hurdles and a 3 year service period to the 11th trading day after the FY25 results announcement EPS - Subject to meeting certain EPS hurdles and 3 year service period to 30 June 2024 TSR - Subject to Total Shareholder Return hurdles and a 3 year service period to the 11th trading day after the FY24 results announcement EPS - Subject to meeting certain EPS hurdles and 3 year service period to 30 June 2023 TSR - Subject to Total Shareholder Return hurdles and a 3 year service period to the 11th trading day after the FY23 results announcement (2023 Plan) 23 November 2022 (2022 Plan) 19 November 2021 (2021 Plan) 16 October 2020 (2020 Plan) 16 October 2019 TSR - Subject to Total Shareholder Return hurdles and a 3 year service period to the 11th trading day after the FY22 results announcement Key estimate and judgement: Share-based payments As a result of the combination of non-market (EPS) and market (TSR) vesting conditions, the fair value of the share rights plan has been measured using Binomial tree and Monte Carlo simulation respectively. The inputs used in the measurement of the fair values at grant date of the equity-settled share based payment plans were as follows: Fair value at grant date (EPS condition) Fair value at grant date (TSR condition) Share price at grant date Expected volatility – Monash IVF Expected volatility – ASX 300 Healthcare Index Expected life (years) Expected dividends Risk free interest rate (based on government bonds) 2023 $1.02 $0.60 $1.02 40% 17% 6 0.00% 3.27% 2022 $0.93 $0.49 $0.93 40% 16% 6 0.00% 0.95% 2021 $0.61 $0.32 $0.62 40% 16% 6 0.00% 0.13% 2020 $0.94 $0.46 $0.94 35% 15% 6 6.0% 0.83% Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general instrument holder behavior. 70 96 | Monash IVF Group Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 3.2 Share-based payments (continued) Reconciliation of outstanding performance rights The number of performance rights under the company’s long-term incentive plan were as follows: 2023 Grant Date Balance at 1July 2022 Granted during the year Lapsed during the year Forfeited during the year Expiry Date Vested during the year Balance at 30 June 2023 Exercisable rights at 30 June 2023 16 Oct 2019 30 June 2022 30 June 2023 16 Oct 2020 19 Nov 2021 30 June 2024 23 Nov 2022 30 June 2025 184,006 856,240 867,919 - - - (184,006)(1) - - - 1,908,165 1,066,324 1,066,324 - (184,006) - - - - - - - - - 856,240 867,919 - 1,066,324 - 2,790,483 - 599,367(2) - - 599,367 TSR vesting conditions for performance rights granted in FY20 were not satisfied therefore these rights lapsed. (1) (2) Vesting conditions were satisfied but not yet exercised. 2022 Grant Date Expiry Date Balance at 1July 2021 Granted during the year Lapsed during the year Forfeited during the year Vested during the year Balance at 30 June 2022 Exercisable rights at 30 June 2022 20 Dec 2018 30 June 2021 40,359 16 Oct 2019 30 June 2022 368,012 - - (40,359)(1) (184,006)(2) - - 30 June 2023 16 Oct 2020 19 Nov 2021 30 June 2024 901,521 - - 917,992 - - (45,281)(3) (50,073) - - - 184,006 - 856,240 - 867,919 1,309,892 917,992 (224,365) (95,354) - 1,908,165 - - - - - (1) (2) (3) TSR vesting conditions for performance rights granted in FY19 were not satisfied therefore these rights lapsed. EPS vesting conditions for performance rights granted in FY20 were not satisfied therefore these rights lapsed. Forfeited due to not satisfying service conditions. 3.3 Key management personnel Short-term employee benefits Post-employment benefits Share-based payments Total key management personnel compensation 2023 $ 2,531,491 154,190 318,178 3,003,859 2022 $ 2,127,923 138,639 250,640 2,517,202 For further information on key management personnel refer to the Remuneration Report. Transactions with key management personnel and related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. 71 Annual Report 2023 | 97 EPS - Subject to meeting certain EPS hurdles and 3 year service period to 30 June 2022 Compensation Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 4 Our Funding Structure This section provides information relating to the Group’s capital structure and its exposure to financial risk, how they affect the Group’s financial position and performance, and how the risks are managed. The Directors determine the appropriate capital structure of Monash IVF, specifically how much is raised from the shareholders (equity) and how much is borrowed from financial institutions (debt) in order to finance the current and future activities of the Group. The Directors review the Group’s capital structure regularly and do so in the context of the Group’s ability to continue as a going concern, to invest in opportunities that grow the business and enhance shareholder value. 4.1 Share capital and reserves 4.4 Derivative financial instruments 4.2 Financial risk management 4.5 Net finance costs 4.3 Borrowings 4.6 Cash and cash equivalents 4.1 Share capital and reserves Opening balance at 1 July 2022 Closing balance at 30 June 2023 Number of shares issued 389,634,840 389,634,840 $’000 506,786 506,786 Ordinary shares Ordinary shares are classified as share capital. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. Ordinary shares entitle the holder to one vote, either in person or by proxy, at a meeting of the Company. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Capital management The Group’s policy is to maintain a strong capital base so as to maintain investor and market confidence and to sustain future growth of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders. The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital structure. In order to maintain an optimal capital structure, the Group may amend the amount of dividends declared and paid, return capital to shareholders or increase borrowings or equity to fund growth and future acquisitions. Other equity reserve The other equity reserve represents the difference between the issued capital in Healthbridge Enterprises Pty Ltd and Monash IVF Group Ltd on 26 June 2014, being the date Monash IVF Group Ltd acquired Healthbridge Enterprises Pty Ltd. Profits reserve The profits reserve comprises the transfer of net profit for the period and characterises profits available for distribution as dividends in future periods. Share option reserve Share option reserve represents the grant-date fair value of equity-settled share-based payment awards granted to employees, which is generally recognised as an expense, with corresponding increase in equity over the vesting period of the awards. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.1 Share capital and reserves (continued) Hedge reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to highly probable forecast transactions. The hedging reserve is used to record gains or losses on derivatives that are designated and qualify as cash flow hedges and that are recognised in OCI. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Escrow arrangements The following ordinary shareholders have entered into voluntary escrow arrangements in relation to certain ordinary shares they hold in Monash IVF Group Ltd. An ‘escrow’ is a restriction on sale, disposal, or encumbering of, or certain other dealings in respect of, the Shares concerned for the period of the escrow, subject to exceptions set out in the escrow arrangement. Doctors (1)(2) Sydney Ultrasound for Women(3) Total 30 June 2023 30 June 2022 Number of shares subject to escrow (m) 12.2 1.2 13.4 Escrowed shares (as a % of shares on issue 3.1% 0.3% 3.4% Number of shares subject to escrow (m) 13.8 1.2 15.0 Escrowed shares (as a % of shares on issue) Escrowed shares (as a % 3.5% 0.3% 3.8% FY23 Includes 1.0m shares subject to escrow held by Richard Henshaw (Executive Director) (FY22:1.0m shares) (1) (2) Doctors (3) Escrow for Sydney Ultrasound for Women (SUFW) The escrow applied to a pre-IPO Doctor was calculated by reference to the aggregate value of that person’s pre- reorganisation equity interests in Healthbridge Enterprises Pty Ltd as follows: Shares equivalent to 10% of a Doctor’s interest prior to the re-organisation were held in short-term escrow, with 3.33% released each year from escrow on the first trading day in Shares following the Company’s FY15, FY16 and FY17 financial results announcements to the ASX. This concluded the release of the pre-IPO doctor short-term escrow. Shares held in long-term escrow are subject to the following conditions: 1. Shares equivalent to 20% of a Doctor’s interest prior to the re-organisation will be released when the Doctor reaches the age of 63. These shares may be otherwise released from escrow in the following circumstances: - for Doctors who were aged 63 or older at the time of re-organisation or who turned 63 within two years of Completion, these shares can be released from escrow from June 2016; or - where a Doctor becomes a ‘relocated leaver’ (as described below), these Shares can be released from escrow five years after the date that they become a ‘relocated leaver’; or - where a Doctor dies or leaves the Group as a result of becoming permanently disabled or seriously disabled, these shares can be released from escrow on the date of the relevant occurrence (as resolved by the Board acting reasonably); or if the Board determines to release the shares from escrow earlier. - 2. Shares equivalent to 20% of a Doctor’s interest prior to re-organisation can be released from escrow: - on retirement by the Doctor from the ARS industry (provided a Doctor must have used their best endeavours to transition their practice to another Doctor to the satisfaction of the Board); or if the Doctor becomes a ‘good leaver’ or a ‘relocated leaver’ (as described below); or five years after the Doctor leaves Monash IVF Group in other circumstances. - - 98 | Monash IVF Group 72 73 Annual Report 2023 | 99 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.1 Share capital and reserves (continued) Doctors will be able to sell any non-escrowed Shares at any time, subject to complying with insider trading restrictions and the Group’s Securities Trading Policy. The escrow arrangements describe the circumstances in which a Doctor is a ‘good leaver’ or a ‘relocated leaver’ in the following manner: (a) A Doctor is a ‘good leaver’ where: - - they leave the Group as a result of death, serious disability or permanent incapacity through ill health (as determined by the Group’s Board, acting reasonably); or they or the Group terminates the Doctor’s contract in specific circumstances; or The Board determines, in its discretion, that the Doctor is a ‘good leaver’. (b) A Doctor is a ‘relocated leaver’ if they terminate their contract and the Board is satisfied that: - - - the Doctor genuinely intends to relocate permanently to a place which is more than 100 km from any clinic operated by the Group or any of its subsidiaries; and the Doctor also intends to provide Assisted Reproductive Services in the place the Doctor is relocating to; and the Doctor has used their best endeavours to transition their practice to another Doctor at the Group. All shares issued to the vendors of SUFW are escrowed such that 53.3% of the shares issued were escrowed until the first trading day after the release of the FY16 results. 3.3% were escrowed until the first trading day after the release of the FY17 results and 3.3% are escrowed until the first trading day after the release of the FY18 results. The remaining 40.1% is subject to escrow and is consistent with the Doctors above in points 1 and 2. Doctors will be able to sell any non-escrowed Shares at any time, subject to complying with insider trading restrictions and the Group’s Securities Trading Policy. The escrow arrangements describing the circumstances in which a SUFW Doctor is a ‘good leaver’ or a ‘relocated leaver’ is the same as described above. 4.2 Financial risk management The Group has exposure to the following risks from its use of financial instruments: Liquidity risk; Foreign exchange risk; Interest risk; and - - - - Market risk. This note presents information about the Group’s exposure to each of the above risks, objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report. Risk management policies are in place to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its recruitment, training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through the following mechanisms: - Preparing forward-looking financial analysis in relation to its operational, investing and financing activities; - Monitoring undrawn credit facilities; - Obtaining funding from a variety of sources; 74 Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.2 Financial risk management (continued) - Maintaining a reputable credit profile; - Managing credit risk related to financial assets; - Only investing surplus cash with major financial institutions; and - Comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting arrangements, subject to the Group meeting future undertakings. 2023 Non-derivative financial liabilities Secured bank loans Trade and other payables Lease liabilities Contingent consideration 2022 Non-derivative financial liabilities Secured bank loans Trade and other payables Lease liabilities Contingent consideration Carrying amount $’000 Total Contractual cash flows $’000 Within 1 year 1-5 years Over 5 years $’000 $’000 $’000 - - (28,950) - (28,950) Over 5 years 39,000 21,196 61,173 10,910 132,279 (42,506) (21,196) (70,724) (10,910) (145,336) - (21,196) (8,227) (5,710) (35,133) (42,506) - (33,547) (5,200) (81,253) Carrying amount $’000 Total Contractual cash flows $’000 Within 1 year 1-5 years $’000 $’000 $’000 10,000 19,237 67,466 971 97,674 (10,970) (19,237) (72,830) (971) (104,008) - (19,237) (8,630) (483) (28,350) (10,970) - (32,438) (488) (43,896) - - (31,762) - (31,762) Foreign exchange risk The Group is not exposed to material levels of foreign currency risk at the reporting date or during the financial year. Interest rate risk The consolidated entity’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the consolidated entity to interest rate risk. Interest rate risk may be managed using a mix of floating rate debt and fixed rate instruments. Interest rate swaps may be used to mitigate interest rate risk on floating rate debt. Interest rate swaps are not entered into for trading purposes and are not classified as held for trading. The interest rate profile of the Group’s interest-bearing financial instruments as reported to management of the Group is as follows including the impact of hedging instruments: Fixed rate instruments Financial assets Financial liabilities Variable rate instruments Financial assets Financial liabilities 2023 $’000 1,440 (61,173) (59,733) 6,565 (38,866) (32,301) 2022 $’000 967 (67,466) (66,499) 6,752 (9,764) (3,012) 75 100 | Monash IVF Group Annual Report 2023 | 101 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.2 Financial risk management (continued) Cash flow sensitivity analysis for variable rate instruments A reasonable possible change of a 100 basis points in interest rates at the reporting date would have increased /(decreased) equity and profit or loss by $323,010 (FY22: $30,120). This assumes that all other variables remain constant. Market risk – Operational risk The Group is exposed to legislative and/or Government policy changes to funding for IVF and related healthcare services which may impact patient out-of-pocket costs resulting in potentially higher or lower demand. Fair Values (a) Accounting classifications and fair values The following table shows the carrying amounts and fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy. The Group has not disclosed the fair values for financial assets such as short- term trade receivables, and financial liabilities such as payables (including variable rate secured bank loans), because these carrying amounts are a reasonable approximation of fair values. $’000 Financial assets measured at fair value Interest rate swaps for hedging Carrying Amount 305 305 Fair Value Level 1 Level 2 Level 3 Total - - 305 305 - - 305 305 The table above analyses financial assets and liabilities carried at fair value. The different levels have been defined as follows: - - - Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities; such as payables (including variable rate secured bank loans), Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). - (b) Measurement of fair value (i) Valuation techniques and significant unobservable inputs The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used. Type Valuation Technique Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement Not applicable Not applicable Interest rate swaps for hedging Market comparison technique: The fair values are based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.3 Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Where there is an unconditional right to defer settlement of the liability for at least twelve months after the reporting date, the loans and borrowings are classified as non-current. Total loan facilities available to the Group in Australian dollars $’000 Syndicated Debt facility A Syndicated Debt facility B(1) Total borrowings Other facilities Working capital facility(2) Accordion facility Borrowings Borrowings Capitalised finance facility fees Total borrowings 2023 2022 Limit Utilised Limit Utilised 40,000 10,000 50,000 32,000 7,000 39,000 40,000 - 40,000 10,000 - 10,000 10,000 30,000 3,637(2) - 10,000 40,000 3,489(2) - 39,000 (134) 38,866 10,000 (236) 9,764 (1) (2) In March 2023, the Group opened facility B utilizing $10m of the Accordion Facility which is available for acquisition and growth capital expenditure purposes. The working capital facility is used for lease bank guarantees which is off-balance sheet. The banking facilities are secured via a first ranking security over substantially all of the Group’s entities. The Group is subject to certain financial undertakings under the banking facilities. As at 30 June 2023, the Group is compliant with its financial undertakings. As at 30 June 2023, the Group had $3,636,859 of bank guarantees in place (FY22: $3,488,999). Reconciliation of movements of liabilities arising from financing activities $’000 Loans Lease liabilities Balance at 1 July 2022 9,764 67,466 Additions Principal repayments Other Balance at 30 June 2023 42,000 2,885 (13,000) (9,178) 102(1) - 38,866 61,173 Total interest bearing loans and borrowings 77,230 44,885 (22,178) 102 100,039 (1) Capitalised bank fees following new and extension to the Syndicated Debt Facilities. 4.3 Derivative financial instruments Non current Derivatives 2023 $’000 305 305 2022 $’000 - - In April 2023, the Group entered into an interest rate swap for $15m which is in a hedging relationship with existing debt. The swap will mature at 14 April 2026. 102 | Monash IVF Group 76 77 Annual Report 2023 | 103 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.6 Cash and cash equivalents Cash at bank Short-term bank deposits Total cash and cash equivalents Reconciliation of profit after income tax to net cash inflow from operating activities Profit for the period 2023 $’000 6,565 1,440 8,005 2023 $’000 2022 $’000 6,907 967 7,874 2022 $’000 21,966 18,502 Adjustments: Depreciation and amortisation Net finance cost included in financing activities Provision for Fertility Solutions Earn-out Provision for expected credit losses Acquisition, Lease Accounting and Other Operating profit before changes in working capital and provisions Change in net operating assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in inventory Increase/(decrease) in trade and other payables Increase/(decrease) in provisions and employee benefits Increase/(decrease) in income and deferred taxes Net cash from operating activities 15,343 1,206 40 (221) 2,171 40,505 (2,984) (1,176) 1,959 1,146 (328) 39,122 14,788 427 395 15 3,191 37,318 (2,702) (1,037) 678 350 (2,718) 31,889 Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 4.3 Derivative financial instruments (continued) Recognition and measurement Derivative financial instruments, including hedge accounting The Group may hold derivative financial instruments to hedge certain floating interest rate exposures. On initial designation of the hedge, the Group formally documents the relationship between the hedging instruments and hedging items, including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the change in the cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss. Derivatives are recognised initially at fair value; attributed transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes to therein are accounted for as described below. All derivative financial instruments are valued using unadjusted quoted prices in active markets for identical assets or liabilities. Cash Flow hedge Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in OCI and presented in the hedging reserve in equity. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in OCI and presented in the hedge reserve in equity remains there until the forecast transaction affects profit or loss. If the forecast transaction is no longer expected to occur, then the balance in OCI is recognised immediately in profit or loss. In other cases the amount recognised in OCI is transferred to profit or loss in the same period that the hedged item affects profit or loss. 4.4 Net Finance Costs Finance income Interest income Finance costs Interest expense Amortisation of borrowing costs(1) Interest on lease liabilities Total finance costs Net finance costs 2023 $’000 25 1,036 195 2,073 3,304 3,279 (1) Includes interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings. 2022 $’000 4 377 54 1,720 2,151 2,147 78 104 | Monash IVF Group 79 Annual Report 2023 | 105 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 5 Our Business Portfolio This section provides further insight into the legal structure and group of subsidiary companies. 5.1 Controlled entities 5.4 Acquisitions and disposals 5.2 Investments accounted for using the equity method 5.5 Deed of cross guarantee 5.3 Parent equity 5.1 Controlled entities Parent entity Monash IVF Group Limited Controlled entities Healthbridge Enterprises Pty Ltd Monash IVF Group Acquisitions Pty Ltd Healthbridge IVF Holdings Pty Ltd Healthbridge Shared Services Pty Ltd Healthbridge Repromed Pty Ltd Repromed Finance Pty Ltd Repromed Holdings Pty Ltd Repromed NZ Holding Pty Ltd Repromed Australia Pty Ltd Adelaide Fertility Centre Pty Ltd Monash IVF Holdings Pty Ltd Monash IVF Finance Pty Ltd Monash IVF Pty Ltd Monash Reproductive Pathology and Genetics Pty Ltd Monash Ultrasound Pty Ltd Monash IVF Auchenflower Pty Ltd Yoncat Pty Ltd My IVF Pty Ltd ACN 169 060 495 Pty Ltd Palantrou Pty Ltd ACN 166 701 819 Pty Ltd ACN 166 702 487 Pty Ltd KL Fertility & Gynaecology Centre Sdn. Bhd. KL Fertility Daycare Sdn. Bhd. Sydney Ultrasound for Women Partnership Ultrasonic Diagnostic Services Trust No.2 ACN 604 384 661 Pty Ltd Ultrasonic Diagnostic Services Pty Ltd Fertility Australia Pty Ltd Fertility Australia Trust MVF Sunshine Coast Pty Ltd Hobart IVF Pty Ltd (1) Monash IVF West Pty Ltd ART Associates Queensland No.2 Pty Ltd (1) Refer to Note 5.4 106 | Monash IVF Group Place of business/country Australia Place of business /country Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Malaysia Malaysia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ownership interest 2022 2023 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 90% 90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 57.4% - - 90% - 100% 80 Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 5.1 Controlled entities (continued) Controlled entities Place of business /country Gold Coast Ultrasound for Women Pty Ltd (1) Australia Singapore Monash IVF Asia Pte Ltd Malaysia Monash IVF South Malaysia Pte Ltd Indonesia Pt Mitra Kasih Medikatama (1) Refer to Note 5.4 5.2 Investments accounted for using the equity method 2022 Ownership interest 2023 -% 90% 62% 54% 51% 90% 62% 54% Name of company Compass Fertility 5.3 Parent entity Principal Activity Ownership Interest % Share of Net Profit/Loss $’000 Fertility Services 2023 30% 2022 25% 2023 106 2022 243 As at 30 June 2023 and throughout the financial year ending on that date, the parent company of the Group was Monash IVF Group Limited. Results of parent entity Profit after tax Other comprehensive income Total comprehensive income Financial position of parent entity at year end Current assets Total assets Current liabilities Total liabilities Net assets Total equity of the parent entity comprising of: Share capital Retained earnings Total equity 2023 $’000 14,865 - 14,865 - 555,071* 862 37,607 517,464 506,786 10,678 517,464 2022 $’000 15,470 - 15,470 - 528,184* 1,294 8,441 519,743 506,786 12,957 519,743 *Includes Intercompany balances with its subsidiaries, as at 30 June 2023, these balances are not expected to be settled within twelve months. Expenditure contracted for but not recognised as liabilities Parent Entity Capital plant and equipment 2023 $’000 7,970 2022 $’000 13,598 Parent entity guarantees in respect of the debts of its subsidiaries The parent entity has entered into a Deed of cross guarantee with the effect that the Company guarantees debts in respect of certain subsidiaries. 81 Annual Report 2023 | 107 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 5.4 Acquisitions and disposals Acquisition of ART Associates Queensland On 1 July 2022, Monash IVF Group Limited announced the acquisition of ART Associates Queensland No.2 Pty Ltd (ART Associates Queensland) in Brisbane, Queensland for initial cash consideration of $3.9m on a debt free basis, with the potential of additional earn out payments, subject to certain clauses, over a five to seven year period from completion. ART Associates Queensland is a specialist fertility clinic in Brisbane performing IVF clinical patient services and processes including nursing, phlebotomy, ultrasound and other related services. Acquisition of Pivet Medical Centre On 27 May 2023, Monash IVF Group Limited announced the completion of the acquisition of PIVET Medical Centre (“PIVET”) which is a Perth, Western Australia and Cairns, Queensland provider of fertility services. The acquisition included initial up-front cash consideration of $7.0 million on a debt free basis, with the potential of additional earn out payments, subject to certain clauses. In this financial report, ART Associates Queensland and Pivet Medical Centre contributed $8.8m of revenue and net profit after tax of $2.0m to the consolidated results. If the acquisitions occurred on 1 July 2022, Management estimated that consolidated revenue would have been $223.5m and consolidated profit after tax for the period would have been $24.0m. The Group incurred acquisition related costs of $1.3m post tax relating to external legal fees, due diligence and stamp duty costs. These costs are included in ‘professional and other fees’ in the Group’s statement of profit or loss and other comprehensive income. The identifiable assets acquired and liabilities assumed for the ART Associates Queensland and Pivet Medical Centre acquisitions have been determined at fair value: Consideration Total cash consideration Contingent consideration Current Non Current Total contingent consideration Total consideration Identifiable assets acquired and liabilities assumed Prepayments Plant and equipment Inventory Trade and other payables Employee entitlements Total identifiable net assets/ (liabilities) Total consideration Plus Fair value of net identifiable liabilities Goodwill 108 | Monash IVF Group $’000 10,948 5,182 5,200 10,382 21,330 150 529 149 (500) (961) (633) 21,330 633 21,963 82 Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 5.4 Acquisitions and disposals (continued) Accounting estimates and judgements- Contingent consideration Deferred or contingent consideration relates to businesses acquired and is initially measured at fair value as at the acquisition date. Subsequent to initial recognition, deferred consideration continues to be measured at fair value with any changes in fair value recognised in the profit or loss. The measurement of contingent consideration requires management to estimate the amount likely to be paid in the future. This requires the exercise of judgement, in particular where the amounts is payable is dependent to the future financial performance of the business that has been acquired. Accounting policy for business combinations The acquisition method of accounting is used to account for business combinations. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition date. Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets and liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i) twelve months from the date of the acquisition or (ii) when the acquirer received all the information possible to determine fair value. Sale of Hobart IVF Pty Ltd On 31 October 2022, a share sale agreement was executed for the sale of Monash IVF Group’s majority shareholding of 57.4% to the sole minority shareholder for no cash consideration. This resulted in a $146K loss on disposal. Accordingly, the loss on disposal and derecognition of assets and liabilities of the subsidiary has been reported in the Group financial statements. Sale of Gold Coast Ultrasound for Women Pty Ltd On 14 April 2023, a share sale agreement was executed for the sale of Monash IVF Group’s majority shareholding of 57.4% to QUFW Southport Pty Ltd for $215K. This resulted in an estimated $14K loss on disposal. Accordingly, the gain on disposal and derecognition of assets and liabilities of the subsidiary has been reported in the Group financial statements. 83 Annual Report 2023 | 109 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 5.5 Deed of cross guarantee The below listed entities are parties to a Deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly Owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission. The below companies represent the parties to the Deed of cross guarantee (‘closed group’): - Monash IVF Group Ltd - Monash IVF Group Acquisition Pty Ltd Healthbridge Enterprises Pty Ltd - Healthbridge Shared Services Pty Ltd - Healthbridge IVF Holdings Pty Ltd - Healthbridge Repromed Pty Ltd - ACN 169060495 Pty Ltd - ACN 166701819 Pty Ltd - - My IVF Pty Ltd - Monash IVF Holdings Pty Ltd Palantrou Pty Ltd - ACN 166702487 Pty Ltd - Repromed Finance Pty Ltd - - Monash IVF Finance Pty Ltd Repromed Holdings Pty Ltd - - Monash IVF Pty Ltd - - - Monash Ultrasound Pty Ltd - Monash Reproductive Pathology & Genetics Pty Ltd - Monash IVF Auchenflower Pty Ltd Yoncat Pty Ltd - Adelaide Fertility Centre Pty Ltd - Sydney Ultrasound for Women Partnership - Ultrasonic Diagnostic Services Trust No. 2 - ACN 604384661 Pty Ltd - Ultrasonic Diagnostic Services Pty Ltd - Fertility Australia Pty Ltd - Fertility Australia Trust - - MVF Sunshine Coast Pty Ltd Repromed Australia Pty Ltd Repromed NZ Holding Pty Ltd An extract of the consolidated statement of comprehensive income and consolidated statement of financial position, comprising the Company and controlled entities which are party to the Deed of cross guarantee, after eliminating all transactions between parties to the Deed of cross guarantee is set out as follows: Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 5.5 Deed of cross guarantee (continued) Extract of the statement of profit or loss and other comprehensive income Profit before tax Income tax expense Net profit after tax Summary of movements in retained earnings Opening balance at 1 July Profit for the period Dividends paid/declared Closing balance at 30 June Statement of financial position Current assets Cash and cash equivalents Trade and other receivables Inventory Total current assets Non current assets Investment in subsidiaries Trade and other receivables Plant and equipment Right of use assets Deferred tax asset Derivative financial instrument Intangible assets Total non current assets Total assets Current liabilities Trade and other payables Lease liabilities Current tax payable Contingent consideration Employee benefits Total current liabilities Non current liabilities Borrowings Lease liabilities Deferred tax liability Contingent consideration Employee benefits Total non current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 2023 $’000 28,182 (7,340) 20,842 (106,047) 20,842 (17,144) (102,349) 5,138 14,507 6,001 25,646 12,964 100 47,234 58,459 10,871 305 264,434 394,367 420,013 20,493 5,935 1,457 3,380 11,103 42,368 38,866 54,659 10,373 5,200 1,381 110,479 152,847 267,166 506,786 (137,271) (102,349) 267,166 2022 $’000 ) 24,128 (6,840) 17,288 (106,582) 17,288 (16,753) (106,047) 5,200 11,956 5,015 22,171 12,967 100 28,401 61,372 11,211 252,746 366,797 388,968 26,061 6,023 457 483 10,853 43,877 9,764 58,134 11,836 488 1,401 81,623 125,500 263,468 506,786 (137,271) (106,047) 263,468 As at 30 June 2023, the Deed of cross guarantee Group has a net current asset deficiency of $16,722,000 (FY22: $21,706,000). Refer to the basis of preparation note in relation to going concern considerations. 110 | Monash IVF Group 84 85 Annual Report 2023 | 111 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 Section 6 Other disclosures 6.1 Auditors’ remuneration 6.4 Reporting entity 6.2 Events occurring after the reporting period 6.5 Basis of preparation 6.3 Commitment and contingencies 6.6 New standards and interpretations 6.1 Auditors’ remuneration During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: Audit services - KPMG Audit and review of financial statements Other services - KPMG Taxation services Other auditors (Non KPMG) Audit and review of financial statements Total services 6.2 Events occurring after the reporting period 2023 $ 2022 $ 313,850 295,000 196,190 134,750 22,443 532,483 22,339 452,089 On 22 August 2023, a fully franked final dividend of 2.2 cents per share was declared. The record date for the dividend is 8 September 2023 and the payment date for the dividend is 11 October 2023. Refer to note 6.3 for developments in contingent liabilities arising after the reporting period. Except as disclosed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial periods. 6.3 Commitment and contingencies As announced to the ASX on 23 December 2020, Monash IVF Group became aware that it and certain number of its subsidiaries have been named as defendants in proceedings filed in the Supreme Court of Victoria in relation to, or in connection with, the Group’s non-invasive pre-implantation genetic screening technology (Ni-PGT or cell- free PGT-A). The proceedings filed makes a series of allegations against Monash IVF Group in relation to the Ni- PGT testing including that those patients who had embryos classified as aneuploid as a result of Ni-PGT testing may have had embryos destroyed or did not proceed to embryo transfer. Ni-PGT testing was suspended in October 2020. As announced to the ASX on 21 August 2023, an amended statement of claim was filed in the Supreme Court of Victoria which, amongst other things, seeks aggravated damages and exemplary damages from the Group. The Group filed its initial defense on 19 August 2022 in accordance with the Court’s directions and expects to file its defense for the amended statement of claim in the coming months. The discovery process is continuing and the Group has notified its insurers of the claim noting the cost of Monash IVF’s defense of the Class Action are currently funded by its insurer. The claim does not specify an amount of damages and it is not currently possible to determine the ultimate impact of this claim, if any, on the Group. The aggravated damages and exemplary damages claim, and the costs of defending that, are uninsured. Legal costs and damages, if any, in excess of insurance proceeds will be funded by Monash IVF. Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 6.4 Reporting entity Monash IVF Group Ltd (the ‘Company’) is a for profit company primarily involved in the area of assisted reproductive services and the provision of specialist women’s imaging services. Monash IVF Group Ltd was incorporated on 30 April 2014. The Company is incorporated in Australia and listed on the Australian Stock Exchange. Its registered office is at Level 1, 510 Church Street, Cremorne, Victoria and is limited by shares. The consolidated financial statements comprise the Company and its controlled entities (collectively ‘the consolidated entity’, ‘Monash Group’ or ‘Group’). 6.5 Basis of preparation Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements of the Group comply with the International Financial Reporting Standards (IFRSs) and interpretations adopted by the international Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Directors on 22 August 2023. Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is the functional and presentational currency of the Company and the majority of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by the Australian Securities and Investments Commission (ASIC), relating to the rounding of amounts in the consolidated financial statements. Amounts in the consolidated financial statements have been rounded off in accordance with that legislative instrument to the nearest thousand, unless specifically stated to be otherwise. Basis of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Monash IVF Group Ltd as at 30 June 2023 and the results of all subsidiaries for the year then ended. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date on which control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Intra-group balances and transactions, arising from intra-group transactions are eliminated at consolidation. Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Interests in associates and the joint venture are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence ceases. 112 | Monash IVF Group 86 87 Annual Report 2023 | 113 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 6.5 Basis of preparation (continued) Basis of measurement The financial report has been prepared on an accrual basis and is based on historical cost (unless otherwise stated), except for derivative financial instruments and contingent consideration assumed in a business combination, which have been measured at fair value. Foreign currency translation Transactions in foreign currencies are translated at foreign exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised costs in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the exchange rate at the date of transaction. Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income (OCI), and presented in the foreign currency translation reserve (translation reserve) in equity. Use of estimates and judgements The preparation of the consolidated financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i) Estimated recoverable amount of goodwill and other non-current assets The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy for intangible assets. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows, which are largely independent of the cash inflows from other assets or groups of assets (cash generating units, or CGUs). Refer to Note 2.6 for further details on impairment testing. (ii) Provision for ECL on receivables The Group calculates the doubtful debts provision under the ECL model. The Group assesses credit losses based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. Measurement of ECL allowance for trade receivables is disclosed in Note 2.1. (iii) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. (iv) Deferred consideration The measurement of deferred consideration requires management to estimate the amount likely to be paid in the future. This requires the exercise of judgement, in particular where the amounts is payable is dependent to the future financial performance of the business that has been acquired. 88 114 | Monash IVF Group Monash IVF Group Limited Notes to the Consolidated Financial Statements for the year ended 30 June 2023 6.5 Basis of preparation (continued) (v) Leases The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the lease liabilities and right-of-use assets recognised. The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of- use asset has been reduced to zero. Going concern As at 30 June 2023, the group has a net current asset deficiency of $16,565,000 (FY22: $12,531,000). 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 which indicate that cash reserves are sufficient to fund operations, the availability of committed but undrawn external debt facilities, and given certain current liabilities such as employee entitlements and deferred revenue will not be fully settled in the short term to cause a liquidity shortfall. The Directors have considered forecast cash flow scenarios for at least the twelve month period from the date of approval of these financial statements. As a result, 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. 6.6 New standards and interpretations A number of new standards are effective for annual periods beginning after 1 July 2022 and earlier applications permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. The following new and amended standards are not expected to have a significant impact on the Group’s consolidated financial statements: • • • • Classification of Liabilities as Current or Non-current (Amendments to AASB 101) Recognising deferred tax on leases (Amendments to AASB 112) Disclosure of Accounting Policies (Amendments to IAS 1and IFRS Statement 2) Definition of Accounting Estimates (Amendments to IAS 8) 89 Annual Report 2023 | 115 Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023Notes to the Consolidated Financial Statements continuedfor the year ended 30 June 2023 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Monash IVF Group Limited Directors’ Declaration Directors’ Declaration for the year ended 30 June 203 for the year ended 30 June 2023 1. In the opinion of the Directors of Monash IVF Group Ltd (the ‘Company’): (a) the Consolidated Financial Statements and Notes set out on pages 51 to 89 and the Remuneration Report on pages 18 to 35 in the Directors’ Report, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its 44 to 60 81 to 115 performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards, the Corporations Regulations 2001; and Independent Auditor’s Report (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. To the shareholders of Monash IVF Group Limited 2. There are reasonable grounds to believe that the Company and the Group entities identified in Note 5.1 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. 3. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 by the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2023. 4. The Directors draw attention to note 6.5 to the Consolidated Financial Statements, which include a Statement of Compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors: Dated in Melbourne, 22nd day of August 2023 Report on the audit of the Financial Report Opinion We have audited the Financial Report of Monash IVF Group Limited (the Company). The Financial Report comprises: 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 the Group’s financial position as at 30 June 2023 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. • Consolidated statement of financial position as at 30 June 2023 • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Notes including a summary of significant accounting policies • 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. Mr. Richard Davis Chairman Mr. Michael Knaap Chief Executive Officer and Managing Director Basis for opinion 22 August 2023 22 August 2023 116 | Monash IVF Group 90 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. 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. 91 Annual Report 2023 | 117 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Recoverable value of goodwill ($255.1m) Refer to Note 2.6 to the Financial Report The key audit matter How the matter was addressed in our audit At 30 June 2023 the Group’s balance sheet includes goodwill related to three cash generating units (CGUs) – Australia, International and Ultrasound. A key audit matter for us was the Group’s annual testing of goodwill for impairment, given the size of the balance (being 61% of total assets) and the extent of judgement involved. We focused on the significant forward-looking assumptions the Group applied in its value in use models, including: • Forecast cash flows, growth rates and terminal growth rates in light of market conditions impacting each CGU and continued economic uncertainties post the COVID-19 pandemic. These conditions impact our consideration of forecasting risk; and • Discount rates, which vary according to the conditions and environment the specific CGU is subject to. The models are largely manually developed, use adjusted historical performance and a range of internal and external sources as inputs to the assumptions. Modelling using forward-looking assumptions tends to be prone to greater risk for potential bias, error and inconsistent application. Where the Group has not met prior year forecasts in relation to a specific CGU, we factor this into our assessment of forecast assumptions. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. Our procedures included: • We considered the appropriateness of the Group’s value in use methodology to perform the annual test of goodwill for impairment against the requirements of the accounting standards. • We assessed the integrity of the value in use models used, including the accuracy of the underlying calculation formulas. • We compared the forecast cash flows contained in the value in use models to Board approved forecasts. • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts included in the models. • We assessed the Group’s underlying methodology and documentation for the allocation of corporate costs and corporate assets to each CGU, for consistency with our understanding of the business and the criteria in the accounting standards. • We considered the sensitivity of the models by varying key assumptions, such as forecast cash flows, growth rates and discount rates, within a reasonably possible range. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to identify those CGUs at higher risk of impairment and to focus our further procedures. • We challenged the Group’s forecast cash flow and growth assumptions having regard to the recovery from the uncertainties arising from the COVID-19 pandemic, with a particular focus on the Ultrasound CGU. We used our knowledge of the Group, business and patients and our industry experience. • Working with our valuation specialists, we: - - independently developed a comparable discount rate range from publicly available market data for comparable entities and adjusted by specific risk factors to the Group and the industry it operates in; independently assessed the growth rates based on the industry in which the Group operates and current economic environment; and - compared the implied multiples for comparable entities to the implied multiples from the Group’s value in use models. • We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards. Other Information Other Information is financial and non-financial information in Monash IVF Group Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report (including the Remuneration Report), Appendix 4E and Corporate Governance Statement. The Chairman’s Report, Managing Director & CEO’s Report, Financial Overview, Chief Financial Officer’s Report, information on “Our Strategy” and “Our Pillars” and Shareholder Information 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 Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a 118 | Monash IVF Group 92 93 Annual Report 2023 | 119 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Shareholder Information Shareholder Information Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. This information is current as at 28 September 2023. Distribution of Shareholders – Ordinary Shareholders Size of Holding 1 to 1000 1001 to 5000 5001 to 10000 10001 to 100000 100001 and Over Total No of Shareholders Ordinary Shares 1,721 2,551 975 1,356 128 6,731 1,091,948 6,874,798 7,598,366 38,207,961 335,861,767 389,634,840 % of issued Capital .28% 1.76% 1.95% 9.81% 86.2% 100.00% The number of security investors holding less than a marketable parcel of 391 securities ($1.280 on 28/9/2023) is 275 and they hold 39,450 securities. true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Monash IVF Group Limited for the year ended 30 June 2023 complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included within 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 Chris Sargent Partner Melbourne 22 August 2023 94 120 | Monash IVF Group Annual Report 2023 | 121 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Shareholder Information continued Shareholder Information continued 20 Largest Shareholders – Ordinary Shareholders Rank 1 Name HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED ARGO INVESTMENTS LIMITED WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED UBS NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 PACIFIC CUSTODIANS PTY LIMTED NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> CITICORP NOMINEES PTY LIMITED IPPOLITI PTY LTD BNP PARIBAS NOMINEES PTY LTD MR PRASHANT NADKARNI VOLLENHOVEN INVESTMENT PTY LTD MCLACHLAN FUTURE FUND PTY LTD BNP PARIBAS NOMS PTY LTD 19 WARBONT NOMINEES PTY LTD ONG ADMINISTRATION PTY LTD 20 Total for Top 20 Total other investors Grand Total Substantial Shareholders No. of fully paid shares 83,516,281 59,749,303 49,255,781 34,190,551 19,982,646 17,725,000 10,168,382 6,861,358 3,355,128 2,474,369 2,465,635 2,429,696 2,011,336 1,556,240 1,461,484 1,447,787 1,385,944 1,311,952 1,285,310 1,201,906 % of issued Capital 21.43% 15.33% 12.64% 8.78% 5.13% 4.55% 2.61% 1.76% .86% .64% .63% .62% .52% .40% .38% .37% .36% .34% .33% .31% 303,836,089 85,798,751 77.98% 22.02% 389,634,840 100.00% As at 28 September 2023, the following details the names of substantial shareholders in Monash IVF Group Limited and the number of shares held, as disclosed in substantial holding notices given to the Company: Rank 1 Name CHALLENGER LIMITED 2 ARGO INVESTMENTS LIMITED Voting Rights No. of fully paid shares 27,512,571 19,982,646 % of issued Capital 7.06% 5.13% In accordance with the Constitution, each member present at a meeting (whether in person, by proxy, by power of attorney or by a duly authorised representative), upon a poll, shall have one vote for each fully paid ordinary share. 122 | Monash IVF Group Annual Report 2023 | 123 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. 124 | Monash IVF Group Annual Report 2023 | 125 About Us Year in Review Chairman's, MD & CEO and CFO Reports Our Strategy Industry Growth Drivers 4 Year Metrics Our Pillars Board of Directors Management Team FY23 Financial Report Financial Overview Corporate Directory Stock Exchange Listing Auditor The shares of Monash IVF Group are listed by ASX Ltd on the Australia Securities Exchange trading under "MVF". Directors Mr Richard Davis - Chairman Mr Neil Broekhuizen Mr Josef Czyzewski Dr Richard Henshaw Mr Michael Knaap Ms Zita Peach Ms Catherine West Mr Malik Jainudeen - Company Secretary KPMG Australia Tower Two, Collins Square 727 Collins Street Docklands VIC 3008 T +61 (0)3 9288 5555 Corporate Office Level 1 510 Church St Cremorne, VIC 3121 Website www.monashivfgroup.com.au Share Registry Link Market Services Tower 4, 727 Collins Street Melbourne VIC 3000 Legal Clayton Utz 1 Bligh Street Sydney NSW 2000 T +61 (0)2 9353 400 2023 Annual General Meeting Tuesday, 28 November at 2pm KPMG Tower Two, Collins Square 727 Collins Street Melbourne VIC 3008 — Level 36 — Meeting room 36.15 Virtual Meeting The online platform for the AGM can be accessed at - https://meetings.linkgroup.com/MVF23 126 | Monash IVF Group Annual Report 2023 | 127 

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