SeaLink Travel Group
Annual Report 2020

Plain-text annual report

Annual Report 2019 – 2020 Cover: Sydney, New South Wales This page: Palm Island, Queensland We acknowledge the Traditional Owners and Custodians of country throughout Australia and their continuing connection to the land, water and community. We pay our Respect to Aboriginal and Torres Strait Island Cultures and Elders past, present and emerging. At SeaLink we are dedicated to connecting people, linking communities, sharing experiences, and creating brilliant memories. SeaLink Travel Group Five Year Financial Highlights Our Global Operations Our Australian Operations Community and Sustainability Chair Report Review of Operations Revenue History 2 3 4 6 8 10 12 20 Key Results Directors’ Report Financial Report Auditor’s Report Auditor’s Independence Declaration Remuneration Report ASX Additional Information Corporate Governance 22 23 28 75 81 82 92 94 Adelaide, South Australia S E A L I N K T R A V E L G R O U P SeaLink provides innovative and efficient transport solutions that link people and communities with places and experiences. With a genuine care for our customers, people and the environment, we believe in delivering safe, convenient and sustainable transport that keeps people connected. SeaLink Travel Group is Australia’s largest land and marine tourism and public transport service provider with established international operations. It is one of Australia’s most experienced and diverse multi-modal transport businesses, boasting performance-driven capabilities across ferry, bus and light rail. The Group is made up of SeaLink marine and tourism operations and facilities, and Transit Systems Group, with domestic and international public transport contracts, with operations in seven Australian states and territories, as well as Singapore and London. The Group moves more than 280 million customers per year, has over 8,600 employees and operates approximately 3,500 buses and 80 ferries. SeaLink is a business with a focus on innovation, and is leading the way in the area of sustainable transport and tourism experiences, with the introduction of electric buses in Perth and London underway, an electric bus trial currently operating in NSW, on demand services in Sydney, and is part of the world’s first hydrogen consortium, the H2OzBus Project. As well as operating an eco-tourism resort on the world heritage listed, Fraser Island and eco experiences and tours in Queensland and South Australia. Headquartered in Adelaide since 1989, the business has experienced a remarkable period of growth, the most recent example being the acquisition of Transit Systems Group in January 2020. Together, SeaLink has emerged as a leader in both public transport and local tourism, bringing together Australia’s most dynamic travel company and a global transport leader. Noteably, the Group was awarded the Brisbane City Council contract for the CityCat and CityFerry operation in June 2020, signifying the success of the acquisition and the union of the two businesses. 2 F I V E Y E A R F I N A N C I A L H I G H L I G H T S SEALINK TRAVEL GROUP PERFORMANCE Total Revenue Underlying* EBIT EBIT margin Underlying* NPAT Underlying* EPS (basic) Dividend per share (100% franked) FINANCIAL STRENGTH Net assets NTA per share Gearing $m $m % $m cents cents $m cents % 2016 176.8 35.3 19.9 23.1 24.4 12.0 137.0 89.0 33 2017 201.4 37.5 18.6 23.6 23.6 14.0 147.7 100.0 31 2018 209.4 33.6 16.0 22.1 21.8 14.5 152.2 101.0 46 2019 251.3 31.5 12.5 23.4 23.0 15.0 157.9 106.0 36 2020 646.5 29.9 4.6 16.4 9.9 11.0 600.2 5.0 31 NET PROFIT/(LOSS) AFTER TAX $25m UNDERLYING EARNINGS PER SHARE UNDILUTED 25 cents $20m $15m $10m $5m ($5m) ($10m) ($15m) 20 cents 15 cents 10 cents 5 cents FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Statutory NPAT Underlying* NPAT Underlying* Earnings per share (ave) – undiluted *Adjusted for significant items for the period ending 30 June 2020 on a pre-AASB 16 basis. This is a non-IFRS measure and has not been audited. 3 O U R G L O B A L O P E R A T I O N S LON DON LOS AN G EL ES SI NGAPOR E DARWI N PE RTH ADE LAI DE TOWNSVI LLE BRISB AN E AUCK LAN D SYDN EY M EL BOU RN E HOBART OU R PU BLIC TRANSPOR T GOVE RN M EN T PARTN E RS 4 LON DON LOS AN G EL ES SI NGAPOR E DARWI N PE RTH ADE LAI DE AUCK LAN D TOWNSVI LLE BRISB AN E SYDN EY M EL BOU RN E HOBART OU R PU BLIC TRANSPOR T GOVE RN M EN T PARTN E RS 8,600 EMPLOYEES 280M PASSENGERS / YEAR 3,500 BUSES 80 FERRIES 12 CITIES 14 ISLANDS 5 O U R A U S T R A L I A N O P E R A T I O N S Tiwi Islands DARWIN Groote Eylandt Ferries Buses Trams Tourism Rottnest Island Busselton Swan River PERTH Bunbury Albany Kangaroo Island 6 Palm Island Magnetic Island TOWNSVILLE BRIS BANE Gladstone Fraser Island North Stradbroke Island South Moreton Islands ADELAIDE Murray River SYDNEY MEL BOURNE HOBART Bruny Island WE STE R N AU STR AL IA 1561 STAFF, 12 VESSELS, 791 BUSES, 20 DEPOTS / PORTS, 10 CONTRACTS 25M PASSENGERS P.A. VI CTO RI A 270 STAFF, 175 BUSES, 1 DEPOT, 1 CONTRACT 2M PASSENGERS P.A. SO UTH AUSTR AL IA Q U E EN S LAN D 1698 STAFF, 5 VESSELS, 24 TRAMS, 863 BUSES, 14 DEPOTS / PORTS, 5 CONTRACTS 33M PASSENGERS P.A. 654 STAFF, 36 VESSELS, 36 BUSES, 13 DEPOTS / PORTS, 8 CONTRACTS 3M PASSENGERS P.A. N ORTH E R N TE R R ITORY N E W SO UTH WAL ES 98 STAFF, 4 VESSELS, 38 BUSES, 2 DEPOTS / PORTS, 4 CONTRACTS 2M PASSENGERS P.A. 2132 STAFF, 19 VESSELS, 847 BUSES, 9 DEPOTS / PORTS, 6 CONTRACTS 60M PASSENGERS P.A. TAS MAN IA 45 STAFF, 4 VESSELS, 2 PORTS, 1 CONTRACT 300,000 PASSENGERS P.A. AUSTRALIA WI DE 6458 STAFF, 80 VE SS E LS, 2750 BU S ES, 24 TRAM S, 61 D E P OTS / P ORTS , 35 CO NTR ACTS 125M PASS E N G ER S P.A. 7 C O M M U N I T Y A N D S U S T A I N A B I L I T Y SeaLink’s approach to corporate social responsibility is through Diversity, Reconciliation, Teams, Community and Sustainability actions. D IVE R S IT Y These pillars are important to our people and the communities S U STAI NAB I L IT Y R EC O N CI L IATIO N in which we work and we believe by focusing on these we will make a positive impact. By providing a safe and satisfying workplace SeaLink can contribute to a healthier environment, celebrate diversity, acknowledge our role in reconciliation and improve regional economic opportunities. This is a snapshot of some of the initiatives and programs SeaLink CO M M U N IT Y TEAM S Travel Group has embarked on over the past financial year. DIVERSITY RECONCILIATION This year, we revised our Group Diversity and Equity Policy, SeaLink’s first Reconciliation Action Plan (RAP) was launched focused on providing equal opportunities to all and fostering in 2018 to provide a framework for SeaLink Travel Group to inclusiveness. We believe that our business and the community support reconciliation and engagement with Aboriginal and Torres benefits by bringing together talented people of different gender Strait people, employees and communities. This year SeaLink and gender identity, sexual orientation, religious beliefs, age, expanded relationships with traditional owners, Land Councils ethnicity and cultural backgrounds, disability, marital or parental and Regional Shire Councils in remote communities including status, educational background and socioeconomic status. agreeing to service contracts with the Groote Eylandt Aboriginal Trust, the Anindilyakwa Land Council, the Palm Island Aboriginal Shire Council and Quandamooka Yoolooburrabee Aboriginal Corporation. With the acquisition of the Transit Systems Group, SeaLink have embarked on renewing our Reconciliation Action Plan to continue building an organisational culture that embraces and incorporates recognition, acknowledgement and understanding of Aboriginal and Torres Strait Islander peoples and culture. 8 TEAMS Connecting and engaging with our predominantly deskless workforce has always been a challenge and this year, we committed to ensuring our entire team – globally, would have access to information and a digitised employee experience through a roll out of an employee app over the coming year. Our focus on the safety and wellbeing of our staff during the last year has also enabled a significant increase in our employees capability to work from home and improved the focus on communication that has improved the integration of our teams with the acquisition of Transit Systems Group. COMMUNITY SUSTAINABILITY Our significant commitment to the local communities was best SeaLink has a strong record of innovation and is actively demonstrated this year when extreme fires burnt more than pursuing opportunities to deploy hydrogen fuel cell buses in 50% of Kangaroo Island. SeaLink staff, crew and vessels were Australia and Singapore, supported by the extensive practical immediately activated to assist with bushfire recovery and experience gained from operating a fleet of Hydrogen along with a huge staff volunteer support package more than Fuel Cell buses in London as part of the Transport for half-a-million dollars in immediate cash support for the local London-led Clean Hydrogen in European Cities (CHIC) and community was provided by SeaLink and its Directors to the 3Emotion projects. The Projects concluded earlier this year Kangaroo Island’s Mayor’s Bushfire fund. – after 7 years of successful operation in one of the world’s In every community where we work, SeaLink has a bespoke local content plan to capture the needs of the community and empower our teams on the ground to take pride in the outcomes. Support for local communities primarily takes the shape of charitable donations, sponsorship support and the provision of in-kind services. SeaLink are highly aware of great cities. In May 2020, we joined forces with strategic partners Ballard Power Systems, BOC Limited, Palisade Investment Partners and ITM Power (‘Consortium’), by signing a memorandum of understanding as a further step in evaluating and demonstrating the concept of hydrogen fuel cell electric buses for use in public bus transport in Australia. our responsibility to local residents and local services. In NSW, we also celebrated our one-year anniversary of the Transit Systems’ electric buses in Region 6; part of the Transport for NSW trial and in Tasmania we undertook a feasibility project to consider building the new Tasmanian ferries with electric power systems. 9 C H A I R R E P O R T Dear Shareholders, It has been a very challenging year for many Australians, from bushfires over the summer holiday period right the way through the COVID-19 pandemic which we are still experiencing. I do want to acknowledge the difficulty many of our customers are suffering, particularly those on Kangaroo Island and in Victoria, our broader operating teams and of course the wider community. From our perspective we’ve been very focused on doing what we can, which is to continue running our business as well as possible, responding and supporting our customers and making sure that we are consistently executing our strategy. Overall, our previously communicated strategy of growth by acquisition of infrastructure like assets has been well founded and impeccably timed. The transformational acquisition of the Transit Systems Group on 16 January 2020 has made the combined operations a business with a very high proportion of contracted revenue, high-quality recurring earnings and entrenched competitive advantages. The associated capital raising, and debt refinancing was a monumental achievement for SeaLink and placed us in a position of financial strength. We have continued our vision and are building on the strong businesses and opening opportunities for both companies to continue to lead a diverse land and sea transport industry. The success of our multi-modal approach can be seen by the recent winning of new bus contracts in Western Australia and South Australia, the Brisbane ferry contract and most recently a ferry contract to Hayman Island. Our bus businesses have remained strong during this period with government backed revenue supporting 85% of revenue from our transport businesses. Although the pandemic has had a devastating effect on many of our tourism businesses, our outstanding management team and the JobKeeper program have allowed us to keep our teams together and engaged with the company ready for when conditions recover. As state borders reopen and consumer confidence grows, we see good opportunity in the Australian tourism market to return to strong sustainable earnings in our tourism businesses. I take this opportunity to again thank our staff who have done an amazing job adapting and changing our businesses to limit the effect of the pandemic and seeking new opportunities to reduce costs and build new revenue opportunities. Regarding earnings, SeaLink Travel Group Ltd has produced a Statutory Net Loss After Tax of $13.5 million for the full year. This is after one-off pre-tax costs of $29.9 million relating to the acquisition of Transit Systems Group and the impairment of certain assets and goodwill to reflect their lower utilisation levels due the coronavirus pandemic. Our Underlying Net Profit after Tax and before Amortisation was $37.2 million, noting this only includes five and half months contribution from the Transit Systems business, is more reflective of our new business strategy. Shareholders will receive a 4.5 cents per share final dividend combined with the interim dividend of 6.5 cents per share, brings the full year dividend to 11.0 cents per share fully franked. (2019 15.0 cents). The Board of course considered a Fraser Island, Queensland 10 range of different scenarios regarding the final dividend. he final decision is in line with our previous declared guidance of between 50% to 70% of Underlying NPATA, industry outlook and future business opportunities. The economic outlook still remains highly uncertain, however we at SeaLink feel we are very well positioned for a range of different economic scenarios. We have a strong balance and good cashflow, the majority of our earnings is contracted with government and we have an excellent management team in place. I am very pleased to acknowledge the appointment of Clint Feuerherdt as the new Group CEO on 16 January 2020. Clint was the former head of Transit Systems and brings with him enormous experience in public transport, government tendering, business growth and acquisition. I would like to thank my fellow Board colleagues for their continued commitment and adding value through offering their diversity of skills and experience and active participation into the governance of the Group. A special welcome to our two new Board members, Neil Smith and Lance Hockridge, both of whom bring enormous experience to the board. Also thank you to our retiring Chairman Andrew McEvoy who provided great support and insight during a period of strong growth. Finally, I would like to express my thanks to the broader SeaLink team of more than 8,600 employees all around Australia and overseas for their hard work and contribution during the year, and I look forward to our continuing success together. Jeff Ellison Chair SeaLink Travel Group Limited Clinton Feuerherdt (B.COM (HONS)) Group CEO Clint joined SeaLink as Group CEO in 2020 following the acquisition of the Transit Systems Group. Clint was the CEO of Transit Systems Group for 10 years and, under his guidance, Transit Systems Australia was entrusted with more franchised bus service contracts than any other company in Australia, growing revenue by over 400%. In 2012-2013 Clint led the expansion of Transit Systems Group into the United Kingdom, making Transit Systems Group the only Australian owned multinational public transport operator and further expanding into Singapore in 2015. Clint has significant experience in managing a large commuter transport business, developing and fostering strong government relationships, tendering for large scale public transport contracts, successful international growth and a strong focus on employee and commuter safety and service excellence. Clint graduated from the University of Queensland with an Honours Degree in Commerce and was awarded the University Medal. Clint previously worked in investment banking. 11 R E V I E W O F O P E R A T I O N S The successful acquisition and integration of the Transit Systems Group during the 2020 financial year has transformed SeaLink into an integrated, resilient, international multi-modal contracted transport business. This has been achieved during a period of unprecedented external events including overcoming the challenges and impacts of both the devastating bushfires across much of Australia during January 2020 and more recently the COVID-19 pandemic. The recent easing of restrictions has seen an improvement in trading from the Marine and Tourism operations as Australians begin travelling on an intra-state basis and we are well positioned to capitalise on this increased demand while international borders remain closed. The unique island destinations that we serve are very popular with domestic tourists and we have launched a national travel brand, Brilliant Travels, to promote all of our destinations through one convenient channel. The first half of the year was tracking very strongly, with most marine and tourism operations ahead of forecast at the half-year point, in what was shaping up to be a very active summer trading period. The rationalisation and redeployment of vessels in Sydney placed the New South Wales business in a strong position pre COVID-19, evidenced by the half-year results in that segment. During the post COVID-19 period, public commuter bus services have remained resilient and consistent, providing an essential service to the community in all geographies. Pleasingly, the Transit Systems Group performed in line with the acquisition base case, despite the pandemic. In addition, most of our ferry operations were well supported by state governments to continue to operate services to island communities, albeit on reduced frequency and capacity to comply with restrictions in place. The integration of the Transit Systems Group has progressed well during this period. The broadening of the senior management team has been very timely to enhance the success of navigating through the pandemic. The new scale of our operations and deep relationships with government bodies has been a valuable asset as the effects of the pandemic were managed and cost base efficiencies were pursued. We remain focused on building a diverse geographic portfolio of contracted essential services and leveraging the strong market position we have in Australia serving a large number of iconic island destinations. The Company has prudently decided to move to the lower end of the stated dividend pay-out range of 50-70% of underlying net profit after tax and before amortisation and has declared a final dividend of 4.5 cents per share, down from 8.5 cents in the prior comparable period. This brings the full year dividend to 11.0 cents per share, down from 15.0 cents per share last year. Result Overview The Company recorded a statutory Net Loss after Tax (NLAT) of $13.5 million compared to a statutory Net Profit After Tax of $21.5 million for the year ended June 2019. From a comparative perspective, the Company reported an underlying Net Profit After Tax and before Amortisation, excluding the impact of adoption of the new lease accounting standard AASB 16 ‘Leases’ of $37.2 million compared with $25.3 million in the prior year. 12 SeaLink’s achievements in its key business segments for the year are: • Underlying Net Profit After Tax and before Amortisation of $37.2 million, excluding the impact of adoption of the new lease accounting standard AASB 16 ‘Leases’, up 47.2% on prior year with total revenue of $646.5 million • Retained three existing bus contracts and awarded an additional bus contract plus a further light rail component for an 8+2 year term in South Australia • Strengthening of the Board with the addition of Neil Smith (16 January 2020) and Lance Hockridge (1 July 2020) and their transport, infrastructure and international experience. • Strong Gross Operating Cashflow • Continued to modernise its asset base across the operations with the launch of new vessels in Tasmania and Queensland • Acquisition of Transit Systems Group – announced 8 October 2019, settled on 16 January 2020 • Successful capital raising of $154 million to facilitate the Transit Systems Group acquisition • Announcement of Mr Clint Feuerherdt as new Group CEO of SeaLink from completion of the acquisition on 16 January 2020 • New multi tranche debt and revolving credit facilities with three to five-year terms • Contribution from Transit Systems Group business in line with acquisition metrics • Decisive action taken to cut costs, conserve cash and scale back Marine and Tourism businesses as a consequence of COVID-19 restrictions • Awarded the 10+5 year contract as operator of Brisbane City Council’s iconic ferry network • Extension of Canning and Southern River bus contracts in Western Australia to September 2024 and awarded the Joondalup bus contract • Retention of the Marmion and Claremont bus contracts in Western Australia • Extension of marine contracts in Gladstone, South East Queensland and Northern Territory The Company continues to focus on its strategy of growth through acquisition as well as maximising organic revenue growth and profitability from its existing businesses, including the addition of new contracts, routes and products. We have an ongoing focus and commitment to margin enhancement initiatives, via pricing strategies as well as cost savings and efficiency gains. We continue to develop our technology knowledge base to provide data to better understand and manage capacity, yield growth, variable pricing and the impacts of passenger trends. Our underlying cash flow profile and the cash position at year end is strong with all financial covenants comfortably met during the year. Gearing (net interest-bearing debt to net debt + equity) at year end was 31.1%, which is well within target gearing levels and positions us well for future investment and growth. Following a comprehensive year-end review of the carrying value of assets of the Group in light of the impact of COVID-19 has had on the business, a non-cash impairment totalling $12.4 million was recognised. This relates to the write off of the balance for the Group’s investment in UWAI, the impairment of some of the goodwill associated with Fraser Island and the write down of the carrying value of certain underutilised vessels across the fleet, primarily those relating to lunch and dining experiences. The Company successfully applied for the Australian Government’s JobKeeper payment. The JobKeeper payment applied to all eligible employees within Australia in the three- month period to June 2020 totalled $8.6 million. Payments of a similar nature received in international jurisdictions totalled $6.3m. Management remain confident the Company has access to enough funding to meet any liquidity challenges that may arise in the 2020/21 financial year, including another severe COVID-19 related contraction in demand. Rottnest Island, Western Australia 13 R E V I E W O F O P E R A T I O N S C O N T I N U E D The majority of additional and ancillary costs associated with dealing with the COVID-19 pandemic, like additional cleaning of buses, physical barriers to ensure driver safety and complying with social distancing requirements, were supported by the state governments. In addition to managing COVID-19, a considerable amount of management time and effort was spent integrating the Australian Bus division into the SeaLink business. The integration work is substantially complete and the speed and progress that has been made positions the business well for FY2021. In terms of state by state performance, some of the highlights include: South Australia During the period, Transit Systems successfully retained all three of its existing Adelaide contracts and secured and transitioned an additional bus contract in the northern suburbs of Adelaide. As part of this contract success, Transit Systems retained its North South contract, which included under the Torrens Connect banner, a light rail/tram element in conjunction with our Joint Venture partners John Holland Adelaide Trams and UGL Rail Services. The successful transition of these two new contracts resulted in 330 employees,118 vehicles, two new sites and 24 trams joining our operation. The Adelaide operation is now very well placed with all contracts renewed for a minimum of eight years, plus a further potential two-year extension period. In early July 2020, the South Australian State Government decided against introducing service changes later this year so the curtailment of some services and introduction of new headway management and demand responsive technology will not proceed. There were minimal changes to the South Australian bus business as a result of COVID-19. Some airport services were suspended along with the city free service and after midnight services. These changes did not have a material impact on our contracted revenue and additional COVID-19 related cleaning costs were and continue to be supported by the Government. Review of operations – Australian Bus The five and a half months of trading of the Australian Bus division has been exceptionally pleasing. The period began with the commencement of three new 10-year contracts in Perth on 19 January 2020. In March 2020, the retention of our Adelaide contracts were announced along with the successful bid for the tram network and an additional bus contract, taking market share in Adelaide to more than 80%. In April 2020, two significant contracts in Perth were extended for a further four year term. In total, approximately $3.8 billion of contracted revenue has been secured over the five and a half month period. Good cost control and additional contracted revenue coming online saw all businesses perform in line with expectations despite the impacts of COVID-19. Like all other parts of the SeaLink business, the Australian Bus division required targeted COVID-19 management. This primarily centred around managing the operational risk management challenges associated with rapidly changing rules and regulations across the capital cities in which we operate. However, unlike most other parts of the business, the operating environment generally improved for all of the Australian bus operations as a result of reduced congestion on the roads leading to lower accidents, improved on-time running performance, less overtime from delays and higher speeds of delivery. In addition, better fuel consumption due to lighter loads, lower levels of sick leave and absenteeism, no cash handling or costs of cash counting and lower security costs were all positives. Offsetting these benefits, there were some negative revenue effects including lower advertising revenue from on-bus advertising, reduced patronage incentive payments with some operations down on patronage by up to 70% and lower charter, rail replacement and special event work. Although the business benefited from a sharp decline in fuel price during the period, the contracted fuel indexation mechanism ultimately flowed through to lower contract revenue for this component. Fortunately, the majority of contracted revenue is not linked to patronage so the lower levels of patronage did not present any material downward revenue pressure. During the period, the Australian Bus division benefited from some good cost control in reaction to a concerted campaign following lower revenues for charter and other non-contracted work. Fortunately, some of the charter and rail work started to come back in May 2020 and schools resumed to some extent in most States. 14 Western Australia In the West, Transit Systems successfully retained its Marmion and Claremont contracts and added the new Joondalup contract that was transitioned from a competitor in January 2020. The addition of the new contract resulted in 272 employees, 172 vehicles and three new sites joining our operation. Furthermore, the business obtained a four-year extension to Canning and Southern River contracts, all together considerably lengthening the weighted average contract expiry profile in Perth. As a result of these contract renewals and new contact win, we have reached the Western Australian Government imposed legislative market share cap. All operational aspects of our Western Australian operations are performing well and with contract terms of between four and ten years the business is well positioned for the future. Western Australia was the only state in Australia to reduce public transport services under the effects of COVID-19. From the period of 6 April 2020 to 29 April 2020, Transit Systems operated approximately 60% of its contracted services, however, the only contract revenue adjustment related to true variable cost savings that needed to be remitted back to Government. New South Wales The Sydney Region 3 contract performed well during the period and considerable cost improvements were realised in Region 6. Despite on road performance dramatically improving in Region 6, this contract is still falling short of its contracted KPI on-time running targets. This is resulting in ongoing monthly contract abatements that will continue to be managed out over the coming year with several new service changes planned. Unfortunately, COVID-19 has exacerbated delays in the major service change associated with the Sydney light rail. This service change has been ready to go for some time but Transport for New South Wales have continually delayed the implementation due to light rail delays and other external factors. Once this service change is implemented in the first half of FY2021, it is expected to deliver a significant improvement in contribution from this business. The New South Wales business continues to lead the way in terms of leveraging new technologies to enhance the delivery of public transport. The electric bus trial in operation in Region 6 celebrated its first-year anniversary recently with operational performance and cost of delivery exceeding all expectations. This is paving the way for a further investment in electric buses over the coming year. Additionally, the demand responsive services in Sydney’s inner west underwent a technology upgrade and a superior level of convenience and service delivery is positioning that service for further expansion also. The Sydney operations were most affected by COVID-19 with the State Government imposing loading limits on buses. This had the effect of limiting patronage to maintain social distancing and thus the small patronage incentive payment was also suppressed. This was offset by the Government requesting additional peak services to help with loadings and facilitate commuters spreading out over more bus assets. These additional services are expected to continue into the first half of FY2021. Like the other states, COVID-19 additional cleaning costs are being supported by Government. Victoria The Sita Bus operations, acquired by Transit Systems in April 2019 provide services to the Victorian Department of Transport and local schools. The bus operations performed well during the period despite the decline in revenue experienced by the school and charter operations. The Department of Transport has confirmed that contract revenue will not be curtailed due to COVID-19 and even under Stage 4 restrictions in Melbourne, Sita continued to deliver a near full service. It is expected that schools, charter and rail replacement will be quickly reinstated post the Stage 4 restrictions lifting. Further impacts of COVID-19 relate to lower on-bus advertising revenue and additional cleaning. Like other states, the State Government supported the costs of additional COVID-19 related cleaning. Future Pipeline of Tender opportunities The effects of COVID-19 on state governments is likely to flow into transport budgets. Our expectation is that lower levels of organic contract service growth may result in the near term but a much greater emphasis will be placed on government outsourcing, potentially opening up new opportunities in the medium to longer term. In Australia there is a very strong pipeline of future bus tender opportunities with Sydney’s Regions 7, 8 and 9 tender process is already underway, the entire Darwin network is likely to be released early in CY2021 and a large tender in Melbourne is expected late this calendar year. We continue to be outspoken about the benefits of competitive tendering in Queensland, Tasmania and the Australian Capital Territory, the last remaining markets that are to move to modern public bus service contracting in Australia. 15 R E V I E W O F O P E R A T I O N S C O N T I N U E D We continue to work with TfL on the delivery of their strategic objectives for cost minimisation and air quality improvement which is likely to result in further electric routes being awarded in the coming years. Singapore The business in Singapore has entered the last year of the initial term of the Bulim contract. Significant effort has been put into the development and submission of a competitive bid for both the existing Bulim operation and the Sembawang-Yishun contract packages which are being tendered in the same timeframe by the Land Transport Authority (LTA). We are fully engaged with the LTA on their clean air projects, leveraging our experience with hydrogen powered vehicles in London, and have recently commenced a trial of 14 fully electric vehicles. Future developments SeaLink is seeking to continually develop the business both in scale and profitability terms, by the utilisation of current excess capacity, the creation of further capacity within London and also will evaluate appropriate synergistic transport activities both within the UK and internationally. London is expected to experience more extreme competitive pressure over the coming year. TfL is suffering from severe budgetary constraints and further cutbacks in the network are expected. All opportunities for maintaining or increasing scale in London will be explored. In Singapore, we are hopeful of an increased market share as tender results are realised and more contracts continue to come to market. Review of operations – Marine and Tourism The period under review for the Marine and Tourism division has been one characterised by two distinct halves. Trading conditions in the first six months were good and all businesses were showing improvements over the prior period with good momentum leading into the peak summer period. However, the last six months has been extremely challenging for SeaLink’s tourism businesses, with visitation numbers heavily affected by the severe Australian bushfires, particularly on Kangaroo Island, followed by COVID-19. Review of operations – International Bus The period since the acquisition of the international businesses in January 2020 has been overshadowed by assisting our public sector clients in managing the industry response to COVID-19. The endeavours of our management have been well recognised by our clients, with forward planning and thought leadership highlighted as key achievements in both London and Singapore. Furthermore, our relationship with the relevant unions has been strong as we have developed working practices appropriate to the prevailing conditions. The financial effects of COVID-19 on the international division during the period have been largely neutral. Whilst additional costs have been incurred through high levels of sick leave in London and accommodating our Malaysian workforce in hotels in Singapore, these costs have been offset through additional government/client support. Fuel price and consumption has been much lower during the period, however the financial effect of this is neutral after taking into account fuel indexation and hedging across the International Bus division. The tendering program has been unaffected in London and Singapore with all tenders proceeding on previously advertised timetables. London COVID-19 aside, the London market remains highly competitive, with margins being reduced as competitors seek higher market share, within a shrinking market as Transport for London (Tf L) rationalises the London bus route network due to budgetary constraints. While the business has lost contracts for two routes, it has retained one and acquired another contract, and significantly both routes are to be operated with 37 fully electric double deck vehicles (due to be put into service in the first half of FY2021). This has required investment in charging infrastructure at the Westbourne Park depot and gives Tower Transit capacity for further electrification at this site in due course. During COVID-19, services in London have been curtailed to align with the lock down periods. Tower Transit dropped back to approximately 70% of its regular services from March and is expected to be back to 100% by the end of August 2020. Over 100 vulnerable staff members were furloughed and sick leave has been running at abnormally high levels. TfL and the unions have been supportive throughout this time. Only variable cost savings have been remitted back to TfL during COVID-19 reduced services and additional costs of cleaning and sick leave have continued to be covered by TfL. 1616 The bushfires saw international visitation reduce into key destinations, with global media reporting that most of Australia was on fire. The January 2020 fires on Kangaroo Island devastated more than half of the island including SeaLink’s own accommodation and dining facility at Vivonne Bay. Key attractions were either destroyed or closed and visitation ceased. COVID-19 followed, which saw the complete shutdown of all tourism products and experiences in the Group for a period of three months. Our contracted ferry services in Gladstone and South East Queensland continued to perform well throughout the COVID-19 shutdown period and the ‘essential service’ nature of other contracted and uncontracted ferry services, to many of our destinations set the base level of business and provided a revenue stream that would not otherwise have been available. In Queensland, New South Wales and Tasmania, state governments have provided additional subsidies and assistance to ensure good levels of service to remote island destinations were maintained. The overall impact on earnings since COVID-19 has been minimised, with business units negotiating rental waivers, berthing fees and charges relief and standing-down or reducing hours of the majority of employees. Most businesses have been eligible for the Government JobKeeper scheme which has assisted in funding wage costs and ensuring valuable team members continue to be employed by and engaged with our business. JobKeeper also has the effect of lowering the breakeven point for our products and assists with the re-start and ramp up of these businesses. Following an extremely strong performance of the Captain Cook Cruises business in the first half, the Sydney business has been the hardest hit by COVID-19 impacts, with over 75% of revenue reliant on international and interstate visitors to the city. Like many of our businesses we have adjusted the product offering to attract the local market. However, with dining restrictions in place and limited local visitors to the Sydney CBD, it is unlikely this business will commence dining operations for a number of months yet. Our commuter services to Lane Cove and Watsons Bay have continued to operate throughout the pandemic. Most other businesses were brought back into operation on a limited scale over the course of June, with services and product offerings in place to meet current demand and minimise operational costs. Like Sydney, products which are heavily reliant on international and interstate visitors will continue with limited operations until borders open. Whilst we continue to work through these challenges, the Marine and Tourism division has had many successes over the past 12 months and continues to focus on business growth strategies for the future. Our government contracted services provide security and strength to our business. During the period we were awarded extensions to existing contracts such as the Mandorah, Tiwi Islands and Groote Eylandt services in the Northern Territory, the Curtis Island services in Gladstone, the Queensland Ambulance Service contract in South East Queensland and the Lane Cove contracted service on Sydney Harbour. In addition, four vessels in Sydney are leased on a dry hire basis to Harbour City Ferries and this has been extended through to mid FY2021. The Kangaroo Island ferry service tender process also commenced with a market sounding process, and negotiations for the ongoing contract for Palm Island and Magnetic Island services in North Queensland are also well advanced. Finally, winning the 10+5-year Brisbane City Ferries contract which commences in November 2020 was a highlight. The Group continues to invest for the future, with the building of additional vessels for improved service and new product offerings. A $7 million, 320 passenger fast ferry has recently been launched for the Palm Island service and the second newbuild catamaran vehicular ferry in Tasmania will be completed in March 2021, with her sister vessel now in operation on the Bruny Island service. A 31 passenger ‘adventure’ style vessel utilised for adventure/eco touring experiences for our guests on Fraser Island was built late 2019 and a 700 guest multi-purpose restaurant dining, bar and private charter venue ‘superyacht’ is currently under construction for delivery on Sydney Harbour mid-2021. This vessel will position us well to take advantage of the recovery in tourism. The rebuilding of Kangaroo Island visitation is underway with the rejuvenation of the bushfire affected areas as a key attraction and we expect to see strong freight demand to the island continue for several years as a result. The loss of Vivonne Bay Lodge opens up redevelopment opportunities for SeaLink to create an accommodation/dining facility for the future. FY2020 saw the repositioning of a Sydney based passenger ferry to Western Australia, allowing for the commencement of an additional service from Perth’s CBD to popular Rottnest Island. Accompanied with a newly developed coach transfer service from CBD hotels, this innovation will grow our Western Australian tourism offerings as business starts to rebuild. Rottnest Island, Western Australia 17 R E V I E W O F O P E R A T I O N S C O N T I N U E D Future developments The immediate focus for the Marine and Tourism division remains on navigating the business around COVID-19 restrictions and maximising all revenue opportunities whilst balancing associated operational costs. With domestic Australian travel being the key market for the next 12 months, SeaLink is well placed to capture good market share of this competitive market due to its unique island destinations. To position for this opportunity, the business has recently fast tracked the launch of our group-wide customer facing brand – Brilliant Travels. The development of a website for the promotion of all tourism products under one brand will open national marketing and cross selling opportunities for all of our island destinations and tourism. The development of tailored products will target new markets who would normally have travelled overseas and all marketing activities around the Group will be focused on driving local business. Outlook The future outlook for SeaLink is positive with our solid base of diversified businesses across Australia in the public bus, light rail and marine transport, tourism and accommodation sectors. With over 87% of our revenue fully contracted, we expect our balance sheet strength and performance to be strong moving forward. Overall, FY21 has started in line with expectations. The coming year contains a significant number of organic contract tendering opportunities with work already well underway on proposals for multiple bus contracts in Sydney. In addition, we expect that a large bus tender contract in Melbourne will be taken to market in the second or third quarter of FY21. The Marine and Tourism division is already well on the way to re-building its revenue base from domestic travel, however ongoing border closures, both domestically and internationally, will limit the ability to fully return to pre COVID-19 levels. In particular, we foresee an ongoing depressed market for Sydney Harbour Cruises, touring on Kangaroo Island and Captain Cook Cruises on the Swan River in Perth. The International division will be cautiously managed as further budgetary constraints in the London public transport market are expected and the current Singapore contract expiring at the end of May 2021. Acquisition activity is a possibility in the International division as new markets are constantly being evaluated. Further service improvements in the Sydney bus network will improve the contribution of the New South Wales bus operations. The Group will also be taking the opportunity to utilise the favourable commercial negotiating environment and scale to strike better terms for key inputs and drive margin expansion across its existing portfolio. 18 In summary, SeaLink’s overall plan for sustainable growth involves: • Working with Governments to develop new routes, improve frequency and drive efficiency within the public transport networks • Continuing to seek new business acquisition opportunities that will enhance, leverage and complement our current capabilities and growth strategies. The Directors would like to thank our employees, customers, suppliers and shareholders for their ongoing support and commitment over the past year. The hard-working talented people at SeaLink are central to our ongoing future growth and success. • Continuing to build a diverse geographic portfolio of contracted essential services • Developing further revenue and cost saving opportunities and efficiencies from recent acquisitions • Preparing for the anticipated resurgence of domestic tourism once border restrictions are lifted • Continuing to improve sales, yields and margins on transport and tourism products • Continue to add and grow additional services within existing locations and routes • Utilising existing sales and marketing skills to promote and cross-sell existing and new products and services • Utilising in-house technical skills to improve booking processes and websites to drive increased sales and productivity Tower Transit, London 19 R E V E N U E H I S T O R Y 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ($M) 640 620 600 500 400 300 280 260 240 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 20 Kangaroo Island Booking Centre retail specialist agency acquired. SeaLink selected as Facility Managers for new Adelaide Central Bus Station. SkyLink Adelaide Airport Shuttle Service and fleet of coaches acquired. Vivonne Bay Eco Adventures built Bistro and Function Centre. CJ’s by the Sea café opened at Cape Jervis Ferry Terminal. 2007 Australian Holiday Centres Melbourne and Sydney acquired. Luxury Kangaroo Island ferry ‘Spirit of KI’ built and launched. 2003 Cape Jervis Ferry Terminal built and officially opened. 2005 2006 Kangaroo Island Adventure Tours soft adventure business acquired. 2008 Big B Cartage Limited – NZ freight & trucking company, majority shareholding acquired. Premier Day Tour business acquired. 2004 Auckland NZ based ferry company, Subritzky Ferries acquired. The Ski Connection ski packaging and express coach transport company acquired. Vivonne Bay Outdoor Education Centre, Kangaroo Island acquired. Adelaide Sightseeing Day Tours and City Centre Travel acquired. 1999 1998 Luxury Kangaroo Island ferry ‘Sealion 2000’ built and launched. ($M) 640 620 600 500 400 300 280 260 240 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 Acquisition of Transit Systems Group Commence Tasmanian operations with Bruny Island contract 2019 2018 Acquisition of Kingfisher Bay Resort Group, Fraser Island. SeaLink Kangaroo Island ferry 21 Establishment of SeaLink Northern Territory and commencement of ferry services from Darwin. Listed on the ASX. 2013 Acquisition of Transit Systems Marine Businesses. 2015 2016 Acquisition of Captain Cook Cruises WA. 2014 Constructed the Penneshaw Terminal, Kangaroo Island. Kangaroo Island Odysseys 4WD Luxury Touring business acquired. 2010 2011 Sunferries Townsville, ferries to Magnetic and Palm Island acquired. Captain Cook Cruises and Matilda Cruises, Sydney Harbour and Murray River Cruises acquired. Sold SeaLink New Zealand including shareholding in Big B Cartage Limited. SkyLink Adelaide Airport Shuttle Service sold. K E Y R E S U L T S RESULTS IN BRIEF1 Normalised Results2 Revenue from Ordinary Activities EBITDA 3 (excl significant items) Significant items Impairment of Investment (UWAI) Acquisition related costs4 Asset impairment5 Depreciation EBITA Interest – net Amortisation of Customer Contracts Net Profit Before Tax Tax Profit After Tax and before Amortisation Profit After Tax JUNE 2020 $M JUNE 2019 $M 623.7 71.7 – – – (20.9) 50.7 (7.3) (20.9) 22.6 (6.2) 37.2 16.4 248.8 47.9 – – – (14.5) 33.4 (4.6) (1.9) 26.9 (3.5) 25.3 23.4 CHANGE % 150.7 49.6 n/a n/a n/a 44.2 51.9 58.7 998.2 (16.1) 77.3 47.2 (30.0) 1 Adjusted to reflect a pre-AASB 16 result (AASB 16 Depreciation and interest adjusted back to EBITDA) 2 Normalised Results have been adjusted for significant items for the period ending 30 June 2020 on a pre-AASB 16 basis. Normalised items are non-IFRS measures and have not been audited. 3 EBITDA – Earnings Before Interest, Tax, Depreciation & Amortisation 4 Costs associated with the acquisition of Transit Systems Group including stamp duty, legal, accounting, tax and other professional costs 5 Impairment of the Book Value of certain vessels and Fraser Island Goodwill due to significant economic impacts in FY20; Costs associated with the unsuccessful tender bid for Sydney Ferries in FY19 DIVIDEND INFORMATION FINAL DIVIDEND DATES AMOUNT PER SHARE (CENTS) FRANKED AMOUNT PER SHARE (CENTS) TAX RATE FOR FRANKING CREDIT Ex-dividend date Record date Payment date 30 June 2019 Interim Dividend Final Dividend 30 June 2020 Interim Dividend Final Dividend 6.5 8.5 6.5 4.5 6.5 8.5 6.5 4.5 30% 30% 30% 30% NET TANGIBLE ASSETS Net tangible assets per ordinary share 4 September 2020 7 September 2020 2 October 2020 JUNE 2020 $0.05 JUNE 2019 $1.06 The report is based on the consolidated financial statements which have been audited by Ernst & Young. Additional Appendix 4E disclosure requirements can be found in the Directors’ Report and the consolidated financial statements. 22 D I R E C T O R S ’ R E P O R T The Board of Directors of SeaLink Travel Group Limited (“SeaLink” or “the Company’) has pleasure in submitting its report for the year ended 30 June 2020. Directors The names and details of the Company’s Directors in office during the financial year and until the date of this report are set out below. Directors have been in office for the entire period unless otherwise stated. CHRISTOPHER D. SMERDON MAICD NON-EXECUTIVE DIRECTOR Mr Smerdon has extensive experience in the Information Technology and Cyber Security field having established and built companies with national and international operations. He is currently Managing Director of Vectra Corporation, a company that provides specialist Cyber Security services to organisations globally handling sensitive data, financial information and large volumes of credit card transactions. Clients include banks, telcos, payment gateways, airlines and utilities. Mr Smerdon joined the Board in 2002 and is a member of the Company’s Audit and Risk Committee. Mr Smerdon has previously held directorships on both government and public company boards. Mr Smerdon is a Member of the Australian Institute of Company Directors. ANDREA J.P. STAINES OAM MBA, B.EC, FAICD NON-EXECUTIVE DIRECTOR TERRY J. DODD NON-EXECUTIVE DIRECTOR Ms Staines has extensive experience in the transport sector and is a former CEO of Qantas subsidiary, Australian Airlines (mk II), which she co-launched. Ms Staines currently sits on the Board of Australia Post, UnitingCare, Acumentis and Freightways (NZ). Ms Staines has been a professional non-executive director for over a decade, and has held previous directorships with a range of entities in the transport, tourism and care sectors, including Tourism Australia, Aurizon, Australian Rail Track Corporation, Gladstone Ports Corporation, North Queensland Airports and NDIA. Ms Staines joined the Board in 2016 and is Chair of the Company’s Remuneration and Nomination Committee which from July 2020 is now called the People, Culture and Remuneration Committee. Ms Staines was a member of the Company’s Audit and Risk Committee until 23 July 2020. Mr Dodd has extensive experience in business management and the marine industry. After qualifying as a commercial diver in the USA and working as a commercial diver in the onshore and offshore oil and gas industry, he successfully established a recreational diving business and a travel agency in North Queensland. Mr Dodd is Managing Director and owner of Pacific Marine Group Pty Ltd, one of Australia’s largest marine construction and commercial diving companies. Mr Dodd was previously Managing Director of Sunferries, a ferry transport business based in Townsville, prior to its sale to SeaLink in March 2011 when Mr Dodd joined the Board of SeaLink. Mr Dodd is a member of the Company’s Remuneration and Nomination Committee (now called the People, Culture and Remuneration Committee). JEFFREY R. ELLISON B. ACC, FCA, FAICD MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER (RETIRED 16 JAN 2020) NON-EXECUTIVE DIRECTOR (BECAME NON-EXECUTIVE DIRECTOR 17 FEB 2020) DEPUTY CHAIR (APPOINTED 26 FEB 2020) CHAIR (APPOINTED 1 JULY 2020) Mr Ellison holds a Bachelor of Arts Degree in Accounting from the University of South Australia, is a Fellow of the Chartered Accountants Australia and New Zealand and the Australian Institute of Company Directors. He has held the position of Chief Executive Officer since 1997 and was appointed Managing Director in 2008. Mr Ellison retired as Managing Director and CEO on 16 January 2020 and following a month of transition as an Executive Director, became a non-executive director from 17 February 2020. He was subsequently appointed Deputy Chair with effect from 26 February 2020 and Chair on 1 July 2020. Mr Ellison is a member on Tourism Australia Board. Mr Ellison is a former Board member of the South Australian Tourism Commission, Tourism and Transport Forum Australia, the Adelaide Convention Centre and the South Australian Botanic Gardens and State Herbarium Board. Mr Ellison was a member of the Company’s Remuneration and Nomination Committee for the period March to June 2020. The Swan River, Perth, Western Australia 23 D I R E C T O R S ’ R E P O R T C O N T I N U E D NEIL E. SMITH MTM, B.ARTS, FCILT NON-EXECUTIVE DIRECTOR (APPOINTED 16 JANUARY 2020) Neil was one of the founding shareholders and the former Chairman of the Transit Systems Group prior to the acquisition by SeaLink. He has over 30 years of commuter transport operations experience. Neil commenced his career within the Sydney bus industry, before acquiring a number of bus operations in rural NSW and then Queensland. In 1995, Neil joined with Graham Leishman and Lance Francis to found Transit Systems and in 2013, was a founding shareholder of Tower Transit. Neil holds a Bachelor of Arts Degree and a Masters of Transport Management from the University of Sydney and is a Fellow of the Chartered Institute of Transport and Logistics. LANCE E. HOCKRIDGE FCILT, FIML, MAICD NON-EXECUTIVE DIRECTOR (APPOINTED 1 JULY 2020) Mr Hockridge has extensive international experience in the transportation, manufacturing and logistics sectors with a focus on safety, operational and financial transformation of businesses. Mr Hockridge was previously the Managing Director and CEO of Aurizon Holdings Limited (2010 to 2016) following the demerger of Queensland Rail and QR National from a government owned railway to an ASX50 company. Other notable accomplishments as an executive include the oversight of BHP’s global transport business, together with key roles in financial and operational reform in the heavy industrial sector and leading a major turnaround for BlueScope Steel’s North American operations. Mr Hockridge is also currently Chair of the Salvation Army Queensland Advisory Council, and an active advocate for diversity in the workforce. Mr Hockridge became a member of the Audit and Risk Committee and People, Culture and Remuneration Committee in July 2020. FIONA A. HELE B.COM, FCA, FAICD NON-EXECUTIVE DIRECTOR Ms Hele is a Non-Executive Director and an experienced Audit & Risk Chair with a strong commercial and finance background. Ms Hele is a Chartered Accountant with over 25 years’ experience in both the private and public sectors specialising in strategic business advisory, mergers and acquisition, risk management and corporate governance. Ms Hele is a Fellow of the Institute of Chartered Accountants, Australia and New Zealand, and a Fellow of the Australian Institute of Company Directors. Ms Hele is also a director of Adelaide Venue Management Corporation, Celsus Securitisation Pty Ltd and the South Australian Water Corporation. Past Directorships include the South Australian Tourism Commission and the Adelaide Fringe Festival. Ms Hele joined the Board in 2016 and is Chair of the Company’s Audit and Risk Committee. 24 ANDREW J. McEVOY MA INT. COMMS, B. ARTS CHAIR (RETIRED 30 JUNE 2020) ANDREW D. MUIR B.EC, MBA JOINT COMPANY SECRETARY Mr Muir (Chief Financial Officer) was appointed Company Secretary on 1 June 2018. Mr Muir has also held a number of similar financial positions with other ASX listed and private companies. Mr Muir holds a Bachelor of Economics and a Master of Business Administration from the University of Adelaide. Mr McEvoy was appointed a Director on 1 February 2015 and was appointed Chair on 1 July 2015. Mr McEvoy holds a Bachelor of Arts Degree from the University of Melbourne and a Masters in Communications from City University in London. Mr McEvoy has extensive experience in the tourism sector and is a previous Managing Director and CEO of both Tourism Australia and the South Australian Tourism Commission. Most recently he was Managing Director, Life Media & Events at Fairfax Media, where he managed the new business portfolio, including events and the key lifestyle titles. Mr McEvoy is Chair of advocacy group Tourism and Transport Forum (TTF) and a Director of the Lux Group Ltd, Ingenia Communities Ltd and Voyages Indigenous Tourism Australia. Mr McEvoy was a member of the Company’s Remuneration and Nomination Committee. JOANNE H. McDONALD LLB, B.EC, GAICD JOINT COMPANY SECRETARY Ms McDonald was appointed Company Secretary on 21 August 2018. Ms McDonald has over 25 years’ experience in commercial and corporate law including company secretary for ElectraNet Pty Ltd and holding senior legal and commercial positions with other listed and statutory corporations. She holds a Bachelor of Laws (Hons) and Bachelor of Economics from the University of Adelaide as well as a graduate of the Australian Institute of Company Directors. Swan Transit, Perth, Western Australia 25 D I R E C T O R S ’ R E P O R T C O N T I N U E D INTEREST IN THE SHARES OF THE COMPANY AND RELATED BODIES CORPORATE As at the date of this report, the interests of the Directors in the shares of the Company were: N Smith C Smerdon T Dodd J Ellison F Hele L Hockridge A Staines DIRECTORS’ MEETINGS NUMBER OF ORDINARY SHARES 33,444,556 6,486,875 5,786,578 5,749,769 28,172 25,000 - SHARES UNDER OPTION Unissued shares / performance rights At 30 June 2020, there were 299,130 (2019: 100,000) options/ performance rights outstanding to acquire ordinary shares in the Company. No options to acquire shares or interests in the Company or a controlled entity were granted since the end of the financial year. Shares issued as a result of the exercise of options During the year, 100,000 options were exercised by Director and Chair, Mr Andrew McEvoy. No options were exercised by employees. The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2020, and the number of meetings attended by each director were: Number of meetings held: A McEvoy (Chair) C Smerdon J Ellison* T Dodd A Staines F Hele N Smith NUMBER OF BOARD MEETINGS ATTENDED 19 19 19 19 19 19 19 8 NUMBER OF AUDIT AND RISK COMMITTEE MEETINGS ATTENDED 6 – 6 – – 6 6 – NUMBER OF REMUNERATION AND NOMINATIONS COMMITTEE MEETINGS ATTENDED 6 6 – 1 6 6 – – * As CEO and Managing Director Mr Ellison attended the Board Committee meetings by invitation only up to January 2020 and as a NED after February 2020 was a member of the Remuneration and Nomination Committee for a period in which one Committee meeting occurred. Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. To the extent that directors who are not members of the relevant Committee attend Committee meetings as guests from time to time their attendance is not recorded in the table above. COMMITTEE MEMBERSHIP PRINCIPAL ACTIVITIES During the reporting period the Company had an Audit and Risk Committee and a Remuneration and Nomination Committee. Members acting on the committees of the Board during the year: Audit and Risk Remuneration and Nomination F Hele (Committee Chair) A Staines (Committee Chair) A Staines C Smerdon A McEvoy T Dodd J Ellison* *Appointed 26 February 2020 to 30 June 2020 During the financial year the principal continuing activities of the consolidated entity consisted of: • domestic public bus transport operations • international public bus transport operations • domestic ferry services • tourism cruises, charter cruises and accommodated cruising • coach tours • travel agency services and packaged holidays. ENVIRONMENTAL REGULATION The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. From July 2020 membership and names of Committees are as follows: Audit and Risk People, Culture and Remuneration F Hele (Committee Chair) A Staines (Committee Chair) L Hockridge C Smerdon T Dodd L Hockridge 26 DIVIDENDS Dividends paid during the financial year were as follows: Interim fully franked dividend for the year ended 30 June 2020 paid 31 March 2020 of 6.5 cents (2019: 6.5 cents) per ordinary share Final fully franked dividend for the year ended 30 June 2019 paid 17 September 2019 of 8.5 cents (2018: 8.0 cents) per ordinary share CONSOLIDATED 2020 ($’000) 2019 ($’000) 9,459 6,593 8,621 18,080 8,092 14,685 SeaLink’s Directors on 31 August 2020 declared a 4.5 cents per share fully franked final dividend payable on 2 October 2020 to shareholders registered on 7 September 2020. This represents a 51.0% return of underlying net profit after tax and before amortisation to shareholders, which is in line with the Company’s policy of returning 50% – 70% of underlying net profit after tax and before amortisation, subject to business needs and ability to pay. The interim dividend for the half-year ended 31 December 2019 was 6.5 cents per share. The Board will continue to consider SeaLink’s growth requirements, its current cash position, market conditions and the need to maintain a healthy balance sheet, when determining future dividends. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the financial year, the consolidated entity acquired the business and operations of the Transit Systems Group on 16 January 2020. This has changed the nature of SeaLink’s principal business operations away from one focused on marine and tourism to a predominantly government contracted public bus transport business with operations throughout Australia and in Singapore and London. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out immediately after this Directors’ report. NON-AUDIT SERVICES There were no non-audit services provided during the financial year by the auditor (2019:Nil). There were no other significant changes in the state of affairs of the consolidated entity during the financial year. INDEMNITY AND INSURANCE OF OFFICERS MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR A fully franked dividend of 4.5 cents per share was declared by SeaLink’s Directors on 31 August 2020, representing a total payment of $9,827,957 to be paid 2 October 2020 based on the current number of ordinary shares. Apart from the above, there are no significant events after the end of the reporting period which have come to our attention. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. ROUNDING OF AMOUNTS The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the Directors and Executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company is party to Deeds of Indemnity in favour of each of the Directors, referred to in this report who held office during the year and certain officeholders of the Company. The indemnities operate to the full extent permitted by law and are not subject to a monetary limit. SeaLink is not aware of any liability having arisen, and no claims have been made, during or since the financial year ending 30 June 2020 under the Deeds of Indemnity. INDEMNITY AND INSURANCE OF AUDITOR To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. 27 F I N A N C I A L R E P O R T SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES Cape Jervis, South Australia 28 STATEMENT OF PROFIT OR LOSS CONSOLIDATED FOR THE YEAR ENDED 30 JUNE 2020 Revenue from contracts with customers Other income Interest income Total revenue and other income EXPENSES DIRECT OPERATING EXPENSES Direct wages Repairs and maintenance Fuel Commission Meals and beverage Tour costs Depreciation Depreciation – ROUA Other direct expenses ADMINISTRATION EXPENSES Indirect wages General and administration Marketing Financing charges Amortisation of customer contracts and permits Impairment on investment Business acquisition expenses Impairment of assets Total expenses PROFIT/(LOSS) BEFORE INCOME TAX EXPENSE Income tax expense Profit/(loss) after income tax expense for the year attributable to the owners of SeaLink Travel Group Limited EARNINGS PER SHARE Basic earnings per share Diluted earnings per share NOTE 4 5 2020 $’000 623,692 22,382 438 646,512 (318,875) (37,095) (44,165) (9,068) (10,982) (7,132) (20,915) (18,654) (25,134) (58,878) (37,497) (4,868) (9,768) (20,865) (1,637) (17,510) (10,797) 2019 $’000 248,774 2,576 38 251,388 (76,399) (14,336) (13,294) (12,397) (14,530) (12,348) (14,431) – (12,237) (26,477) (17,078) (4,992) (3,974) (1,944) (1,637) (364) – (653,840) (226,438) 6 27 40 40 (7,328) (6,244) (13,572) CENTS (8.2) (8.2) 24,950 (3,407) 21,543 CENTS 21.2 21.2 STATEMENT OF OTHER COMPREHENSIVE INCOME (OCI) CONSOLIDATED FOR THE YEAR ENDED 30 JUNE 2020 PROFIT/(LOSS) AFTER INCOME TAX EXPENSE FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF SEALINK TRAVEL GROUP LIMITED OTHER COMPREHENSIVE INCOME/(LOSS) Items that may be reclassified subsequently to profit or loss Net change in the fair value of cash flow hedges taken to equity, net of tax Foreign currency translation Other comprehensive income/(loss) for the year, net of tax Total comprehensive profit/(loss) for the year attributable to the owners of SeaLink Travel Group Limited NOTE 27 2020 $’000 2019 $’000 (13,572) 21,543 (1,746) (966) (2,712) (16,284) (1,812) – (1,812) 19,731 THE ABOVE STATEMENT OF PROFIT OR LOSS AND STATEMENT OF OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES 29 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIESFINANCIAL REPORT STATEMENT OF FINANCIAL POSITION CONSOLIDATED AS AT 30 JUNE 2020 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Income tax refund due Other assets Total Current Assets NON-CURRENT ASSETS Property, plant and equipment Right-of-use assets Intangibles Deferred tax Other assets Total Non-Current Assets Total Assets LIABILITIES CURRENT LIABILITIES Trade and other payables Contract liabilities Lease liabilities Other financial liabilities Income tax Employee benefits Provisions Other liabilities Total Current Liabilities NON-CURRENT LIABILITIES Borrowings Lease liabilities Other financial liabilities Deferred tax Employee benefits Other liabilities Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Issued capital Reserves Retained profits Total Equity NOTE 2020 $’000 2019 $’000 7 8 9 11 12 10 13 14 11 15 16 18 19 20 21 22 23 17 18 19 24 21 23 25 26 27 119,903 82,463 13,881 – 12,575 228,822 374,051 138,505 605,283 43,161 – 1,161,000 1,389,822 80,409 7,408 29,974 1,906 15,833 70,509 36,173 63,938 306,150 11,904 12,355 4,921 5,684 4,263 39,127 201,396 – 53,383 5,936 1,637 262,352 301,479 7,885 7,087 822 943 – 11,027 275 6,015 34,054 310,201 92,500 74,409 4,364 58,887 12,190 23,329 483,380 789,530 600,292 572,377 (3,991) 31,906 600,292 2,457 2,832 9,132 1,813 776 109,510 143,564 157,915 96,057 (1,700) 63,558 157,915 30 THE ABOVE STATEMENT OF FINANCIAL POSITION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIESFINANCIAL REPORTSTATEMENT OF CHANGES IN EQUITY CONSOLIDATED BALANCE AT 1 JULY 2018 Profit after income tax expense for the year Other comprehensive income/(loss) for the year, net of tax Total comprehensive profit/(loss) for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 25) Share-based payments (note 41) Dividends paid (note 28) Balance at 30 June 2019 ISSUED CAPITAL $’000 95,557 – – – 500 – – RESERVES $’000 (36) – (1,812) (1,812) – 148 – 96,057 (1,700) ISSUED CAPITAL $’000 RESERVES $’000 BALANCE AT 1 JULY 2019 96,057 (1,700) Loss after income tax expense for the year Other comprehensive income/(loss) for the year, net of tax Total comprehensive profit/(loss) for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 25) Share-based payments (note 41) Dividends paid (note 28) Balance at 30 June 2020 – – – 476,320 – – – (2,712) (2,712) – 421 – 572,377 (3,991) RETAINED PROFITS $’000 56,700 21,543 – 21,543 – – (14,685) 63,558 RETAINED PROFITS $’000 63,558 (13,572) – (13,572) – – (18,080) 31,906 NON- CONTROLLING INTEREST $’000 – – – – – – – – NON- CONTROLLING INTEREST $’000 – – – – – – – – TOTAL EQUITY $’000 152,221 21,543 (1,812) 19,731 500 148 (14,685) 157,915 TOTAL EQUITY $’000 157,915 (13,572) (2,712) (16,284) 476,320 421 (18,080) 600,292 THE ABOVE STATEMENT OF CHANGES IN EQUITY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES 31 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIESFINANCIAL REPORT F I N A N C I A L R E P O R T SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 NOTE CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Other revenue Interest and other finance costs paid Income taxes refunded/(paid) Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchase of business, net of cash acquired Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Repayment of debt from share capital raising Proceeds of refinancing Repayment acquired debt Payments for leases Share issue transaction costs Dividends paid Repayment of borrowings Net cash from/(used in) financing activities Net increase in cash and cash equivalents 39 35 12 25 28 Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 7 CONSOLIDATED 2020 $’000 2019 $’000 650,640 (579,896) 70,744 438 20,978 (9,768) 7,667 90,059 (119,810) (29,458) 2,958 (146,310) 154,000 (92,500) 266,000 (100,300) (37,818) (7,052) (18,080) – 164,250 107,999 11,904 119,903 249,790 (202,879) 46,911 38 1,817 (4,582) (3,539) 40,645 – (17,645) 12,605 (5,040) 500 – – – – – (14,685) (12,758) (26,943) 8,662 3,242 11,904 32 THE ABOVE STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES F I N A N C I A L R E P O R T SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES Significant accounting policies Critical accounting judgements, estimates and assumptions Operating segments Revenue from contracts with customers Other income Income tax expense Cash and cash equivalents Trade and other receivables Inventories Right-of-use assets Other assets Property, plant and equipment Intangibles Deferred tax assets Trade and other payables Contract liabilities Borrowings Lease liabilities Other financial liabilities Income tax Employee benefits Provisions Other liabilities Deferred tax liabilities Issued capital Reserves Retained profits Dividends Financial instruments Key management personnel disclosures Remuneration of auditors Commitments Related party transactions Parent entity information Business combinations Interests in subsidiaries Deed of cross guarantee Events after the reporting period Reconciliation of profit/(loss) after income tax to net cash from operating activities Earnings per share Share-based payments INDEX NOTES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 PAGE 34 41 43 45 46 46 47 47 48 48 49 49 50 52 53 53 54 55 56 56 56 57 57 58 58 59 60 60 60 64 65 65 66 66 67 69 71 71 72 72 73 33 NOTE 1 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period and relevant. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity other than described below. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 16 Leases The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 ‘Leases’ and Interpretation 4 ‘determining whether an arrangement contains a lease’ for lessees and eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position at commencement date of the lease when the asset is available for use. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities using the method where lease assets equal lease liabilities at the start of the lease. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Impact of adoption AASB 16 was adopted using the modified retrospective approach where the right of use asset is equal to the lease liability and as such the comparatives have not been restated. The impact of adoption was as follows: IMPACT ON CONSOLIDATED STATEMENT OF FINANCIAL POSITION 1 JULY 2019 Right of use asset Lease liability Deferred tax expense RECONCILIATION ONTO CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE Operating lease commitments at 30 June 2019 Impact of discounting at the incremental borrowings rate Lease assets that are not recognised as lease liabilities under AASB 16 (low value and short term) Additional lease liabilities recognised on adoption of AASB 16 at 1 July 2019 Carrying value of existing finance leases at 30 June 2019 Balance of lease liabilities at 1 July 2019 Below the movement tables include leases that had previously been treated as finance lease assets and leases. ROUA MOVEMENT YEAR ENDED 30 JUNE 2020 Transition adjustment New leases acquired during the year Depreciation Business combinations Exchange differences Closing balance 34 $’000 16,889 (17,931) (13) 16,085 (1,359) (74) – 3,279 17,931 $’000 16,889 1,753 (18,654) 141,827 (3,310) 138,505 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTLEASE LIABILITIES MOVEMENT FOR THE YEAR ENDED 30 JUNE 2020 $’000 Transition adjustment Lease related interest Lease payments COVID-19 rental relief Leases acquired by parent entity Leases from business combinations Exchange differences Closing balance When measuring the lease liabilities for leases that were previously classified as operating leases, the Group discounted lease payments using its estimate for an incremental borrowing rate. At 1 July 2019 the weighted average rate applied was 3.3%. The Group elected to apply the following transitional provisions: • Exemption for lease arrangements with a short term less than 12 months from the date of initial application • Exemption for lease arrangements where the value of the underlying leased asset is deemed to be low-value • Reliance on the assessment of whether a contract was a lease based on the Interpretation 4 assessment; and • Used a single discount rate for a portfolio of similar leases. BASIS OF PREPARATION These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for- profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Funding and liquidity The financial statements are prepared on a going concern basis. As at 30 June 2020, the Consolidated Statement of Financial Position reflected an excess of current liabilities over current assets of $77.3m. The amount of the deficit is fully covered by the Company’s undrawn banking facilities of $115.4m as at 30 June 2020. In addition there are amounts included in current liabilities which are not expected to be paid in the next 12 months, despite the accounting treatment requiring them to be disclosed as current liabilities including leave liabilities which historically have not all been paid out within 12 months. In addition, there is no indication the future operating cashflows of the business will be materially different to those achieved historically. Historical cost convention PARENT ENTITY INFORMATION The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 34. 17,931 3,425 (37,818) (431) 510 123,651 (2,885) 104,383 PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of SeaLink Travel Group Limited (‘company’ or ‘parent entity’) as at 30 June 2020 and the results of all subsidiaries for the year then ended. SeaLink Travel Group Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. 35 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTWhere the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. OPERATING SEGMENTS Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. FOREIGN CURRENCY TRANSLATION The financial statements are presented in Australian dollars, which is SeaLink Travel Group Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. 36 REVENUE RECOGNITION The consolidated entity recognises revenue as follows: Revenue from contracts with customers Revenue from transport of passengers, freight and accommodation is recognised at the time of delivery of the service to the customer, which is the time where the control is transferred and when each separate performance obligation in the customer contract is fulfilled given the short time services are provided (less than a day). This typically occurs on a departure date or booking date basis whereby customers or groups who have paid for services have actually departed on those travel or accommodation services. The revenue is recognised in the month of the said departure date. Some of the ferry and freight transports have a series of performance obligations, but as the duration of these transports are short term the impact from splitting these contract into “distinct services” does not have material impact. Revenue in relation to retailing of travel services is recognised on a gross basis when customers have paid for their travel services. Revenue is recognised at the amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer, excluding GST and after deduction of trade discounts. Trade Receivables typically do not contain a significant financing component. The general credit terms are overall short and are following market terms. Accounting estimates and judgements are made in order to determine time of delivery and account for income accruals when it is deferred. These accounting estimates and judgements are based on experience and continuous follow-up on service delivered. Delivery of services Revenue from bus contracts to provide services is recognised over time as the services are delivered based on agreed contractual rates for delivery of the defined services. If services are increased or decreased, a pre- determined contractual adjustment on a per kilometre basis is made against the contractual rates. Contract revenue includes the revenue from pre-operational phase, initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. Given the impact from business combinations during the period, we have amended comparatives where reasonable to align to the current year classification and disclosure to be consistent with the whole group application of accounting policies. We note $35 million of revenue previously disclosed as “point in time” has been more appropriately disclosed as services delivered “over time”, to be consistent with the updated group policies. The contracts being reclassified from “point in time” to “over time” have a very short duration (i.e. days, hours) and therefore, there is no difference in the timing of recognition of revenue from the change in classification. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other income Other income is recognised when it is received or when the right to receive payment is established. Government grants Revenue for government grants is recognised when you have reasonable assurance that the obligations under the government grant will be satisfied. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Jobkeeper and similar payments from governments received in the United Kingdom and Singapore have been accounted for using the net offset method and have therefore been offset against the costs they are intended to support. SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTINCOME TAX The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. SeaLink Travel Group Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. CURRENT AND NON-CURRENT CLASSIFICATION Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. TRADE AND OTHER RECEIVABLES Trade receivables are initially recognised at transaction price and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has established a provision matrix that is based on it’s historical loss experience, adjusted for forward looking factors specific for the debtors and the economic environment. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. CUSTOMER ACQUISITION COSTS Customer acquisition costs are capitalised as an asset where such costs are incremental to obtaining a contract with a customer and are expected to be recovered. Customer acquisition costs are amortised on a straight-line basis over the term of the contract. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or which are not otherwise recoverable from a customer are expensed as incurred to profit or loss. Incremental costs of obtaining a contract where the contract term is less than one year is immediately expensed to profit or loss. INVENTORIES Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. 37 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNet realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. DERIVATIVE FINANCIAL INSTRUMENTS Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Derivatives are classified as current or non-current depending on the expected period of realisation. Cash flow hedges Cash flow hedges are used to cover the consolidated entity’s exposure to variability in cash flows that is attributable to particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income through the cash flow hedges reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs. Cash flow hedges are tested for effectiveness on a regular basis prospectively to ensure that each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, the amounts recognised in equity are transferred to profit or loss. If cashflow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cashflows are still expected to occur and released to profit or loss when the forecast transaction occurs. Otherwise the amount will be immediately reclassified to profit or loss as a reclassification adjustment. 38 PROPERTY, PLANT AND EQUIPMENT subject to impairment or adjusted for any remeasurement of lease liabilities. Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight- line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: 14–60 years Land and buildings Leasehold improvements 4–22 years 3–30 years Plant and equipment 5–25 years Vessels 3–20 years Motor vehicles 3–5 years Leased motor vehicles The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. RIGHT-OF-USE ASSETS (ROUA) A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short- term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. INTANGIBLE ASSETS Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Customer contracts Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their estimated finite life of 1 to 10 years. IMPAIRMENT OF NON- FINANCIAL ASSETS Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT might be impaired. Other non-financial assets including right of use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. CONTRACT LIABILITIES Contract liabilities represent the consolidated entity’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. 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. LEASE LIABILITIES A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset may fully written down after taking into account remaining lease term and any options to extend or terminate the agreement. EMPLOYEE BENEFITS Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when incurred. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. FINANCE COSTS Share-based payments Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. PROVISIONS Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Equity-settled and cash-settled share- based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black- Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. 39 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTThe cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: • during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period • from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, 40 it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. FAIR VALUE MEASUREMENT When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. ISSUED CAPITAL Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. DIVIDENDS Dividends are recognised when declared during the financial year and no longer at the discretion of the company. BUSINESS COMBINATIONS The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non- controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition- date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition- date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTduring the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. EARNINGS PER SHARE Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of SeaLink Travel Group Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. GOODS AND SERVICES TAX (‘GST’) AND OTHER SIMILAR TAXES Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. ROUNDING OF AMOUNTS The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR EARLY ADOPTED Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2020. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. NOTE 2 CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES & ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. CORONAVIRUS (COVID-19) PANDEMIC COVID-19, which is a respiratory illness caused by a new virus, was declared a world-wide pandemic by the World Health Organisation in March 2020. COVID-19, as well as measures to slow the spread of the virus, have since had a significant impact on global economies and equity, debt and commodity markets. The Company is continuing to assess the impact of the COVID-19 outbreak on demand for SeaLink’s products and services, customers and supply chain. The Governments restrictions on domestic and international borders, travel generally and on gatherings and social distancing measures have impacted SeaLink’s sales in FY20 and have the potential to impact them further in FY21, however, at present and given the uncertainty that exists, the financial impact cannot be reasonably estimated. The Company has considered the impact of COVID-19 and other market volatility in preparing its financial statements. While COVID-19 did not result in the identification of any further areas of judgement and critical accounting estimates in addition to those specifically disclosed below it did result in the application of additional judgement. Given the dynamic and evolving nature of COVID-19, limited recent experience of the economic and financial impacts of such a pandemic, changes to the estimates and outcomes that have been applied in the measurement of the Company’s assets and liabilities may arise in the future. Other than adjusting events that provide evidence of conditions that existed at the end of the reporting period, the impact of events that arise after the reporting period will be accounted for in future reporting periods. 41 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTAs a consequence of COVID-19 and in preparing these financial statements, management: COVID-19 as at 30 June 2020. Cost is calculated using the weighted average cost method. • reviewed external market Impairment of non-financial assets communications to identify other COVID-19 related impacts • reviewed internal processes to ensure consistency in the application of the expected impact of COVID-19 across all asset classes • assessed the carrying values of its assets and liabilities and determined the impact thereon as a result of market inputs and variables impacted by COVID-19 • considered the impact of COVID-19 on the Company’s financial statement disclosures • considered SeaLink’s Marine and Tourism operating segment’s eligibility for Jobkeeper and implemented accordingly, separate from the remaining public transport bus segments which were not considered eligible. Property, Plant & Equipment The Company has assessed the carrying value of its tangible assets at the reporting date for indicators of impairment and, where applicable, reviewed the measurement of the carrying value of such tangible assets. Such assessment incorporated a consideration of COVID-19 and an impairment of the carrying value of vessels was brought to account in the period to reflect this. (refer Note 12) Impairment of financial assets specifically trade receivables The Company has reviewed the expected credit losses for its trade receivables balances. AASB 9 requires forward-looking information (including macroeconomic information) to be considered both when assessing whether there has been a significant increase in credit risk and when measuring expected credit losses. There were no adjustments required to the carrying values of trade receivables from the impact of COVID-19 as at 30 June 2020. Valuation of inventory The Company has performed an assessment of inventory on hand at balance date to assess whether inventories are valued at the lower of cost and net realisable value. There were no adjustments required to the carrying values of inventories from the impact of 42 Intangible assets comprise of goodwill and other intangible assets with both finite and indefinite lives. Consistent with the Company’s accounting policies, it has evaluated the conditions specific to the Company and the assets subject to impairment to assess whether any impairment triggers that may lead to impairment have been identified. In doing this, the Company has reviewed the key assumptions in its previous annual impairment assessment to assess whether any changes to the assumptions within that impairment assessment would result in an impairment loss at 30 June 2020. Such assessment incorporated a consideration of COVID-19 and an impairment of the carrying value of intangibles associated with the Fraser Island CGU was brought to account in the period to reflect this. (refer Note 13) Investments The Company has assessed the carrying value of its investments at the reporting date for indicators of impairment and, where applicable, reviewed the measurement of the carrying value of such investments. This assessment incorporated a consideration of COVID-19 and an impairment of the carrying value of the Company’s investment in UWAI was brought to account in the period to reflect this. (refer Note 11) Risk management The Company’s risk management framework continues to be applied across the Operating Group and the Company continues to monitor the impact of COVID-19 on Company’s risk profile. Non-financial risks emerging from global and local movement restrictions, liquidity, remote working by our staff, counterparties, clients and suppliers, are being identified, assessed, managed and governed through timely application of Company’s risk management framework. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence. Fair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTevent. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash- generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Income tax The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Employee benefits provision As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Lease make good provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision NOTE 3 OPERATING SEGMENTS requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. Warranty provision In determining the level of provision required for warranties the consolidated entity has made judgements in respect of the expected performance of the products, the number of customers who will actually claim under the warranty and how often, and the costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data associated with similar products and services. Business combinations As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Identification of reportable operating segments For management purposes the consolidated entity is organised into four operating segments. The principal products and services of each of these operating segments are as follows: Marine and Tourism – operates vehicle and passenger ferry services, barging, coach tours and package holidays, lunch, dinner and charter cruises and accommodation facilities throughout Australia; Australian Bus – operates metropolitan public bus services on behalf of governments in Sydney, Melbourne, Perth, Adelaide and Darwin; International Bus – operates metropolitan public bus services on behalf of governments in London and Singapore; and Corporate (Head Office) – provides finance, domestic and international sales and marketing, information and technology, business development, fleet management, health and safety and administration and risk management support. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors and Executive Committee (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted 43 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTin the financial statements. Finance costs, finance income, and fair value gains and losses on financial assets are not allocated to the individual segments below as the underlying instruments are managed on a group basis. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to the individual segments below as the underlying instruments are managed on a group basis. The information reported to the CODM is on a monthly basis. Intersegment transactions Transfer pricing between operating segments is on an arm’s length basis in a manner similar to transactions with third parties and inter-segment revenues are eliminated on consolidation. Intersegment receivables, payables and loans Capital expenditure consists of additions of property, plant and equipment, intangible assets and investment properties including assets from the acquisition of subsidiaries. Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non- market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. Major customers During the year ended 30 June 2020 approximately 64.7% (2019: 0.0%) of the consolidated entity’s external revenue was derived from sales to governments. Operating segment information CONSOLIDATED – 2020 REVENUE Sales to external customers Interest received Total revenue EBITDA Depreciation Depreciation ROUA Impairment of assets Amortisation of customer contracts Finance costs Business acquisition expenses Revaluation of deferred consideration Income tax expense Loss after income tax expense ASSETS Segment assets Unallocated assets: Deferred tax asset Total assets LIABILITIES Segment liabilities Unallocated liabilities: Deferred tax liability Total liabilities MARINE AND TOURISM $’000 AUSTRALIAN BUS $’000 INTERNATIONAL BUS $’000 CORPORATE $’000 TOTAL $’000 213,937 277,111 132,644 – – – 213,937 277,111 132,644 – 438 438 50,851 (13,299) (3,750) (10,797) (1,877) (385) – – 31,661 (5,018) (2,142) – (13,248) (819) – – 23,990 (1,476) (12,762) (15,079) (1,122) – – (1,637) (5,740) (1,467) – – – (7,097) (17,510) 1,395 (41,050) 623,692 438 624,130 91,423 (20,915) (18,654) (12,434) (20,865) (9,768) (17,510) 1,395 (7,328) (6,244) (13,572) 370,434 560,547 284,624 131,056 1,346,661 43,161 1,389,822 111,686 122,099 126,033 370,825 730,643 58,887 789,530 Profit/(loss) before income tax expense 20,743 10,434 2,545 The 2019 segment note is not comparable to the 2020 segment note due to the impact of depreciation in the current year, which will make EBITDA look higher in 2020 by $18.6m based on depreciation of right of use assets. 44 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT CONSOLIDATED – 2019 REVENUE Sales to external customers Interest received Total revenue EBITDA (underlying) Depreciation Impairment of assets Amortisation of customer contracts Finance costs Business acquisition expenses Profit/(loss) before income tax expense Income tax expense Loss after income tax expense ASSETS Segment assets Unallocated assets: Total assets LIABILITIES Segment liabilities Unallocated liabilities: Deferred tax liability Total liabilities Geographical information Australia Singapore United Kingdom MARINE AND TOURISM $’000 AUSTRALIAN BUS $’000 INTERNATIONAL BUS $’000 CORPORATE $’000 TOTAL $’000 248,774 – 248,774 47,298 (14,295) – (1,942) (3,974) (364) 26,723 294,849 134,432 – – – – – – – – – – – – – – – – – – – – – – – – – 38 38 – (136) (1,637) – – – (1,773) 248,774 38 248,812 47,298 (14,431) (1,637) (1,942) (3,974) (364) 24,950 (3,407) (21,543) 694 295,543 5,936 301,479 – 134,432 9,132 143,564 SALES TO EXTERNAL CUSTOMERS GEOGRAPHICAL NON-CURRENT ASSETS 2020 $’000 2019 $’000 2020 $’000 2019 $’000 491,048 248,774 935,095 262,352 58,919 73,725 – – 8,174 221,129 – – 623,692 248,774 1,164,398 262,352 The geographical non-current assets above are exclusive of, where applicable, financial instruments and deferred tax assets. NOTE 4 REVENUE FROM CONTRACTS WITH CUSTOMERS Goods transferred at a point in time Services transferred over time Revenue from contracts with customers 2020 $’000 187,256 436,436 623,692 CONSOLIDATED 2019 $’000 213,511 35,263 248,774 45 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT NOTE 5 OTHER INCOME Net foreign exchange gain Gain on disposal of property, plant and equipment Other income Other income NOTE 6 INCOME TAX EXPENSE Income tax expense Current tax Deferred tax – origination and reversal of temporary differences Adjustment recognised for prior periods – s40-880 (off balance sheet) Aggregate income tax expense Deferred tax included in income tax expense comprises: Decrease/(increase) in deferred tax assets (note 14) Decrease in deferred tax liabilities (note 24) Deferred tax – origination and reversal of temporary differences Numerical reconciliation of income tax expense and tax at the statutory rate Profit/(loss) before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Entertainment expenses Impairment of goodwill Impairment of investment Share-based payments Non-taxable income Acquisition costs Net capital gain Share issue expenses NANE dividends s408-880 Adjustment recognised for prior periods Income tax expense Amounts credited directly to equity Deferred tax assets (note 14) 46 2020 $’000 1,395 9 20,978 22,382 2020 $’000 14,266 (7,606) (287) (129) 6,244 213 (7,819) (7,606) (7,328) (2,198) 13 1,200 491 – (3,882) 4,586 6,247 126 77 (129) 6,531 (287) 6,244 (748) CONSOLIDATED CONSOLIDATED 2019 $’000 – 687 1,889 2,576 2019 $’000 4,187 (782) 2 – 3,407 (621) (161) (782) 24,950 7,485 17 – 492 44 (4,633) – – – – – 3,405 2 3,407 (776) SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 7 CASH AND CASH EQUIVALENTS Current assets Cash on hand Cash at bank Cash on deposit NOTE 8 TRADE AND OTHER RECEIVABLES Current assets Trade receivables Less: Allowance for expected credit losses Other receivables 2020 $’000 469 77,645 41,789 119,903 2020 $’000 63,038 (356) 62,682 19,781 82,463 CONSOLIDATED 2019 $’000 154 6,162 5,588 11,904 CONSOLIDATED 2019 $’000 11,395 (12) 11,383 972 12,355 Allowance for expected credit losses Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance is made for trade receivables and other receivables, as the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The ageing of the receivables and allowance for expected credit losses provided for above are as follows: EXPECTED CREDIT LOSS RATE CARRYING AMOUNT ALLOWANCE FOR EXPECTED CREDIT LOSSES CONSOLIDATED Not overdue 0 to 1 month overdue 1 to 2 months overdue 2 to 3 months overdue Over 3 months overdue 2020 % – – – – 30.89% 2019 % – 0.02% 0.10% 0.25% 5.10% 2020 $’000 74,217 7,458 131 (139) 1,152 2019 $’000 972 9,130 1,679 449 137 82,819 12,367 Movements in the allowance for expected credit losses are as follows: Opening balance Additional provisions recognised Additions through business combinations Receivables written off during the year as uncollectable Closing balance 2020 $’000 – – – – 356 356 CONSOLIDATED 2019 $’000 – 2 2 1 7 12 2019 $’000 31 – – (19) 12 47 2020 $’000 12 205 139 – 356 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 9 INVENTORIES Current assets Goods held for resale – at cost Less: Provision for impairment Fuel at cost Spare parts at cost Less: Provision for impairment NOTE 10 RIGHT-OF-USE ASSETS Non-current assets Land and buildings – right-of-use Less: Accumulated depreciation Motor vehicles – right-of-use Less: Accumulated depreciation 2020 $’000 2,051 (31) 2,020 2,250 10,017 (406) 13,881 2020 $’000 107,769 (5,392) 102,377 47,175 (11,047) 36,128 138,505 CONSOLIDATED 2019 $’000 1,881 (31) 1,850 438 2,633 – 4,921 CONSOLIDATED 2019 $’000 – – – – – – – Reconciliations: Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: CONSOLIDATED Balance at 1 July 2018 Balance at 30 June 2019 Additions (including 1 July 2019 takeup) Additions through business combinations (note 35) Exchange differences Transfers in/(out) Depreciation expense Balance at 30 June 2020 LAND AND BUILDINGS $’000 – – 15,162 94,901 (2,044) – (5,642) 102,377 MOTOR VEHICLES ’000 – – 1,066 46,926 (1,266) 2,414 (13,012) 36,128 TOTAL $’000 – – 16,228 141,827 (3,310) 2,414 (18,654) 138,505 Refer Note 1. Impact of Adoption AASB 16 for the reconciliation “ROUA movement year ended 30 June 2020” for split of opening balance take up amounts on 1 July 2019 of $14.6m with the balance being additions during the year. 48 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 11 OTHER ASSETS Current assets Prepayments Customer acquisition costs Non-Current assets Other non-current assets 2020 $’000 10,824 1,751 12,575 – 12,575 CONSOLIDATED 2019 $’000 4,263 – 4,263 1,637 5,900 There are currently several bids in process for the Australian and International bus businesses and customer acquisition costs reflects balances that will be brought to account once the successful bidder is announced by the governing body. Other non-current assets is nil due to impairment of the remaining balance of the investment in UWAI Limited. This was a Simple Agreement for Future Equity (“SAFE”) for $2.5M USD entered into 19 March 2018. The SAFE contains a debt contract with an option to convert to equity however there with significant unobservable inputs at 30 June 2019 and 2020 it has now been fully impaired based on fair market valuation. NOTE 12 PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED Non-current assets Land and buildings – at cost Less: Accumulated depreciation Leasehold improvements – at cost Less: Accumulated depreciation Plant and equipment – at cost Less: Accumulated depreciation Motor vehicles – at cost Less: Accumulated depreciation Motor vehicles under lease Less: Accumulated depreciation Vessels – at cost Less: Accumulated depreciation Less: Impairment Capital works in progress – at cost 2020 $’000 81,052 (5,172) 75,880 17,205 (409) 16,796 26,468 (8,827) 17,641 134,281 (9,759) 124,522 – – – 186,179 (56,756) (6,797) 122,626 16,586 374,051 2019 $’000 46,454 (4,588) 41,866 712 (193) 519 19,101 (8,691) 10,410 13,259 (4,139) 9,120 3,238 (824) 2,414 178,469 (47,582) – 130,887 6,180 201,396 49 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTReconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: LAND & BUILDINGS $’000 LEASEHOLD IMPROVEMENTS $’000 PLANT & EQUIPMENT $’000 MOTOR VEHICLES $’000 VEHICLES UNDER LEASE $’000 VESSELS $’000 581 11,590 2,783 142,203 – 5,994 CWIP $’000 2,256 8,465 TOTAL $’000 210,101 17,645 CONSOLIDATED Balance at 1 July 2018 Additions Disposals Transfers in/(out) Depreciation expense Balance at 30 June 2019 Additions Additions through business combinations (note 35) Disposals Exchange differences Impairment of assets Transfers in/(out) Depreciation expense 42,426 284 – – (844) 41,866 651 (537) (1,888) – 590 (911) – – – (62) 519 392 – (843) – 42 645 (21) 879 (2,683) 10,410 1,746 9,148 (73) (33) – 683 (271) (4,240) 8,262 2,257 (84) – (1,315) 9,120 3,400 116,687 (607) (132) – 2,234 (6,180) 36,109 16,957 (33) (11,781) – (11,919) – (336) 3,662 (9,191) (4,541) – – (14,431) 2,414 130,887 6,180 201,396 570 – 22,699 29,458 90 178,991 (1,732) – (6,797) – – – (2,949) (2,896) (6,797) (2,237) (2,414) 9,011 (12,383) – – (9,313) – (20,915) 122,626 16,586 374,051 – – – – – Balance at 30 June 2020 75,880 16,796 17,641 124,522 At 30 June 2020 three vessels are under construction, seventy-two buses and four vehicles were under contract to be purchased in Australia and thirty-seven buses and six vehicles are under contract internationally. Additionally we have committed to an electrification project for the buses internationally. At 30 June 2019, there were three vessels under construction, three bus refurbishments underway and the fitout for the upgrade facilities in Queensland. During the period following a review of the carrying value of certain underutilised vessels across the fleet, primarily those relating to lunch and dining experiences, an impairment of $6.8m was recognised. This is a COVID-19 related impairment. NOTE 13 INTANGIBLES Non-current assets Goodwill – at cost Less: Impairment Customer contracts – at cost Less: Accumulated amortisation Other intangible assets – at cost Less: Accumulated amortisation Customer relationships – Sita Coaches 50 2020 $’000 481,213 (4,000) 477,213 143,065 (26,191) 116,874 4,064 (1,568) 2,496 8,700 605,283 CONSOLIDATED 2019 $’000 47,800 – 47,800 8,414 (5,644) 2,770 3,199 (386) 2,813 – 53,383 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: CONSOLIDATED Balance at 1 July 2018 Amortisation expense Balance at 30 June 2019 Goodwill $’000 47,800 – 47,800 Additions through business combinations (note 35) Impairment of assets Amortisation expense Balance at 30 June 2020 433,413 (4,000) – 477,213 Customer contracts $’000 Other intangibles $’000 Customer relationships $’000 4,328 (1,558) 2,770 134,652 – (20,548) 116,874 3,199 (386) 2,813 – – (317) 2,496 – – – 8,700 – – 8,700 Total $’000 55,327 (1,944) 53,383 576,765 (4,000) (20,865) 605,283 The impairment of $4m against goodwill relates to Fraser Island resort which was reviewed for impairment. See commentary below. Impairment testing Goodwill acquired through business combinations have been allocated to the following cash-generating units: CONSOLIDATED KI Odysseys SeaLink Queensland Captain Cook Cruises WA Transit Systems Marine business (South East Queensland) Fraser Island (after impairment) Transit – NSW Transit – WA & NT Transit – SA Sita – Victoria Tower Transit – Singapore Tower Transit – London 2020 $’000 209 6,420 3,590 30,081 3,500 62,000 159,100 58,571 44,900 104,934 3,908 477,213 2019 $’000 209 6,420 3,590 30,081 7,500 – – – – – 47,800 The recoverable amount of the consolidated entity’s goodwill (excluding the goodwill associated with the recently acquired Transit Systems Group) has been determined by a value-in-use calculation using a discounted cash flow model. The cashflow projections are based on annual financial budgets approved by senior management and the Board, extrapolated using the growth rates below for a five-year period as approved by management together with a terminal value. The assumptions for determining the recoverable amount are based on past experience and Senior Management’s expectation for the future taking into consideration the impact of COVID-19, travel restrictions that exist and recent trading performance. Management have assessed the recent trading performance and outlook for each of the Transit Systems Group CGU’s against the financial metrics supporting the acquisition and determined that there were no indicators of impairment for the goodwill recognised with the acquisition. In the event the Singapore bus contract is not retained in FY2021 there is the potential for the goodwill to be impaired for this CGU. For all cash-generating units (CGU), an EBITDA multiple of between 6 and 8 times five year earnings has been used to determine the terminal value based on comparable multiples for similar businesses and Senior Management’s expectations of market prices for these types of businesses. Key assumptions are those to which the recoverable amount of an asset or CGU is most sensitive. The following key general assumptions were used in the discounted cash flow models and value in use calculations: The discount rate of 9.4% (2019:10.5%) pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital adjusted for, the risk free rate and the volatility of the share price relative to market movements. Management believes the projected 2.0% revenue growth rate is prudent and justified, based on the current uncertainty of the market. As a result of the updated analysis, management did not identify an impairment for any of the CGU’s except for Fraser Island. Sensitivity As disclosed in note 2, the Directors have made assumptions and estimates in respect of impairment testing of goodwill. 51 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Should these assumptions and estimates not occur the resulting goodwill carrying amount may decrease. The assumptions and estimates are as follows: SeaLink Queensland Passenger numbers to Magnetic Island – An increase of 2%-3% in traffic has been inbuilt into forecast sales based on strong domestic growth as well as a growing population base in Townsville. Vessel repairs – These are estimated to increase at 1.5% adjusted for significant expected engine rebuilds and refurbishments. KI Odysseys Passengers for KIO – An increase of 2%-3% in traffic has been inbuilt to the forecast based on increased demand for small group touring , increased marketing focus and higher online sales expected. Captain Cook Cruises WA Passenger revenue for CCC WA – An increase of 2% in traffic based on increased tourism flow and growth from Elizabeth Quay and 7% growth in the Rottnest Island operation. Transit Systems Marine business Revenue for the Transit Marine business – An increase in revenue of 3% to reflect small traffic growth as well as a 2% pricing increase based on increased tourism flow to Stradbroke Island, CPI increases built into fixed contracts and growth in vessel charter rates. Fraser Island business Revenue for the Fraser Island business – While revenue growth is anticipated as being 2%, which is lower than has been forecasted in previous years, due to the island being closed during COVID-19 and the uncertainty as to when international borders will open and international tourists return, a $4.0 million impairment has been recognised against the carrying value of goodwill associated with Fraser Island. There has been no change to the current level of capital expenditure assumed for all CGU’s. Management have reviewed the changes to the key assumptions in the model and based on those changes have assessed there would not be an impairment of goodwill for any of the CGU’s other than Fraser Island. Management believes that other reasonable changes in the key assumptions on which the recoverable amount of the Marine and Tourism division’s goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount. CUSTOMER CONTRACTS AND OTHER INTANGIBLES (PERMITS AND CUSTOMER RELATIONSHIPS) Customer contracts of $7.4m are associated with several government contracts for ferry services in the Southern Moreton Bay, Gladstone, Perth. As part of the Transit Systems Group acquisition, bus contracts in Australia and Singapore were acquired with a fair value of $134.7m. As part of the Fraser acquisition in 2018, touring and access permits were acquired with a fair value of $3.2m. In addition $8.7m of intangible customer relationships was recognised for Sita as part of the Transit Systems acquisition. As part of the Transit Systems Group acquisition, during the period, the Company recorded amortisation of $19.4m associated with customer contracts and permits with an associated reduction in the Deferred Tax Liability of $5.8m. All customer contracts are amortised over their estimated finite life and the amortisation period ranges between 1 and 10 years. NOTE 14 DEFERRED TAX ASSETS Non-current assets Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Tax losses Allowance for expected credit losses Employee benefits Accrued expenses Revenue received in advance Capital expense timing differences Finance leases Provisions Finance costs Amounts recognised in equity: Derivative financial instruments Deferred tax asset 52 CONSOLIDATED 2020 $’000 2019 $’000 1,760 102 20,040 1,382 233 165 13,370 3,694 534 41,280 1,881 43,161 – 3 3,852 179 412 357 – – – 4,803 1,133 5,936 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTMovements Opening balance Credited/(charged) to profit or loss (note 6) Credited to equity (note 6) Additions through business combinations (note 35) Closing balance NOTE 15 TRADE AND OTHER PAYABLES Current liabilities Trade payables BAS payable Other payables Refer to note 29 for further information on financial instruments. Trade creditors are non-interest bearing and are normally settled on 14-60 day terms. NOTE 16 CONTRACT LIABILITIES Current liabilities Contract liabilities Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Payments received in advance Closing balance 2020 $’000 5,936 (213) 748 36,690 43,161 2020 $’000 32,936 13,469 34,004 80,409 2020 $’000 7,408 7,087 321 7,408 CONSOLIDATED CONSOLIDATED CONSOLIDATED 2019 $’000 4,539 621 776 – 5,936 2019 $’000 6,150 766 969 7,885 2019 $’000 7,087 6,471 616 7,087 A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e. transfers control of the related goods or services to the customer). Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $3,696,954,000 as at 30 June 2020 ($73,130,000 as at 30 June 2019) and is expected to be recognised as revenue in future periods as follows: CONSOLIDATED Within one year More than one year 2020 $’000 976,117 2,720,837 3,696,954 2019 $’000 28,561 44,569 73,130 53 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT2020 $’000 44,201 266,000 310,201 CONSOLIDATED 2019 $’000 – 92,500 92,500 The facilities are provided on a floating rate basis referenced to the BBSY rate. As at year end, the balance of Facility A (fully drawn) $230,000,000 had an average rate of 1.87% (2019: 3.85%) and the balance of Facility B $36,000,000 had an average rate of 1.57%. All current facilities are at floating rates (2019: 2.2%). Committed financing facilities of $345,000,000 (2019: $118,000,000) were available to the consolidated entity at the end of the financial year. As at that date, $266,000,000 (2019: $92,500,000) of these facilities were in use. During the current year, there were no defaults or breaches. NOTE 17 BORROWINGS Non-current liabilities Other loans Commercial bills payable Refer to note 29 for further information on financial instruments. Total secured liabilities Other loans are made up of vendor financing relating to the acquisition of the Sita bus business ($36.6m) and separately an MRPS loan instrument ($7.6m) as part of business combinations. Both attract an interest rate of 6% per annum. Repayments for the Sita vendor financing are due in equal instalments in April 2022 and April 2023. The MRPS has a rolling coupon arrangement in place with no fixed future repayment date. Assets pledged as security SeaLink and each borrower (which includes members of the Transit Systems Group), has provided security in respect of all of their respective assets and undertakings, including direct shares and units in entities within the Transit Systems Group other than those which cannot be charged without third party consent and real property mortgages over its freehold real property (excluding the bus depot at Westbourne Park, UK) and certain leasehold property. Also registered ship mortgages over all vessels in the fleet that are not leased, except for the WA vessels. SeaLink and certain guarantors (which includes members of the Transit Systems Group) has provided a guarantee and indemnity to the Lenders in respect of the new Financing Facilities. Various guarantees /performance bonds have been provided as surety on a range of material operational contracts and lease contracts. Guarantees provided total $91.3 million (2019: $2.4 million), the significant increase relates to the acquisition of the Transit Systems Group with significant government contractual obligations. Interest bearing loans and borrowings have a fair value of $266,000,000 (2019: $92,500,000) and a carrying value of $266,000,000 (2019: $92,500,000). During the year, interest bearing borrowings of $228,102,000 were repaid from funds raised through cashflow from operations, new borrowings and capital raising. During the year $266,000,000 were drawn down in order repay borrowings, complete the acquisition of Transit Systems Group and fund operations. As part of the Transit Systems Group acquisition, SeaLink entered into the following new three to five year facilities with a panel of four financiers: • Facility A: a multicurrency term loan facility with a limit of $230 million and a term of 5 years from commencement, utilised primarily to fund the Acquisition, associated transaction costs and any repayment of debt of the Transit Systems Group; • Facility B1: a multicurrency revolving credit facility with a limit of $50 million and a term of 3 years from commencement, for general corporate purposes; • Facility B2: a multicurrency revolving credit facility with a limit of $65 million and a term of 5 years from commencement, for general corporate purposes; and • Facility C: a multicurrency revolving letter of credit facility with a limit of $125 million and a term of 5 years from commencement, for the provision of letters of credit for material contract performance (including the provision of new or refinanced performance bonds and bank guarantees). 54 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTFinancing arrangements As part of Transit Systems Group acquisition, SeaLink entered into the following 3-5 year facilities with a panel of four financiers. Unrestricted access was available at the reporting date to the following lines of credit: CONSOLIDATED Total facilities Facility A – multi currency term loan Facility B1 – revolving credit Facility B2 – revolving credit Facility C – revolving letter of credit Interchangeable bill facility Vendor financing facility MRPS loan Used at the reporting date Facility A – multi currency term loan Facility B1 – revolving credit Facility B2 – revolving credit Facility C – revolving letter of credit Interchangeable bill facility Vendor financing facility MRPS loan Unused at the reporting date Facility A – multi currency term loan Facility B1 – revolving credit Facility B2 – revolving credit Facility C – revolving letter of credit Interchangeable bill facility Vendor financing facility MRPS loan 2020 $’000 230,000 50,000 65,000 125,000 – 36,601 7,600 514,201 230,000 36,000 – 88,647 – 36,601 7,600 398,848 – 14,000 65,000 36,353 – – – 2019 $’000 – – – – 118,000 – – 118,000 – – – – 92,500 – – 92,500 – – – – 25,500 – – Financing cash flows During the period $92.5m debt was repaid from $154m share capital raising proceeds (related share issue transaction cost expended were $7.1m) and then a further $266m was drawndown through new finance facilities. Of this $135.6m was used to repay debt of the acquired businesses at acquisition. A further $24.5m of repayments were made on leases and finally $18.1m of dividends were paid during the year. 115,353 25,500 NOTE 18 LEASE LIABILITIES Current liabilities Lease liability – Current Non-current liabilities Lease liability – Non current Refer to note 29 for further information on financial instruments. CONSOLIDATED 2020 $’000 29,974 74,409 104,383 2019 $’000 822 2,457 3,279 55 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT2020 $’000 1,167 739 1,906 4,284 80 4,364 6,270 2020 $’000 15,833 2020 $’000 41,305 27,725 1,117 362 70,509 12,190 82,699 2019 $’000 943 – 943 2,832 – 2,832 3,775 2019 $’000 – CONSOLIDATED CONSOLIDATED CONSOLIDATED 2019 $’000 5,110 5,669 64 184 11,027 1,813 12,840 NOTE 19 OTHER FINANCIAL LIABILITIES Current liabilities Interest rate swap contracts – cash flow hedges Fuel price swap contracts – cash flow hedges Non-current liabilities Interest rate swap contracts – cash flow hedges Fuel price swap contracts – cash flow hedges Refer to note 29 for further information on financial instruments. NOTE 20 INCOME TAX Current liabilities Provision for income tax NOTE 21 EMPLOYEE BENEFITS Current liabilities Annual leave Long service leave Sick leave Employee benefits Non-current liabilities Long service leave 56 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 22 PROVISIONS Current liabilities Deferred consideration Other provisions CONSOLIDATED 2020 $’000 25,005 11,168 36,173 Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: CONSOLIDATED – 2020 Carrying amount at the start of the year Additional provisions recognised Additions through business combinations (note 35) Amounts used Exchange differences Carrying amount at the end of the year Motor claims $’000 – 3,014 3,625 (1,714) (176) 4,749 Make good $’000 – 42 3,406 (193) (178) 3,077 Bus parts $’000 Deferred consideration $’000 – – 3,190 (79) (44) 3,067 – – 26,400 – (1,395) 25,005 NOTE 23 OTHER LIABILITIES Current liabilities Deferred consideration Accrued expenses Deferred revenue Subsidies and grants received in advance Non-current liabilities Deferred consideration Subsidies and grants received in advance CONSOLIDATED 2020 $’000 18,850 36,637 8,137 314 63,938 22,867 462 23,329 87,267 Current deferred consideration includes $7.4m relating to a historical acquisition within the business combination acquired. 2019 $’000 – 275 275 Other $’000 275 – – – – 275 2019 $’000 – 5,418 – 597 6,015 – 776 776 6,791 57 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT CONSOLIDATED 2020 $’000 2019 $’000 21,433 876 35,071 90 1,417 58,887 9,132 (7,819) 57,574 58,887 8,111 48 830 143 – 9,132 9,293 (161) – 9,132 2019 $’000 96,057 $’000 95,557 500 96,057 108,312 5,017 40,671 329,372 (7,052) – 572,377 NOTE 24 DEFERRED TAX LIABILITIES Non-current liabilities Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Property, plant and equipment Prepayments Customer contracts Consumables Other intangible assets Deferred tax liability Movements: Opening balance Credited to profit or loss (note 6) Additions through business combinations (note 35) Closing balance NOTE 25 ISSUED CAPITAL Ordinary shares – fully paid 218,399,048 101,429,103 572,377 2020 $’000 CONSOLIDATED 2019 $’000 2020 $’000 Movements in ordinary share capital DETAILS Balance Conversion of options Balance Issue of shares Issue of shares Issue of shares Issue of shares as consideration Share raising costs Issue of shares Balance DATE 1 July 2018 SHARES 101,154,103 275,000 30 June 2019 101,429,103 17 October 2019 5 November 2019 6 November 2019 16 January 2020 30,946,200 1,433,426 11,620,374 72,869,945 – 100,000 30 June 2020 218,399,048 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. Capital risk management The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the 58 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTcurrent company’s share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2019 Annual Report. The consolidated entity monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘trade and other payables’ and ‘borrowings’ as shown in the statement of financial position) less ‘cash and cash equivalents’ as shown in the statement of financial position. Total capital is calculated as ‘total equity’ as shown in the statement of financial position (including non- controlling interest) plus net debt. The gearing ratio at the reporting date was as follows: CONSOLIDATED Current liabilities – trade and other payables (note 15) Non-current liabilities – borrowings (note 17) Total borrowings Current assets – cash and cash equivalents (note 7) Net debt Total equity Total capital Gearing ratio NOTE 26 RESERVES Foreign currency reserve Hedging reserve – cash flow hedges Options reserve 2020 $’000 80,409 310,201 390,610 (119,903) 270,707 600,292 870,999 2019 $’000 7,885 92,500 100,385 (11,904) 88,481 157,915 246,396 31% 36% 2020 $’000 (966) (4,389) 1,364 (3,991) CONSOLIDATED 2019 $’000 – (2,643) 943 (1,700) Hedging reserve – cash flow hedges The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an effective hedge. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: CONSOLIDATED Balance at 1 July 2018 Revaluation – gross Deferred tax Balance at 30 June 2019 Revaluation – gross Deferred tax Share option expense Balance at 30 June 2020 Share option surplus $’000 Cash flow hedging $’000 Foreign currency $’000 795 – 148 943 – – 421 1,364 (831) (1,812) – (2,643) (2,494) 748 – (4,389) Total $’000 (36) (1,812) 148 (1,700) (3,460) 748 421 – – – – (966) – – (966) (3,991) 59 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT NOTE 27 RETAINED PROFITS Retained profits at the beginning of the financial year Profit/(loss) after income tax expense for the year Dividends paid (note 28) Retained profits at the end of the financial year NOTE 28 DIVIDENDS Dividends Dividends paid during the financial year were as follows: Interim fully franked dividend for the year ended 30 June 2020 paid 31 March 2020 of 6.5 cents (2019: 6.5 cents) per ordinary share Final fully franked dividend for the year ended 30 June 2019 paid 17 September 2019 of 8.5 cents (2018: 8.0 cents) per ordinary share Franking credits Franking credits available at the reporting date based on a tax rate of 30% Franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date based on a tax rate of 30% Franking credits available for subsequent financial years based on a tax rate of 30% 2020 $’000 63,558 (13,572) (18,080) 31,906 CONSOLIDATED 2019 $’000 56,700 21,543 (14,685) 63,558 2020 $’000 9,459 8,621 18,080 2020 $’000 44,385 – 44,385 CONSOLIDATED 2019 $’000 6,593 8,092 14,685 CONSOLIDATED 2019 $’000 49,999 – 49,999 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for income tax. NOTE 29 FINANCIAL INSTRUMENTS Financial risk management objectives The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity’s operating units. Finance reports to the Board on a monthly basis. 60 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT MARKET RISK Foreign currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations.Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. the ensuing financial year. Management has a risk management policy to hedge 100% of purchases and 50% of anticipated foreign currency transactions for the subsequent 6 months. In order to protect against exchange rate movements, the consolidated entity has entered into forward foreign exchange contracts. These contracts are hedging highly probable forecasted cash flows for The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: CONSOLIDATED US dollars Pound Sterling Singapore dollars Assets Liabilities 2020 $’000 14 14,484 37,882 52,380 2019 $’000 – – – – 2020 $’000 – 49,300 19,260 68,560 2019 $’000 – – – – The consolidated entity had net current liabilities denominated in foreign currencies of $25,550,553 (assets of $63,688,792 less liabilities of $89,239,345) as at 30 June 2020 (2019: $nil). Based on this exposure, had the Australian dollar weakened by 5%/strengthened by 5% (2019: n/a) against these foreign currencies with all other variables held constant, the consolidated entity’s profit before tax for the year would have been $1,277,528 lower/$1,277,528 higher (2019: n/a) and equity would have been $894,270 lower/$894,270 higher (2019: n/a). The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. The actual foreign exchange gain for the year ended 30 June 2020 was $1.395m (2019: $nil). Price risk The consolidated entity is not exposed to any significant price risk from fluctuations in fuel price as this is indexed in the bus contracts and passed through to the customer. Interest rate risk The consolidated entity’s main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the consolidated entity to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair value interest rate risk. The policy is to maintain approximately 50% of current borrowings at fixed rates using interest rate swaps to achieve this when necessary. As at the reporting date, the consolidated entity had the following average interest rate borrowings and interest rate swap contracts outstanding: CONSOLIDATED Bank overdraft and bank loans – floating Vendor financing – fixed MRPS loan – fixed coupon rate Net exposure to cash flow interest rate risk Weighted average interest rate % 1.83% 6.00% 6.00% 2020 2019 Weighted average interest rate % 2.74% – – – Balance $’000 266,000 36,601 7,600 310,201 Balance $’000 92,500 – – 92,500 61 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT The consolidated entity has entered into an interest rate swap of $120m that effectively hedges approximately 50% of the company’s exposure to fluctuations in interest rates. An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below. For the consolidated entity the bank loans outstanding, totalling $266 million (2019: $92.5 million), are principal and interest payment loans. Monthly cash outlays of approximately $477,464 (2019: $114,583) per month are required to service the interest payments. An official increase in interest rates of 0.5% and decrease 1% (2019: increase 0.5%, decrease 1.0%) basis points would have an adverse effect on profit before tax of $1,330,000, decrease positive effect $2,660,000 (2019: (increase rates ($462,500), decrease rates $925,000)) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. There are no minimum principal repayments due (2019:nil). CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the Financing arrangements Unused borrowing facilities at the reporting date: Facility B1 – revolving credit Facility B2 – revolving credit Facility C – revolving letter of credit Interchangeable bill facility financial statements. The consolidated entity does not hold any collateral. LIQUIDITY RISK Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk using a liquidity planning tool and by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, interchangeable limits, finance leases and hire purchase contracts. The Group’s policy is to ensure that the core funding limits have no less than a 12 month maturity date. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing or alternative lenders. Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on references, industry knowledge, ability to pay and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored with an analysis reported to the Board monthly. Material debtors are largely associated with government agencies and are reviewed by management taking into consideration the associated credit ratings and risk applicable to the relevant country for (international operations) or state within Australia and are generally considered relatively low risk. Generally, trade and other receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. There were no exposures that comprised more than 30% of trade receivables. Collection of this debt is generally not considered doubtful however some small provisions have been made for debts with the indicators of no reasonable recovery, mainly businesses impacted by COVID-19. Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Audit and Risk Committee in accordance with the Group’s policy. Investments of surplus funds are only placed with the Group’s major bank. 2020 $’000 14,000 65,000 36,353 – 115,353 CONSOLIDATED 2019 $’000 – – – 25,500 25,500 Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have an average maturity of 3.5 years (2019: 5 years). 62 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTRemaining contractual maturities The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. CONSOLIDATED – 2020 Non-derivatives Non-interest bearing Trade payables BAS payables Other payables Financial guarantee contracts (on demand) Interest-bearing variable Commercial bills Interest-bearing – fixed rate Lease liability Vendor financing MRPS loan Total non-derivatives Derivatives Interest rate swaps net settled Fuel price swaps net settled Total derivatives CONSOLIDATED – 2019 Non-derivatives Non-interest bearing Trade payables BAS payables Other payables Interest-bearing variable Commercial bills Interest-bearing – fixed rate Commercial bills Lease liability Total non-derivatives Derivatives Interest rate swaps net settled Total derivatives Weighted average interest rate % – – – – 1 year or less $’000 32,936 13,469 37,401 91,322 Between 1 and 5 years $’000 Over 5 years $’000 Remaining contractural maturities $’000 – – – – – – – – 32,936 13,469 37,401 91,322 1.83% 4,868 49,945 234,209 289,022 36,079 105,103 – 8,056 278,344 – – – 40,993 8,968 619,214 5,451 819 6,270 Between 1 and 5 years $’000 Over 5 years $’000 Remaining contractural maturities $’000 2.97% 6.00% 6.00% – – Weighted average interest rate % – – – 30,864 2,196 456 38,160 38,797 456 213,512 127,358 1,167 739 1,906 1 year or less $’000 6,150 766 969 4,284 80 4,364 – – – 2.20% 1,375 66,625 3.85% 3.71% – 1,155 846 11,261 943 943 33,465 3,545 103,635 2,832 2,832 – – – – – – – – – 6,150 766 969 68,000 34,620 4,391 114,896 3,775 3,775 63 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Details about the financial guarantee contracts are provided in Note 17. The amounts disclosed in the above tables are the maximum amounts allocated to the earliest period in which the guarantee could be called upon. The consolidated entity does not expect these payments to eventuate. The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair values of financial assets and liabilities, together with their carrying amounts in the statement of financial position, for the consolidated entity are as follows: CONSOLIDATED Assets Cash on hand Cash at bank Cash on deposit Trade receivables Other receivables Other financial assets Liabilities Trade payables Other payables BAS payable Commercial bills Lease liability Interest rate swap Vendor financing MRPS loan 2020 2019 Carrying amount $’000 Fair value $’000 Carrying amount $’000 Fair value $’000 469 77,645 41,789 62,682 19,781 – 469 77,645 41,789 62,682 19,781 – 202,366 202,366 32,936 34,004 13,469 266,000 104,383 6,270 36,601 7,600 32,936 34,004 13,469 266,000 104,383 6,270 36,601 7,600 154 6,162 5,588 11,383 972 1,637 25,896 6,150 969 766 92,500 3,279 3,775 – – 154 6,162 5,588 11,383 972 1,637 25,896 6,150 969 766 92,500 3,279 3,775 – – The fair value of the financial assets and liabilities is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management assessed that cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. 501,263 501,263 107,439 107,439 NOTE 30 KEY MANAGEMENT PERSONNEL DISCLOSURES Directors The following persons were directors of SeaLink Travel Group Limited during the financial year: Non-executive directors A McEvoy T Dodd C Smerdon A Staines F Hele N Smith Chair Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Retired 30 June 2020 Appointed 16 January 2020 Executive director J Ellison 64 CEO and Managing Director, Deputy Chair and Non-Executive Director Retired as CEO 16 January 2020. Non-Executive Director 17 February 2020 Appointed Deputy Chair 26 February 2020 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Other key management personnel The following personnel also had the authority and responsibility for planning, directing and controlling the major activities of the consolidated entity, directly or indirectly, during the financial year: CEO and Senior executives C Feuerherdt Group Chief Executive Officer Appointed 16 January 2020 A Muir G Legh Chief Financial Officer & Joint SeaLink Secretary Chief Development Officer C Beaumont Chief Operating Officer – International Managing Director – Singapore Chief Operating Officer – Marine and Tourism Appointed 16 January 2020 Appointed 16 January 2020 Appointed 16 January 2020 W Toh D Gauci P Victory C Benson J McDonald B Martlew M Niemann General Manager – Growth and Innovation Ceased 16 January 2020 Chief Information Officer Ceased 16 January 2020 General Counsel & Joint SeaLink Secretary Ceased 16 January 2020 Chief People Officer General Manager, Marine Fleet Ceased 16 January 2020 Ceased 16 January 2020 Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: CONSOLIDATED Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments 2020 $’000 4,426 – 160 375 4,961 2019 $’000 2,438 180 67 1 2,686 NOTE 31 REMUNERATION OF AUDITORS During the financial year the following fees were paid or payable for services provided by Ernst & Young, the auditor of the company, and unrelated firms: CONSOLIDATED Audit services – Ernst & Young Audit or review of the financial statements Audit services – unrelated firms Audit or review of the financial statements Other services – unrelated firms Other NOTE 32 COMMITMENTS Capital commitments Committed at the reporting date but not recognised as liabilities, payable: Vessels Buses and motor vehicles Other 2020 $’000 545 183 116 299 2020 $’000 9,844 59,989 3,225 2019 $’000 215 – – – CONSOLIDATED 2019 $’000 19,914 965 170 65 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 33 RELATED PARTY TRANSACTIONS Parent entity SeaLink Travel Group Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 36. Key management personnel Disclosures relating to key management personnel are set out in note 30 and the remuneration report included in the directors’ report. Transactions with related parties The following transactions occurred with related parties at arms length prices: Payment for goods and services: Vectra Corporation Limited (associated with Mr C Smerdon) – Software licensing in relation to cyber security products Pacific Marine (associated with Mr T Dodd) – Provision of marine piling services ST Property Trust, ST Property Trust No. 2, Newton No. 2 Trust and Bridj Pty Ltd (associated with Mr N Smith) Rental for bus depots operated by Transit Systems Group in Australia and “on demand” software licencing costs 2020 $’000 21 19 – 1,671 CONSOLIDATED 2019 $’000 101 13 – – Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. NOTE 34 PARENT ENTITY INFORMATION Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income/(loss) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Options reserve Accumulated losses Total equity 66 2020 $’000 18,081 18,081 15,919 574,268 – 2,206 572,377 1,364 (1,679) 572,062 PARENT 2019 $’000 14,685 14,685 15,919 97,525 – 2,206 96,055 943 (1,679) 95,319 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2020. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Investments in associates are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. NOTE 35 BUSINESS COMBINATIONS Acquisition of Transit Systems Group On 16 January 2020, the Group acquired 100% of the voting shares of Transit Systems Pty Ltd, Tower Transit Group Ltd and their broader group of entities (including trusts) (“the Transit Systems Group”), a passenger transport group operating in the bus segment in exchange for cash consideration and SeaLink ordinary shares. Transit Systems Group is Australia’s largest private operator of metropolitan public bus services and an established international bus operator in London and Singapore. The acquisition creates a large marine and bus multi-modal transport provider and has diversified and expanded SeaLink’s business operations and geographic base creating opportunities for expansion both domestically and internationally. The consolidated financial statements include the results of Transit Systems Group for the period from 16 January 2020 until 30 June 2020 and has been accounted for using the acquisition method. The goodwill of $433.4m represents the value of expected synergies and future benefits arising from the acquisition associated with the business track record and experience to win and retain future contracts that are not separately recognised. Goodwill is allocated to the Australian and International Bus segments. The acquired business contributed revenues of $409.8m and profit after tax of $12.7m to the consolidated entity for the period from 16 January 2020 to 30 June 2020. If the acquisition occurred on 1 July 2019, the full year contributions would have been revenues of $940.3m and profit after tax of $55.2m. The values identified in relation to the acquisition of the Transit Systems Group are provisional as at 31 August 2020. The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities and adjusted to reflect the favourable terms of the lease relative to market terms. The Company issued 72,869,945 ordinary shares as consideration for the 100% interest in Transit Systems Group. The fair value of the shares is calculated with reference to the quoted price of the shares of the Company at the date of completion, which was $4.52 per share. The fair value of the consideration paid by way of shares was therefore $329,372,151. Transaction costs of $17,510,000 were expensed and are shown as a separate line in the Profit and Loss Statement. The attributable costs of the issuance of the shares of $7,052,000 has been charged directly to equity as a reduction to issued capital. CONTINGENT CONSIDERATION As part of the purchase agreement with the previous owners of Transit Systems Group, a contingent consideration had been agreed subject to achieving certain financial performance milestones per the purchase agreement. There will be additional cash payments to the previous owners of Transit Systems Group of up to $63,000,000, if Transit Systems Group generates up to $7,000,000 of EBITDA above the FY20 proforma normalised EBITDA for Transit Systems Group of $79,000,000. This remains subject to final review audit sign off by the vendors but it is managements expectation that no additional payment will be made as based on their assessment the criteria has not been met. In addition, a provision for deferred consideration has been recognised for the potential part sale of the Westbourne Park property in London. This is subject to an option held by an unrelated third party. 67 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT As at the acquisition date, it was assessed that no contingent consideration would be paid and as a consequence, the fair value of the contingent consideration was estimated to be nil. Details of the Transit Systems Australia acquisition are as follows: FAIR VALUE $’000 13,390 89,195 10,207 9,873 178,991 141,827 143,352 36,690 (77,637) (12,945) (57,574) (65,650) (10,221) (185,988) (123,651) 89,859 433,413 523,272 133,200 329,372 34,300 26,400 523,272 17,510 523,272 (60,700) (329,372) 133,200 Cash and cash equivalents Trade receivables Inventories Prepayments Property, plant and equipment Right-of-use assets Intangible assets (excl Goodwill) Deferred tax asset Trade payables Provision for income tax Deferred tax liability Employee benefits Provisions Interest bearing loans and borrowings Lease liability Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing Cash paid or payable to vendor SeaLink Travel Group Limited shares issued to vendor Deferred cash consideration Deferred consideration Acquisition costs expensed to profit or loss Cash used to acquire business, net of cash acquired Acquisition-date fair value of the total consideration transferred Less: payments to be made in future periods Less: shares issued by company as part of consideration Net cash used The amounts disclosed above are provisional pending finalisation. 68 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT NOTE 36 INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Name Australia Inbound Pty Ltd Avonward Pty Ltd Big Red Cat Pty Ltd BITS Assets Pty Ltd BITS Ferry Services Pty Ltd Captain Cook Cruises Pty Ltd Curtis Island Assets Pty Ltd Curtis Island Services Pty Ltd Kangaroo Island Adventure Tours Pty Ltd Kangaroo Island Odysseys Pty Ltd Kangaroo Island SeaLink Pty Ltd KBRV Resort Operations Pty Ltd KBRV Services Pty Ltd Magnetic Island Cruise Corporation Pty Ltd Pacific Transit Pty Ltd PDW Pty Ltd River City Ferries Pty Ltd Sea Stradbroke Services Pty Ltd SeaLink Ferries Pty Ltd SeaLink Fraser Island Pty Ltd SeaLink KI Ferries Pty Ltd SeaLink Marina Pty Ltd SeaLink Northern Territory Pty Ltd SeaLink Queensland Pty Ltd SeaLink Tasmania Pty Ltd SeaLink Vessels Pty Ltd Sita Bus Lines Pty Ltd Sita Coaches Pty Ltd Sita Tours Pty Ltd STG Properties Pty Ltd Stradbroke Assets Pty Ltd Stradbroke Ferries Pty Ltd Sunferries Travel Pty Ltd Swan Transit Canning Pty Ltd Swan Transit Group Pty Ltd Swan Transit Kalamunda Pty Ltd Swan Transit Marmion Pty Ltd Swan Transit Midland Pty Ltd Swan Transit Pty Ltd Swan Transit Services (South West) Pty Ltd Swan Transit Services (South) Pty Ltd Principal place of business / Country of incorporation 2020 % 2019 % Ownership interest Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – – – 100.00% 100.00% 100.00% 100.00% – – – – – – – – 69 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTPrincipal place of business / Country of incorporation 2020 % 2019 % Ownership interest Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia United Kingdom Australia United Kingdom United States of America United Kingdom United Kingdom United Kingdom Singapore Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 55.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% – – – – – – 100.00% – 100.00% – – – – – – – – – – – – – – – – – – – – – – – – 100.00% 100.00% 100.00% 100.00% 100.00% Name Swan Transit Services Pty Ltd Swan Transit South West Pty Ltd Swan Transit Southern River Pty Ltd Swan Transit Trust Territory Transit Holdings Pty Ltd Territory Transit Pty Ltd The Living Classroom Pty Ltd The Port Jackson & Manly Steamship Company Pty Ltd The South Australian Travel Company Pty Ltd Torrens Connect Pty Ltd Torrens Transit Group Pty Ltd Torrens Transit Pty Ltd Torrens Transit Services (North) Pty Ltd Torrens Transit Services Pty Ltd Torrens Transit Trust Tower Transit Asset Holdings Ltd Tower Transit Europe Pty Ltd Tower Transit Group Ltd Tower Transit Holdings USA Inc. Tower Transit Ltd Tower Transit Operations Ltd Tower Transit Property Holdings Ltd Tower Transit Singapore Pte Ltd Tower Transit Training Singapore Pty Ltd Transit (NSW) Group Pty Ltd Transit (NSW) Liverpool Pty Ltd Transit (NSW) Services Pty Ltd Transit (NSW) Trust Transit Systems NSW Pty Ltd Transit Systems Pty Ltd Transit Systems WA Pty Ltd Transit Systems West Pty Ltd Transit Systems West Services Pty Ltd TravelLink Pty Ltd TravelLink Technology Pty Ltd TSA Ferry Group Pty Ltd Vivonne Bay Outdoor Education Centre Pty Ltd Vyscot Pty Ltd 70 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 37 DEED OF CROSS GUARANTEE The parent has entered into various cross-guarantees with its subsidiaries to support borrowings across the Group. Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, SeaLink Travel Group Limited and the following subsidiaries have entered into a Deed of Cross Guarantee on 3 June 2019: Kangaroo Island SeaLink Pty Ltd, Captain Cook Cruises Pty Ltd, SeaLink Queensland Pty Ltd, Curtis Island Assets Pty Ltd, Curtis Island Services Pty Ltd, TSA Ferry Group Pty Ltd, Stradbroke Ferries Pty Ltd, Stradbroke Assets Pty Ltd, Sealink Ferries Pty Ltd, KBRV Resort Operations Pty Ltd and SeaLink Fraser Island Pty Ltd. On 9 June 2020 the following subsidiaries entered into a deed of assumption and also became parties to that Deed of Cross Guarantee: Sita Bus Lines Pty Ltd, Sita Coaches Pty Ltd, Transit Systems Pty Ltd, Swan Transit Pty Ltd, Swan Transit Services Pty Ltd, Torrens Transit Pty Ltd, Torrens Transit Services Pty Ltd, Transit (NSW) Services Pty Ltd, Transit Systems West Pty Ltd, Transit Systems West Services Pty Ltd, Sita Tours Pty Ltd, Swan Transit Group Pty Ltd and Transit (NSW) Group Pty Ltd. The effect of the deed is that SeaLink Travel Group Limited has guaranteed to pay any deficiency in the event of winding up any controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The controlled entities have also given a similar guarantee in the event SeaLink Travel Group Limited is wound up or it does not meet its obligations under the terms of the overdrafts, loans, leases or other liabilities subject to the guarantee. In reliance on ASIC Corporations (Audit Relief) Instrument 2016/784, subsidiary companies in the closed group (as described above) that are also large proprietary companies have complied with the terms of that instrument and relied on it for relief from individual auditing requirements for those companies as separate entities. The statement of profit or loss and other comprehensive income and statement of financial position are substantially the same as the consolidated entity and therefore have not been separately disclosed. NOTE 38 EVENTS AFTER THE REPORTING PERIOD No matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. 71 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTNOTE 39 RECONCILIATION OF PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES CONSOLIDATED Profit/(loss) after income tax expense for the year Adjustments for: Depreciation and amortisation Impairment Share-based payments Net gain on disposal of non-current assets Other revenue – non-cash Foreign currency differences Change in operating assets and liabilities: Decrease in trade and other receivables Decrease/(increase) in inventories Decrease in income tax refund due Decrease/(increase) in deferred tax assets Decrease/(increase) in prepayments Decrease in other operating assets Increase/(decrease) in trade and other payables Increase in contract liabilities Increase in derivative liabilities Increase in provision for income tax Decrease in deferred tax liabilities Increase in employee benefits Increase in other provisions Increase/(decrease) in other operating liabilities Net cash from operating activities NOTE 40 EARNINGS PER SHARE Profit/(loss) after income tax attributable to the owners of SeaLink Travel Group Limited Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Performance rights Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share 72 2020 $’000 (13,572) 60,434 10,797 421 (9) (1,395) (966) 19,087 1,247 5,684 213 3,312 489 792 321 1 15,833 (7,819) 4,209 27,073 (36,093) 90,059 2020 $’000 (13,572) NUMBER 2019 $’000 21,543 16,376 – 147 (687) – – 110 (183) 650 (621) (2,263) 1,637 (232) 505 – – (161) 1,201 390 2,233 40,645 CONSOLIDATED 2019 $’000 21,543 NUMBER 165,498,000 101,412,000 32,000 24,000 – – 165,554,000 101,412,000 CENTS (8.2) (8.2) CENTS 21.2 21.2 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT NOTE 41 SHARE-BASED PAYMENTS Recognised share-based payment expenses Expense arising from performance rights issued in 2016 Expense arising from options issued in 2017 Expense arising from performance rights issued in 2020 TYPES OF SHARE OPTION PLANS Employee Share Option Plan “ESOP” Share options are generally granted to senior executives with more than 12 months service. The ESOP is designed to align participants interests with those of shareholders. When a participant ceases employment prior to the vesting of their share options, the share options are forfeited. In November 2014, 200,000 share options were granted to an employee under the SeaLink Employee Option Plan. The exercise price of the options was $2.50 and the contractual life 5 years. The options vest after a period of 1 year as long as the senior employee is still employed on such date. The fair value of the share option granted was valued at $0.176 per share being $35,200, the cost being expensed over the vesting period. In October 2016, 100,000 share options were granted to the Chair under the SeaLink Employee Option Plan. There were no performance related conditions attaching to the options. The options vest after a period of 3 years as long as the Chair remains in the role as Non- Executive Director. The fair value of the share option granted was valued at $4.11 per share being $411,000, the cost being expensed over the vesting period. Employee Performance Rights “EPRP” Performance rights are generally granted to senior executives with more than 12 months service. The EPRP is designed to align participants interests with those of shareholders. When a participant ceases employment prior to the vesting of their performance rights or where the performance hurdle is not met, the performance rights lapse. Should all conditions be met, one ordinary share is issued for each performance right at no consideration. The performance hurdle for the 2016 and 2017 issue is measured against a minimum share price quoted on the ASX. This future price hurdle targets a 10% compound growth rate from the share price at the date of issue of the performance rights. For the 2020 EPR issue there are two tranches of Performance Rights with the following weighting: a. 50% for earnings per share growth (Tranche 1). b. 50% for Total Shareholder Return (TSR) measured against companies in the ASX 300 (Tranche 2). For the 2020 Performance Rights to vest in total, SeaLink must achieve the following conditions: Tranche 1 – a target compound annual growth rate (CAGR) of earnings per 2020 $’000 – 47 421 468 CONSOLIDATED 2019 $’000 11 137 – 148 share (EPS) of 10% for the three-year measurement period, commencing 1 July 2019. A threshold CAGR over that three-year period of 10% will result in 50% of the Performance Rights vesting, with pro rata vesting for achievement for between 10% and 12% of CAGR for the three-year measurement period. Tranche 2 – an Annualised Indexed TSR measured against the ASX300 Accumulation Index for the three-year measurement period, commencing 1 July 2019. A threshold annualised TSR over that three year period meeting the Index will result in 50% of the Performance Rights vesting, with pro rata vesting of the remaining remainder of the tranche for achievement up to 10% above the Index TSR for the three-year measurement period. The amount recognised as an expense is only adjusted when performance rights do not vest due to non-market-related conditions. The fair value of the performance rights granted is estimated at the date of grant using a custom binomial lattice pricing model, taking into account terms and conditions upon which the performance rights were granted. EFFECTIVE DATE ISSUED Number of Performance Rights issued Minimum hurdle share price Dividend yield Expected volatility (as per valuation) Risk free interest rate Expected life (years) Valuation per performance right (Tranche 1) Valuation per performance right (Tranche 2) 2016 ISSUE 85,000 $3.20 3.35% 27.6% 3.35% 3.0 $0.618 n/a 2017 ISSUE 45,000 $5.94 2.69% 29.4% 1.61% 3.0 $1.72 n/a 2020 ISSUE 299,130 Nil 3.30% 40.0% 0.30% 2.0 $3.303 $4.227 73 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORTSet out below are summaries of options granted under the plan: Number of options 2020 Weighted average exercise price 2020 Number of options 2019 Weighted average exercise price 2019 Outstanding at the beginning of the financial year Exercised Outstanding at the end of the financial year 100 (100) – $1.67 $0.00 $0.00 300 (200) 100 The outstanding balance is represented by Directors CONSOLIDATED 2020 $’000 – $1.67 $0.00 $0.00 2019 $’000 100 100,000 ordinary shares were issued during the year as a result of conversion of share options (2019: Nil). PERFORMANCE RIGHTS Outstanding at the beginning of the year Granted (under the Employee Share Option Plan) Forfeited Exercised Number ($000’s) 2020 Weighted average exercise price 2020 Number ($000’s) 2019 Weighted average exercise price 2019 190 299 (190) – 299 n/a $Nil $Nil n/a 265 (75) – – 190 n/a $Nil $Nil n/a 74 SEALINK TRAVEL GROUP LIMITED AND ITS CONTROLLED ENTITIES – NOTES TO FINANCIAL STATEMENTS FOR YEAR END 30 JUNE 2020FINANCIAL REPORT Ernst & Young 121 King William Street Adelaide SA 5000 Australia GPO Box 1271 Adelaide SA 5001 Tel: +61 8 8417 1600 Fax: +61 8 8417 1775 ey.com/au Independent Auditor’s Report to the Members of SeaLink Travel Group limited Report on the Audit of the Financial Report Opinion We have audited the financial report of SeaLink Travel Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit and loss, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its consolidated financial performance for the year ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 75 AUDITOR’S REPORTAcquisition of Transit Systems Group (‘TSG’) Why significant How our audit addressed the key audit matter On 16 January 2020, SeaLink acquired the Transit Systems Group (‘TSG’) for $523.3 million. The acquisition resulted in the recognition of goodwill of $433.4 million after the allocation of the purchase price across the identifiable assets acquired and liabilities assumed. This preliminary allocation of the purchase price is based on estimated fair values for the assets acquired and liabilities assumed, and will be finalised within twelve months of the acquisition date. SeaLink engaged an independent expert to assist in the identification and valuation of the main tangible and intangible assets and liabilities of TSG. We considered that this was a key audit matter given the significance of the transaction and the level of judgment exercised by the Group to identify the acquired assets and liabilities and to assess their fair values. Our audit procedures included the following: • With the assistance of our valuation specialists we assessed whether the methodologies used by the Group for the estimation of the fair value of assets acquired and liabilities assumed are in accordance with the requirements of Australian Accounting Standards and tested the mathematical accuracy of those models. • With the assistance of our valuation specialists, we assessed the key inputs and assumptions used in the fair value determination prepared by the Group with assistance from their third-party valuation experts. • We assessed the competence, qualifications and objectivity of the third party valuation experts used by the Group. • With the assistance of our tax specialists, we assessed the provisional deferred tax balances recorded by the Group. • In relation to the fair value attributed to buses, which forms part of the acquired property, plant and equipment, our valuation experts considered the valuation. • With respect to the deferred consideration arrangements, we analysed the contractual agreements and considered how the conditions were reflected in the valuation of the estimated earn-out liabilities. • Furthermore, we assessed the adequacy of the disclosures in Note 35 to the Financial Statements. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 76 AUDITOR’S REPORTGoodwill Impairment Why significant How our audit addressed the key audit matter Our audit procedures included the following: • We agreed the projected cash flows for 2020 used in the impairment model to Board approved budgets. • We tested the mathematical accuracy of the cash flow models. • We evaluated management’s key assumptions by analysing the extent to which the outcome of the impairment test is most sensitive and assessed the historical accuracy of management’s estimates. • We involved our valuation specialists to assess the discount rate, growth rates and terminal values used in the model for the identified higher risk cash generating units (CGUs). This included an assessment of the assumptions regarding recovery from COVID-19 by management. • We compared the recoverable amount calculated within the value in use models to the carrying value recorded at 30 June 2020 and agreed the calculated impairment expense of $4 million to the financial statements. • We considered the relationship between market capitalisation and net assets of the Group. • We considered multiple sensitivities over the forecasts and key estimates for the higher risk CGUs, including possible changes in growth rates, discount rates and budget accuracy. • We considered the recoverability of the provisional goodwill recorded in relation to the Transit Systems Group acquisition. • Furthermore, we assessed the adequacy of the disclosures in Note 13 to the financial statements. SeaLink holds a significant amount of goodwill and other intangible assets. As stated in Note 13 to the financial statements, the carrying value of goodwill and other intangible assets are tested annually for impairment. SeaLink performed its annual impairment test in the fourth quarter of 2020 and determined the recoverable amount of its individual cash generating units (CGUs) to which the goodwill was allocated, on a value in use basis. The Group’s impairment assessment resulted in an impairment charge against goodwill of $4 million in relation to the Fraser Island CGU. Procedures over the annual impairment test were significant to our audit because the assessment process requires estimates. Key assumptions relating to the impairment test are disclosed in Note 13 to the consolidated financial statements. The Group uses assumptions in respect of future market and economic conditions such as economic growth, expected inflation rates, demographic developments, revenue and margin development. At 30 June 2020 the Group’s performance, the tourism industry and the economy as a whole were impacted by the restrictions and economic uncertainty resulting from the COVID-19 pandemic, with significant impact to date and unpredictable impact on the tourism industry. Significant assumptions used in the impairment testing referred to above, such as the continuing impact of COVID-19 on the tourism industry are inherently subjective and in times of economic uncertainty the degree of subjectivity is higher than it might otherwise be. Changes in certain assumptions can lead to significant changes in the recoverable amount of these assets. In this situation the disclosures in the financial report provide particularly important information about the assumptions made in the impairment testing and the market conditions at 30 June 2020. As a result, we consider the impairment testing of goodwill and other intangible assets and the related disclosures in the financial report to be particularly significant to our audit. For the same reasons we consider it important that attention is drawn to the information in Note 13. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 77 AUDITOR’S REPORTVessel Valuation Why significant How our audit addressed the key audit matter The accounting for vessels has a significant impact on the Group’s financial statements due to the cumulative value of the vessels and the long-lived nature of these assets. The Group carries owned ferries at cost less accumulated depreciation and any accumulated impairment losses. The determination of the useful lives and residual values of the vessels and the determination of components of vessels requires judgment to be exercised by the Group. The carrying values of these assets are reviewed annually for potential indicators of impairment and where indicators are identified an impairment assessment is performed. This resulted in an impairment expense of $6.7 million in the current year. This was considered a key audit matter due to the value of vessels relative to total assets. In FY20 the COVID-19 pandemic has been highly disruptive to vessel operations due to the strict restrictions on tourism and travel, which increased our attention to the recoverability of the vessels. Key assumptions relating to the vessels are disclosed in Note 1 and 12 to the financial statements. Our audit procedures included the following: • We analysed the performance of each vessel to determine whether any indications of impairment were present. • We assessed the recorded depreciation for each vessel taking into account remaining useful life and the expected residual value determined by SeaLink. • We assessed the residual values of vessels through consideration of the Group’s evaluation of market information for similar assets. • We involved our valuation specialists to assess the carrying value of the vessels and to review the valuation methodology and the potential impact of the COVID-19 pandemic on the individual vessel values. • We analysed the planned and actual utilisation of each vessel and assessed the impact of customer contracts associated with the planned usage of individual vessels. • We assessed the competence, capability and objectivity of the management expert used by the Group and evaluated the appropriateness of his work to support the recorded valuations. • We agreed the calculated impairment expense of $6.7 million to the consolidated financial statements. • Furthermore, we assessed the adequacy of the disclosures in Note 1 and 12 to financial statements. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 78 AUDITOR’S REPORTInformation Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2020 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 79 AUDITOR’S REPORT• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2020. In our opinion, the Remuneration Report of SeaLink Travel Group Limited for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young David Sanders Partner Adelaide 31 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 80 AUDITOR’S REPORTA U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N Ernst & Young 121 King William Street Adelaide SA 5000 Australia GPO Box 1271 Adelaide SA 5001 Tel: +61 8 8417 1600 Fax: +61 8 8417 1775 ey.com/au Auditor’s Independence Declaration to the Directors of Sealink Travel Group Limited As lead auditor for the audit of the financial report SeaLink Travel Group Limited for the financial year ended 30 June 2020, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of SeaLink Travel Group Limited and the entities it controlled during the financial year. Ernst & Young David Sanders Partner Adelaide 31 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 81 This Remuneration Report forms part of the Directors’ Report and sets out the remuneration framework and arrangements of SeaLink Travel Group Limited (‘Group’ or ‘SeaLink’) for the Key Management Personnel (KMP) of the consolidated entity, for the purposes of the Corporations Act 2001 and Accounting Standards for the financial year ended 30 June 2020. This information has been audited as required by Section 308 (3A) of the Corporations Act 2001. Table of Contents: 1. Key Management Personnel (KMP) 2. Remuneration Governance 3. Remuneration Framework and Details of KMP 4. Executive KMP Contracts 5. Overview of Financial Performance 6. Options, Shareholdings and Performance Rights of KMP 1. KEY MANAGEMENT PERSONNEL (KMP) The KMP for the purposes of this Report are those Executives having the authority and responsibility for planning, directing and controlling major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise) of SeaLink. The term Executive includes the Group Chief Executive Officer and other Senior Executives of the Group. Following the acquisition of Transit Systems Group on 16 January 2020, the KMP have been reviewed and are set out in the table below. TABLE 1.1: KMP FROM 1 JULY 2019 TO 30 JUNE 2020 NON-EXECUTIVE DIRECTORS (NEDs) A McEvoy T Dodd C Smerdon A Staines F Hele N Smith Chair Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Retired 30 June 2020 Appointed 16 January 2020 EXECUTIVE DIRECTOR J Ellison * CEO and Managing Director Deputy Chair and Non-Executive Director Retired as CEO 16 January 2020 Appointed Deputy Chair 26 February 2020 CEO & SENIOR EXECUTIVES C Feuerherdt A Muir G Legh C Beaumont W Toh D Gauci P Victory** C Benson** J McDonald** B Martlew** M Niemann** Group Chief Executive Officer Chief Financial Officer & Joint SeaLink Secretary Chief Development Officer Chief Operating Officer – International Managing Director – Singapore Chief Operating Officer – Marine and Tourism General Manager – Growth and Innovation Chief Information Officer General Counsel & Joint SeaLink Secretary Chief People Officer General Manager, Marine Fleet Appointed 16 January 2020 Appointed 16 January 2020 Appointed 16 January 2020 Appointed 16 January 2020 Ceased as KMP 16 January 2020 Ceased as KMP 16 January 2020 Ceased as KMP 16 January 2020 Ceased as KMP 16 January 2020 Ceased as KMP 16 January 2020 * became a NED on 17 February 2020, ** Classification of KMP’s revised following Transit Systems Group acquisition on 16 January 2020 82 REMUNERATION REPORT 2. REMUNERATION GOVERNANCE The Remuneration and Nomination Committee was comprised of three independent NEDs and chaired by an independent NED. The Remuneration and Nomination Committee had responsibility throughout the reporting period for supporting and advising the Board of Directors of SeaLink Travel Group Limited (“the Board”) on remuneration practices and implementation for Directors and Executives and required to make recommendations to the Board on these matters. Specifically, the Board approves the remuneration arrangements of the Group Chief Executive Officer and direct reports to the CEO, following a recommendation from the Committee. The Board also sets the remuneration of all NEDs, which is subject to shareholder approval of the total maximum aggregate remuneration amount per annum for NEDs. The Remuneration and Nomination Committee met regularly throughout the year. The Group Chief Executive Officer (and previously the Managing Director) attends certain Committee meetings by invitation, where Management input is required. However, the Group Chief Executive Officer (and previously the Managing Director) is not present during discussions related to their own remuneration arrangements. During the financial year ended 30 June 2020, SeaLink, through the Remuneration and Nomination Committee, engaged Godfrey Remuneration Group (GRG), remuneration consultants, to review its existing remuneration strategy and framework and provide recommendations on how to improve the short and long term incentive programs. GRG were paid $16,500 for the work undertaken. During July 2020, the Remuneration and Nomination Committee was renamed as the People, Culture and Remuneration Committee with consequential changes to its responsibilities. As remuneration matters during the whole of the financial year the subject of this report were the responsibility of the Remuneration and Nomination Committee, this report refers to the Committee by that name. 3. REMUNERATION FRAMEWORK AND DETAILS OF KMP REMUNERATION FRAMEWORK AND DETAILS FOR NEDs (i) Objectives The key objectives of SeaLink’s NED Remuneration Framework are to: • secure and retain talented and qualified Directors – fee levels are set with regard to time commitment and workload, experience and expertise, risk and responsibility of the role, and market benchmarking of listed companies with a similar market capitalisation; • promote independence and impartiality – fee levels do not vary according to the performance of the Group; and • align Director and shareholder interests – SeaLink encourages its NEDs to build a long-term stake in the Group and Directors can acquire shares through acquisition on market during trading windows. (ii) Details NEDs fees are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination Committee may, from time to time, receive advice from independent remuneration consultants to ensure NED fees and payments are appropriate and in line with the market. NEDs do not receive share options, other incentives or retirement benefits and there are no additional fees for chairing or serving on a sub-committee of the Board. (‘pool’) for NEDs was at the General Meeting of shareholders held on 18 December 2019, where the shareholders approved a pool of $1.25 million. NEDs are entitled to be reimbursed for all business-related expenses. The remuneration of NEDs consists of Director fees, inclusive of statutory superannuation, which are currently set as follows, on an annualised basis. • The Chair receives $220,000; • The Deputy Chair role, in existence from 1 March 2020 to 30 June 2020, received fees based on $150,000 per annum; and • All other NEDs receive $120,000. No increase in NED fees is proposed for FY2021. With effect from 26 February 2020, the Board appointed Jeffrey Ellison, former CEO and Managing Director, to the position of Deputy Chair. Mr Ellison was appointed Acting Chair with effect from 1 July 2020. In accordance with SeaLink’s Constitution and ASX listing rules, the aggregate amount paid to all NEDs must not exceed the maximum determined by shareholders in a General Meeting. The most recent determination of the maximum aggregate remuneration 83 REMUNERATION REPORTIn light of current global events in relation to the impact of COVID-19, NEDs volunteered to take a reduction of 20% in their remuneration for the three-month period 1 April 2020 to 30 June 2020 and this is reflected in Table 3.1 below. TABLE 3.1: NED REMUNERATION FOR THE YEARS ENDED 30 JUNE 2019 AND 30 JUNE 2020 NON-EXECUTIVE DIRECTOR A McEvoy A Staines C Smerdon T Dodd F Hele J Ellison* N Smith** DIRECTOR FEE 148,118 136,577 76,307 68,288 76,307 68,288 76,307 68,288 76,307 68,288 36,401 – 45,391 – YEAR 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 SHORT TERM INCENTIVE NON- MONETARY BENEFITS OTHER SUPER LONG TERM BENEFIT LSL PERFORM. RIGHTS/ OPTIONS TOTAL – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 14,071 12,975 7,249 6,487 7,249 6,487 7,249 6,487 7,249 6,487 3,458 – – – – – – – – – – – – – – – – – 45,667 207,856 137,000 286,552 – – – – – – – – – – – – 83,556 74,775 83,556 74,775 83,556 74,775 83,556 74,775 39,859 – 45,391 – * Became a NED on 17 February 2020; **Appointed 16 January 2020 REMUNERATION FRAMEWORK AND DETAILS FOR EXECUTIVES (i) Objectives SeaLink’s approach to remunerating and rewarding Executives ensures that: • Remuneration is at levels that are competitive with market rates to attract, motivate and retain high calibre candidates; • Parity exists for similar roles to maintain stability within the Executive group; and • Executives are incentivised to drive and sustain long term growth and increase shareholder value. The objective of SeaLink’s Executive Remuneration Framework is to ensure it aligns Executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board ensures that Executive reward satisfies the following key criteria for good reward governance practices: • Competitiveness and reasonableness; • Acceptability to shareholders; • Performance linkage / alignment of Executive compensation; and • Transparency. 84 The reward framework for Executives is designed to align executive reward to shareholders’ interests. The Board have considered that it should seek to enhance shareholders’ interests by: • having economic profit as a core component of the reward framework design; • focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and • attracting and retaining high calibre executives. (ii) Components The Executive remuneration and reward framework has three components: • fixed remuneration; • short-term performance incentives (STI); and • long-term performance incentives The combination of these comprises the Executive’s total remuneration. SeaLink does not adopt a philosophy of excessive “at risk components” for Executive remuneration and, while it is encouraged, there is no requirement for KMP to hold shares in SeaLink. Fixed remuneration, consisting of base salary, superannuation and non- monetary benefits, is reviewed annually by the Remuneration and Nomination Committee on behalf of the Board. This is based on individual responsibility and contribution, business unit performance, the overall performance of the consolidated entity and comparable market remuneration taking into account the scale of SeaLink’s business and responsibilities. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to SeaLink and provides additional value to the Executive. The short-term performance incentives (‘STI’) program is designed to align the targets of SeaLink and operating business units with the performance hurdles of Executives. STI payments are granted to Executives based on specific annual financial and operational targets and key performance indicators (‘KPI’s’) being achieved include stretch targets and both financial and non- financial goals. These are chosen to drive outcomes and behaviours that support the safe operation and delivery of SeaLink’s objectives and lead to long term growth in shareholder value. KPI’s include financial and operational performance, safety, customer REMUNERATION REPORT satisfaction and leadership contribution to achieve the overall Group strategic goals and values. STI payments are “at- risk” cash components paid to KMPs when agreed stretch targets have been met, they are discretionary and do not form part of the employment contract. To align the interests of Executives with the creation of long-term shareholder value, SeaLink generally awards its longterm incentives (LTI) as Performance Rights (PR). PRs are granted at no cost to the Executive and only vest if SeaLink meets a number of performance hurdles. If a KMP resigns before the PR has vested then any unvested rights are forfeited, unless and to the extent otherwise determined by the Board. The LTI plan is discretionary and does not form part of the employment contract. Vesting conditions for rights are determined by the Board annually as part of each invitation with the conditions selected for PR being intended to create alignment with indicators of shareholder value creation over the measurement period. The SeaLink LTI Rights Plan was approved by shareholders at the October 2019 Annual General Meeting and a summary can be found in the SeaLink 2019 AGM Notice of Meeting refer: https://www.sealinktravelgroup.com.au/ investor-centre/company-reporting/ TABLE 3.2: EXECUTIVE KMP REMUNERATION FOR THE YEARS ENDED 30 JUNE 2019 AND 30 JUNE 2020 YEAR SALARY SHORT TERM INCENTIVE NON- MONETARY BENEFITS 2020 558,893 650,000 2019 526,547 68,629 – – OTHER SUPER 2,882 19,378 1,770 23,000 299,757 504,000 23,781 787 7,990 EXECUTIVE J Ellison *** C Feuerherdt ** D Gauci – – – – – – – 2020 2019 – 2020 353,299 2019 297,057 – 34,000 31,933 43,660 – C Beaumont ** 2020 165,486 2019 – A Muir 2020 311,360 246,400 2019 300,269 22,500 G Legh ** 2020 197,880 175,000 14,690 W Toh ** 2020 222,427 64,521 2019 – – P Victory* 2019 – 2020 119,290 – – 2019 202,827 12,179 C Benson * 2020 120,577 J McDonald * B Martlew * 2019 2020 2019 2020 2019 195,000 111,731 168,269 95,731 129,808 M Niemann * 2020 113,382 2019 192,782 – 4,875 – 8,750 – 5,200 – 6,270 – – – – – – – – – – – – – LONG TERM BENEFIT LSL PERFORM. RIGHTS TOTAL 7,350 19,735 69,307 – 7,948 21,956 – – 4,400 2,802 – 1,238,503 – 639,681 196,272 1,101,894 – – 26,693 446,940 515 376,461 – – 219,075 – 40,040 627,631 – 350,588 34,666 98,136 525,623 – – – 3,655 8,112 1,161 497 516 211 3,156 3,348 3,813 – – – – – 300,139 – 134,203 515 243,201 – – 133,097 218,897 7,654 130,852 – 193,215 6,614 115,047 – – 150,688 128,198 10,188 343 228,110 – – – – – – – – – – – – – – – – – – – – – – 25,000 25,000 9,929 – 25,432 25,017 5,251 – 13,191 – 11,258 19,568 11,269 18,525 10,951 15,986 9,546 12,332 11,003 18,527 * Ceased as KMP 16 January 2020; ** Became KMP on 16 January 2020 following Transit Systems Group acquisition; *** Ceased to be an Executive 16 February 2020 85 REMUNERATION REPORTSHORT TERM PERFORMANCE INCENTIVES SeaLink measures key performance indicators (KPI) covering financial and non-financial measures, at both Group and business unit levels. For each KPI, a target and stretch objective is set. Group Net Profit After Tax (NPAT) and business unit Earnings Before Interest and Tax (EBIT) are the primary financial measures against which management and the Board assess the short-term financial performance of the Group. achievement of defined business goals, achievement of specific Business Unit EBIT targets as well as the extent to which the Group achieved the Board- approved budget for the year. For KMP, STI remuneration paid varies by Executive depending on the influence on the Group and the Business Unit, TABLE 3.3: SHORT-TERM OBJECTIVES FOR STIs AND THEIR RATIONALE Individual KMP goals reflect their position and may include the following: MEASURE REASON CHOSEN FINANCIAL up to 70% depending on role up to 30% depending on role Achieve target Group net profit after tax (NPAT) including stretch target; Included to deliver improved earnings performance for the business at the Group level, which aligns with shareholder interests Achieve target business unit earnings before interest and tax (EBIT) including stretch target Included to deliver improved earnings performance for the Group at the individual business unit level, which aligns with shareholder interests BUSINESS UNIT STRATEGIC GOALS INCLUDE up to 30% depending on role Delivery of Development Pipeline Key driver of future growth Safety Environmental Leadership & Culture Strategic Plan Priorities Company committed to providing a workplace without injury or illness Manage the impact of business on the environment People are the core of SeaLink’s business. Develop the capability of our employees Focus on increasing the value of the Company’s core asset portfolio through delivery of commercial, operational and efficiency improvements, which aligns with shareholder interests TABLE 3.4: STI REMUNERATION PAYABLE TO KMP FOR THE CURRENT REPORTING PERIOD EXECUTIVE STI REMUNERATION AT RISK (MAXIMUM) ACHIEVEMENT OF GOALS J Ellison $650,000 • Contractual commitment – retention related C Feuerherdt $800,000 • Met 82.5% of KPI’s in relation to integration of Transit Systems Group into SeaLink including safety, accounting, synergies and culture • Discretionary payment in recognition of response to COVID-19 pandemic DISCRETIONARY STI TOTAL STI PAYABLE – $650,000 $240,000 $504,000 G Legh $250,000 • Discretionary payment in recognition of contract renewals and $175,000 $175,000 contract wins A Muir $277,000 • Met 100% of KPI’s in relation to acquisition of Transit Systems $30,600 $246,400 Group • Met 80% of KPIs in relation to finance function strategic objectives • Discretionary payment in recognition of response to COVID-19 pandemic D Gauci $68,000 • Met 60% of KPI’s in relation to business unit strategic objectives • Discretionary payment in recognition of response to COVID-19 $13,600 $34,000 pandemic C Beaumont $57,245 • Met KPI’s in relation to strategic objectives • Discretionary payment in recognition of response to COVID-19 $43,660 $43,660 pandemic W Toh $64,521 • Met 100% of KPI’s in relation to Financial objectives • Met 100% of KPI’s in relation to business unit strategic objectives – $64,521 * Discretionary amount assessed based on revised objectives for part of the year as a result of COVID-19 impacts 86 REMUNERATION REPORT 4. EXECUTIVE KMP CONTRACTS GROUP CHIEF EXECUTIVE OFFICER • SeaLink Travel Group achieving OTHER EXECUTIVE KMP Remuneration arrangements for all other KMP are formalised in individual employment contracts. On 16 January 2020, Mr Clint Feuerherdt was appointed to the position of Group Chief Executive Officer following the acquisition of Transit Systems Group. Under his employment contract, Mr Feuerherdt receives a total fixed remuneration package of $800,000 per annum (including salary and superannuation) for his position as Group CEO of SeaLink. Mr Feuerherdt is also eligible to participate in short term incentives and long-term incentives which are reviewed annually and may be changed or withdrawn at the discretion of the Board. For the reporting period Mr Feuerherdt was eligible for a maximum STI performance bonus for the reporting period of up to 100% of annual salary. The actual performance bonus paid is conditional on: Group budget NPAT; • SeaLink Travel Group exceeding Group budgeted NPAT on a sliding scale up to 15%; and • Achieving specifically defined Key Performance Indicators. In addition, Mr Feuerherdt was granted a LTI for the reporting period of 156,392 PR under SeaLink’s LTI Rights Plan. Mr Feuerherdt’s remuneration package including incentives is reviewed on an annual basis. In light of current global events in relation to the impact of COVID-19, the CEO volunteered to take a reduction in his remuneration of 20% for the three-month period 1 April 2020 to 30 June 2020. This is reflected in the remuneration reported in Table 3.2. TABLE 4.1: STANDARD KMP TERMINATION CONDITIONS NOTICE PERIOD PAYMENT IN LIEU OF NOTICE TREATMENT OF STI ON TERMINATION TREATMENT OF LTI ON TERMINATION Resignation 8 weeks or 12 weeks 8 weeks or 12 weeks Termination for cause None None Termination in cases of death, disablement, redundancy or notice without cause 4 weeks or 8 weeks 4 weeks or 8 weeks Unvested awards forfeited Unvested awards forfeited Subject to Board discretion Unvested awards forfeited Unvested awards forfeited Subject to Board discretion 5. OVERVIEW OF FINANCIAL PERFORMANCE TABLE 5.1: SEALINK’S FINANCIAL PERFORMANCE AS MEASURED BY NET PROFIT AFTER TAX (NPAT) FROM CONTINUING OPERATIONS, EARNINGS PER SHARE, GROSS DIVIDENDS PAID, DIVIDEND PAID PER SHARE AND SHARE PRICE AT YEAR END 30 JUNE 2015 $’000 30 JUNE 2016 $’000 30 JUNE 2017 $’000 30 JUNE 2018 $’000 30 JUNE 2019 $’000 30 JUNE 2020 $’000 Revenue NPAT Gross Dividend paid Earnings per share (cents) Dividend paid per share (cents) Share Price ($) 111,748 177,459 201,407 209,436 251,388 9,349 5,761 12.6 7.8 2.19 22,349 7,624 23.6 12.0 4.08 23,832 13,654 23.6 14.0 4.07 19,565 14,667 19.3 14.5 4.43 21,543 15,214 21.3 15.0 3.81 646,512 (13,572) 18,080 (8.2) 11.0 4.42 87 REMUNERATION REPORTTABLE 5.2: SEALINK’S SHARE PRICE PERFORMANCE SINCE IT WAS LISTED RELATIVE TO S&P ASX300: The Compound Annual Growth Rate (CAGR) of SeaLink’s share price during the 2013-2020 period was 17.57% compared with the CAGR of the S&P ASX 300 which was 4.08%. 6. OPTIONS, SHAREHOLDINGS AND PERFORMANCE RIGHTS OF KMP TABLE 6.1: OPTIONS HELD BY KMP IN PREVIOUS AND CURRENT REPORTING YEARS: YEAR END 30/06/2019 BALANCE 01/07/2018 GRANT DATE AWARDED/ (FORFEITED) EXERCISED BALANCE 30/06/2019 FAIR VALUE PER OPTION AT AWARD DATE INTRINSIC VALUE OF OPTIONS EXERCISED/ SOLD EXPIRY DATE DIRECTORS A McEvoy Total 100,000 25/10/2016 100,000 – – – – 100,000 100,000 $4.11 26/10/2019 – – – YEAR END 30/06/2020 BALANCE 01/07/2019 GRANT DATE AWARDED/ (FORFEITED) EXERCISED BALANCE 30/06/2020 FAIR VALUE PER OPTION AT AWARD DATE INTRINSIC VALUE OF OPTIONS EXERCISED/ SOLD EXPIRY DATE DIRECTORS A McEvoy 100,000 25/10/2016 100,000 26/10/2019 Total 100,000 – 100,000 – – – $ 4.11 – – – $411,000 $411,000 88 REMUNERATION REPORT TABLE 6.2: SHAREHOLDINGS HELD BY KMP IN PREVIOUS AND CURRENT REPORTING YEARS YEAR END 30/06/2019 BALANCE 01/07/2018 EXERCISE OF OPTIONS ACQUIRED/ (SOLD) BALANCE 30/06/2019 AMOUNT PAID PER SHARE ON OPTION EXERCISE DIRECTORS A McEvoy J Ellison T Dodd F Hele A Staines C Smerdon 19,579 5,524,769 5,035,990 10,000 – 6,104,500 OTHER KEY MANAGEMENT PERSONNEL D Gauci A Muir P Victory C Benson J McDonald B Martlew M Niemann 10,000 – 59,889 – – 4,500 – Total 16,769,227 – – – – – – – – – – – – – – – – (249,412) – – – 8,000 – 17,236 9,324 – – 10,000 19,579 5,524,769 4,786,578 10,000 – 6,104,500 18,000 – 77,125 9,324 – 4,500 10,000 (204,852) 16,564,375 – – – – – – – – – – – – – – YEAR END 30/06/2020 BALANCE 01/07/2019 EXERCISE OF OPTIONS ACQUIRED/ (SOLD) BALANCE 30/06/2020# AMOUNT PAID PER SHARE ON OPTION EXERCISE DIRECTORS A McEvoy J Ellison T Dodd F Hele A Staines N Smith C Smerdon 19,579 5,524,769 4,786,578 10,000 – – 6,104,500 100,000 – – – – – – OTHER KEY MANAGEMENT PERSONNEL C Feuerherdt D Gauci C Beaumont ** A Muir G Legh ** W Toh ** P Victory * C Benson * J McDonald * B Martlew * M Niemann * – 18,000 – – – – 77,125 9,324 – 4,500 10,000 – – – – – – – – – – – 17,326 225,000 1,000,000 18,172 – 33,444,556 382,375 5,744,171 13,250 223,418 100,000 40,000 30,000 32,010 9,461 6,000 – 2,500 136,905 5,749,769 5,786,578 28,172 – 33,444,556 6,486,875 5,744,171 31,250 223,418 100,000 40,000 30,000 109,135 18,785 6,000 4,500 12,500 Total 16,564,375 100,000 41,288,239 57,952,614 *Ceased to be KMP on 16 January 2020; ** Became a KMP on 16 January 2020 # The balance reflects the number of shares held as at 30 June 2020 or the date on which the Executive ceased to hold the KMP position. Refer to Section 1 for further information. – – – – – – – – – – – – – – – – – – – 89 REMUNERATION REPORTAll equity transactions with KMP have been entered into under terms and conditions no more favourable than those SeaLink would have adopted if dealing on an arm’s length basis. TABLE 6.3 Performance Rights (PR) are generally granted to Senior Executives as part of a LTI plan. When a participant ceases employment prior to the vesting of their PR or where the performance hurdle is not met, the PR are forfeited, unless and to the extent that the Board determines otherwise. Should all conditions be met, one Ordinary Share is issued for each PR at no consideration. There were 299,130 PR issued in the 12-month period to 30 June 2020. At 30 June 2020, 287,761 PR to KMP remained outstanding. In addition to the above, 11,369 PR (2019: Nil) were held by senior staff. Table 6.3 The following Performance Rights have been issued to KMP: KEY MANAGEMENT PERSONNEL BALANCE 01/07/2019 AWARDED/ (FORFEITED) BALANCE 30/06/2020 HURDLE PRICE FAIR VALUE PER PERF. RIGHT AT AWARD DATE ISSUE DATE VESTING DATE DIRECTORS J Ellison A Muir C Feuerherdt A Muir G Legh D Gauci 160,000 15,000 – – – – (160,000) (15,000) 156,392 31,904 78,196 21,269 – – 156,392 31,904 78,196 21,269 25/10/2016 09/01/2017 12/06/2020 12/06/2020 12/06/2020 12/06/2020 $6.08 * * * * $4.11 $1.72 $3.77 $3.77 $3.77 $3.77 25/10/2019 07/01/2020 31/08/2022 31/08/2022 31/08/2022 31/08/2022 * The plan under which the Performance Rights were granted was approved at the SeaLink AGM in October 2019 and under that plan the rights have conditions as follows: 1) Executive must remain in continuous employment with SeaLink until the third anniversary of the date of grant of the Performance Rights; and 2) There are two tranches of Performance Rights with the following weighting: a. b. 50% for Total Shareholder Return (TSR) measured against companies in the ASX 300. 50% for earnings per share growth. 3) For the Performance Rights to vest in total, SeaLink must achieve the following conditions for each tranche: a. A target compound annual growth rate (CAGR) of earnings per share (EPS) of 10% for the three-year measurement period, commencing 1 July 2019. A threshold CAGR over that three-year period of 10% will result in 50% of the Performance Rights vesting, with pro rata vesting for achievement for between 10% and 12% of CAGR for the three-year measurement period. b. An Annualised Indexed TSR measured against the ASX300 Accumulation Index for the three-year measurement period, commencing 1 July 2019. A threshold annualised TSR over that three year period meeting the Index will result in 50% of the Performance Rights vesting, with pro rata vesting of the remaining remainder of the tranche for achievement up to 10% above the Index TSR for the three-year measurement period. Disclosures required in the remuneration report by the Corporations Act, particularly the inclusion of accounting values for LTI performance rights awarded but not vested, can vary significantly from the remuneration actually paid to senior executives. This is because the accounting standards require a value to be placed on a right at the time it is granted to a senior executive and then reported as remuneration even if ultimately the senior executive does not receive any actual value, for example, because performance conditions are not met and the rights do not vest. Signed in accordance with a resolution of the Directors. On behalf of the Directors Andrea Staines OAM Chair, Remuneration & Nomination Committee SeaLink Travel Group Limited Adelaide Date: 31 August 2020 90 REMUNERATION REPORT D I R E C T O R S ’ D E C L A R A T I O N DIRECTORS’ DECLARATION In the directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the financial year ended on that date; • there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and • at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 37 to the financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Jeffrey R Ellison Chair 31 August 2020 91 ASX ADDITIONAL INFORMATION Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as of 31 August 2020. A DISTRIBUTION OF EQUITY SECURITIES (i) Ordinary share capital 218,399,048 fully paid ordinary shares are held by 3,404 individual shareholders. All issued ordinary shares carry one vote per share and carry the right to dividends. 72,869,945 of these fully paid ordinary shares are subject to voluntary escrow arrangements whereby half of those shares are subject to voluntary escrow until 15 January 2021 and the other half are subject to voluntary escrow until 15 January 2022 (both dates inclusive). (ii) Performance Rights 299,130 performance rights are held by six employees of the Company. Pursuant to the Rules of the SeaLink Rights Plan, performance rights do not carry voting or dividend entitlements. Shares issued when performance rights vest rank equally with fully paid ordinary shares. The number of holders of equity securities, by size of holding, in each class are: FULLY PAID ORDINARY SHARES PERFORMANCE RIGHTS NUMBER OF HOLDERS NUMBER OF SECURITIES 925 1,198 603 601 77 3,404 191 344,279 3,391,950 4,481,146 13,891,207 196,290,466 218,399,048 1692 % OF CLASS 0.158 1.553 2.052 6.360 89.877 100 (0.0008) NUMBER OF HOLDERS NUMBER OF SECURITIES 0 0 2 3 1 6 N/A 0 0 11,369 131,369 156,392 299,130 N/A % OF CLASS 0 0 3.800 43.917 52.282 100 N/A HOLDING RANGES 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total Holdings less than a marketable parcel (based on a closing price of $4.75 on 31 August 2020) 92 B SUBSTANTIAL SHAREHOLDERS Substantial shareholders as disclosed by notices received by the Company as at 31 August 2020 SUBSTANTIAL SHAREHOLDERS^ ASSOCIATED SCRIP VENDORS^^ SEALINK TRAVEL GROUP LIMITED AND ITS SUBSIDIARIES^^ NUMBER OF VOTING SHARES IN WHICH THE SUBSTANTIAL HOLDER OR AN ASSOCIATE HAD A RELEVANT INTEREST AS THE DATE OF NOTICE 72,127,329 72,869,945 DATE OF NOTICE 16/01/2020 16/01/2020 ^ Sarto Pty Ltd provided a notice on 21/06/2019 stating that it had a relevant interest in 5,331,000 voting shares. No notice of ceasing to be a substantial holder has been received from Sarto Pty Ltd as at 31/08/2020. However, as at 31/08/2020 Sarto Pty Ltd and associate held a relevant interest of approximately 3.0% based on details of the previous notice and accordingly has not been listed a substantial holder in the table above. ^^ As at 16 January 2020, • the Associated Scrip Vendors held approximately 33% of the Company’s voting shares. The details of the Associated Scrip Vendors are listed in the Form 603 (Notice of initial substantial holder) released to the ASX on 17/01/2020; • the registered holders of the voting shares in which the Associated Scrip Vendors had a relevant interest were: (i) Leishman Australia Pty Ltd as trustee for the Leishman Enterprises Trust; (ii) Finchton Enterprises Pty Ltd as trustee for the Leishman Family Trust No 2; (iii) Windfury Pty Ltd as trustee for the Cleveland Transport Trust; (iv) Pacific Transit Pty Limited as trustee for the Pacific Transit Trust; (v) Accuro Trustees (Jersey) Ltd as trustee for the Inubia Paulista Trust; and (vi) Smith Feuerherdt Holdings Pty Ltd as trustee for the Rubicon Trust. Those entities were issued shares by the Company as consideration for the purchase of the Transit Systems Group as announced by SeaLink on 8 October 2019; and • SeaLink had a relevant interest in approximately 33% of its voting shares by reason of the voluntary escrow arrangements associated with the purchase of the Transit Systems Group announced by SeaLink on 8 October 2019. C TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES ORDINARY SHAREHOLDERS HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED FINCHTON ENTERPRISES PTY LTD – THE LEISHMAN FAMILY NO 2 A/C PACIFIC TRANSIT PTY LIMITED – THE PACIFIC TRANSIT A/C NATIONAL NOMINEES LIMITED ACCURO TRUSTEES (JERSEY) LTD – THE INUBIA PAULISTA A/C J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BALANCE AS AT 27/08/2020 23,630,272 18,671,572 18,671,572 14,877,583 14,772,984 13,185,210 10,855,063 CITICORP NOMINEES PTY LIMITED 9,210,194 WINDFURY PTY LIMITED – THE CLEVELAND TRANSPORT A/C 6,326,960 SARTO PTY LTD – R ZAPPIA & SONS P/FUND A/C 5,744,171 SMITH FEUERHERDT HOLDINGS PTY LTD – THE RUBICON A/C 5,056,836 LEISHMAN AUSTRALIA PTY LTD – THE LEISHMAN ENTERPRISES A/C 4,937,000 PRESCOTT NO 22 PTY LTD – THE PRESCOTT NO 22 A/C 4,602,503 SUNROP PTY LTD – SUNROP UNIT A/C 3,721,000 EQUILINK PTY LTD – F A MANN FAMILY A/C 3,582,601 BNP PARIBAS NOMINEES PTY LTD – AGENCY LENDING DRP A/C 3,563,692 ARISTOS NOMINEES PTY LTD – BJ MAYFIELD FAMILY A/C 2,724,769 HEBDEN PTY LTD – J R ELLISON FAMILY A/C 2,716,565 BNP PARIBAS NOMS PTY LTD – DRP 2,460,714 BELAHVILLE PTY LTD 1,942,133 WITRON PTY LTD – WITTMANN RETIRE FUND A/C Total of Securities 171,253,394 % 10.820% 8.549% 8.549% 6.812% 6.764% 6.037% 4.970% 4.217% 2.897% 2.630% 2.315% 2.261% 2.107% 1.704% 1.640% 1.632% 1.248% 1.244% 1.127% 0.889% 78.413% 93 Head Office Level 3, 26 Flinders Street Adelaide SA 5000 Web www.sealinktravelgroup.com.au Email info@sealinktravelgroup.com.au Phone +61 8 8202 8688 ABN 49 109 078 257 ACN 109 078 257 ASX Code SLK CORPORATE GOVERNANCE The Board of Directors of SeaLink Travel Group Limited (“SeaLink”) is responsible for the corporate governance of the Company and its controlled entities (the Group), monitoring the operational and financial performance of the Group, overseeing its business strategy and approving its strategic direction. The ASX Listing Rules require listed entities to disclose the extent to which they have followed the best practice recommendations set by the ASX Corporate Governance Council during a reporting period. Our Corporate Governance Statement is available at sealinktravelgroup.com.au/corporate-governance 

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