SG Fleet Group Ltd
Annual Report 2023

Plain-text annual report

Annual Report 2023 Onward CONTENTS About SG Fleet Sustainability statement Chairman’s report CEO’s report Directors’ report Auditor’s independence declaration Financial report Shareholder information Corporate directory IFC 4 18 19 23 43 44 98 100 About SG Fleet Group Limited SG Fleet Group Limited is a leading provider of integrated mobility solutions, including fleet management, vehicle leasing, and salary packaging services. We deliver highly efficient products and services to meet our customers’ needs in a socially, environmentally, and ethically responsible manner. The company operates in Australia, New Zealand, and the United Kingdom and has over 270,000 vehicles under management worldwide. SG Fleet listed on the Australian Securities Exchange in March 2014. The company has a unique position in the marketplace, built on the experience and product expertise of its team, its innovation capability, and a customer-centric approach to service delivery. We actively contribute to the global discussion about the future of transport and shape the new mobility landscape in cooperation with all levels of government, as well as leading corporates. SG Fleet continuously evolves its highly advanced fleet management capabilities and flexible mobility solutions, and selectively invests in new technologies and business models that are changing the way we move. SG Fleet’s expertise in low and zero-emission vehicles and the introduction of a number of measures to promote Electric Vehicle (EV) take-up in Australia resulted in significantly increased demand for the company’s services during the 2023 financial year. We were able to deploy the EV know-how already accumulated in the United Kingdom in support of our customers’ sustainable transport objectives. During the year, SG Fleet also continued to progress the integration of the Australian and New Zealand businesses of LeasePlan Corporation, acquired in the previous financial period. Ongoing in-house innovation activity again brought additional products and services to market, including the DingGo digital accident management platform, charging activity management capabilities for the eStart service, and a refresh of the Inspect365 safety inspection application. A Year in Numbers Financial NET REVENUE $350.3m 11.9% $313.0m $198.2m $172.3m 2023 2022 2021 2020 NPAT $75.2m 23.9% $60.7m $43.7m $36.4m 2023 2022 2021 2020 EPS 22.00cps 2023 2022 2021 2020 21.2% 18.16cps 16.22 cps 13.88 cps DIVIDEND 16.18cps 2023 2022 2021 2020 6.9% 15.13 cps 12.50 cps 10.00 cps SG FLEET GROUP LIMITED ABN 40 167 554 574 2023 Annual Report 1 OPERATIONAL VEHICLES UNDER MANAGEMENT1 270,000+ INCREASE IN NUMBER OF ZERO EMISSION VEHICLES MANAGED2 446% KILOMETRES TRAVELLED BY MANAGED FLEET2 3.8 billion+ REPAIRS MANAGED1 510,000+ FUEL AND TOLL TRANSACTIONS PROCESSED2 18 million+ Our Ambition To be a trusted partner in shaping the future of sustainable mobility Our Purpose To solve our customers’ mobility needs and aspirations 1. Group. 2. AU. 2 Electric Vehicles – Driving a better mobility future SG Fleet has been a leader in the battery and fuel cell electric vehicle segments from the very early days of these technologies. Since the appearance of the first EVs in our managed fleet over ten years ago, we have developed our know-how and helped our customers embark on their journey towards more sustainable mobility solutions. In 2019, we launched the eStart zero emission vehicle transition planning service. eStart wraps up the entire EV universe for our customers, from development of the transition process to the implementation of their EV strategy. Helped by our exceptional access to available vehicle stock and our purchasing power, we take advantage of our unique scale to make this transition efficient and effective. As is the case with any new technology, there are often challenges, concerns, and misconceptions regarding EVs. As a leader in the field, we see it as our responsibility to inform, educate, and help overcome every one of our customers’ challenges. In the 2023 financial year, SG Fleet’s EV Drive Days have again been the go-to event for organisations and individuals to get hands-on experience with the newest advances in EV technology and the ever-widening range of models available. SG Fleet is a driving force in the EV world today and will continue to shape the future of low emission transport. We help set the direction through our representation on the Board of the Electric Vehicle Council in Australia, our membership of Drive Electric in New Zealand, and our recognised position as an EV expert in the UK market, where we won the 2022 Business Car Best Eco Initiative Award for eStart. SG Fleet will also continue to support and participate in ground-breaking new research such as the REVS EV-to-Grid Services project. SG Fleet continues to innovate and disrupt the mobility market Australia A number of developments in Australia led to a dramatic increase in interest in low emission vehicles, particularly in the second half of the 2023 financial year. In November 2022, the Federal Government introduced legislation providing a Fringe Benefits Tax exemption for novated zero- or light-emission vehicles under the Luxury Car Tax threshold. Various States and Territories have added further financial incentives. Since then, SG Fleet’s Australian business has seen a dramatic uptick in novated customer enquiries for eligible vehicles, accounting for approximately 40% of all enquiries in the third quarter of the reported period. There is no doubt this burgeoning interest is more than an incentive-driven, temporary phenomenon. We are witnessing a significant shift in our customers’ mindset and buying behaviour, with the importance of adopting cleaner and greener means of transportation increasingly front of mind, both for consumers and organisations. The April 2023 release of Australia’s first-ever Electric Vehicle Strategy, which seeks to increase the supply of EVs and establish the required infrastructure to facilitate EV uptake, is likely to increase this momentum further. While just three years ago, battery electric vehicles accounted for only 1% of new vehicle sales in Australia, that percentage is now approaching double digits. As one of the country’s largest vehicle purchasers, SG Fleet is playing a key role in bringing EVs to local drivers, accounting for a significant proportion of new EV registrations nationally. While interest in low-emission hybrid vehicles had been on the rise for a number of years now, growing by almost 50% as a proportion of SG Fleet’s managed Australian fleet since the end of the 2021 calendar year, the sudden acceleration in demand for zero-emission vehicles has been exceptional. The number of EVs in our fleet doubled in the 12 months to December 2022, and then more than tripled in the six months since, buoyed by the Government’s incentives. The increase is even more noticeable in the Novated channel, where the number of EVs increased almost five-fold during that period. SG Fleet Group Limited3 New Zealand United Kingdom While the gap is narrowing, New Zealand’s early adopter approach has resulted in a higher uptake of EVs compared to Australia. The NZ Government introduced the Clean Car Discount for consumers in 2021 and the Clean Car Standard, which incentivises the importation of low emission vehicles, in early 2023. SG Fleet New Zealand informs and educates local organisations about EVs via its Drive Days and its involvement in the yearly NZ Electro Mobility Summit, which showcases electric vehicles, micro-mobility, and charging infrastructure solutions. In addition to its Drive Electric membership, SG Fleet New Zealand also participated in the Sustainable Business Council’s Clean Car Accelerator program. The UK Government put in place a comprehensive approach for transport electrification several years ago, establishing the Office for Zero Emission Vehicles (OZEV) and outlining its ‘Road to Zero’ strategy. EV-related incentives include car grants, tax benefits, congestion charge exemptions, and parking benefits, as well home and workplace charger grants. Companies and consumers have responded positively to these initiatives and EV take-up in the UK is significantly ahead of that in the Australasian region. SG Fleet UK has established itself as an EV specialist in the local market, getting industry recognition for its know-how and sharing its insights across the entire SG Fleet organisation. This provides us with unique expertise across the full EV lifecycle, an important asset in markets that are still in the early stages of adoption, such as Australia and New Zealand. The number of EVs in our New Zealand fleet has grown steadily, doubling over the last 18 months. Interest in low-emission hybrids increased by a similar proportion during that period. At the end of the 2023 financial year, EVs accounted for close to 22% of SG Fleet UK’s fleet, and with about 37% of new orders during the period going to EVs, this percentage will continue to increase. A feature of the UK market is the high uptake of light commercial EVs, which account for one third of our UK EV fleet. With light commercial EVs largely unavailable in Australia and New Zealand at the moment, our UK experience in this vehicle class again gives us a head start when helping corporate customers with the electrification of their commercial fleets. 2023 Annual Report4 Sustainability Statement SG Fleet’s approach to long-term value creation for all of its stakeholders is driven by the principle that industry-leading environmental, social, and governance (‘ESG’) behaviours should be integrated into daily business practices. The company established a Sustainability Committee, governed by a Charter, in 2019. In 2021, SG Fleet issued its first Sustainability Statement. The Group’s ESG Strategy was launched in 2022, followed by a revised Environmental Policy in 2023. The 2023 Sustainability Statement outlines the relevant actions taken by the company during the 2023 financial year with respect to the risks identified as material in the Group’s ESG Strategy. ESG Action Plan Development The first yearly ESG Action Plan, which spanned the second half of the 2023 financial year, was developed in cooperation with internal and external stakeholders in late 2022. New Action Plans will be developed in June of every calendar year and apply to the subsequent financial year period. The Action Plan consists of a list of initiatives grouped under the Environment, Social, or Governance headings and linked to specific key ESG risks. These initiatives are earmarked to be executed during the period or assessed for potential execution in future periods. Consideration is also given to the relevance of the initiatives for the Group as a whole or for specific jurisdictions. Future Focus In the 2024 financial year, we will focus on aligning our ESG values across the organisation to take full advantage of the strong commitment of our people to sound ethical behaviours. Part of this will be the organisation of ESG-themed staff events covering environmental, physical and mental health, and diversity topics. Environmental, Social & Governance Strategy ESG Strategy Launch In August 2022, SG Fleet Group Limited’s Board approved the company’s first comprehensive ESG Strategy, which was launched for internal and external stakeholders the following month. The ESG Strategy further optimises how we determine our key ESG risks and how we approach the management of these risks, outlining both current practices and future focus areas. The determination process takes into account the nature of our business operations, which are predominantly the provision of services in an office-based environment. The ESG Strategy, which will be reviewed on a three-yearly basis, can be found on the Corporate Social Responsibility page of the www.sgfleet.com website. ESG Committee Charter January 2023 Document Classification: Confidential Governance Structure Enhanced In December 2022, the company introduced a new ESG governance structure, replacing the Sustainability Committee founded in 2019. The structure reflects the broader scope of our approach under the new ESG Strategy. The ESG Committee’s Charter was established in January 2023 and the first quarterly meeting took place in March 2023. The ESG Committee’s primary roles include monitoring the company’s adherence to the ESG Strategy, the development of the yearly Action Plans and the verification of their execution, the centralised management of all ESG-related statements, and any reporting to the Board and Executive Committee. The ESG Committee is composed of senior executives responsible for the business areas related to the company’s key ESG risks. SG Fleet Group Limited 5 Key Highlights Environmental Policy sets emission reduction target Group ESG Strategy, Committee, and Action Plan launch UK operations achieve carbon neutral certification 2023 Annual Report6 Environment SG Fleet ensures its day-to-day operations minimise resource consumption, waste, and emissions. In addition, we work with our customers, business partners, and suppliers to assist them with their environmental impact reduction initiatives. To achieve the above objectives, SG Fleet operates an environmental management system (‘EMS’), which is based on global and local standards, including ISO 14001:2018, and all applicable regulations and laws. Several company executives attended training relating to the ISO 14001:2018 standard during the reported period and the company aims to obtain group-wide certification for the standard during the 2024 financial year. The EMS is comprised of the Environmental Policy, the environmental component of the ESG Action Plan, the ESG Committee governance structure, and all associated monitoring, measurement, management, and reporting activities. The environmental component of the ESG Action Plan, referred to as the Emissions Reduction Action Plan, or E-RAP, lists environmental initiatives earmarked for execution or assessment during the period. The initiatives are grouped by the relevant risk, the corresponding emissions-producing activity, as well the scope under which these emissions fall. E-RAP focuses in particular on the areas identified as the main contributors to the company’s emissions total. As these areas are an integral part of the company’s day-to-day operations, the execution of the Environmental Policy and E-RAP, as well as the operation of the EMS, involve the implementation of adjustments to a range of ongoing business practices. Supporting Eco-diversity We were thrilled to see the official opening of the Wildbark Visitor Centre in Throsby in November 2022. SG Fleet has been a proud sponsor of the Woodlands and Wetlands Trust in the Australian Capital Territory for some years, offering our support as it continues to provide rich and diverse environments for current and future generations. SG Fleet’s ESG Materiality Assessment identified the following environmental risks as material to the company: – Levels of emission impacting the environment Risks that are perceived as relevant to the wider community, even if not directly material to SG Fleet due to the nature of its business, are: – Other environmental risks, such as energy consumption levels and waste Group Environmental Policy In April 2023, SG Fleet Group Limited’s Board approved the company’s new harmonised Environmental Policy, which superseded its Environmental Impact and Performance Policy, the corresponding policy of the acquired LeasePlan businesses, and the UK Environmental Policy. Environmental Policy SG Fleet Group Limited ABN 40 167 554 574 26 April 2023 The Policy outlines the company’s approach to achieve the following objectives: (a) continually improve its overall environmental performance and management, (b) reduce the Scope 1, 2, and 3 emissions that fall within the boundaries of its environmental impact assessment, and (c) fulfill any compliance obligations. With regard to the emission reduction objective, SG Fleet aims to reduce emission intensity, measured as tCO2-e per Full-time Equivalent to take into account growth in the business, by 33% by the end of the 2030 financial year, with the 2023 financial period as the base year. The execution of the Policy is independent of the company’s carbon neutrality status in its various geographies and the company will continuously explore options to further cut emissions and progressively reduce its reliance on carbon offsets to achieve carbon neutrality. SG Fleet Group Limited 7 Educating and Supporting Our People, Our Customers, and the Community We believe that we can create a positive environmental impact not only by reducing the company’s own footprint, but also by shaping and supporting behaviours with our various stakeholders. In addition to instilling environmentally sound practices in the workplace, we aim to provide our people with information on how to contribute to a more sustainable future in every walk of life. The same objective is also the foundation of the work we do with our customers to support their organisational sustainability objectives. SG Fleet’s core expertise is mobility and during the 2023 financial year, we stepped up the way in which we share our know-how and our operational scale by introducing our customers to the latest advances in electric vehicles and micro-mobility. EV Drive Days proved particularly successful, with multiple sessions organised in Australia and New Zealand during the year. The Drive Days provided our customers with an opportunity to get behind the wheel of a range of electric and hybrid cars and trucks for a test drive, talk to experts about everything organisations need to know about operating and driving an EV, and plan for a new business mobility future with SG Fleet. This initiative, combined with several government incentives, undoubtedly contributed to the five-fold increase in EVs in the company’s Australian customer fleet. The future is multi-modal, and our solutions are not limited to traditional vehicle types. The functionality of alternative modes of transport is increasingly recognised in the personal and delivery transport space, with consumers and companies exploring micro-mobility as an environmentally friendly, viable alternative. SG Fleet’s cooperation with eMobility provider Zoomo offers customers additional options to improve the efficiency of their fleets, both in terms of flexibility and sustainability. In the 2023 financial year, SG Fleet’s expertise in sustainable mobility was again recognised by the industry and its peers, with the company’s UK operations winning the coveted Business Car Best Eco Initiative Award for the eStart EV transition solution. SG Fleet’s contribution to a better transport future isn’t limited to its day-to-day services. We also actively collaborate with industry bodies and organisations across all of our geographies to inform, foster debate, and break down barriers. In Australia, the company is represented on the Board of the Electric Vehicle Council and an active member of the Australian Hydrogen Council. In New Zealand, we have joined Drive Electric NZ and the Sustainable Business Council. In the UK, we work with the British Vehicle Rental and Leasing Association (BVRLA) to assist with the Government’s Road to Zero strategy, sharing our know-how on an industry panel investigating ‘second life’ EVs and supporting the BVRLA’s response to the Financial Conduct Authority’s consultation on finance for positive sustainable change. Future Focus In future periods, in addition to continuing to make a difference by supporting our stakeholders’ environmental objectives, we will widen the scope of our focus. This includes exploring the environmental performance of our premises with landlords, reciprocal participation in our customers’ sustainability efforts, and the introduction of specific environmental training modules for our people. 2023 Annual Report8 Environment Emissions SG Fleet measures its emissions footprint both as direct CO2 emissions and as the emissions equivalents associated with a range of business or support activities. As an office-based services company, SG Fleet does not directly produce meaningful levels of CO2 in its day-to-day business operations. We only operate a small internal fleet of vehicles, and the provision of our services does not generally require significant travel or transport. The main contributors to our emissions equivalent total are IT equipment and services, electricity consumption, staff commuting, and to a lesser extent, waste, direct emissions from our own fleet, and air travel. We continuously explore options to further cut emissions across Scope 1 and 2 and, where under the company’s control, Scope 3, with a particular focus on these main contributors Where possible, we move IT-related equipment and services off premises towards more sustainable solutions to reduce their emissions equivalent impact. Where possible, we also source equipment that includes offsets as part of the purchasing or leasing contract. During the year, the company has stepped up its efforts to facilitate staff commuting by offering arrangements and facilities that will reduce fuel consumption overall. This includes carpooling clubs, the availability of eBikes, and the installation of bicycle storage shed at our offices. The rate of transition of SG Fleet’s own fleet to low and zero-emission vehicles accelerated during the period, increasing from 10% at the end of the 2022 financial year to 35% at the end of the 2023 financial year. Use of our on-premises EV chargers increased significantly, in line with the higher proportion of EVs in our own fleet and amongst our staff. The Australian operations of SG Fleet obtained ClimateActive certification as a carbon neutral organisation during the 2022 financial year. SG Fleet’s UK operations achieved carbon neutrality early in the 2023 financial year. Future Focus SG Fleet aims to accelerate its progress in reducing direct and equivalent emissions by targeting sources within its control, including the sourcing of lower emissions equivalent IT equipment and services. We will explore new areas to minimise commute-related emissions by introducing shuttle buses where practical, supporting staff EV penetration by upgrading our charging infrastructure, and by offering further incentives to boost the use of eBikes. A new travel policy will also be introduced to ensure air travel is undertaken only when necessary. The company is also targeting group-wide carbon neutrality status by completing the New Zealand certification currently underway. Energy Consumption Future Focus SG Fleet aims to lower its energy intensity ratio by putting in place additional initiatives to reduce overall energy consumption, including the adoption of ‘smart working’ set-ups and sensor/ timed lighting and air conditioning systems. Where possible, the company continues to explore further opportunities with its landlords to improve the sustainability of its office locations. SG Fleet’s energy consumption is largely limited to the operation of its office and warehouse locations, including lighting, power sources, and heating. As the integration of premises acquired as part of the LeasePlan businesses continued, we transitioned additional office operations to more energy-efficient solutions and to renewable green energy sources. At the end of the period, LED lighting and Green Energy arrangements were in place for all offices that will remain part of our network and where we have direct control over lighting and energy set-ups. SG Fleet Group Limited9 Waste SG Fleet does not produce meaningful quantities of waste for packaging or other purposes, but our aim is to further minimise waste generation in the conduct of our business. Where waste is generated, for example in the operation of offices or disposal of hardware, we explore opportunities to divert waste via the process of recycling triage. IT assets, including desk and data centre hardware, are recycled wherever possible after extracting optimal, life-time use of the equipment. Company-issued mobile phones are offered for sale to the user, or if unsold, go into our external disposal process, with a third-party provider recycling, refurbishing, re-selling, or securely destroying these and other end-of-life IT assets. In selecting the third-party provider, we assess the company’s disposal process and environmental commitments. While SG Fleet does not dispose of vehicle tyres itself, the company is a member of Tyre Stewardship Australia, whose stated mission is to create productive outcomes for end-of-life tyres and increase the use of locally tyre-derived products. We actively encourage our customers to join this worthwhile scheme. During the 2023 financial year, recycling facilities were boosted across our offices, including in our Pymble (NSW) Head Office, where the office refurbishment included the installation of additional, designated disposal receptacles. We also increasingly source eco-friendly, lower-waste alternatives for merchandise and other small items, including bamboo or ‘seeded’ name badges used for events and conferences. Future Focus We continue to look at opportunities to further reduce the production of waste and optimise its disposal. In our offices, plastic water bottles will progressively be phased out in favour of reusable containers, and we are exploring targeted recycling of items such as disposable cups and cutlery. Alternative disposal solutions for IT and telephony hardware are also under investigation. Internal items such as business cards and various certificates will be replaced by digital alternatives, as will be various items provided to customers, such as in-car documents and fuel cards, where practicable. Other Environmental Aspects While due to the nature of its business, SG Fleet does not utilise a meaningful amount of packaging or other materials such as paper, or consume and discharge significant amounts of water, we do approach the management of any materials and water consumption as an integral part of our overall environmental approach. Accordingly, we continue our efforts to minimise associated impacts. Since the 2021 financial year, we have reduced paper use across the Group by 38%, despite the business growing substantially as a consequence of the acquisition of LeasePlan ANZ during that period. This was helped further by the introduction of a ‘paperless & clean desk’ policy in our newly refurbished Pymble head office in the 2023 financial year. SG Fleet conducts yearly audits on the outsourced wash facilities used for the cleaning of end-of-lease vehicles, monitoring detergent use and water disposal processes. As an office-based business located in urban areas, SG Fleet’s activities have a negligible direct impact on natural habitats. 2023 Annual Report10 Social SG Fleet respects and seeks to further the interests of its customers, its employees, and the wider communities in which we operate. Our culture is one of trust, respect, care, and responsibility, and we aim to apply this in all our interactions with every individual, as well as with community groups. SG Fleet’s ESG Materiality Assessment identified the following social risks as material to the company: – Working conditions (employment) and training – Occupational health & safety – Diversity, non-discrimination, and equal opportunity – Customer privacy and data security Risks that are perceived as relevant to the wider community, even if not directly material to SG Fleet due to the nature of its business, are: – Support of indigenous communities – Human rights, including forced, compulsory, or child labour in the company and its supply chain (Modern Slavery) Working Conditions SG Fleet’s success as a business and its ability to deliver excellence in services and products to its customers relies on a motivated workforce. Providing a positive environment and optimal work conditions is an essential component of our efforts to support our employees. During the 2023 financial year, we introduced a number of initiatives to provide a better and more flexible workplace, and increased employment benefits. Our efforts included a state-of-the-art refurbishment of our head office, with social, relaxation, and privacy spaces, additional disabled accessibility and facilities, as well as a greening of the workspace. As part of SG Fleet’s recruitment process, vacancies are evaluated for their suitability for flexible work arrangements and for arrangements other than full time. Eligible employees are able to participate in a ‘Purchase Annual Leave’ program to assist with balancing family commitments. We also offer employer-funded parental leave, a sick-leave donation program, social activities, and Wellness Days in addition to annual leave entitlements. Future Focus SG Fleet will continue to implement strategies that support role and work flexibility, including the adoption of workplace arrangements and approaches that reflect a greater awareness of the social impacts of working conditions. SG Fleet Group Limited11 Training SG Fleet is committed to supporting the continued growth of its people. We have a reputation within the industry of developing the best available talent and expertise. We provide formal and informal advancement and learning opportunities that recognise and grow the ability, capacity, and leadership skills of our people. In the 2023 financial year, SG Fleet significantly stepped up its training and development activities. In addition to multiple e-learning modules and the various external courses and webinars offered, we launched a General Education Budget, providing financial support to staff wanting to develop their knowledge in areas relevant to their roles. This initiative forms part of a broader Learning Development Policy introduced in the second half of the year. A strong emphasis was also put on the way we welcome new staff to the workplace. Staff orientation sessions were re-designed, and the improved workplace introduction process was duly recognised with the Brandon Hall Group Gold Medal Award for best new hire onboarding program at the 2023 HCM Excellence Conference. At various levels of the organisation, we introduced additional development programs, such as the Gear Up manager development modules, and the executive and general manager talent pool frameworks. Future Focus SG Fleet will continue to investigate opportunities to extend the range of its current training structures, both in terms of training topics and the ability of staff to access training. We will also implement initiatives to optimise the continued education process. In line with our strong commitment to provide further e-learning opportunities for employees at SG Fleet, we will be providing all of our people with access to the LinkedIn Learning facility, which contains a digital library of over 20,000 courses covering a wide range of technical, business, software, and creative topics. 2023 Annual Report12 Social Occupational Health and Safety To champion our people, we place their well-being as our top priority, and foster a cooperative and supportive environment where our teams can thrive. Following several years of significant socio-economic changes and the resulting impact on individuals’ lives and workplaces, SG Fleet increased its efforts during the 2023 financial year to ensure it supported the health and mental wellbeing of its people. In addition to providing our staff with a healthy work environment, we conduct regular e-training on a range of topics that can impact their wellbeing. These modules include sexual harassment prevention, work health and safety awareness, and workplace bullying and occupational violence. In addition to risk mitigation education, we encourage our staff to proactively look after their physical and mental wellbeing. We provide access to a range of staff wellness benefits and activities, such as subsidised gym memberships and on-site classes. SG Fleet also actively supports others in the community to raise awareness of the importance of good physical and mental health. We are a sponsor of the Men’s Health Awareness Ball and the Workplace Wellness Festival. Safety in the workplace is a core element of our efforts to support the wellbeing of our people and staff regularly participate in relevant e-learning modules. During the year, additional training was provided to first aiders, as well as to those tasked with addressing mental health challenges. SG Fleet holds ISO45001 OH&S Management certification for parts of its business. Future Focus We intend to investigate other occupational health and safety aspects within the workplace and in support of our employees outside the workplace and at home. In addition to expanding the mental health training program, we will be offering additional wellbeing benefits and introducing regular delivery of free healthy food options. Diversity, Equal Opportunity, and Non-discrimination SG Fleet’s business success is built on the expertise of its people. We recognise the importance of being an inclusive employer and have a strong commitment to equal opportunity and diversity. This drives the company’s ability to attract, retain, and develop the best talent, create an engaged workforce, deliver the highest quality of service to customers, and achieve sustainable growth. SG Fleet complies fully with the Workplace Gender Equality Act (2012) and is a complying employer with the Workplace Gender Equality Agency. We conduct regular e-training on equal employment opportunity. As at 30 June 2023, the company’s workforce was made up of 46% women and 54% men. In the 2023 financial year, we launched SG Fleet’s Women’s Network in New Zealand and the United Kingdom, followed by the launch of the Australian Chapter shortly after the end of the year. In March, we held our International Women’s Day events, with staff attending Australian HR Institute lunches across various locations to celebrate woman’s achievements, raise awareness about discrimination, acknowledge gender inequality, and increase efforts to address it. We also celebrate the diverse range of cultural backgrounds and experiences of our employees and provide a welcoming work environment that is free from discrimination. During the year, we introduced designated locations for prayer, reflection, and general wellness activities. The company’s new intranet also provides a calendar of activities celebrating culturally significant events such as Pride Month, Harmony Week, World Food Day, and others. SG Fleet’s Code of Conduct stipulates compliance with the letter and spirit of a full range of anti-discrimination laws to establish a workplace free from any kind of discrimination. The company conducts regular e-training on discrimination to reinforce awareness and correct behaviours Code of Conduct SG Fleet Group Limited ABN 40 167 554 574 Adopted by the Board on 28 November 2022 Document Classification: Confidential Future Focus SG Fleet continues to work towards a diverse workforce, including balanced gender representation at Board and Senior Management level. The company intends to widen its diversity focus to other areas, in addition to gender, and ensure that a more diverse representation also translates into actual inclusion of more diverse opinions. We will also investigate further initiatives, including e-learning, that will help break down perceptions that foster discrimination. SG Fleet Group Limited 13 Indigenous Communities SG Fleet is committed to furthering wherever possible the cause of Aboriginal and Torres Strait Islander, Māori, and other indigenous communities in the geographies in which it operates. In addition to offering employment opportunities, the company actively supports indigenous business ventures. We are a proud member of Supply Nation, which aims to promote and support procurement through indigenous organisations and create a more inclusive economy. As part of the tender process, our procurement staff check the Supply Nation Membership list for any relevant suppliers. Indigenous businesses are then invited to tender and evaluated amongst other bidders. We currently source a number of goods from these businesses. Future Focus SG Fleet is aiming to build the right perspective amongst its leadership and its people to work towards an effective and impactful Reconciliation Action Plan in the future. We will also continue to put a greater emphasis on supporting indigenous businesses and employment where practical and viable. We intend to build on the Acknowledgement of Country Guide made available to our people in the 2023 financial year by introducing relevant information on our digital platforms. Similar initiatives will also be rolled out for our New Zealand operations to recognise the Māori heritage. Various events related to indigenous communities in both Australia and New Zealand are now included in our cultural activities calendar. 2023 Annual Report14 Social Human Rights, and Forced, Compulsory, or Child Labour As an office-based services company, SG Fleet’s direct exposure to the risk of human rights infringement is limited. The company does however expect partners in its supply chain that are more likely to encounter human rights issues to take necessary measures to mitigate against this risk. Our Supplier Code of Conduct stipulates our expectations with regard to the conduct of suppliers in terms of modern slavery risks, the treatment of labour, and human rights generally. Customer Privacy To be able to create value for its customers and conduct its business in an efficient manner, SG Fleet needs to collect and process certain personal and business information. The way we collect, use, and retain this information is governed by strict protocols and detailed processes. SG Fleet complies with all applicable privacy laws in each jurisdiction in which we operate and processes customer information in accordance with its privacy policies. Our Personal Data Protection Policy sets out how we protect the personal data we collect. Supplier Code of Conduct SG Fleet Group Limited ABN 40 167 554 574 22 May 2022 Modern Slavery Statement (Australia) SG Fleet Group Limited ABN 40 167 554 574 December 2022 Document Classification: Confidential Modern Slavery Policy SG Fleet Group Limited ABN 40 167 554 574 24 May 2021 Document Classification: Confidential SG Fleet’s approach to ensure responsible internal conduct with respect to human rights centres on the training of staff on related topics, such as modern slavery, non-discrimination, and diversity and equal opportunity. The awareness of the importance of customer privacy and the need for secure handling of data is reinforced at the individual employee level through regular staff updates and continuous training via our e-learning portal. The SG Fleet Group has ISO27001 Information Security Management certification. During the 2023 financial year, the company continued to enhance its relevant security set-up and maintain a robust data and privacy protection standard, including through regular penetration testing and crisis simulations. Future Focus Further enhancements of SG Fleet’s relevant processes will be introduced as the cyber security environment continues to evolve. The company will also enhance staff data security awareness by providing regular bulletins on how to identify potential threats. We do not tolerate any form of enslavement or exploitation and we are committed to ensuring measures are in place to minimise the risk of modern slavery in our business and in our supply chain. The company has voluntarily put in place a Modern Slavery Policy, which outlines our overall approach to combatting modern slavery. During the 2023 financial year, we embarked on a review of our supplier modern slavery survey approach, with the aim of broadening the assessment to a wider range of environmental, social, and governance (ESG) criteria. SG Fleet issues Modern Slavery Statements overviewing its initiatives during the respective reporting periods in Australia (pursuant to the Modern Slavery Act 2018 (Cth)) and the United Kingdom (pursuant to the Modern Slavery Act 2015 (UK)). Future Focus SG Fleet intends to roll out a more robust supplier assessment methodology, based on the survey review currently underway, to optimise the process by which it identifies modern slavery and other ESG risks, as well as how any identified risks are  investigated and addressed. We also intend to introduce selection criteria that take into account human rights management and behaviours of potential suppliers and work with our existing suppliers to achieve better outcomes across a range of related aspects. SG Fleet Group Limited 15 Other Social Aspects National Road Safety Week (Australia) As a longstanding supporter, SG Fleet attended the launch of the National Road Safety Week in Perth in May. Many national icons around the country lit up in NRSW’s yellow colours to remind people to ‘Pledge To Drive So Others Survive’. Pink Shirt Day (New Zealand) The SG Fleet team in New Zealand took a stand against bullying In May, donning their colourful shirts in support of this worthwhile cause. Pink Shirt Day seeks to encourage inclusion and celebrate our unique differences, emphasising bullying is never OK. SG Fleet interacts with local communities in Australia, New Zealand, and the UK as a significant employer and as a purchaser of goods and services. We firmly believe that we have a responsibility to the communities in which we operate, as well as people elsewhere, to give back and make a positive contribution in other areas wherever we can. SG Fleet supports a number of initiatives across a wide range of areas. As a company, our community contribution comes in the form of financial support, and the provision of goods or vehicles. Our people also contribute generously by collecting donations or by volunteering in their own communities or for charitable activities of their choice. For that purpose, we offer staff the opportunity to take two volunteer leave days each year. Wherever possible, we look to deploy our mobility expertise to the advantage of organisations or individuals who have limited access to transport or to support road safety initiatives. As in previous periods, we supported a wide range of initiatives in the countries in which we operate during the 2023 financial year. These included National Road Safety Week, the Santos Wheelchair Rugby National Championship, Friendship Circle, the Aboriginal and Torres Strait Islander Community Health Service, the Cancer Council’s Biggest Morning Tea, Kmart Wishing Tree Appeal, and Redkite in Australia, Northland Emergency Services Trust, Auckland Rescue Helicopter Trust, Special Children’s Christmas, Road Safety Week, and Pink Shirt Day in New Zealand, as well as support for Cancer Research UK (CRUK), the Motor Neuron Disease Association, and Guide Dogs for the Blind in the UK. Medical Research Support (United Kingdom) In the UK, our people raised money for both Cancer Research UK (CRUK) and motor neuron disease research via ‘Stand Up to Cancer’ and a range of other activities. 2023 Annual Report16 Governance Across our organisation, we ensure we adopt responsible business practices and policies in all aspects of our operations. As a listed entity, SG Fleet Group Limited also reports against the ASX Corporate Governance Council’s Principles and Recommendations (4th Edition) via its Corporate Governance Statement. This statement describes the rules, systems and processes we have in place to manage our company and our operations in a responsible manner. In addition to the requirements set out by the ASX Corporate Governance Council, we have a number of policies in place to instil and promote ethical behaviour across the organisation, as well as our supply chain. SG Fleet also ensures its people are aware and observant of these policies by conducting regular e-learning sessions. Business Ethics and Conduct Our people are expected to conduct themselves in a manner consistent with the company’s standards and in compliance with all relevant legislation. SG Fleet’s Code of Conduct outlines how we expect our representatives to behave and conduct business in the workplace on a range of issues. It includes legal compliance and guidelines on appropriate ethical standards. SG Fleet’s ESG Materiality Assessment identified the following governance risks as material to the company: Future Focus – Business ethics and conduct – (Presence of) whistle-blower policy – Supply chain management – Anti-corruption and bribery – Anti-competitive behaviour – Risk and crisis management SG Fleet’s governance standards were again recognised in the 2023 financial year, with its Company Secretary Tawanda Mutengwa named as a finalist in the Governance Top 100 Awards. The Governance Top 100 organisation emphasises the value and benefit that robust governance frameworks, and the individuals that are responsible for driving these initiatives, bring to an organisation. SG Fleet will continue to review its Code of Conduct as required, further improve the processes in place to ensure adherence to the Code, including training, and optimise how it addresses any breaches. Whistle-blower Policy SG Fleet is committed to ensuring that serious misconduct or malpractice is identified and addressed appropriately. We believe that the ability to raise related concerns is an important mechanism to ensure that the company functions efficiently and in accordance with its own principles of conduct. SG Fleet has adopted a Whistle-blower Policy in accordance with the Corporations Act. The Whistle-blower Policy encourages whistle-blowers to raise concerns and reportable conduct, where there are reasonable grounds to support such action and to ensure that serious misconduct or malpractice is identified and addressed appropriately. Future Focus SG Fleet’s Audit, Risk and Compliance Committee reviews its Whistle-blower Policy annually, and we will further improve employee awareness of and access to the whistle-blower process. SG Fleet Group LimitedSupply Chain Management We view it as our responsibility to promote ethical behaviour not just within our business operations, but also at supplier level. SG Fleet takes great care in selecting suppliers of goods and services and we expect our suppliers to operate to recognised national and international standards, and appropriate codes of practice. In order to do so, we have put in place a Supplier Code of Conduct and a Procurement Policy. These policies set out the requirements we expect from our suppliers in the areas of ethical business practice, anti-competitive conduct, labour and human rights, work health and safety, environment, and confidentiality of information. Future Focus SG Fleet continuously explores opportunities to optimise its supply chain management process, including in terms of the expected qualifications and behaviours of suppliers. The company started a review of its supplier ESG assessment process during the 2023 financial year and intends to roll out an optimised approach in future periods. Anti-corruption and Bribery SG Fleet prohibits bribery and corruption in any form, whether direct or indirect, and in any country in which it operates. We have adopted an Anti-bribery and Corruption Policy, detailing our commitment to conducting business activities with integrity and ensuring measures are in place to prevent bribery and corruption. The company expects its employees to demonstrate honesty, integrity, and fairness in all aspects of their business dealings and exercise a high standard of professionalism and ethical conduct in all their activities. We promote employee awareness of and compliance with our policies against bribery and corruption through appropriate dissemination of our own procedures, policies, and training programmes. Future Focus SG Fleet will continue to review its Anti-bribery and Corruption Policy as required, further improve the processes in place to ensure adherence to the Policy, including training, and optimise how it addresses any breaches. Anti-competitive Behaviour The company aims to maintain its reputation of having a high standard of ethical behaviour in conducting business and to behave with integrity in all dealings with competitors and customers. SG Fleet’s Code of Conduct stipulates the behaviours required to meet its standards in terms of responsible business practices. We actively monitor for any breaches of the Code. In the reported period, no actions or issues occurred in respect of anti-competitive behaviour. Future Focus SG Fleet will continue to review its Code of Conduct as required, further improve the processes in place to ensure adherence to the Code, including training, and optimise how it addresses any breaches. 17 Risk and Crisis Management The presence of effective risk management structures and processes is essential for the continued conduct of SG Fleet’s business operations. SG Fleet has a strong risk management culture and a robust operating model, imbedding governance and risk responsibilities across multiple lines of defence. We maintain a combined Audit, Risk and Compliance Committee as a subcommittee of the company’s Board, as well as a dedicated internal audit function. The Committee reviews the company’s risk management framework and internal control framework, while the internal audit function provides the Board and management with independent and objective assurance on the effectiveness of governance, risk management, and internal control processes. Future Focus SG Fleet will continue to review its risk management approach and processes, in line with the evolving nature of its business and its operational environment. Other Governance Aspects Visit the Governance section of our Investor Centre to read our Corporate Governance Statement, which covers a number of additional governance aspects. Corporate Governance Statement https://investors.sgfleet.com/Investors/?page=corporate- governance-statement UN Global Compact During the 2021 financial year, SG Fleet became a signatory to UN Global Compact (UNGC), committing to its corporate responsibility initiative and its principles in the areas of human rights, labour, the environment, and anti-corruption. In the 2023 financial year, the company joined UNGC’s Early Adopter Programme to lodge its second Communication on Progress, assisting the organisation with the development of its digital reporting platform. 2023 Annual Report18 Chairman’s report “ Our people have again demonstrated their exceptional commitment to the continued growth of your company.” Dear Shareholder I have the pleasure of presenting you with the SG Fleet Group Limited Annual Report for the year ended 30 June 2023. In the 2023 financial year, your company has continued the momentum built up over the past few years. Our people have again demonstrated their exceptional commitment to the continued growth of your company. Helped by the seamless bringing together of the teams across SG Fleet and the acquired LeasePlan businesses, we have strengthened our leadership position in the industry, extended our products and services range, and enhanced the way we serve our customers. These efforts have allowed SG Fleet to register a third year of continued progress across all key financial measures. For you, our shareholders, the outcome has been a further increase in dividends, and I’m delighted to announce that your Board has declared a combined 2023 financial year dividend of 16.18 cents per share, an increase of 7% on the prior year. This year has again been a period during which the service focus of SG Fleet’s employees has allowed us to navigate the uncertain operational environment. Rising interest rates impacted economic activity and consumer sentiment, and in our industry, logistical disruptions and parts shortages resulted in limited vehicle supply. This meant that a significant proportion of the strong order growth achieved during the financial year will only result in deliveries in future periods. We have continued our concerted effort to provide our employees with the best possible work environment and support their contribution to the success of your company. During the 2023 financial year, we introduced a number of additional benefits for our people, creating a welcoming and flexible environment that supports strong productivity as well as physical and mental wellbeing. Undoubtedly, these initiatives have greatly supported our ability to deliver excellence in service to customers. Your company has a reputation for fostering the best talent and expertise in the industry. We offer a range of training and learning opportunities to support the continued development of our employees. During the year, we launched our new Learning Development Policy, which includes financial support for those wishing to develop their knowledge on topics that will further improve their career opportunities within SG Fleet. Our culture of learning and education is also reflected in our customer service approach. Sustainable mobility is at the core of what we do as a business, and we take an active role in providing our customers with the latest know-how in this field. A feature of the year has been the rapid increase in uptake of electric vehicles, or EVs, and your company continues to play a key role in educating organisations and drivers about the benefits and the challenges associated with the adoption of this new technology. SG Fleet’s EV Drive Days have been in high demand with our customers, leading to increased interest in our fleet EV transition services as organisations contemplate the future shape of their fleets. The invaluable insights we provide were duly recognised by the Business Car Best Eco Initiative Award we received for our eStart solution in the UK. Our work with our customers, as well as with industry bodies in Australia, New Zealand, and the UK, to facilitate a more sustainable transport future continues unabated. The concept of sustainability in the way we operate and govern your company is also reflected in our overall approach to our Environmental, Social and Governance, or ESG, performance. In the first half of the 2023 financial year, we launched our ESG Strategy and Action Plan, which will further enhance the way we approach the management of any ESG risks, as well as how we can contribute positively to the objectives of our stakeholders and the wellbeing of the communities in which we operate. In addition to achieving Carbon Neutral status for our Australian and UK operations during the year, we introduced our new harmonised Environmental Policy. This policy sets a target for the continued reduction in emission intensity, to be achieved in the 2030 financial year. In keeping with its strong culture of continuous development, your company will maintain its approach to innovate, not only in terms of the products and services it offers, but also in the way we manage our business, to achieve growth in a sustainable and responsible manner and reward you, our shareholders, for your support. The developments of this year have again confirmed that our strategy and our innovation have put us on the right path to achieve this objective. I would like to give my thanks to everyone at SG Fleet for their efforts during the year. The contributions of the Directors of the Board, our management team, and our people have allowed your company to again make progress on past periods. I thank you, our Shareholders, for your continued encouragement of all those that have again contributed to making SG Fleet a company with a promising future. Andrew Reitzer CHAIRMAN 22 August 2023 Sydney SG Fleet Group Limited19 CEO’s report “Whilst the macro environment remained challenging, we again demonstrated the strength of our competitive position and our ability to translate this into positive business outcomes.” Dear Shareholder I am pleased to report on the financial performance of SG Fleet Group Limited for the year ended 30 June 2023. My review of this financial year will refer for comparison to the financial figures for the year ended 30 June 2022. Detailed financial data can be found in the full annual report. Further progress across key financial metrics The patterns seen in the 2022 financial year largely remained in place at the start of the reported period. While continued strong order growth was a feature throughout the 2023 financial year, towards period end, we did see an improvement in several areas, including better supply levels and a stabilisation in the labour environment. Opportunities continued to arise at a steady pace, and we were able to translate these into customer wins and orders across all of our businesses. The Novated channel in particular saw a surge in interest for its products during the period. This trend was accelerated by the EV initiatives announced by the Federal Government, which dramatically increased interest in EVs amongst novated drivers. Unfortunately, while supply of some models improved somewhat late in the financial year, the mainstream vehicles our tool-of-trade drivers require remained in scarce supply. As a result, our order pipeline grew further as strong new business growth outpaced the pick-up in deliveries. During the year, the LeasePlan integration continued, and we were able to extract a number of benefits in terms of scale, product range and penetration, and operational processes. Following the end of the reported period, we also successfully completed the refinancing of the LeasePlan warehouse facility without any meaningful change in cost of funds and on improved general terms. Whilst the macro environment remained challenging, we again demonstrated the strength of our competitive position and our ability to translate this into positive business outcomes. This meant we were able to maintain our excellent record of making consistent period-on-period progress across all key financial metrics. Total net revenue for the full financial year was $350.4 million, up 11.9% on the previous year. Net profit after tax for the reported period was up 23.9% on the previous year, to $75.2 million. Reported earnings per share amounted to 22.00 cents, up 21.2% on the previous corresponding period. This consistent progress was achieved despite supply challenges continuing to delay deliveries and associated revenue. Net rental and finance income grew by 18% to $52.6 million, driven by an increase in the on-balance sheet funded fleet and further growth in the number of vehicles in inertia, a consequence of the lack of new vehicle stock. The Company’s net mobility services revenue increased by 2% to $91.3 million, while net additional products and services revenue grew by 3.3% to $49.0 million, primarily as a result of the growth in funded deliveries. Finance commission reduced by 2.6% on the previous corresponding period, in line with the greater proportion of on-balance sheet funded deliveries, as well as extensions. Finance commission per unit benefited from higher average funded capital as a result of new car inflation and the greater uptake of electric vehicles, which generally carry a higher price tag. End-of-life net vehicle risk income achieved growth of 21%, to $112.1 million on the back of the higher number of operating lease disposals in the 2023 financial year. As was the case in previous periods, end of lease income benefitted from used vehicle pricing, which remained relatively stable at high levels throughout the period. Operating expenses increased to $196.9 million, largely as a consequence of higher technology costs associated with investment in our infrastructure and cyber-security measures, as well as continued material wage cost pressure. Delivery numbers pick up in Corporate channel The business environment in the Australian Corporate channel remained stable throughout the reported period. Tenders continued to come to market on a regular basis and competition was largely rational. As in previous years, many of our customers simply renewed or extended existing contracts. Our win rates remained very healthy, both with existing full-service accounts and with organisations that moved from managed-only to financed or were new to outsourcing. Sale and leasebacks were a particular focus for the Company. These deliver growth in the fleet despite supply issues. Translating our wins and growing order book into deliveries remained the key challenge. Promisingly, in the second half of the financial year, supply improvements in some areas meant that we were able to increase deliveries noticeably and in the fourth quarter, the Corporate channel achieved its best delivery numbers since about two years ago. In terms of customer penetration, we saw continued growth for a number of our products, such as the Inspect365 safety inspection tool, telematics, the DingGo accident and repair management platform portal, and the upgraded bookingintelligence asset management solution. Legacy LeasePlan customers in particular were keen adapters of this technology platform. Not surprisingly given the introduction of measures to promote EV take-up, demand for our eStart EV transition solution also grew further. 2023 Annual Report20 CEO’s report EV boom supports exceptional Novated activity levels Largely mirroring the fortunes of the Corporate channel, Novated again made good progress during the reported period, winning new accounts and attracting additional driver interest. We reached new highs in terms of novated leads in the first half and this trend just accelerated in the second half, helped by EV interest and a significant step-up in our marketing presence. This in turn led to enquiry levels setting new records throughout the period and quotes doubling from the first to the second half. The Government announcement of an FBT exemption for novated leasing of low emission vehicles in late 2022 led to a dramatic increase in demand for EVs and customer requests for quotes on these vehicles rose sharply. This allowed us to achieve industry-leading numbers in terms of EV penetration and at the end of the reported period, we had nine times more EVs in the Novated fleet than in the 2022 financial year. Thankfully, we were able to deliver on this demand more easily as the period progressed, with fourth quarter Novated delivery numbers exceeding the previous high set in the first quarter of the 2022 financial year. Nevertheless, strong business growth meant that the order pipeline grew again on the previous period. “The 2023 financial year was a period during which our UK business significantly raised its profile and received recognition for the unique expertise it offers to customers.” Sustainability agenda drives New Zealand demand for efficient mobility expertise While the New Zealand business environment showed some encouraging signs early in the 2023 financial year, the impact of natural disasters muted the local economy later in the period. Despite this, vehicle registration numbers remained strong. The natural disasters also led to sustained high used vehicle values as supply of new vehicles remained tight. Tender activity in both the private and public sector remained very healthy. We were disciplined in the pursuit of new business in the context of at times irrational pricing, but retention of existing customers continued successfully. At the same time, we remained focused on expanding the services we provide to existing customers. As in previous periods, customers approached their fleet management in the context of a broader sustainability or corporate responsibility agenda, and this continued to drive interest in our mobility and EV products. As was the case in Australia, the roll-out of this and other SG Fleet products to legacy LeasePlan customers continued to receive a very positive response. UK business receives industry acclaim In the UK, some of the concerns about interest rates started to abate as the year passed. In due course, this led to a steady improvement in corporate sentiment and the business opportunities pipeline grew. As more opportunities emerged, our business was able to step up its win activity. This came in the shape of the continued conversion of panel arrangements to sole supply, the addition of vehicle units to existing customer fleets, and noticeably, another period of significant success for our Novalease consumer product. There is no doubt that the upward pressure on prices is driving consumers to look for a more efficient way to access vehicles, leading them to consider our salary sacrifice offering, particularly where there is an added tax incentive as is the case with EVs. The 2023 financial year was a period during which our UK business significantly raised its profile and received recognition for the unique expertise it offers to customers. Following the Business Car Best Eco Initiative Award we received for the eStart solution in the first half, we won the FleetNews Leasing Company of the Year award in the sub-20,000 vehicle category later in the year. LeasePlan integration progresses During the reported period, the various project streams within the LeasePlan integration progressed well. Our focus remained on extracting the benefits we get as we continued to bring two great businesses together. These benefits are being realised predominantly in the areas of product, process, and supply. In addition to the harmonisation of our dealer network and process, we obtained improved supply arrangements for fuel, tyres, accident management and roadside assistance. Our planning and work towards the full integration continues and we are constantly reviewing processes and products, and their impact on customers and service. The changes we are making are positive from a products, risk, and customer point of view, but change always comes with some temporary disruption. After the end of the reported period, we took the decision to improve the customer experience during the system migration phase of the integration by making several planned products and services changes in the LeasePlan system and under the old brand first. Completing the pre-migration product harmonisation in the LeasePlan system first will ensure a smoother transition for customers when they do migrate to the SG Fleet system. As a consequence of the re-prioritisation of the migration process, the final stages of the Australian system migration will now be completed towards the end of the 2025 financial year, at which stage we will start benefiting from the remaining acquisition synergies in the 2026 financial year. This change has no impact on the current financial year and the minor synergies we flagged for this period are expected to remain. We will also continue to extract synergy benefits throughout the 2025 financial year. We reconfirm our acquisition synergy targets and we are looking at opportunities to extract additional benefits. SG Fleet Group Limited21 Innovation focus on digitisation and electric vehicles It is SG Fleet’s stated aim to build out its products and services range and provide a truly integrated mobility solution for our customers. Digitisation is a core enabler of that. During the reported period, we transitioned our traditional accident management services to a digitised approach under the DingGo banner, a first in the industry. The service integrates claims, replacement vehicles and other accident-related needs into a customisable process management and reporting portal. Another mobility solution we invested in, Carly, went from strength to strength, turning in its best quarterly results ever in the first half of the financial year. Conversations with customers in Australia and the UK continued about the introduction of Zoomo e-bikes into their fleets. DingGo, Carly and Zoomo are great examples of our strategy to make selective and targeted investments and then leverage the new products set into our customer base. eStart continues to evolve and we added a capability to manage and process charging activity and charge cards called eManage to this solution. As EV drivers have multiple options to charge their vehicles, a standardised approach to reporting and invoicing is a key requirement for organisations running EV fleets. Of course, the 2023 financial period was the year Australia fully embraced EVs on the back of the government’s initiatives to promote take-up. There is no doubt this burgeoning interest is more than an incentive-driven, temporary phenomenon. We are witnessing a significant shift in our customers’ mindset and buying behaviour, with the importance of adopting cleaner and greener means of transportation increasingly front of mind, both for consumers and organisations. Helped by the experience and expertise we have already accumulated in the higher EV-penetration UK market, we capitalised on this emerging demand during the financial year. As one of Australia’s largest vehicle purchasers, we played a key role in bringing EVs to local drivers, accounting for a significant proportion of new EV registrations nationally. The number of EVs in our Australian fleet doubled in the 12 months to December 2022, and then more than tripled in the six months since. In New Zealand, the EV fleet has been growing steadily for a longer period now, but still doubled over the last 18 months. At the end of the 2023 financial year, EVs accounted for close to 22% of SG Fleet UK’s fleet. SG Fleet UK has clearly established itself as an EV specialist in the local market, getting industry recognition for its know-how and sharing its insights across the entire SG Fleet organisation. Over the years, we have set a benchmark in terms of innovating, adding value, and building flexible solutions for our customers, and not just for EVs. Our ultimate objective is to be our customers’ integrated one-stop shop for all things mobility, and during the 2023 financial year, we accelerated our progress towards that goal. “Our innovation strategy aims to build out our products and services range to provide a truly integrated mobility solution for our customers, with digitisation as a core enabler.” Favourable demand and delivery trends provide added momentum In the 2023 financial year, we have been able to navigate an ever-changing macro environment, continue a transformational integration, and maintain good business growth. Improved supply levels allowed us to achieve our best delivery quarter for some time at the end of the reported period and the strong order book we secured during the 2023 financial year will ensure that this trend will flow into the 2024 financial period. All of our businesses have shown good progress during the year. Momentum in the Australian Corporate business was maintained, and the Novated channel saw unprecedented activity levels across enquiries, quotes, orders, and deliveries during the period. The focus on sustainable mobility continued in New Zealand, playing into our recognised expertise in this area. In the UK, improving business sentiment translated into an acceleration in business activity towards the end of the financial year. Our innovation strategy aims to build out our products and services range to provide a truly integrated mobility solution for our customers, with digitisation as a core enabler. The unique EV expertise we have built up across the organisation puts us in an ideal position to facilitate the introduction of more sustainable forms of transport. The positive impact of the EV boom on Novated orders will continue to play out over future periods and the EV transition will eventually also manifest itself in the Corporate channel. I would like to give my sincere thanks to our Board, my Executive team and each of my colleagues across the Group. In an environment where our unique expertise and innovation capability is in increasing demand, SG Fleet’s future is promising. I would like to thank you, our shareholders, for supporting us as we continue to strengthen our position as a leader in our industry, grow the value we add for our customers, and achieve higher returns for the Company. Robbie Blau CEO 22 August 2023 Sydney 2023 Annual Report22 Contents Directors’ report Auditor’s independence declaration Statement of profit or loss Statement of other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report to the members of SG Fleet Group Limited Shareholder information Corporate directory 23 43 44 45 46 47 48 49 92 93 98 100 SG Fleet Group LimitedDirectors’ report 30 June 2023 23 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of SG Fleet Group Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were Directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: Andrew Reitzer (Chairman) Robert (Robbie) Blau Cheryl Bart AO Peter Mountford Edwin Jankelowitz Kevin Wundram Tex Gunning Colin Brown (alternate for Peter Mountford) Details of the Directors are set out in the section ‘Information on Directors’ below. Principal activities During the financial year, the principal continuing activities of the Group consisted of motor vehicle fleet management, vehicle leasing, short-term hire, consumer vehicle finance and salary packaging services. Dividends Dividends paid during the financial year were as follows: Final dividend for the year ended 30 June 2022 of 6.811 cents per ordinary share paid on 8 September 2022 (2022: Final dividend for the year ended 30 June 2021 of 5.393 cents) Interim dividend for the year ended 30 June 2023 of 8.913 cents per share paid on 9 March 2023 (2022: Interim dividend for the year ended 30 June 2022 of 8.318 cents) CONSOLIDATED 2023 $’000 23,293 30,481 53,774 2022 $’000 16,039 28,446 44,485 On 22 August 2023, the Directors declared a fully franked final dividend for the year ended 30 June 2023 of 7.271 cents per ordinary share, to be paid on 15 September 2023 to eligible shareholders on the register on 1 September 2023. This equates to a total estimated distribution of $24,866,000, based on the number of ordinary shares on issue as at 30 June 2023. The financial effect of dividends declared after the reporting date are not reflected in the 30 June 2023 financial statements and will be recognised in subsequent financial reports. 2023 Annual Report2424 Review of operations The profit for the Group after providing for income tax amounted to $75,248,000 (30 June 2022: $60,732,000). The fleet under management at 30 June 2023 consisted of 121,045 funded vehicles (30 June 2022: 122,516) and Lite Fleet of 149,597 (30 June 2022:145,351). Refer to Chairman’s report and Chief Executive Officer’s report for further commentary on the review of operations. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year Subsequent to the year end, the Group has extended the Autonomy 2021-1 Warehouse facility of $1,050 million and Autonomy NZ 2021-2 Warehouse facility of $240 million with the availability periods extended to June 2025. Apart from the dividend declared and events as discussed above, no other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Likely developments and expected results of operations Likely developments in the operations of the Group and the expected results of those operations are contained in the Chairman’s report and Chief Executive Officer’s report. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on Directors Name: Title: Andrew Reitzer Independent Non-Executive Director and Chairman Qualifications: Bachelor of Commerce and a Master of Business Leadership from the University of South Africa Experience and expertise: Andrew has over 40 years of global experience in both the retail and wholesale industry. He has served as the Chief Executive Officer (‘CEO’) of Metcash Limited between 1998 and 2013. Prior to his appointment as CEO of Metcash, Andrew held various management roles at Metro Cash & Carry Limited and was appointed to lead the establishment of Metro’s operations in Israel and Russia and served as the Group Operations Director. Andrew is currently Chairman of IPIC Pty Ltd. Other current directorships: None Former directorships (last 3 years): Special responsibilities: Non-executive Chairman of Webcentral Group Limited (ASX: WCG) – resigned on 10 November 2020 and Non-executive Chairman of Amaysim Australia Limited (ASX: AYS) – delisted on 6 April 2021. Chairman of the Nomination and Remuneration Committee and Chairman of the Innovation and Technology Committee Interests in shares: 94,461 ordinary shares in the Company Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited2525 Name: Title: Qualifications: Experience and expertise: Robert (Robbie) Blau Executive Director and Chief Executive Officer (‘CEO’) Bachelor of Commerce (Accounting and Law), Bachelor of Laws (Cum Laude) from the University of the Witwatersrand, Higher Diploma in Tax Law from Johannesburg University Robbie was appointed CEO of SG Fleet in July 2006 and has significant experience in the fleet management and leasing industry. Robbie has overall responsibility for the strategic development of the Group and manages its relationships with financial services partners. Previously, Robbie was Managing Director of Nucleus Corporate Finance in South Africa, which he founded in 1999. During his time at Nucleus Corporate Finance, Robbie advised South African listed entity Super Group Limited on corporate advisory and strategic projects. He also spent a year working with the Operations Director of South African Breweries Limited and practised as a commercial attorney for five years at Werksmans Attorneys in South Africa. Other current directorships: Carly Holdings Limited (ASX: CL8) Former directorships (last 3 years): None Special responsibilities: Member of the Innovation and Technology Committee Interests in shares: Interests in options: Interests in rights: Name: Title: Qualifications: Experience and expertise: 8,050,288 ordinary shares in the Company 4,244,276 options over ordinary shares in the Company 158,535 performance rights over ordinary shares in the Company Cheryl Bart AO Independent Non-Executive Director Bachelor of Commerce and Bachelor of Laws from the University of New South Wales, Fellow of the Australian Institute of Company Directors Cheryl is a qualified lawyer and company director with experience across industries including financial services, utilities, energy, renewable energy, television and film. Cheryl previously worked as a lawyer specialising in Banking and Finance at Mallesons Stephen Jaques (now King & Wood Mallesons). Cheryl is currently a director of Shaw Australia Pty Ltd, Chairman of Endeavour Energy, Tilt Renewables and TEDxSydney. Cheryl is past Chairman of ANZ Trustees Ltd, the Environment Protection Authority of South Australia, the South Australian Film Corporation, Adelaide Film Festival and the Foundation for Alcohol Research and Education (‘FARE’). She is the 31st person in the world to complete The Explorer’s Grand Slam, and is a Patron of SportsConnect. Cheryl has also previously been a director of Football Federation Australia, ME Bank, The Prince’s Trust Australia, Australian Himalayan Foundation and Invictus Games Sydney 2018. Other current directorships: Audio Pixels Holdings Limited (ASX: AKP) Former directorships (last 3 years): None Special responsibilities: Member of the Audit, Risk and Compliance Committee, member of the Nomination and Remuneration Committee and member of the Innovation and Technology Committee Interests in shares: 30,665 ordinary shares in the Company 2023 Annual Report2023 Annual Report2626 Name: Title: Qualifications: Experience and expertise: Peter Mountford Non-Executive Director Bachelor of Commerce and Bachelor of Accountancy from the University of the Witwatersrand, Chartered Accountant, Higher Diploma in Taxation from the University of Witwatersrand and MBA (With Distinction) from Warwick University Peter is the nominee for Super Group Limited, has over 25 years of senior management experience and since 2009 has served as the CEO of Super Group Limited. Prior to becoming the CEO of Super Group Limited, he served as the Managing Director of Super Group’s Logistics and Transport division and later its Supply Chain division. Peter’s experience also includes six years as the CEO of Imperial Holdings Limited’s Consumer Logistics division and as Managing Director of South African Breweries Limited’s Diversified Beverages. He is currently a Director and vice Chairman of The Road Freight Association in South Africa and Bluefin Investments Limited (Mauritius). Other current directorships: Super Group Limited (JSE: SPG) Former directorships (last 3 years): None Special responsibilities: Member of the Audit, Risk and Compliance Committee and member of the Nomination and Remuneration Committee Interests in shares: 580,000 ordinary shares in the Company Name: Title: Qualifications: Experience and expertise: Edwin Jankelowitz Non-Executive Director Bachelor of Commerce from the University of the Witwatersrand, Chartered Accountant (South Africa) Edwin has spent over 40 years in corporate offices and has been Chairman of a number of listed companies. He was a member of the Income Tax Special Court in South Africa for 20 years. Prior to joining the Group, Edwin was Finance Director of Metcash Trading Limited and Metcash Limited from May 1998 to January 2011, and a Non-Executive Director of the company until August 2015. Edwin held the positions of Finance Director, Managing Director and then Chairman at Caxton Limited from 1983 to 1997. Edwin was a consultant in business management and tax between 1980 and 1983. Edwin was with Adcock Ingram Ltd from 1967 to 1979 in the Head Office and was promoted over time to Group Company Secretary and then Finance Director. Other current directorships: Former directorships (last 3 years): None None Special responsibilities: Chairman of the Audit, Risk and Compliance Committee Interests in shares: 23,000 ordinary shares in the Company Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited2727 Name: Title: Qualifications: Experience and expertise: Kevin Wundram Executive Director, Chief Financial Officer (‘CFO’) and Head of Risk Bachelor of Commerce from the University of the Witwatersrand, Honours Bachelor of Accounting Science degree from the University of South Africa, Chartered Accountant Kevin has been CFO of SG Fleet Group since July 2006 and has significant experience in the fleet management and leasing industry. He is responsible for the effective management of the finance, treasury, risk and corporate governance functions across the Group. Prior to joining the Group, Kevin was responsible for special projects at Super Group Limited, including the execution of acquisitions, disposals and due diligence. Kevin was also a member of the management committees of the Automotive Parts, Commercial Dealerships and Supply Chain Divisions. Prior to joining Super Group, Kevin worked in the audit and corporate finance divisions of KPMG South Africa for six years. Other current directorships: Alternate Director for Robbie Blau at Carly Holdings Limited (ASX: CL8) Former directorships (last 3 years): None Special responsibilities: Member of the Innovation and Technology Committee Interests in shares: Interests in options: Interests in rights: Name: Title: 872,661 ordinary shares in the Company 1,601,305 options over ordinary shares in the Company 60,506 performance rights over ordinary shares in the Company Tex Gunning Non-Executive Director Qualifications: Economics graduate of Erasmus University Experience and expertise: Tex previously served as the Chief Executive Officer and Chairman of the Managing Board of LeasePlan. He has also served on the supervisory board of TNT express from 2011–2013 to subsequently become the CEO of TNT Express between 2013 and 2016 which was later sold to Fedex in 2016. Tex has also served as CEO of Vedior between 2007 and 2008 after which the company was sold to Randstad. Subsequently he led for 5 years the merger of the ICI paint division with Akzo paint, restructuring and selling the US business to PPG. Tex has 25 years of experience with Unilever, of which 7 years as President East Asia Pacific. Tex currently serves as a supervisory board member of various entities including Erasmus University Trustfonds, The Nexus Institute and World Life Fund Netherlands. He is also chairman of the Board of The Amsterdam Canal festival and the World Economic Forum Climate Sector Leader Auto. Other current directorships: None Former directorships (last 3 years): LeasePlan Corporation N.V Special responsibilities: Interests in shares: None None 2023 Annual Report2023 Annual Report2828 Name: Title: Qualifications: Experience and expertise: Colin Brown Alternate Director for Peter Mountford Bachelor of Accounting Science degree from the University of South Africa (‘UNISA’), Honours Bachelor of Accounting Science degree from UNISA, Certificate in the Theory of Accounting from UNISA, Chartered Accountant (South Africa), Master in Business Leadership degree from the UNISA School of Business Leadership Colin provided support services to Super Group Limited’s treasury activities in Johannesburg from June 2009 to February 2010, and was appointed to the Super Group Limited’s board as CFO in February 2010. Prior to that, Colin was CFO and a member of the board of Celcom Group Limited, a business in the mobile phone industry and previously listed on the Alternative Exchange (‘AltX’) of the Johannesburg Stock Exchange (‘JSE’). Colin has also held the Financial Director position at Electronic Data Systems (‘EDS’) Africa Limited and Fujitsu Services South Africa, both multi-national companies in the information technology services industry and Bluefin Investments Limited (Mauritius). Other current directorships: Super Group Limited (JSE: SPG) Former directorships (last 3 years): None Special responsibilities: Alternative director and member of the Audit, Risk and Compliance Committee for Peter Mountford Interests in shares: 122,639 ordinary shares in the Company ‘ Other current directorships’ set out above are current directorships for listed entities only and exclude directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and exclude directorships of all other types of entities, unless otherwise stated. Company secretary Tawanda Mutengwa (Bachelor of Laws (with distinction), University of Witwatersrand, Master of Laws, UNSW, AGIA) has held the role of company secretary since 10 December 2019. Tawanda first practised law at Bowman Gilfillan in South Africa before taking on legal, governance and secretariat roles at Macquarie Bank, Chubb Insurance, Elanor Investors and at PwC Australia. Meetings of Directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each Director were: BOARD OF DIRECTORS AUDIT, RISK AND COMPLIANCE COMMITTEE NOMINATION AND REMUNERATION COMMITTEE Attended Held Attended Held Attended Held Andrew Reitzer Robbie Blau Cheryl Bart AO Peter Mountford Edwin Jankelowitz Kevin Wundram Tex Gunning 9 8 7 9 9 8 8 9 9 9 9 9 9 9 – – 4 4 4 – – – – 4 4 4 – – 5 – 5 5 – – – 5 – 5 5 – – – Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited2929 INNOVATIONS AND TECHNOLOGY COMMITTEE Attended Held 2 2 2 2 2 2 2 2 Andrew Reitzer Robbie Blau Cheryl Bart AO Kevin Wundram Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee. Colin Brown did not attend any meetings in his capacity as an Alternate Director during the financial year. Remuneration report (audited) The remuneration report, which has been audited, details the Key Management Personnel (‘KMP’) remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: – Principles used to determine the nature and amount of remuneration – Details of remuneration – Service agreements – Share-based compensation – Additional information – Additional disclosures relating to KMP Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to market best practice for 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. The main role of the Nomination and Remuneration Committee (‘NRC’) is to assist the Board in fulfilling its corporate governance responsibilities and to review and make recommendations in relation to the remuneration arrangements for its Directors and executives. The NRC comprises two independent Non-Executive Directors and one Non-Executive Director and meets regularly throughout the financial year. The CEO and CFO attend certain committee meetings by invitation, where management input is required. The CEO and CFO are not present during any discussions related to their own remuneration arrangements. The performance of the Group depends on the quality of its Directors and executives. The remuneration philosophy is to attract, motivate and retain high performing, quality executives. The remuneration framework has been structured to be market competitive and complementary to the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders’ interests. The Board has considered that it should seek to enhance shareholders’ interests by: – having economic profit as a key component of plan 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. 2023 Annual Report2023 Annual Report3030 Additionally, the reward framework should seek to enhance executives’ interests by: – rewarding capability and experience; – reflecting competitive reward for the achievement of strategic objectives and contribution to growth in shareholder wealth; and – providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of Non-Executive Directors and executive remunerations are separate. Non-Executive Directors’ remuneration Fees and payments to Non-Executive Directors reflect the demands that are made on, and the responsibilities of, these Directors. Non-Executive Directors’ fees and payments are reviewed annually by the NRC. The NRC may, from time to time, receive advice from independent remuneration consultants to ensure Non-Executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of other Non-Executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. Non-Executive Directors do not receive retirement benefits, share options or other cash incentives. The remuneration of Non-Executive Directors consists of Directors’ fees and committee fees. The Chairman of the Board attends all committee meetings but does not receive committee fees in respect of his role as Chairman or member of any committee. ASX listing rules require the aggregate Non-Executive Directors remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 12 February 2014, where the shareholders approved the aggregate remuneration be fixed at a maximum of $1,000,000 per annum. Non-Executive Director fees (Directors’ fees and committee fees) (inclusive of superannuation) are summarised as follows: Name – Position Andrew Reitzer – Independent Non-Executive Chairman Cheryl Bart AO – Independent Non-Executive Director Peter Mountford – Non-Executive Director Edwin Jankelowitz – Independent Non-Executive Director Tex Gunning – Non-Executive Director Executive remuneration Fees per annum $211,958 $124,525 $123,375 $139,256 $100,000 The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: – base salary and non-monetary benefits; – short-term performance incentives; – long-term performance incentives; and – other remuneration, such as superannuation and long service leave. The combination of these comprise the executive’s total remuneration. Total Fixed Remuneration (‘TFR’) consisting of base salary, annual leave, superannuation and non-monetary benefits, is reviewed annually by the NRC, based on individual performance and comparable market remunerations. 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 the Group and provides additional value to the executive. Short-term incentives The short-term incentives (‘STI’) program is designed to align the targets of the business units with the performance hurdles of executives. The STI program has an Individual Performance component and a financial component. Non-financial component of STI The Individual Performance component comprises 20% of the STI and the financial component 80%. Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited3131 An individual performance gateway applies in relation to the award of the STI. For an executive to receive payment under the STI program, their performance must be assessed as being fully satisfactory. This includes their individual contribution to the Group’s organisational culture and demonstrating and upholding the shared values that underpin the Group’s purpose and ambition. Upon successfully passing through the performance gateway, in order to earn the non-financial component of their STI, the Executive is appraised according to the achievement of key performance indicators (KPI’s) as well as the achievement of key strategic initiatives. KPI’s include productivity and product profitability measures. Key Strategic Initiatives are defined annually as part of the Group’s strategic planning and each year an assessment is made of the achievements against the initiatives set twelve months before. Strategic Initiatives include for example, new product development, significant technology and business systems development, innovation, customer wins and internal efficiency initiatives. Group performance and link to remuneration – Financial component of STI At the beginning of each year, the NRC sets the growth target for the business units and for the Group as a whole for the purpose of the STI. A minimum profit growth gateway of 60% of the target growth rate applies in order for an executive to be entitled to the financial component of the STI. The performance condition for the financial component of the STI is based on the annual growth rate of the Group’s earnings per share (‘EPS’). EPS is determined by dividing the Company’s NPAT (‘net profit after tax’) by the weighted average number of ordinary shares on issue during the financial year. The growth achieved for the year, and the achievement against the performance conditions for the purpose of the STI is determined by the Board in its absolute discretion, having regard to any matters that it considers relevant. To determine EPS for the purposes of the STI, the Board typically exercises its discretion to adjust the EPS for the impact of non-recurring or significant transactions. The STI is subject to a 12 month payment deferral in equity in respect of 25% of the amount determined as payable and requires continual service over the deferred period. Long-term incentives Long-term incentives (‘LTI’) are typically granted annually to KMP (‘Participants’) in order to align remuneration with the creation of shareholder value over the long term. LTI include long service leave and share-based payments. LTI awards to Participants are made under the Equity Incentive Plan (‘EIP’) and are currently delivered in the form of share options and performance rights (‘LTI Instruments’). The number of LTI Instruments granted is based on a fixed percentage of the relevant Participant’s TFR and is issued to the Participant at no cost. LTI Instruments currently granted to KMP typically vest over a three year period although from time to time the Board may approve a two year vesting period when deemed appropriate (the ‘Performance Period’). The 2021 LTI offer will be assessed over a Performance Period of 1 July 2020 to 30 June 2023 with vesting to occur in August 2023 if the performance conditions are met. The 2022 LTI offer will be assessed over a Performance Period of 1 July 2021 to 30 June 2024 with vesting to occur in August 2024 if the performance conditions are met. The 2023 LTI offer will be assessed over a Performance Period of 1 July 2022 to 30 June 2025 with vesting to occur in August 2025 if the performance conditions are met. The 2023 LTI to the Executive Directors were approved by the shareholders at the Annual General Meeting held on 25 October 2022. The 2021 LTI and 2022 LTI were granted to the Executive Directors on 28 October 2020 and 26 October 2021 respectively. Group performance and link to remuneration – LTI The performance conditions for the LTI Instruments are based on the compound annual growth rate (‘CAGR’) of the Group’s earnings per share (‘EPS’). EPS was selected as the performance condition for the LTI since it is a measure of economic profit and is a key driver of the share price which is a key component in delivering sustained growth in shareholder wealth. The CAGR, and the achievement against the performance conditions for the purpose of the LTI is determined by the Board in its absolute discretion, having regard to any matters that it considers relevant. To determine the EPS CAGR for the purposes of the LTI, the Board typically exercises its discretion to adjust the EPS for the impact of non-recurring or significant transactions. The Performance Period and applicable performance conditions for any future LTI opportunities will be determined by the Board and specified in the relevant offer document. 2023 Annual Report2023 Annual Report3232 For the current LTI offers, the percentage of options that vest and become exercisable, if any, is determined by reference to the vesting schedule, summarised as follows: CAGR of EPS over the Performance Period for 2020 and 2021 LTI % of options that become exercisable Less than 3% 3% (Threshold performance) Between 3% and 7% Nil 42.9% Straight-line pro-rata vesting between 42.9% and 100% 7% or above (Stretch performance) 100% CAGR of EPS over the Performance Period for 2022 LTI % of options that become exercisable Less than 4.8% 4.8% (Threshold performance) Between 4.8% and 11.2% Nil 42.9% Straight-line pro-rata vesting between 42.9% and 100% 11.2% or above (Stretch performance) 100% CAGR of EPS over the Performance Period for 2023 LTI % of options that become exercisable Less than 3% 3% (Threshold performance) Between 3% and 7% Nil 42.9% Straight-line pro-rata vesting between 42.9% and 100% 7% or above (Stretch performance) 100% Any LTI Instruments that remain unvested at the end of the Performance Period will lapse immediately. The Participant is entitled to receive one share for each right that vests. The Participant is entitled to receive one share for each option that vests and is exercised. The Participant must exercise any vested options within 3 years of vesting. After 3 years, any unexercised options will lapse. The Board may make an equivalent cash payment in lieu of providing shares to the participant. Any cash payment is at the Group’s discretion only. The Board may determine to implement a cashless exercise arrangement under which, in lieu of paying cash, the Board may permit a participant to pay the exercise price by forfeiting some of the vested options or forgoing some of the shares that would otherwise be allocated to the participant on exercise. The LTI Instruments do not carry dividends or voting rights prior to vesting and exercise. Participants must not sell, transfer, encumber, hedge or otherwise deal with the options. The EIP provides the Board with broad ‘clawback’ powers if, amongst other things, the Participant has: acted fraudulently or dishonestly, engaged in gross misconduct or has acted in a manner that has brought the Group into disrepute; or there is a material financial misstatement; or the Group is required or entitled under law or Company policy to reclaim remuneration from the Participant; or the Participant’s entitlements vest as a result of fraud, dishonesty or breach of obligations of any other person and the Board is of the opinion that the incentives would not have otherwise vested. If the Participant ceases employment for cause, the unvested LTI Instruments automatically lapse unless the Board determines otherwise. In other circumstances, the LTI Instruments will remain on issue with a broad discretion for the Board to vest or lapse some or all of the LTI Instruments. The Board will ordinarily lapse LTI Instruments in the case of resignation. Where there may be a change of control event, the Board has the discretion to accelerate vesting of some or all of the LTI Instruments and the Board will notify the Participant of the date on which any vested but unexercised options will expire. Where only some of the LTI Instruments are vested on a change of control event, the remainder of the LTI Instruments will immediately lapse. The EIP also provides flexibility for the Group to grant, subject to the terms of individual offers, restricted shares. Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited3333 Use of remuneration consultants During the financial year 30 June 2023, the Group engaged PricewaterhouseCoopers to review and recommend changes to its STI and LTI plans. These recommended changes, to the extent that they are adopted, will be implemented in future STI and LTI plans. PricewaterhouseCoopers was paid $80,000 for the services. An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from KMP. These protocols included the selection of the preferred remuneration consultant being determined by the Nomination and Remuneration Committee, the appointed consultant being briefed by the Nomination and Remuneration Committee, without any KMP’s present and the Remuneration Consultant reporting their recommendations directly to the Chairman of the Nomination and Remuneration Committee. Voting and comments made at the Company’s 2022 Annual General Meeting (‘AGM’) At the 2022 AGM, the shareholders voted to approve the adoption of the remuneration report for the year ended 30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of the KMP of the Group are set out in the following tables. The KMP of the Group consisted of the Directors of SG Fleet Group Limited and the following persons: – Andy Mulcaster – Managing Director, Australia – Geoff Tipene – Managing Director, New Zealand – Peter Davenport – Managing Director, United Kingdom SHORT-TERM BENEFITS POST- EMPLOY- MENT BENEFITS LONG- TERM BENEFITS Cash salary and fees $ Current year bonus $ Non- monetary $ Super- annuation $ Leave benefits $ 2023 Non-Executive Directors: Andrew Reitzer Cheryl Bart AO Peter Mountford Edwin Jankelowitz Tex Gunning Executive Directors: 191,781 112,671 123,375 126,000 100,000 – – – – – Robbie Blau 1,155,356 934,756 Kevin Wundram 582,586 336,678 Other KMP: Andy Mulcaster 518,418 239,676 Geoff Tipene* Peter Davenport* 296,660 339,221 127,840 137,263 3,546,068 1,776,213 21,702 2,639 24,341 – – – – – – – – 20,177 11,854 – 13,256 – 25,292 25,292 25,292 13,626 – – – – – – 25,319 12,778 11,113 – 732 SHARE-BASED PAYMENTS Deferred bonus equity settled $ Other equity  settled $ – – – – – – – – – – Total $ 211,958 124,525 123,375 139,256 100,000 267,009 788,625 3,196,357 97,295 298,277 1,352,906 69,834 35,673 41,175 154,169 1,018,502 91,556 96,212 587,057 617,242 * Total remuneration in local currency paid to Geoff Tipene amounts to NZ$639,598. Total remuneration in local currency paid to Peter Davenport amounts to £343,976. 134,789 49,942 510,986 1,428,839 7,471,178 2023 Annual Report2023 Annual Report3434 2022 Non-Executive Directors: Andrew Reitzer Cheryl Bart AO Graham Maloney* Peter Mountford Edwin Jankelowitz Tex Gunning** Executive Directors: SHORT-TERM BENEFITS POST- EMPLOY- MENT BENEFITS LONG- TERM BENEFITS Cash salary and fees $ Current year bonus $ Non- monetary $ Super- annuation $ Leave benefits $ SHARE-BASED PAYMENTS Deferred bonus equity settled $ Other equity  settled $ – – – – – – – – – – – – – – – – – – Total $ 207,610 121,971 97,500 121,417 119,823 83,333 188,738 110,884 97,500 121,417 108,935 83,333 – – – – – – – – – – – – – – – 18,872 11,087 – – 10,888 – 23,568 23,568 23,568 8,654 – Robbie Blau 1,098,791 863,255 Kevin Wundram 546,315 317,059 Other KMP: Andy Mulcaster 473,677 226,800 Geoff Tipene*** Peter Davenport*** 287,419 342,654 126,965 145,608 3,459,663 1,679,687 22,429 2,315 24,744 74,951 41,137 348,619 836,300 3,245,484 136,872 313,612 1,378,563 36,868 102,213 165,388 1,028,514 – 1,861 57,814 22,877 101,497 108,186 604,778 623,501 120,205 154,817 668,395 1,524,983 7,632,494 * Represents remuneration paid until resignation on 6 April 2022. ** Represents remuneration paid from appointment on 1 September 2021. *** Total remuneration in local currency paid to Geoff Tipene amounts to NZ$644,118. Total remuneration in local currency paid to Peter Davenport amounts to £339,591. Colin Brown (Alternate Director) received no remuneration during the year ended 30 June 2023 and 30 June 2022. Non-Executive Directors’ salaries are 100% fixed. The fixed proportion and the proportion of remuneration linked to performance of Executive Directors and KMP are as follows: Name Executive Directors: Robbie Blau Kevin Wundram Other KMP: Andy Mulcaster Geoff Tipene Peter Davenport FIXED REMUNERATION AT RISK – STI AT RISK – LTI 2023 2022 2023 2022 2023 2022 37% 46% 55% 56% 55% 37% 44% 52% 52% 56% 38% 32% 30% 28% 29% 37% 33% 32% 31% 27% 25% 22% 15% 16% 16% 26% 23% 16% 17% 17% Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited3535 The proportion of the cash bonus paid/payable or forfeited is as follows: Name Executive Directors: Robbie Blau Kevin Wundram Other KMP: Andy Mulcaster Geoff Tipene Peter Davenport Service agreements CASH BONUS PAID/PAYABLE CASH BONUS FORFEITED 2023 2022 2023 2022 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – – – – – – – – – – KMP are employed under individual employment agreements. The agreements are continuous (i.e. not of a fixed duration) unless otherwise stated. These agreements provide for a total compensation including a base salary, superannuation contribution and incentive arrangements; variable notice and termination provisions; provisions for redundancy. Details of these agreements are provided below: Robbie Blau – CEO – Total fixed remuneration (‘TFR’) of $1,176,221 per annum, which includes base salary, statutory superannuation contributions and any salary sacrifice arrangements – Participate in the STI with a maximum STI opportunity of 98% of TFR – Participate in the LTI with a maximum LTI opportunity of 60% of TFR Kevin Wundram – CFO – TFR of $605,646 per annum, which includes base salary, statutory superannuation contributions and any salary sacrifice arrangements – Participate in the STI with a maximum STI opportunity of 70% of TFR – Participate in the LTI with a maximum LTI opportunity of 45% of TFR Other KMP – Other KMP have employment agreements setting out the terms and conditions of their employment. The agreements are not of a fixed duration. – Total compensation inclusive of a base salary and statutory superannuation contributions and any salary sacrifice arrangements – Eligibility to participate in the STI with a maximum STI Opportunity of 56% of TFR – Eligibility to participate in the LTI with a maximum LTI Opportunity of 30% of TFR Terms of STI payments: STI payments are granted to Executive Directors based on specific financial targets and an appraisal of the executive’s performance and KPI’s. The growth achieved for the year, and the achievement against the performance conditions for the purpose of the STI is determined by the Board in its absolute discretion, having regard to any matters that it considers relevant. To determine EPS for the purposes of the STI, the Board typically exercises its discretion to adjust the EPS for the impact of non-recurring or significant transactions. The STI determined annually for each of the above KMP is subject to a 12 month payment deferral in equity in respect of 25% of the amount determined as payable and requirement of service. Terms of termination: In general the contract is terminated by providing 4 weeks’ notice by the Company and 3 months’ notice by the KMP. The KMP have no entitlement to termination payments in the event of removal for misconduct. 2023 Annual Report2023 Annual Report3636 Share-based compensation Issue of shares There were no shares issued to Directors and other KMP during the year ended 30 June 2023 as a result of the exercise of options as part of compensation (2022: Nil). Option holding The number of options over ordinary shares in the Company held during the financial year and at the date of this report by each Director, members of the KMP and other employees of the Group, including their personally related parties, is set out below: Options over ordinary shares Balance at the start of the year Granted Exercised Expired/ forfeited/ other Expired/ forfeited after 30/06/2023 Exercised after 30/06/2023 Balance at the Directors’ report date (148,585) 2,001,328 (218,750) (148,585) 9,726,084 (218,750) Balance at the end of the year 4,244,276 1,601,305 840,854 504,358 533,963 7,724,756 – – – – – – – – – – – – – – – – – – Robbie Blau 3,376,571 867,705 Kevin Wundram 1,266,214 335,091 Andy Mulcaster Geoff Tipene Peter Davenport Total Directors and other KMP 641,038 393,723 418,790 199,816 110,635 115,173 6,096,336 1,628,420 Non-KMP 1,689,323 460,590 Total options 7,785,659 2,089,010 Options: – – – – – – – – The terms and conditions of each grant of options over ordinary shares affecting remuneration of Directors, KMP and other employees in this financial year or future reporting years are as follows: Expired/ forfeited after 30/06/2023 Exercised after 30/06/2023 Balance at the Directors’ report date Balance at the start of the year 960,980 1,823,951 3,235,700 1,765,028 Granted Exercised – – – – – – – – – – – 2,089,010 7,785,659 2,089,010 Expired/ forfeited/ other Balance at the end of the year (148,585) 812,395 1,823,951 3,235,700 (218,750) 1,765,028 2,089,010 – – (148,585) 9,726,084 (218,750) Vesting date and exercisable date 15/08/2022 15/08/2022 22/08/2023 12/08/2024 21/08/2025 Expiry date 14/08/2025 14/08/2025 21/08/2026 11/08/2027 20/08/2028 Exercise price $2.35 $1.68 $1.68 $2.93 $2.17 Options granted carry no dividend or voting rights and can be exercised only once the vesting conditions have been met until their expiry date. The share option plan is subject to a service condition and a performance condition. The performance condition is based on the compound annual growth rate (‘CAGR’) of the Group’s earnings per share. Grant date 25/11/2019 (a) 28/10/2020 (b) 28/10/2020 (c) 26/10/2021 (d) 03/11/2022 (e) Grant date of options 25/11/2019 (a) 28/10/2020 (b) 28/10/2020 (c) 26/10/2021 (d) 03/11/2022 (e) – – – – – – – – 4,244,276 1,601,305 840,854 504,358 533,963 7,724,756 1,782,578 9,507,334 – – – – – – 812,395 1,823,951 3,016,950 1,765,028 2,089,010 9,507,334 Fair value per option at grant date $0.70 $0.45 $0.46 $0.60 $0.60 Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited3737 Performance rights holding: The number of performance rights over ordinary shares in the Company held during the financial year and at the date of this report by each Director, members of the KMP and other employees of the Group, including their personally related parties, is set out below: Performance rights over ordinary shares (LTI) Balance at the start of the year Robbie Blau Kevin Wundram Andy Mulcaster Geoff Tipene Peter Davenport Total Directors and other KMP 287,090 107,659 55,422 34,041 36,198 Granted Vested 94,349 36,436 21,727 12,030 12,523 (107,555) (40,333) (15,995) (9,795) (10,605) 520,410 177,065 (184,283) Expired/ forfeited/ other Balance at the end of the year Expired/ forfeited after 30/06/2023 Vesting after 30/06/2023 Balance at the Directors’ report date – – – – – – 273,884 103,762 61,154 36,276 38,116 513,192 – – – – – – (115,349) 158,535 (43,256) (24,457) (15,091) (15,971) 60,506 36,697 21,185 22,145 (214,124) 299,068 Non-KMP 2,083,378 1,080,206 (501,167) (53,354) 2,609,063 (115,743) (800,327) 1,692,993 Total rights (LTI) 2,603,788 1,257,271 (685,450) (53,354) 3,122,255 (115,743) (1,014,451) 1,992,061 Performance rights over ordinary shares (STI) Balance at the start of the year Robbie Blau Kevin Wundram Andy Mulcaster Geoff Tipene Peter Davenport Total Directors and other KMP 80,145 28,615 19,414 12,753 14,335 Granted 110,765 40,682 29,101 15,693 17,969 Vested (80,145) (28,615) (19,414) (12,753) (14,335) 155,262 214,210 (155,262) Expired/ forfeited/ other Balance at the end of the year Expired/ forfeited after 30/06/2023 Vesting after 30/06/2023 Balance at the Directors’ report date – – – – – – 110,765 40,682 29,101 15,693 17,969 214,210 – – – – – – (110,765) (40,682) (29,101) (15,693) (17,969) (214,210) Non-KMP 247,207 362,834 (221,183) (26,024) 362,834 (11,521) (351,313) Total rights (STI) 402,469 577,044 (376,445) (26,024) 577,044 (11,521) (565,523) – – – – – – – – 2023 Annual Report2023 Annual Report3838 Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of Directors, KMP and other employees in this financial year or future reporting years are as follows: Balance at the start of the year 590,916 147,888 1,130,194 734,790 Grant date LTI 25/11/2019 (f) 28/10/2020 (g) 28/10/2020 (h) 26/10/2021 (i) 03/11/2022 (j) Granted Vested Expired/ forfeited/ other Balance at the end of the year Expired/ forfeited after 30/06/2023 Vesting after 30/06/2023 Balance at the Directors’ report date – – – – (537,562) (53,354) (147,888) – – – – – – – – – – – – – 1,130,194 (115,743) (1,014,451) – – – 734,790 1,257,271 – – – – 734,790 1,257,271 – 1,257,271 Total rights (LTI) 2,603,788 1,257,271 (685,450) (53,354) 3,122,255 (115,743) (1,014,451) 1,992,061 STI 08/09/2021 (k) 09/09/2022 (l) 402,469 – (376,445) (26,024) – – – – 577,044 – – 577,044 (11,521) (565,523) Total rights (STI) 402,469 577,044 (376,445) (26,024) 577,044 (11,521) (565,523) Grant date of rights 25/11/2019 (f) 28/10/2020 (g) 28/10/2020 (h) 26/10/2021 (i) 03/11/2022 (j) 08/09/2021 (k) 09/09/2022 (l) Vesting date 15/08/2022 15/08/2022 22/08/2023 12/08/2024 21/08/2025 01/07/2022 01/07/2023 – – – Fair value per right at grant date $2.46 $1.55 $1.47 $2.33 $1.74 $2.95 $1.74 Performance rights granted carry no dividend or voting rights and will vest when the performance conditions have been met. The performance rights are subject to a service condition and a performance condition. The performance condition is based on the compound annual growth rate of the Group’s earnings per share. Additional information The earnings of the Group for the five years to 30 June 2023 are summarised below: Revenue Profit after income tax Dividends paid 2023 $’000 1,044,897 75,248 53,774 2022 $’000 907,559 60,732 44,485 2021 $’000 2020 $’000 482,080 452,896 43,705 26,859 36,381 43,159 The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: Share price at financial year end ($) Basic earnings per share (cents per share) 2023 2.30 22.00 2022 2.15 18.16 2021 3.00 16.22 2020 1.60 13.88 2019 $’000 509,722 60,462 47,035 2019 2.95 23.20 Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited3939 Additional disclosures relating to KMP Shareholding The number of shares in the Company held during the financial year by each Director and other members of KMP of the Group, including their personally related parties, is set out below: Ordinary shares Andrew Reitzer Cheryl Bart AO Peter Mountford Edwin Jankelowitz Tex Gunning Colin Brown Robbie Blau Kevin Wundram Andy Mulcaster Geoff Tipene Peter Davenport Balance at the start of the year Received as part of remuneration Additions Other 94,461 30,665 580,000 23,000 – 122,639 7,862,588 803,713 617,618 6,525 360,074 10,501,283 – – – – – – – – – – – – – – – – – – 187,700 68,948 35,409 22,548 24,940 339,545 – – – – – – – – – – – – Balance at the end of the year 94,461 30,665 580,000 23,000 – 122,639 8,050,288 872,661 653,027 29,073 385,014 10,840,828 This concludes the remuneration report, which has been audited. Shares under option Unissued ordinary shares of SG Fleet Group Limited under option at the date of this report are as follows: Grant date 25/11/2019 28/10/2020 28/10/2020 26/10/2021 03/11/2022  Expiry date 14/08/2025 14/08/2025 21/08/2026 11/08/2027 20/08/2028 Exercise price Number under option $2.35 $1.68 $1.68 $2.93 $2.17 812,395 1,823,951 3,016,950 1,765,028 2,089,010 9,507,334 Shares under performance rights Unissued ordinary shares of SG Fleet Group Limited under performance rights at the date of this report are as follows: Grant date 26/10/2021 03/11/2022 Vesting date Number under rights 12/08/2024 734,790 21/08/2025 1,257,271 1,992,061 Shares issued on the exercise of options There were no ordinary shares of SG Fleet Group Limited issued on the exercise of options during the year ended 30 June 2023 and up to the date of this report. Shares issued on the exercise of performance rights There were no ordinary shares of SG Fleet Group Limited issued on the vesting of performance rights during the year ended 30 June 2023 and up to the date of this report. 2023 Annual Report2023 Annual Report4040 Material business risks The Board approves the Group’s Risk Management Policy and Risk Appetite. This provides a strong foundation from which the Group can successfully deliver on its strategic priorities. The Group’s Risk Management Policy and Risk Appetite Statement guide management to proactively identify, monitor and manage the existing and emerging material risks that could impact the Group. Risk-aware decision making is embedded within the Group's key processes. The following table sets out the material business risks, in no particular order and excluding generic risks, that could adversely affect the Group’s future business, operations and financial prospects. Risk description Risk Mitigation Vehicle residual values The Group may inaccurately predict future market movements in used vehicle values. Used vehicle values are currently materially inflated due to disruptions in new vehicle supply. The Group expects used vehicle values to normalise at some point, which will cause a reduction in vehicle risk income. The timing of this normalisation is uncertain. New vehicle supply The Group is dependent on a predictable and reliable new vehicle supply chain in order to deliver vehicles and originate leases within a reasonable timeframe from the date the customer places an order. The current disruption to new vehicle supply limits the Group's ability to do so, which adversely impacts customer satisfaction and revenue generation. In a time of rising interest rates, extended delays in new vehicle deliveries can adversely impact the profitability of some of the Group’s products. People The Group’s performance is largely dependent on its ability to attract and retain talent. Loss of key personnel could adversely affect financial performance and business growth. The current tight labour market conditions make recruitment and retention more difficult than is ordinarily the case. In addition, remuneration costs are increasing materially. Economic conditions In the current inflationary environment, the Group is exposed to the risk that it is unable to pass cost increases on to customers thereby adversely impacting profitability. The rising interest rate environment may adversely impact consumer sentiment and the demand for leasing. – The Group uses advanced statistical modelling underpinned by extensive data and overlaid with deep industry expertise to set vehicle residual values. – Multiple residual value risk mitigation strategies are employed during the life of the lease, including lease restructures and extensions. – Contractual incentives are in place with customers to align interests in optimising residual value performance. – The Group's disposal model assists in achieving above-market end-of-lease disposal results. – When new vehicle supply is restored, income on new vehicle deliveries will increase, which will to some extent offset the decline in vehicle risk income. – New vehicle order lead-times have been adjusted to account for the supply chain disruptions. – The Group frequently engages with manufacturers and dealers on the status of production lines and shipping. – Additional resources and technology have been deployed to keep customers informed at regular intervals of the status of their deliveries. – Competitive remuneration structures to attract, motivate and retain talent. – Succession planning to develop or attract talent for sustainable growth. – Employee engagement surveys to identify areas for improvement and support retention. – Performance management processes to help identify, develop and grow talent in line with the Group's values. – The development of a comprehensive employee value proposition. – Increased focus on individual, manager and leadership development. – Robust controls are in place to manage headcount growth and remuneration adjustments. – Pricing is reviewed periodically. – A deal committee structure is in place to set pricing for new customer opportunities. Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited4141 Risk description Risk Mitigation Credit Historically, the majority of the Group’s funding for its lease portfolio was provided under principal & agency funding arrangements in terms of which credit risk is borne by the underlying financier rather than the Group. The introduction of securitisation funding, combined with the acquisition of the LeasePlan ANZ business, means that the Group now has a material credit risk exposure in its own right. Funding The Group’s operations are dependent on having access to competitively priced funding for lease portfolio assets. This funding is secured using two primary funding models, principal & agency and securitisation warehouses. A loss of access to funding or a material change to the terms of funding could adversely affect the Group’s ability to attract or retain customers. The Group’s securitisation warehouses typically have two-year terms. At the expiration date, the Group is exposed to the risk that financiers may not have the appetite to extend the facility. If this occurs, the facility will enter an orderly amortisation phase, but no new business could be originated under the relevant facility. The Group is also exposed to the risk that the funding cost of the securitisation warehouses increases at the point of facility extension. An increase in funding costs would impact the profitability of the back-book as well as the ability to originate new leases at competitive pricing. Integration project execution The Group is undertaking a large-scale, multi-year, integration of the LeasePlan acquisition. This project includes an organisational restructure and multiple system migrations. Delays or failures in the execution of this project could adversely impact the Group’s operations and the achievement of synergy targets. Regulatory Demand for novated leases is driven by the tax concessions available to lessees under existing fringe benefits tax ('FBT') legislation. Changes to the FBT legislation may adversely impact the attractiveness of novated leasing, which would impact the profitability of the Group’s novated leasing channel. Cyber security/data privacy A successful cyber-attack could compromise the technology platforms used by the Group and could result in the exfiltration and loss of information or breach of data privacy laws and/or customer agreements. – The Group has an experienced credit team that operates within a robust credit policy and delegated lending authority framework. – The credit policy, and any changes thereto, are approved by the panel of financiers. – Appropriate segregation of duties is in place, both within the business and on the credit committee. – Annual reviews are performed on corporate customers. – Robust credit decisioning systems are in place. – Comprehensive portfolio parameter limits are in place together with monthly monitoring and reporting. – The Group has a diversified funding structure, with multiple funding partners. – Interest rate risk is hedged in accordance with the contractual maturity of the underlying leases. – The Group is consolidating its operations onto a single ERP system, which will allow originations to be funded using a variety of funding models and financiers. – The integration project is overseen by a Steering Committee that meets fortnightly. The Steering Committee monitors progress and makes key decisions in relation to the integration. – Sub-committees are in place to manage each detailed integration stream. – Robust project management processes are in place for all system migration processes. – Appropriate budgets are in place to adequately resource each project. – The Group has diversified its lease portfolio to reduce the proportion of novated leases. – The Group invests in product development to increase the leasing value proposition beyond the tax concessions. – The company is a member of the National Automotive Leasing and Salary Packaging Association (NALSPA), which is a body formed to communicate the economic benefits of existing FBT policy settings. – A security operations centre is in place that actively monitors the Group’s logical environment for malicious activity 24/7/365. – Robust Infosec and data privacy policies and processes are in place in line with international cybersecurity standards. – Regular penetration testing, vulnerability management controls and patching of all critical IT assets are in place. – Training in data privacy and security is conducted on a recurring basis. 2023 Annual Report2023 Annual Report4242 Indemnity and insurance of officers The Company has indemnified the Directors, executives and employees of the Company for costs incurred, in their capacity as a director, executive or employee, for which they may be held personally liable, except where there is a lack of good faith. The Company’s subsidiary, SG Fleet Australia Pty Limited on behalf of the Company paid a premium in respect of a contract to insure the Directors and executives of the Company and of any related bodies corporates defined in the insurance policy, against a liability to the extent permitted by the Corporations Act 2001. 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 Australia during or since the financial year. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 36 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 36 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: – all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and – none of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards. Officers of the Company who are former partners of Ernst & Young There are no officers of the Company who are former partners of Ernst & Young. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 immediately follows this Directors’ report. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors Andrew Reitzer Chairman 22 August 2023 Sydney Robbie Blau Chief Executive Officer Directors’ report30 June 2023SG Fleet Group LimitedSG Fleet Group Limited Auditor’s independence declaration 4343 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s independence declaration to the Directors of SG Fleet Group Limited As lead auditor for the audit of the financial report of SG Fleet Group Limited for the financial year ended 30 June 2023, 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; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of SG Fleet Group Limited and the entities it controlled during the financial year. Ernst & Young Glenn Maris Partner 22 August 2023 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 27 2023 Annual Report2023 Annual Report 4444 Statement of profit or loss For the year ended 30 June 2023 Revenue Interest revenue calculated using the effective interest method Share of loss of associates accounted for using the equity method Notes 6 15 Expenses Mobility services cost of sale Vehicle risk cost of sale Additional product and services cost of sale Rental and finance cost of sale Other direct costs Depreciation and amortisation Impairment of intangible assets Finance costs Employee benefits expense Occupancy costs Technology and communication costs Other expenses Total expenses Profit before income tax expense Income tax expense Profit after income tax expense for the year attributable to the owners of SG Fleet Group Limited Basic earnings per share Diluted earnings per share Refer to note 4 for detailed information on Restatement of comparatives. 7 7 7 8 44 44 CONSOLIDATED 2023 $’000 2022 $’000 (Restated) 1,044,897 907,559 8,595 (474) (73,870) (288,706) (46,335) (7,627) (19,606) 650 – (63,896) (261,029) (35,635) (11,545) (12,675) (241,942) (202,611) – (71,915) (151,729) (4,018) (26,624) (14,143) (946,515) 106,503 (31,255) 75,248 Cents 22.00 21.88 (55) (52,410) (136,442) (3,515) (22,318) (16,946) (819,077) 89,132 (28,400) 60,732 Cents 18.16 17.99 The above statement of profit or loss should be read in conjunction with the accompanying notes. SG Fleet Group LimitedSG Fleet Group LimitedStatement of other comprehensive income For the year ended 30 June 2023 4545 CONSOLIDATED 2023 $’000 2022 $’000 Profit after income tax expense for the year attributable to the owners of SG Fleet Group Limited 75,248 60,732 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation difference for foreign operations Effective portion of changes in fair value of cash flow hedges, net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of SG Fleet Group Limited 5,646 (2,057) 3,589 78,837 (8,816) 32,193 23,377 84,109 The above statement of other comprehensive income should be read in conjunction with the accompanying notes. 2023 Annual Report2023 Annual Report4646 Statement of financial position As at 30 June 2023 Assets Cash and cash equivalents Restricted cash Finance lease, trade and other receivables Inventories Derivative financial instruments Prepayments Income tax refund due Investments – equity accounted Investments – fair valued Leased motor vehicle assets Property, plant and equipment Intangibles Right-of-use assets Deferred tax Total assets Liabilities Trade and other payables Derivative financial instruments Employee benefits Provisions Lease portfolio borrowings Borrowings Lease liabilities – right-of-use assets Vehicle maintenance funds Contract liabilities Income tax Deferred tax Total liabilities Net assets Equity Issued capital Reserves Retained profits Total equity Notes 9 10 11 12 13 14 8 15 16 17 18 19 20 8 21 22 23 24 25 26 27 28 29 8 8 30 31 CONSOLIDATED 2022 $’000 (Restated) 2021 $’000 (Restated) 61,613 168,820 627,041 47,160 44,094 20,982 5,675 – 6,556 967,019 8,443 630,965 27,846 – 201,605 29,512 66,886 10,136 – 7,522 – – 2,627 94,176 5,461 401,006 8,690 6,235 2023 $’000 92,848 167,566 801,560 29,583 40,687 21,164 4,723 1,637 6,438 1,010,814 11,346 623,130 25,715 – 2,837,211 2,616,214 833,856 275,803 235,047 100,793 26 23,976 31,860 688 22,809 29,782 1,296,404 1,199,266 300,814 25,956 140,509 72,642 – 292,392 27,319 157,838 62,341 – 95,353 42,790 2,263,343 2,070,272 573,868 545,942 505,968 (83,661) 151,561 573,868 505,968 (90,113) 130,087 545,942 1,877 10,967 20,055 65,041 124,519 9,015 82,542 40,617 4,701 – 460,127 373,729 376,661 (116,772) 113,840 373,729 Refer to note 4 for detailed information on Restatement of comparatives. The above statement of financial position should be read in conjunction with the accompanying notes. SG Fleet Group LimitedSG Fleet Group LimitedStatement of changes in equity For the year ended 30 June 2023 Consolidated Balance at 1 July 2021 Adjustment for correction of error (note 4) Balance at 1 July 2021 – restated Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 31) Dividends paid (note 32) Balance at 30 June 2022 – restated Refer to note 4 for detailed information on Restatement of comparatives. Consolidated Balance at 1 July 2022 – restated Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 31) Dividends paid (note 32) Balance at 30 June 2023 Issued capital $’000 Reserves $’000 376,661 (116,772) – – 376,661 (116,772) – – – – – – 23,377 23,377 – 3,282 – 505,968 (90,113) Issued capital $’000 Reserves $’000 505,968 (90,113) – – – – – – 3,589 3,589 2,863 – 505,968 (83,661) Contributions of equity, net of transaction costs (note 30) 129,307 4747 Retained profits $’000 118,297 (4,457) 113,840 60,732 – 60,732 – – (44,485) 130,087 Retained profits $’000 130,087 75,248 – 75,248 – (53,774) 151,561 Total equity $’000 378,186 (4,457) 373,729 60,732 23,377 84,109 129,307 3,282 (44,485) 545,942 Total equity $’000 545,942 75,248 3,589 78,837 2,863 (53,774) 573,868 The above statement of changes in equity should be read in conjunction with the accompanying notes. 2023 Annual Report2023 Annual Report4848 Statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Cash generated from operations before investment in lease portfolio Acquisition of operating and finance lease assets Proceeds from disposal of operating lease assets (excluding vehicle risk income) Capital receipts from finance lease assets Interest received Interest and other finance costs paid Income taxes refunded Income taxes paid Net cash from operating activities Cash flows from investing activities Payment for purchase of subsidiary, net of cash acquired Payment for investments Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Payments for intangibles Payments for investments in associates Net cash used in investing activities Cash flows from financing activities Share awards settled through direct market acquisition Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities – right-of-use assets Borrowing costs paid Dividends paid Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents CONSOLIDATED Notes 2023 $’000 2022 $’000 (Restated)* 1,137,646 (704,355) 433,291 (698,175) 119,590 196,362 8,595 (64,796) 23,038 – 17,905 996,276 (677,560) 318,716 (530,169) 198,628 157,383 650 (46,981) – (52,106) 46,121 – (455,812) (1,243) (7,126) 405 (5,533) (782) (4,863) (4,015) 616 (4,244) – (14,279) (468,318) (1,759) – 145,045 1,837,871 (57,280) (1,352,077) (6,935) (636) (53,774) 24,661 28,287 230,433 1,694 (6,546) (11,444) (44,485) 423,319 1,122 231,117 (1,806) 43 18 19 15 31 43 43 43 32 Cash and cash equivalents and restricted cash at the end of the financial year 9,10 260,414 230,433 * Restatement and realignment of comparatives: 30 June 2022 statement of cash flows has been restated/realigned to the current period presentation. Acquisition and disposal of lease portfolio assets are included within the operating activities above compared to investing activities disclosed in the prior year. As a result, 30 June 2022 net cash flow from operating activities is lower by $183,905,000 from $230,026,000 to $46,121,000. 30 June 2022 net cash used in investing activities improved by $183,905,000 from an outflow of $652,223,000 to $468,318,000. Receipts from customers and Payments to suppliers have been grossed by $23,220,000 inclusive of GST. There has been no impact on the net increase in cash and cash equivalents of $1,122,000 as at 30 June 2022. The above statement of cash flows should be read in conjunction with the accompanying notes. SG Fleet Group LimitedSG Fleet Group Limited Notes to the financial statements 30 June 2023 4949 Note 1. General information Critical accounting estimates The financial statements cover SG Fleet Group Limited as a Group consisting of SG Fleet Group Limited (the ‘Company’ or ‘parent entity’) and the subsidiaries it controlled at the end of, or during, the year (the ‘Group’). The financial statements are presented in Australian Dollars, which is SG Fleet Group Limited’s functional and presentation currency. SG Fleet Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 2, Building 3 20 Bridge Street Pymble NSW 2073 During the financial year, the principal continuing activities of the Group consisted of motor vehicle fleet management, vehicle leasing, short-term hire, consumer vehicle finance and salary packaging services. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 22 August 2023. The Directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for certain financial instruments measured at fair value. 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 Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 40. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of SG Fleet Group Limited as at 30 June 2023 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control at the end of, or during the year. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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 Group. The acquisition of common control subsidiaries is accounted for using the common control method. The acquisition of other 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. Where the Group 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 Group 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. 2023 Annual Report2023 Annual Report5050 Note 2. Significant accounting policies continued 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 are 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 SG Fleet Group Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into the entity’s functional currency 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 rate at the date of the transaction, 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. Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer or where the Group combines two or more contracts entered into in a ‘linked arrangement’ and accounts for the contract as a single contract, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as a contract liability. The Group combines two or more contracts in a linked arrangement when contracts are entered into at or near the same time, contracts are negotiated as a package with a single commercial objective or there is price dependency between the contracts. Where these elements are satisfied, the Group will account for these combined agreements as one contract. Mobility services income Mobility services revenue includes the products and services required to keep a vehicle on the road in a safe and compliant manner. This revenue category includes income from registering and insuring the vehicle, providing assistance in the event of a break-down or accident, telematics and safety inspections. It also includes income from car-share bookings. This is an annuity income stream which is primarily driven by the funded fleet size and brought to account over time due to continuous performance obligations received by customers over the term of the lease. Additional products and services Additional products and services revenue is generated by products that are not typically related to keeping the vehicle on the road and mobile. This revenue category includes products such as accessories, redundancy protection, Trade Advantage and rebates. This income stream is largely transactional in nature and the key driver is the volume of funded deliveries coupled with penetration rates. Revenue from the sale of additional products and services is recognised when it is received or when the right to receive payment is established and the performance obligation has been satisfied. Specifically, upfront establishment fees levied to the customer to establish the contract for the services to be provided for the term of the contract, are recognised over the term of the contract. Revenue related to the waiver of the lessee’s wear and tear obligations is recognised at the point in time, being at the end of the lease term. Finance commission Finance commission is the income earned on leased vehicles funded off balance sheet. This income stream is largely transactional in nature, has no direct costs and the key driver is the volume of funded deliveries. Introductory commissions earned are recognised in profit or loss in full at a point in time, being in the month in which the finance is introduced to the relevant financier. Trailing commissions earned for the collection and distribution of ongoing customer rentals to the financier are recognised over time. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited5151 Vehicle risk income Vehicle Risk Income (‘VRI’) is the income earned as a result of underwriting a long-term risk position on a vehicle at lease commencement, the ultimate financial outcome of which will depend on circumstances and market conditions that occur over the life of each vehicle. VRI consists of an end of lease component (revenues earned on the sale of vehicles from underwriting residual value risk) and in-life component (profits earned from underwriting maintenance and other running costs). VRI end of lease is largely transactional in nature and its primary driver is the volume of operating lease disposals. VRI in-life is a combination of annuity and transactional income and is driven by the number of open-contract vehicles and vehicles with underwritten maintenance risk positions. Rental and finance income Rental and finance income is the income earned on leased vehicles funded on the balance sheet. Rental income is generated by operating lease vehicles, short-term rental vehicles as well as subscription vehicles. Rental income on operating leases is recognised in profit or loss in periodic amounts over the lease term on a straight-line basis. Where variable lease payments are offered which are not linked to an index or rate they are recognised within rental income in the statement of profit and loss in the period which they arise. Finance Income is generated by finance lease vehicles. The cost of sale related to this income stream is operating lease depreciation, direct interest and short-term hire costs. This is an annuity income stream, and the key driver of this income stream is the size of the on balance sheet funded fleet. Rental and finance income is recognised overtime over the lease term. Other income Other income is recognised when it is received or when the right to receive payment is established. 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. 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. SG Fleet 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. 2023 Annual Report2023 Annual Report5252 Note 2. Significant accounting policies continued 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. Finance, trade and other receivables Trade receivables are initially recognised at fair value 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 Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, finance, trade and other receivables have been grouped based on days overdue. For finance lease and contract purchase agreements see the ‘Leases – Group as lessor’ accounting policy. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories End-of-term operating lease assets are stated at the lower of cost and net realisable value. Cost comprises purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the lower of (i) estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale and (ii) cost. 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. At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its hedge transactions. The Group has elected to adopt the general hedge accounting model in AASB 9. This requires the Group to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness. Where derivative instruments do not qualify for hedge accounting, changes in the fair value are recognised immediately in profit or loss. Cash flow hedges Cash flow hedges are used to cover the Group’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 hedging 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. When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were classified in equity are immediately reclassified to profit or loss. Associates Associates are entities over which the Group has significant influence but not control or joint control. Investments in associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in associates are carried in the statement of financial position at cost adjusted by cumulative post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. If impaired, the carrying value of the Group’s share of the underlying assets of associates is written down to its estimated recoverable amount. Dividends received or receivable from associates reduce the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The Group discontinues the use of the equity method upon the loss of significant influence over the associate and recognises any retained investment at its fair value. Any difference between the associate’s carrying amount, fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Property, plant and equipment Plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited5353 Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Leasehold improvements five years Computer hardware and office equipment three to eight years Motor vehicles four years 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 Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. For leased motor vehicles see the ‘Leases – Group as lessor – leased motor vehicles assets’ accounting policy. Leases Group as lessee At inception of a contract, the Group assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, and the Group obtains substantially all the economic benefits of the use of the assets. The Group has elected to apply the practical expedient to account for each lease component and any non-lease components as a single lease component. Right-of-use assets The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost 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 lease incentives received, any initial direct costs incurred, and an estimate of costs required for dismantling and removing the underlying asset, site restoral and asset restoral. Right-of-use assets are subsequently measured applying a cost model such that the asset is depreciated and impaired as required or adjusted for any remeasurement of the lease liability. Where the lease transfers ownership of the asset to the lessee by the end of the lease term, or if the cost of the asset reflects that the lessee will exercise a purchase option, the lessee shall depreciate the right-of-use asset to the end of the asset’s useful life, otherwise, the assets are depreciated to the earlier of the end of their useful lives or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term represents the non-cancellable period of the lease and includes periods covered by an option to extend if the Group is reasonably certain to exercise that option. Lease terms shall only be revised if there is a change in the non-cancellable period or there is a reassessment upon a significant event or a change in circumstances that is both within the control of the lessee and affects whether or not the lessee is reasonably certain to exercise an option. Lease terms range from 1 to 14 years. In addition, the right-of-use assets are periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. Lease liabilities – right-of-use assets The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments comprise fixed lease payments less incentives receivable, variable lease payments, residual value guarantees payable, exercise price of purchase options where exercise is reasonably certain, and any anticipated termination penalties made over the expected term of the lease which includes optional periods where option exercise is considered reasonably certain. Variable lease payments include those dependent upon an index, interest rate or market but are included only using the index or rate existing at commencement date. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change in lease term such as if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or to the profit or loss to the extent that the carrying amount has been reduced to zero. Interest on the lease liability and variable lease payments not included in the measurement of the lease liability are recognised in profit or loss. The Group has elected to apply the practical expedient not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term. Group as lessor A lease is classified as a finance lease if it transfers all the risks and rewards incidental to ownership of the assets. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of underlying assets. 2023 Annual Report2023 Annual Report5454 Note 2. Significant accounting policies continued Amounts due from customers under finance leases and contract purchase agreements are recorded as receivables. Finance and contract purchase receivables are initially recognised at an amount equal to the present value of the minimum instalment payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the contract term. Interest income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the contracts. Group as lessor – leased motor vehicle assets Operating lease assets are stated at historical cost less accumulated depreciation. The cost of operating lease assets includes the purchase cost including non-refundable purchase taxes and other expenditure that is directly attributable to the acquisition of the assets to bring the assets held-for-use in the lease asset portfolio to working condition for the intended use. The depreciable amount of the asset is depreciated over its estimated useful life of two to five years on a straight-line basis. Lease rental income on operating leases is recognised in the statement of profit or loss in periodic amounts over the lease term on a straight line basis. Where variable lease payments are offered which are not linked to an index or rate they are recognised within rental income in the statement of profit or loss in the period which they arise. 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 of amortisation and the 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 Where an entity or operation is acquired in a business combination, that is not a common control transaction, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of the acquisition over the fair value of the identifiable net assets acquired is brought to account as goodwill. 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 The customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite useful lives of ten years. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite useful lives of between two and eight 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 might be impaired. Other non-financial 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 Trade and other payables represent liabilities for goods and services provided to the Group 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 Group’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group 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. Maintenance deferred income liability Maintenance income is recognised for each performance obligation at the point in time when the service is provided and the obligation is completed. Maintenance costs are expensed when incurred. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited5555 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 Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group 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. Residual values The Group has entered into various agreements with its financiers that govern the transfer of the residual value risk inherent in operating lease assets from the financier to the Group at the end of the underlying lease agreement. These agreements include put/call options, sale direction deeds and guaranteed buyback arrangements. The residual value provision is an onerous contract provision and is created to cover estimated future shortfalls on the disposal of these vehicles. Employee benefits Short-term employee benefits Employee benefits expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for employee benefits not expected to be settled within 12 months of the reporting date is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. 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 based on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Equity-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. The cost of equity-settled transactions is 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 Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions is 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. 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 Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award are 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. 2023 Annual Report2023 Annual Report5656 Note 2. Significant accounting policies continued 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 interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Vehicle maintenance funds Vehicle maintenance funds represents amounts collected from customers for vehicles under management, with such amounts subsequently used for payments for ongoing vehicle maintenance expenses such as fuel, service cost, registration and other charges. Any unused amounts at the end of the lease period are refunded to the customers. 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 are 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 Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group 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 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 SG Fleet 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. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited5757 Comparatives Comparatives in the financial report have been realigned to the current period presentation. There has been no effect on the comparative period profit. Significant judgement is applied to the Group consideration of each of its performance obligations as a principal or agent within an individual contract. The determination of principal or agent impacts the presentation of each individual item within the statement of profit or loss as gross revenues or net revenues. 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 Group for the annual reporting period ended 30 June 2023. The adoption of these Accounting Standards and Interpretations is not expected to have any significant impact on the Group’s financial statements. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Revenue from vehicle risk Income As discussed in note 2, the Group estimates the vehicle risk income-in life to be recognised for each performance obligation at a point in time when the service is provided and the obligation fulfilled. These calculations require the use of assumptions, including an estimation of the profit margin to be achieved over the life of the contract for each performance obligation. Principal and Agent considerations In revenue from contracts with customers, the Group provides a range of goods and services whereby it is required to determine whether the nature of its promise to its customers is a performance obligation to provide the specified goods or services itself (that is, the Group entity is a principal) or to arrange for those goods or services to be provided by another party (that is, the Group is an agent). Linked arrangement considerations As discussed in note 2, the Group combines two or more contracts in a linked arrangement when contracts are entered into at or near the same time, contracts are negotiated as a package with a single commercial objective or there is price dependency between the contracts. Where these elements are satisfied, the Group will account for these combined agreements as one contract. The consideration and judgement regarding the linking of contracts is complex and dependent on several factors, with significant judgement required to consider associated price dependency within each of the linked arrangements. Where relevant, considering contracts as linked arrangements results in the inclusion of the variable cost of vehicle acquisition in the cost of inventories at the end of an arrangement. Goodwill The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units, to which goodwill belongs, have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 19 for further information. Residual values As discussed in note 2, the Group has entered into various agreements with its financiers relating to residual value risk inherent in operating lease assets being transferred to the Group at the end of the underlying lease agreement. A provision is raised to cover the future shortfall on the disposal of these vehicles. Significant judgment is required in estimating the market value of the vehicle in its expected future condition. Income tax The Group 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 Group recognises liabilities for anticipated tax audit issues based on the Group’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. 2023 Annual Report2023 Annual Report5858 Note 4. Restatement of comparatives Correction of error Previously the Group’s residual value provision was estimated on a pooled asset basis. This has been changed to reflect the required provision at an asset level. The impact of the retrospective change on the comparative period financial position and results is provided below. Variable consideration payments to customers have been reclassified from Vehicle Risk Cost of Sale to Rental and Finance Income. Mobility services income and expenses have been stated on a gross basis to reflect the nature of the contracts where the Group acts as principal and not the agent for services provided. As a result, comparative period revenue increased by $21,438,000 with a corresponding increase in the comparative period cost of sales. Statement of profit or loss When there is a restatement of comparatives, it is mandatory to provide a statement of profit or loss and other comprehensive income for the year ended 30 June 2022. However, since the above change to the residual risk provision did not impact the comparative year statement of profit or loss, the Group has elected not to show the statement of profit or loss amounts. Statement of financial position at the beginning of the earliest comparative period Extract Assets Deferred tax Total assets Liabilities Provisions Total liabilities Net assets Equity Retained profits Total equity CONSOLIDATED 2021 $’000 Reported $’000 Adjustment 2021 $’000 Restated 4,328 831,949 13,691 453,763 378,186 118,297 378,186 1,907 1,907 6,364 6,364 (4,457) (4,457) (4,457) 6,235 833,856 20,055 460,127 373,729 113,840 373,729 2022 $’000 Restated 29,782 42,790 2,070,272 545,942 130,087 545,942 Statement of financial position at the end of the earliest comparative period Extract Liabilities Provisions Deferred tax Total liabilities Net assets Equity Retained profits Total equity Statement of cash flows: Refer to the statement of cash flows for details on restatement. CONSOLIDATED $’000 Adjustment 6,364 (1,907) 4,457 (4,457) (4,457) (4,457) 2022 $’000 Reported 23,418 44,697 2,065,815 550,399 134,544 550,399 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited5959 Note 5. Operating segments Identification of reportable operating segments The Group is organised into geographic operating segments: Australia, New Zealand, United Kingdom and Corporate. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. 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 in the financial statements. The information regarding products and services are detailed in note 6. Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. Major customers There are no major customers that contributed more than 10% of revenue to the Group. Operating segment information Consolidated – 2023 Revenue Revenue from contracts with customers Rental and finance income Total sales revenue Interest income Total revenue EBITDA Depreciation and amortisation Finance costs Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Australia $’000 New Zealand $’000 577,419 227,796 805,215 6,774 811,989 314,114 (171,310) (55,933) 86,871 80,155 62,066 142,221 1,523 143,744 75,973 (49,663) (12,003) 14,307 United Kingdom $’000 60,075 37,386 97,461 298 97,759 31,211 (20,969) (3,979) 6,263 2,269,228 359,707 208,276 1,855,236 253,805 154,302 Corporate $’000 Total $’000 – – – – – (938) – – (938) – – 717,649 327,248 1,044,897 8,595 1,053,492 420,360 (241,942) (71,915) 106,503 (31,255) 75,248 2,837,211 2,837,211 2,263,343 2,263,343 2023 Annual Report2023 Annual Report6060 Note 5. Operating segments continued Consolidated – 2022 (Restated) Revenue Revenue from contracts with customers Rental and finance income Total sales revenue Interest income Total revenue EBITDA Depreciation and amortisation Impairment of assets Finance costs Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Note 6. Revenue Revenue from contracts with customers Mobility services income Additional products and services Finance commission Vehicle risk income Other income Other revenue Finance lease income Operating lease income Revenue Australia $’000 New Zealand $’000 United Kingdom $’000 Corporate $’000 Total $’000 517,565 174,646 692,211 333 692,544 251,401 (139,713) (55) (39,235) 72,398 68,816 55,746 124,562 291 124,853 67,678 (45,841) – (10,084) 11,753 54,586 36,200 90,786 26 90,812 30,723 (17,057) – (3,091) 10,575 2,083,931 355,476 176,807 1,680,359 261,172 128,741 – – – – – (5,594) – – – (5,594) – – 640,967 266,592 907,559 650 908,209 344,208 (202,611) (55) (52,410) 89,132 (28,400) 60,732 2,616,214 2,616,214 2,070,272 2,070,272 CONSOLIDATED 2023 $’000 165,132 95,404 30,992 416,986 9,135 717,649 27,068 300,180 327,248 1,044,897 2022 $’000 (Restated) 153,383 83,124 31,832 368,048 4,580 640,967 16,444 250,148 266,592 907,559 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group LimitedDisaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Timing of revenue recognition Revenue transferred at a point in time – upfront Revenue transferred over time Revenue transferred at a point in time – end of life Revenue from external customers by geographic regions is set out in note 5 operating segments. Note 7. Expenses Profit before income tax includes the following specific expenses: Depreciation Leasehold improvements Computer hardware and office equipment Motor vehicles Leased motor vehicle assets Right-of-use assets Total depreciation Amortisation Customer contracts Software Total amortisation Total depreciation and amortisation Impairment Intangibles – customer contracts Finance costs External borrowing costs for corporate debt External borrowing costs for lease portfolio Net interest (receivable)/payable on interest rate swap contracts Cash flow hedge ineffectiveness Net foreign exchange losses/(gains) Interest on lease liabilities – right-of-use assets Interest on lease make good Total finance costs Net fair value loss Net fair value loss on investments Superannuation expense Defined contribution superannuation expense 6161 CONSOLIDATED 2023 $’000 59,137 250,890 407,622 717,649 2022 $’000 (Restated) 58,715 229,025 353,227 640,967 CONSOLIDATED 2023 $’000 2022 $’000 377 2,870 821 211,779 7,680 223,527 13,911 4,504 18,415 112 1,950 624 175,515 7,697 185,898 12,616 4,097 16,713 241,942 202,611 – 55 18,386 68,609 (16,522) (121) 577 858 128 12,243 37,456 2,362 (288) (162) 711 88 71,915 52,410 32 934 10,730 10,138 2023 Annual Report2023 Annual Report6262 Note 8. Income tax Income tax expense Current tax Deferred tax – origination and reversal of temporary differences Aggregate income tax expense Deferred tax included in income tax expense comprises: Decrease/(increase) in deferred tax assets Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Entertainment expenses Non-deductible expenses Difference in overseas tax rates Adjustment recognised for prior periods Assessed loss Income tax expense Amounts charged/(credited) directly to equity Deferred tax assets Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at statutory tax rates CONSOLIDATED 2023 $’000 (21,912) 53,167 31,255 2022 $’000 32,825 (4,425) 28,400 53,167 (4,425) 106,503 31,951 73 1,409 33,433 (881) (1,297) – 89,132 26,740 53 2,493 29,286 (1,398) 734 (222) 31,255 28,400 CONSOLIDATED 2023 $’000 2022 $’000 (1,037) 13,084 12,384 3,095 11,483 2,871 The above potential tax benefit for tax losses and temporary differences, relating to United Kingdom, has not been recognised in the statement of financial position. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited6363 CONSOLIDATED 2023 $’000 2022 $’000 (Restated) 622 7,433 7,174 5,329 7,147 (84,231) (5,515) (24,085) (86,126) (9,227) (95,353) (95,353) (42,790) – (53,167) 1,037 – (433) (95,353) 480 7,315 6,825 4,677 7,628 (26,210) (5,536) (27,942) (32,763) (10,027) (42,790) (42,790) 4,328 1,907 4,425 (13,084) (41,203) 837 (42,790) CONSOLIDATED 2023 $’000 4,723 4,723 2022 $’000 5,675 5,675 Deferred tax asset/(liability) Deferred tax asset/(liability) comprises temporary differences attributable to: Amounts recognised in profit or loss: Allowance for expected credit losses Contract liabilities Employee benefits Accrued expenses Provisions (restated) Property, plant and equipment Prepayments Intangibles Amounts recognised in equity: Derivative financial instruments Deferred tax liability Amount expected to be settled after more than 12 months Movements: Opening balance Adjustment due to correction of error (note 4) Credited/(charged) to profit or loss Credited/(charged) to equity Additions through business combinations Exchange differences Closing balance Income tax refund due Income tax refund due Amount expected to be recovered within 12 months During the current financial year, the Group exercised the ‘Temporary full expensing allowance’ provided by the Australian Taxation Office (‘ATO’) which enables the Group to claim an immediate deduction for the cost of an asset in the year it is first used or installed ready for use for a taxable purpose. The Group retrospectively claimed this tax benefit resulting in a higher income tax receivable balance compared to the previous year. As a result, the Group has recognised a corresponding deferred tax liability on the temporary differences arising due to the tax deduction. The net deferred tax liability as at 30 June 2023 increased to $95,353,000 (30 June 2022: $42,790,000). 2023 Annual Report2023 Annual Report 6464 Note 9. Cash and cash equivalents Cash at bank Amount expected to be recovered within 12 months Note 10. Restricted cash Secured deposits Securitisation collection and capital accounts Securitisation reserves Amount expected to be recovered within 12 months CONSOLIDATED 2023 $’000 92,848 92,848 2022 $’000 61,613 61,613 CONSOLIDATED 2023 $’000 26,605 27,589 113,372 167,566 167,566 2022 $’000 27,388 11,185 130,247 168,820 168,820 Secured deposits represent bank account balances held as security as required under certain lease portfolio funding and insurance agreements. Cash held in bank accounts within the securitisation warehouses can only be used to service the obligations of the warehouse in accordance with the transaction agreements. These restricted balances are not available as free cash for the purpose of other operations of the Group. Note 11. Finance lease, trade and other receivables Trade receivables Less: Allowance for expected credit losses Finance lease receivables Less: Allowance for expected credit losses Amount expected to be recovered within 12 months Amount expected to be recovered after more than 12 months CONSOLIDATED 2023 $’000 215,756 (1,898) 213,858 590,195 (2,493) 587,702 801,560 409,172 392,388 801,560 2022 $’000 177,492 (1,218) 176,274 451,938 (1,171) 450,767 627,041 344,082 282,959 627,041 Allowance for expected credit losses The Group has recognised a loss of $1,975,000 (2022: $1,626,000) in profit or loss in respect of the expected credit losses for the year ended 30 June 2023. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited6565 The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Not overdue 30 to 60 days overdue 60 to 90 days overdue 90 to 120 days overdue Over 120 days overdue EXPECTED CREDIT LOSS RATE CARRYING AMOUNT ALLOWANCE FOR EXPECTED CREDIT LOSSES 2023 % 0.31% 22.09% 19.27% 21.42% 20.97% 2022 % 0.19% 38.30% 36.20% 49.10% 26.50% 2023 $’000 796,973 2,989 1,546 1,784 2,659 2022 $’000 626,076 2,028 644 143 539 2023 $’000 2,493 660 298 382 558 2022 $’000 1,166 777 233 70 143 805,951 629,430 4,391 2,389 Movements in the allowance for expected credit losses are as follows: Opening balance Additional provisions recognised Exchange differences Closing balance Lease receivables – finance lease Committed at the reporting date, receivable: 1 year or less Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years Over 5 years Total commitment Less: Future finance charges Net commitment recognised as assets CONSOLIDATED 2023 $’000 2,389 1,975 27 4,391 CONSOLIDATED 2023 $’000 2022 $’000 783 1,626 (20) 2,389 2022 $’000 220,733 175,232 148,118 82,482 37,095 23,291 686,951 (96,756) 590,195 186,898 124,277 96,082 53,317 27,206 3,510 491,290 (39,352) 451,938 2023 Annual Report2023 Annual Report6666 Note 12. Inventories End-of-term operating lease assets held for disposal Less: Provision for impairment Amount expected to be recovered within 12 months Note 13. Derivative financial instruments Interest rate swap contracts – cash flow hedges Amount expected to be recovered within 12 months Amount expected to be recovered after more than 12 months Refer to note 34 for further information on fair value measurement. Note 14. Prepayments Prepayments Amount expected to be recovered within 12 months CONSOLIDATED 2023 $’000 29,798 (215) 29,583 29,583 2022 $’000 47,175 (15) 47,160 47,160 CONSOLIDATED 2023 $’000 40,687 16,197 24,490 40,687 2022 $’000 44,094 16,439 27,655 44,094 CONSOLIDATED 2023 $’000 21,164 21,164 2022 $’000 20,982 20,982 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited6767 Note 15. Investments – equity accounted Investment in DingGo AU Pty Ltd (‘DingGo’) During the current financial year, the Group gained significant influence on the investments in DingGo AU Pty Ltd. As detailed in note 2, investments in associates are carried in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Investment in DingGo AU Pty Ltd Amount expected to be recovered after more than 12 months Reconciliation Reconciliation of the carrying amounts at the beginning and end of the current and previous financial year are set out below: Opening carrying amount Transfer from investments – fair valued on gaining significant influence Additions during the year Share of loss after income tax Closing carrying amount Interests in associates CONSOLIDATED 2023 $’000 1,637 1,637 – 1,329 782 (474) 1,637 2022 $’000 – – – – – – – Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are material to the Group are set out below: Name DingGo AU Pty Ltd Note 16. Investments – fair valued Investments in listed equity securities Investments in other companies Amount expected to be recovered after more than 12 months Refer to note 34 for further information on fair value measurement. Principal place of business/ Country of incorporation Australia Ownership interest 2023 % 19.96% CONSOLIDATED 2023 $’000 1,011 5,427 6,438 6,438 2022 $’000 648 5,908 6,556 6,556 2023 Annual Report2023 Annual Report6868 Note 17. Leased motor vehicle assets Lease portfolio assets – at cost Less: Accumulated depreciation Amount expected to be recovered within 12 months Amount expected to be recovered after more than 12 months CONSOLIDATED 2023 $’000 2022 $’000 1,143,418 1,033,285 (132,604) 1,010,814 282,705 728,109 1,010,814 (66,266) 967,019 387,386 579,633 967,019 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Additions through business combinations Disposals Exchange differences Depreciation expense Balance at 30 June 2022 Additions Disposals Exchange differences Depreciation expense Balance at 30 June 2023 Leased  assets $’000 94,176 483,512 883,626 (299,607) (19,173) (175,515) 967,019 363,733 (119,590) 11,431 (211,779) 1,010,814 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group LimitedNote 18. Property, plant and equipment Leasehold improvements – at cost Less: Accumulated depreciation Computer hardware and office equipment – at cost Less: Accumulated depreciation Motor vehicles – at cost Less: Accumulated depreciation Amount expected to be recovered after more than 12 months Reconciliations CONSOLIDATED 2023 $’000 5,397 (1,076) 4,321 9,756 (6,312) 3,444 4,536 (955) 3,581 11,346 11,346 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Additions through business combinations Disposals Exchange differences Depreciation expense Balance at 30 June 2022 Additions Disposals Exchange differences Depreciation expense Balance at 30 June 2023 Leasehold improvements $’000 Computer hardware and office equipment $’000 397 299 5 – (16) (112) 573 4,101 – 24 (377) 4,321 3,149 2,120 1,135 (181) (22) (1,950) 4,251 2,037 – 26 (2,870) 3,444 Motor vehicles $’000 1,915 1,596 1,299 (435) (132) (624) 3,619 988 (386) 181 (821) 3,581 6969 2022 $’000 1,564 (991) 573 11,266 (7,015) 4,251 4,023 (404) 3,619 8,443 8,443 Total $’000 5,461 4,015 2,439 (616) (170) (2,686) 8,443 7,126 (386) 231 (4,068) 11,346 2023 Annual Report2023 Annual Report7070 Note 19. Intangibles Goodwill – at cost Customer contracts – at cost Less: Accumulated amortisation Less: Accumulated impairment Software – at cost Less: Accumulated amortisation Amount expected to be recovered after more than 12 months Reconciliations CONSOLIDATED 2023 $’000 523,980 141,766 (59,368) (125) 82,273 34,641 (17,764) 16,877 623,130 623,130 2022 $’000 519,547 140,424 (44,708) (125) 95,591 29,070 (13,243) 15,827 630,965 630,965 Total $’000 401,006 4,244 247,631 (12) (5,136) (55) (16,713) 630,965 5,533 5,047 (18,415) 623,130 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Additions through business combinations Disposals Exchange differences Impairment of assets Amortisation expense Balance at 30 June 2022 Additions Exchange differences Amortisation expense Balance at 30 June 2023 Goodwill $’000 357,880 – 165,732 – (4,065) – – 519,547 – 4,433 – 523,980 Customer contracts $’000 27,449 – 81,878 – (1,065) (55) (12,616) 95,591 – 593 (13,911) 82,273 Software $’000 15,677 4,244 21 (12) (6) – (4,097) 15,827 5,533 21 (4,504) 16,877 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited    7171 Goodwill acquired through business combinations have been allocated to the following cash-generating units (‘CGUs’): Australian CGU United Kingdom CGU New Zealand CGU Total Impairment testing for goodwill CONSOLIDATED 2023 $’000 441,493 53,760 28,727 523,980 2022 $’000 441,493 49,852 28,202 519,547 The impairment test was based on a value-in-use approach. The recoverable amount was determined to be higher than the carrying amount and therefore no impairment loss was recognised. Value-in-use was determined by discounting the future cash flows based on the following key assumptions: – Cash flows were projected based on actual operating results and the four-year business plan. Cash flow beyond Year 4 was projected at a growth rate of 0% (2022: 0%) for the three CGUs; – Revenue growth was projected at 4.8% (2022: 7.1%) per annum for the Australian CGU, 15.2% (2022: 8.3%) per annum for the United Kingdom CGU and 4.4% (2022: 8.1%) per annum for the New Zealand CGU; – Direct costs were forecast based on the margins historically achieved by the business; – Overheads were forecast based on current levels adjusted for inflationary increases; and – The Company’s pre-tax weighted average cost of capital was applied in determining the recoverable amount. The discount rate of 11.77% (2022: 9.29%) was used for the Australian CGU, 9.43% (2022: 7.29%) for the United Kingdom CGU and 10.5% (2022: 9.01%) for the New Zealand CGU. The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external and internal data sources. Sensitivity analysis Management estimates that any reasonable changes in the key assumptions would not have a significant impact on the value-in-use of intangible assets and goodwill that would require the assets to be impaired. 2023 Annual Report2023 Annual Report7272 Note 20. Right-of-use assets Right-of-use assets – at cost Less: Accumulated depreciation Amount expected to be recovered after more than 12 months CONSOLIDATED 2023 $’000 55,162 (29,447) 25,715 25,715 2022 $’000 49,589 (21,743) 27,846 27,846 The Group leases office premises under agreements of between 3 to 10 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The Group also leases motor vehicles and equipment under agreements of between 1 to 5 years. Reconciliation Reconciliation of the written down values at the beginning and end of the current financial year are set out below: Consolidated Balance at 1 July 2021 Additions Additions through business combinations Exchange differences Depreciation expense Balance at 30 June 2022 Additions Lease modification and termination Exchange differences Depreciation expense Balance at 30 June 2023 Office premises $’000 Motor vehicles $’000 Others $’000 8,113 13,511 12,920 (176) (7,234) 27,134 4,699 (63) 260 (7,225) 24,805 534 256 – (1) (393) 396 653 – – (359) 690 43 305 38 – (70) 316 – – – (96) 220 Total $’000 8,690 14,072 12,958 (177) (7,697) 27,846 5,352 (63) 260 (7,680) 25,715 For other AASB 16 lease-related disclosures refer to the following: – note 7 for details of interest on lease liabilities and other lease expenses; – note 27 and note 43 for details of lease liabilities at the beginning and end of the reporting period; – note 33 for the maturity analysis of lease liabilities; and – consolidated statement of cash flows for repayment of lease liabilities. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited7373 CONSOLIDATED 2023 $’000 252,957 22,846 275,803 275,803 2022 $’000 214,409 20,638 235,047 235,047 Note 21. Trade and other payables Trade payables Accrued expenses Amount expected to be settled within 12 months Refer to note 33 for further information on financial instruments. Trade payables include residual values payable to financiers, which are secured by the underlying operating lease asset and security deposits of $26,605,000 (2022: $27,632,000). Note 22. Derivative financial instruments Interest rate swap contracts – cash flow hedges Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months CONSOLIDATED 2023 $’000 26 11 15 26 2022 $’000 688 256 432 688 Refer to note 33 for further information on financial instruments. Refer to note 34 for further information on fair value measurement. Note 23. Employee benefits Annual leave Long service leave Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months CONSOLIDATED 2023 $’000 12,478 11,498 23,976 22,424 1,552 23,976 2022 $’000 11,606 11,203 22,809 21,472 1,337 22,809 2023 Annual Report2023 Annual Report7474 Note 24. Provisions Lease make good Residual value risk Other provisions Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months CONSOLIDATED 2023 $’000 4,733 18,339 8,788 31,860 11,676 20,184 31,860 2022 $’000 (Restated) 4,785 17,856 7,141 29,782 11,177 18,605 29,782 Lease make good The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end of the respective lease terms. Residual value risk provision The provision is to recognise the future liability relating to residual value exposures as described in note 2 and note 3. The Group has entered into agreements with its lease portfolio financiers under which the residual value risk inherent in operating leases is transferred from the financier of the asset to the Group at the end of the lease. Under these agreements, at the end of the contractual lease term for each vehicle, the Group is obliged to pay the guaranteed residual value amount to the financier. The Group then sells the vehicles and realises a profit or loss on sale. Secured deposits have been issued to lease portfolio financiers as security for these obligations. An amount of $18,339,000 (2022: $17,856,000) has been recognised as a residual value provision to cover potential shortfalls on the disposal of these vehicles. Other provisions The provision represents the potential loss arising from overdrawn vehicle running cost accounts in relation to novated leases. Movements in provisions Movements in the provision during the current financial period is set out below: Consolidated – 2023 Carrying amount at the start of the year Additional provisions recognised Exchange differences Unused amounts reversed Carrying amount at the end of the year Lease make  good $’000 4,785 128 36 (216) 4,733 Residual value risk (restated) $’000 17,856 – 483 – 18,339 Other provision $’000 7,141 2,341 24 (718) 8,788 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited7575 CONSOLIDATED 2023 $’000 75,830 2022 $’000 65,193 1,220,574 1,134,073 1,296,404 1,199,266 514,290 782,114 443,495 755,771 1,296,404 1,199,266 Note 25. Lease portfolio borrowings Lease portfolio borrowings – non-securitised Lease portfolio borrowings – securitised Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months Refer to note 33 for further information on financial instruments. Lease portfolio borrowings – non-securitised The lease portfolio borrowings are secured by the underlying funded assets and lease agreements, together with secured deposits. These facilities are interest-bearing and are repaid monthly in accordance with the contractual amortisation schedule of the underlying assets. Lease portfolio borrowings – securitised The Group has established limited recourse securitisation warehouse trusts with total commitments from external financiers of $1,369 million (2022: $1,361 million). All amounts owing to parties to the warehouse are secured by fixed and floating charges over all assets of the warehouse, including cash balances, lease receivables and related leased motor vehicles. The financiers to the warehouse have no recourse to the Group, other than in relation to their responsibilities as originator and servicer of assets to the warehouse. As at 30 June 2023, the Group had utilised $1,221 million (2022: $1,134 million) of securitised lease portfolio borrowings. Note 26. Borrowings Bank loans Capitalised borrowing costs Amount expected to be settled after more than 12 months Refer to note 33 for further information on financial instruments. The total secured liabilities are as follows: Bank loans Lease portfolio borrowings – non-securitised (note 25) Lease portfolio borrowings – securitised (note 25) CONSOLIDATED 2023 $’000 301,662 (848) 300,814 300,814 2022 $’000 299,723 (7,331) 292,392 292,392 CONSOLIDATED 2023 $’000 301,662 75,830 2022 $’000 299,723 65,193 1,220,574 1,134,073 1,598,066 1,498,989 Corporate borrowings Corporate borrowings comprise of bank loans and ancillary facility with a facility limit of $423 million as at 30 June 2023. The facility is secured by fixed and floating charges over the assets of the Group as well as composite guarantees and indemnities issued by the Group and certain subsidiaries of the Group. The interest comprises a base rate plus a variable margin and all loans are repayable in full on the maturity date being 31 August 2024. 2023 Annual Report2023 Annual Report7676 Note 26. Borrowings continued Financing arrangements The Group has access to the following lines of credit: Total facilities Corporate borrowings (bank loans) Corporate Borrowings (ancillary facilities) Lease portfolio borrowings – non-securitised Lease portfolio borrowings – securitised Used at the reporting date Corporate borrowings (bank loans) Corporate Borrowings (ancillary facilities) Lease portfolio borrowings – non-securitised Lease portfolio borrowings – securitised Unused at the reporting date Corporate borrowings (bank loans) Corporate Borrowings (ancillary facilities) Lease portfolio borrowings – non-securitised Lease portfolio borrowings – securitised Note 27. Lease liabilities – right-of-use assets Lease liabilities – right-of-use assets Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months CONSOLIDATED 2023 $’000 2022 $’000 301,662 121,529 152,110 299,723 56,998 197,838 1,369,186 1,360,552 1,944,487 1,915,111 301,662 299,723 15,631 75,830 13,519 65,193 1,220,574 1,134,073 1,613,697 1,512,508 – 105,898 76,280 148,612 330,790 – 43,479 132,645 226,479 402,603 CONSOLIDATED 2023 $’000 25,956 6,209 19,747 25,956 2022 $’000 27,319 7,134 20,185 27,319 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited Note 28. Vehicle maintenance funds Vehicle maintenance funds Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months Note 29. Contract liabilities Contract liabilities Amount expected to be settled within 12 months Amount expected to be settled after more than 12 months Reconciliation Reconciliation at the beginning and end of the current and previous financial year are set out below: Opening balance Additions through business combinations Transfer to revenue – included in the opening balance Increase in cash received excluding amounts recognised as revenue during the year Closing balance 7777 CONSOLIDATED 2023 $’000 140,509 49,787 90,722 140,509 2022 $’000 (Restated) 157,838 56,205 101,633 157,838 CONSOLIDATED 2023 $’000 72,642 57,039 15,603 72,642 62,341 – (43,283) 53,584 72,642 2022 $’000 62,341 45,793 16,548 62,341 40,617 43,320 (56,639) 35,043 62,341 2023 Annual Report2023 Annual Report7878 Note 30. Issued capital CONSOLIDATED 2023 Shares 2022 Shares 2023 $’000 2022 $’000 Ordinary shares – fully paid 341,984,920 341,984,920 505,968 505,968 Movements in ordinary share capital Details Balance Date Shares Issue price 1 July 2021 297,396,370 Shares issued on acquisition of LeasePlan ANZ 1 September 2021 44,588,550 $2.90 Balance Balance Ordinary shares 30 June 2022 341,984,920 30 June 2023 341,984,920 $’000 376,661 129,307 505,968 505,968 Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up, in proportions that consider both the number of shares held and the extent to which those shares are paid up. 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. Capital risk management The Group’s objectives when managing capital are 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. The Group monitors capital on the basis of its gearing ratio. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. The Group is subject to certain financing arrangements covenants and meeting these are 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 30 June 2022. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited7979 CONSOLIDATED 2023 $’000 (2,908) 29,640 8,765 (119,158) (83,661) 2022 $’000 (8,554) 31,697 5,902 (119,158) (90,113) Note 31. Reserves Foreign currency reserve Hedging reserve – cash flow hedges Share-based payments reserve Capital reserve Foreign currency reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian Dollars. Hedging reserve – cash flow hedges The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments 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. Capital reserve The reserve is used to recognise contributions from or to SG Fleet Group Limited and its controlled subsidiaries by shareholders. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Cash flow hedge $’000 Share-based payments $’000 Consolidated Balance at 1 July 2021 Foreign currency translation Share-based payments Movement in hedges – gross Deferred tax Balance at 30 June 2022 Foreign currency translation Share-based payments Share awards settled through direct market acquisition Movement in hedges – gross Deferred tax Balance at 30 June 2023  Foreign  currency $’000 262 (8,816) – – – (8,554) 5,646 – – – – (2,908) (496) – – 45,277 (13,084) 31,697 – – – (3,094) 1,037 29,640 Capital $’000 Total $’000 (119,158) (116,772) – – – – (119,158) – – – – – (8,816) 3,282 45,277 (13,084) (90,113) 5,646 4,622 (1,759) (3,094) 1,037 2,620 – 3,282 – – 5,902 – 4,622 (1,759) – – 8,765 (119,158) (83,661) 2023 Annual Report2023 Annual Report8080 Note 32. Dividends Dividends Dividends paid during the financial year were as follows: Final dividend for the year ended 30 June 2022 of 6.811 cents per ordinary share paid on 8 September 2022 (2022: Final dividend for the year ended 30 June 2021 of 5.393 cents) Interim dividend for the year ended 30 June 2023 of 8.913 cents per share paid on 9 March 2023 (2022: Interim dividend for the year ended 30 June 2022 of 8.318 cents) CONSOLIDATED 2023 $’000 23,293 2022 $’000 16,039 30,481 28,446 53,774 44,485 On 22 August 2023, the Directors declared a fully franked final dividend for the year ended 30 June 2023 of 7.271 cents per ordinary share, to be paid on 15 September 2023 to eligible shareholders on the register on 1 September 2023. This equates to a total estimated distribution of $24,866,000, based on the number of ordinary shares on issue as at 30 June 2023. The financial effect of dividends declared after the reporting date are not reflected in the 30 June 2023 financial statements and will be recognised in subsequent financial reports. Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% CONSOLIDATED 2023 $’000 20,327 2022 $’000 80,312 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: – franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date – franking debits that will arise from the payment of dividends recognised as a liability at the reporting date – franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date The franking credits above excludes exempting credits. Note 33. Financial instruments Financial risk management objectives The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group’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 Group. The Board has overall responsibility for the establishment and oversight of the risk management framework. The Audit, Risk and Compliance Committee, a sub-committee of the Board, has responsibility for managing risk. The Committee reports to the Board on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Market risk Foreign currency risk The Group is not exposed to any significant foreign currency risk, except for translation of financial assets and liabilities of foreign subsidiaries into the presentation currency. Price risk The Group is exposed to market price risk on the investments it holds at fair value. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited8181 Interest rate risk The Group’s main interest rate risk arises from its borrowings and cash at the bank, both of which carry variable rates of interest. The Group policy is to ensure that at least 60% of Group corporate borrowings are hedged into a fixed rate for the term of the borrowing (unless approved by the Board). Non-securitised lease portfolio borrowings (other than where used to fund leases in inertia or informal extension) are required to be hedged using an amortising swap profile that reflects the expected repayment profile of the borrowings. Securitisation borrowings are similarly required to be hedged using an amortising swap profile that reflects the expected repayment profile of the borrowings, in compliance with parameters agreed with the financiers to the securitisation. As at the reporting date, the Group had the following variable rate bank accounts and other facilities after impact of hedging instruments: Consolidated Cash at bank Securitisation accounts Secured deposits Bank loans (unhedged) Net exposure to cash flow interest rate risk 2023 Balance $’000 92,848 140,961 26,605 (55,000) 205,414 2022 Balance $’000 61,613 141,432 27,388 (55,000) 175,433 An official increase/decrease in interest rates of 100 (2022: 100) basis points would have a favourable/adverse effect on profit before tax and equity of $2,054,000 (2022: $1,754,000) per annum. The percentage change is based on the expected volatility of interest rates using market data and analyst’s forecasts. Derivatives interest rate swap The Group has entered into interest rate swap contracts with the following notional/principal values as at 30 June 2023: – $246,660,000 (2022: $244,722,000) of bullet swaps maturing in September 2024 with a weighted average fixed rate of 0.65% (2022: 1.07%) in respect of corporate debt borrowings; and – $1,328,158,000 (2022: $1,174,357,000) of amortising swaps with tenors of up to 5 years and a weighted average fixed rate of 3.00% (2022: 1.31%), in relation to securitisation trusts. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to finance, trade and other receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Liquidity risk Vigilant liquidity risk management requires the Group 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. Typically, the Group ensures that it has sufficient cash or facilities on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements Refer to note 26 for details of unused borrowing facilities at the reporting date. 2023 Annual Report2023 Annual Report8282 Note 33. Financial instruments continued Remaining contractual maturities The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated – 2023 Non-derivatives Non-interest bearing Trade payables Interest-bearing – variable Corporate borrowings (bank loans) Lease portfolio liabilities – non-securitised Lease portfolio facilities – securitised Interest-bearing – fixed rate Lease liabilities – right-of-use assets Total non-derivatives Derivatives Interest rate swaps net settled Total derivatives Consolidated – 2022 Non-derivatives Non-interest bearing Trade payables Interest-bearing – variable Corporate borrowings (bank loans) Lease portfolio liabilities – non-securitised Lease portfolio facilities – securitised Interest-bearing – fixed rate Lease liabilities – right-of-use assets Total non-derivatives Derivatives Interest rate swaps net settled Total derivatives 1 year or less $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Over 5 years $’000 Remaining contractual maturities $’000 252,957 – 18,962 28,978 547,018 7,114 855,029 11 11 311,142 24,712 339,379 6,963 682,196 15 15 – – 25,093 453,967 13,026 492,086 – – 1 year or less $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 214,409 – – 4,537 22,771 442,918 7,810 692,445 256 256 4,537 20,491 291,194 6,369 322,591 432 432 301,990 26,181 434,713 14,153 777,037 – – – – – 252,957 330,104 78,783 8,457 1,348,821 1,350 9,807 28,453 2,039,118 – – 26 26 Over 5 years $’000 Remaining contractual maturities $’000 – – – 214,409 311,064 69,443 9,748 1,178,573 1,446 11,194 29,778 1,803,267 – – 688 688 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited8383 Note 34. Fair value measurement Fair value hierarchy The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. Consolidated – 2023 Assets Investments in listed equity securities Investment in other companies Derivative financial instruments – Interest rate swap contracts Total assets Liabilities Derivative financial instruments – Interest rate swap contracts Total liabilities Consolidated – 2022 Assets Investments in listed equity securities Investment in other companies Derivative financial instruments – Interest rate swap contracts Total assets Liabilities Derivative financial instruments – Interest rate swap contracts Total liabilities There were no transfers between levels during the financial year. Level 1 $’000 Level 2 $’000 Level 3 $’000 1,011 – – 1,011 – – Level 1 $’000 648 – – 648 – – – – 40,687 40,687 26 26 Level 2 $’000 – – 44,094 44,094 688 688 – 5,427 – 5,427 – – Level 3 $’000 – 5,908 – 5,908 – – Total $’000 1,011 5,427 40,687 47,125 26 26 Total $’000 648 5,908 44,094 50,650 688 688 Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of trade receivables and trade payables approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial instruments. Valuation techniques for fair value measurements categorised within level 2 and level 3 Unquoted investments have been valued using a discounted cash flow model. Derivative financial instruments have been valued using observable market rates including relevant bank bill swap rates (BBSW). This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates. 2023 Annual Report2023 Annual Report8484 Note 34. Fair value measurement continued Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Balance at 30 June 2022 Additions Transfer to ‘Investments accounted for using the equity method’ on gaining significant influence Balance at 30 June 2023 Other investments $’000 1,330 4,578 5,908 848 (1,329) 5,427 Note 35. Key management personnel disclosures Compensation The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments CONSOLIDATED 2023 $’000 2022 $’000 5,346,622 5,164,094 134,789 49,942 120,205 154,817 1,939,825 2,193,378 7,471,178 7,632,494 Note 36. 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: Audit services – Ernst & Young (2022: KPMG) Audit or review of the financial statements Other services – Ernst & Young (2022: KPMG) Tax services Corporate advisory CONSOLIDATED 2023 $ 2022 $ 1,026,050 1,345,382 – – – 102,300 136,071 238,371 1,026,050 1,583,753 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group LimitedNote 37. Maturity analysis – operating lease receivable Committed at the reporting date, receivable: Within one year One to two years Two to three years Three to four years Four to five years 8585 CONSOLIDATED 2023 $’000 2022 $’000 271,050 154,923 114,306 63,920 25,276 267,631 163,498 116,518 67,856 27,440 629,475 642,943 Future minimum rentals receivable includes contracted amounts for motor vehicles under non-cancellable operating leases between one and five years. Note 38. Contingent liabilities and contractual commitments The Group has entered into agreements with its lease portfolio financiers under which the residual value risk inherent in operating leases is transferred from the financier of the asset to the Group at the end of the lease. The aggregate value of these commitments amounts to $713,858,000 (2022: $702,488,000). Under these agreements, at the end of the contractual lease term for each vehicle, the Group is obliged to pay the guaranteed residual value amount to the financier. The Group then sells the vehicles and realises a profit or loss on sale. Bank guarantees, letters of credit and cash lock-ups have been issued to lease portfolio financiers as security for these obligations. An amount of $18,339,000 (30 June 2022 restated: $17,856,000) has been recognised as a residual value provision to cover potential shortfalls on the disposal of these vehicles. The Group has executed certain guarantees and indemnities, as well as fixed and floating charges over the assets of the Group in favour of funders as security for banking and lease portfolio facilities provided to the Group. Note 39. Related party transactions Parent entities SG Fleet Group Limited is the parent entity. The ultimate parent entity is Super Group Limited, incorporated in South Africa and listed on the Johannesburg Stock Exchange. Subsidiaries Interests in subsidiaries are set out in note 41. Associates Interests in associates are set out in note 15. Key management personnel Disclosures relating to key management personnel are set out in note 35 and the remuneration report included in the Directors’ report. Transactions with related parties During the year, DingGo Pty Ltd (Associate entity) provided accident management services to the Group’s customers resulting in a related party expense within Mobility Services cost of sales of $797,000. DingGo Pty Ltd has one operating lease managed by the Group. As at 30 June 2023 there were no amounts payable or receivable from DingGo Pty Ltd. 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. 2023 Annual Report2023 Annual Report8686 Note 40. 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 Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Retained profits Total equity PARENT 2023 $’000 59,343 59,343 2022 $’000 344,738 344,738 PARENT 2023 $’000 149 2022 $’000 8,592 1,087,433 1,044,773 – – 332,823 295,732 716,356 38,254 754,610 716,356 32,685 749,041 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity and its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others. No deficiencies of assets exist in any of these subsidiaries. Refer to note 42 for further details. The parent entity has also provided guarantees and indemnities for bank facilities. Refer to note 26 for further details. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2023 and 30 June 2022. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: – investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity; and – dividends received from subsidiaries are recognised as other income by the parent entity. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited 8787 Note 41. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: OWNERSHIP INTEREST Name SG Fleet Solutions Pty Limited SG Fleet Holdings Pty Limited SG Fleet Investments Pty Ltd SG Fleet Management Pty Limited SG Fleet Australia Pty Limited SG Fleet Salary Packaging Pty Limited NLC Pty Limited NLC Finance Pty Ltd NLC Insurance Pty Ltd Vehicle Insurance Underwriters Pty Ltd LeasePlan Australia Limited SG Fleet NZ Limited LeasePlan New Zealand Limited SG Fleet UK Limited SG Fleet UK Holdings Limited Fleet Hire Holdings Limited SG Fleet Solutions UK Limited Principal place of business/ Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand United Kingdom United Kingdom United Kingdom United Kingdom 2023 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% – 100% 100% 100% 100% 2022 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Note 42. Deed of cross guarantee The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: SG Fleet Group Limited (holding entity) NLC Insurance Pty Ltd SG Fleet Solutions Pty Limited* SG Fleet Holdings Pty Limited* SG Fleet Investments Pty Ltd* Vehicle Insurance Underwriters Pty Ltd LeasePlan Australia Limited* SG Fleet NZ Limited SG Fleet Management Pty Limited* LeasePlan New Zealand Limited** SG Fleet Australia Pty Limited* SG Fleet UK Limited SG Fleet Salary Packaging Pty Limited* SG Fleet UK Holdings Limited NLC Pty Limited* NLC Finance Pty Ltd* Fleet Hire Holdings Limited SG Fleet Solutions UK Limited By entering into the deed, the entities (denoted above by an asterisk (*)) have opted to obtain relief from the requirement to prepare financial statements and Directors’ report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission (‘ASIC’). The above companies represent a ‘Closed Group’ for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by SG Fleet Group Limited, they also represent the ‘Extended Closed Group’. The statement of profit or loss, statement of other comprehensive income and statement of financial position for the Closed Group are the same as the Group and therefore have not been separately disclosed. ** In accordance with section 255 of the New Zealand Companies Act 1993, LeasePlan New Zealand Limited amalgamated to become SG Fleet NZ Limited on 1 November 2022. In accordance with the New Zealand Companies Act, LeasePlan New Zealand Limited ceased to exist as a separate entity, and all of its rights and obligations, became rights and obligations of SG Fleet NZ Limited. 2023 Annual Report2023 Annual Report8888 Note 43. Cash flow information Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Depreciation and amortisation Impairment of intangibles Net loss/(gain) on disposal of property, plant and equipment Net fair value loss on investments Share of loss – associates Finance costs – non-cash Share-based payments Net movement in fair value of derivatives Change in operating assets and liabilities: Decrease/(increase) in finance lease, trade and other receivables Decrease/(increase) in inventories Decrease/(increase) in income tax refund due Decrease in deferred tax assets Increase in prepayments Increase in lease portfolio assets and finance lease receivables Increase in trade and other payables Increase/(decrease) in contract liabilities Decrease in provision for income tax Increase/(decrease) in deferred tax liabilities Increase in employee benefits Increase/(decrease) in other provisions Net cash from operating activities Non-cash investing and financing activities Additions and modifications to the right-of-use assets Leasehold improvements (lease make good) within right-of-use assets Shares issued in relation to business combinations CONSOLIDATED 2023 $’000 75,248 2022 $’000 (Restated) 60,732 241,942 202,611 – (19) 32 474 7,119 4,622 (349) (38,923) 17,577 952 – (182) (381,997) 24,263 10,301 – 53,600 1,167 2,078 17,905 55 12 934 – 5,435 3,282 (6) 2,516 (29,766) (5,675) 4,328 (13,460) (173,497) 31,726 (21,596) (13,606) (9,590) 2,113 (427) 46,121 CONSOLIDATED 2023 $’000 5,289 – – 5,289 2022 $’000 12,066 2,006 129,307 143,379 Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2021 Net cash (used in)/from financing activities Non-cash additions Changes through business combinations Exchange differences Balance at 30 June 2022 Net cash (used in)/from financing activities Non-cash additions/changes Exchange differences Balance at 30 June 2023 Note 44. Earnings per share Lease portfolio borrowings $’000 65,041 310,794 – 837,540 (14,109) Bank loans $’000 125,841 175,000 – – (1,118) 1,199,266 299,723 87,765 – 9,373 1,296,404 – – 1,939 301,662 Profit after income tax attributable to the owners of SG Fleet Group Limited 8989 Lease liabilities – right-of-use assets $’000 9,015 (6,546) 12,066 12,958 (174) 27,319 (6,935) 5,289 283 Total $’000 199,897 479,248 12,066 850,498 (15,401) 1,526,308 80,830 5,289 11,595 25,956 1,624,022 CONSOLIDATED 2023 $’000 75,248 2022 $’000 60,732 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 341,984,920 334,410,975 Adjustments for calculation of diluted earnings per share: Options over ordinary shares Performance rights over ordinary shares 736,857 1,190,233 1,519,527 1,574,641 Weighted average number of ordinary shares used in calculating diluted earnings per share 343,912,010 337,505,143 Basic earnings per share Diluted earnings per share Cents 22.00 21.88 Cents 18.16 17.99 2023 Annual Report2023 Annual Report9090 Note 45. Share-based payments The Group has a share option plan and performance rights to incentivise certain employees and Key Management Personnel. The share-based payment expense for the year was $4,622,000 (2022: $3,282,000). Share option plan The share option plan is subject to a service condition and a performance condition. The performance condition is based on the compound annual growth rate (‘CAGR’) of the Group’s earnings per share. Set out below are summaries of options granted under the plan: 2023 Grant date Expiry date 25/11/2019 14/08/2025 28/10/2020 14/08/2025 28/10/2020 21/08/2026 26/10/2021 11/08/2027 03/11/2022 20/08/2028 Exercise price $2.35 $1.68 $1.68 $2.93 $2.17 Balance at the start of the year 960,980 1,823,951 3,235,700 1,765,028 – 2,089,010 7,785,659 2,089,010 Granted Exercised Weighted average exercise price $2.05 $2.17 $0.00 $2.35 $2.07 – – – – – – – Expired/ forfeited/ other Balance at the end of the year (148,585) 812,395 – – – – 1,823,951 3,235,700 1,765,028 2,089,010 (148,585) 9,726,084 Expired/ forfeited/ other – – – – – Balance at the end of the year 960,980 1,823,951 3,235,700 1,765,028 7,785,659 – – – – – – – – – – – 2022 Grant date Expiry date 25/11/2019 28/10/2020 28/10/2020 26/10/2021 14/08/2025 14/08/2025 21/08/2026 11/08/2027 Exercise price $2.35 $1.68 $1.68 $2.93 Balance at the start of the year 960,980 1,823,951 3,235,700 – 1,765,028 6,020,631 1,765,028 Granted Exercised Weighted average exercise price $1.79 $2.93 $0.00 $0.00 $2.05 The weighted average share price during the financial year was $1.98 (2022: $2.55) per ordinary share. Outstanding options exercisable as at 30 June 2023 was 2,636,346 (2022: nil). The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.8 years (2022: 1 year). Performance rights The performance rights are subject to a service condition and a performance condition. The performance condition is based on the compound annual growth rate of the Group’s earnings per share. Rights do not carry a right to receive any dividends. If rights vest and are exercised to receive shares, these shares will be eligible to receive dividends. Notes to the financial statements30 June 2023SG Fleet Group LimitedSG Fleet Group Limited9191 Balance at the end of the year – – 1,130,194 – 734,790 577,044 1,257,271 Set out below are summaries of performance rights granted under the plan: 2023 Grant date 25/11/2019 28/10/2020 28/10/2020 08/09/2021 26/10/2021 09/09/2022 03/11/2022 2022 Grant date 25/11/2019 28/10/2020 28/10/2020 08/09/2021 26/10/2021 Vesting date 15/08/2022 15/08/2022 22/08/2023 01/07/2022 12/08/2024 01/07/2023 21/08/2025 Vesting date 15/08/2022 15/08/2022 22/08/2023 01/07/2022 12/08/2024 Balance at the start of the year 590,916 147,888 1,130,194 402,469 734,790 Balance at the start of the year 590,916 147,888 1,130,194 Granted Exercised Expired/ forfeited/ other (53,354) – – (537,562) (147,888) – (376,445) (26,024) – – – – – – – – 577,044 1,257,271 3,006,257 1,834,315 (1,061,895) (79,378) 3,699,299 Granted Exercised Expired/ forfeited/ other Balance at the end of the year – – 402,469 734,790 1,868,998 1,137,259 – – – – – – – – – – – – 590,916 147,888 1,130,194 402,469 734,790 3,006,257 – – – – – – – – Performance rights exercisable as at 30 June 2023 was nil (2022: nil). The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 37 months (2022: 31 months). For the options granted during the current financial year the Black-Scholes valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Vesting date Share price at grant date Exercise price Estimated volatility Dividend yield Risk-free interest rate Fair value at grant date 03/11/2022 21/08/2025 $2.04 $2.17 52.00% 6.00% 3.60% $0.600 For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Vesting date 09/09/2022 01/07/2023 03/11/2022 21/08/2025 Share price at grant date $2.60 $2.04 Exercise price $0.00 $0.00 Dividend yield Fair value at grant date 6.05% 6.00% $1.740 $1.740 Note 46. Events after the reporting period Subsequent to the year end, the Group has extended the Autonomy 2021-1 Warehouse facility of $1,050 million and Autonomy NZ 2021-2 Warehouse facility of $240 million with the availability periods extended to June 2025. Apart from the dividend declared as disclosed in note 32, and the events above, no other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. 2023 Annual Report2023 Annual Report9292 Directors’ declaration 30 June 2023 In the Directors’ opinion: – the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; – the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; – the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2023 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 42 to the financial statements. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. 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 Andrew Reitzer Chairman 22 August 2023 Sydney Robbie Blau Chief Executive Officer SG Fleet Group LimitedSG Fleet Group Limited Independent auditor’s report to the members of SG Fleet Group Limited 9393 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent auditor’s report to the members of SG Fleet Group Limited Report on the audit of the financial report Opinion We have audited the financial report of SG Fleet Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit and loss, the consolidated statement of other comprehensive income, consolidated statement of changes in equity and 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 2023 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 81 2023 Annual Report2023 Annual Report 9494 Independent auditor’s report to the members of SG Fleet Group Limited Revenue Recognition Why significant The Group provides a range of services to customers for mobility services, additional products and services, financing commissions and vehicle risk income relating to sale of rental vehicles. In addition, the Group records income in relation to rental and finance income on a straight-line basis for amounts earned on leased motor vehicles where the Group is a lessor to the arrangement. Revenue recognition was considered a key audit matter due to the significance of this account to the financial statements and due to the judgements it required the Group to make, including: • • • Assessment of the Group’s role in a contract with a customer as either principal or agent. Assessment of certain revenue arrangements as linked contracts, which impact the timing and extent of revenue recognised in the period. Estimation of the stand-alone selling price and total margin earned in a contract, in order to recognise revenue on maintenance services, and associated assessment of deferred revenue balances within deferred maintenance income (contract liabilities). The Group’s revenue recognition accounting policies are set out in Note 2. Note 3 discloses the critical accounting judgements, estimates and assumptions that have been applied by the Group when determining revenue. How our audit addressed the key audit matter Our audit procedures included the following: • • • Assessment of whether the Group’s revenue recognition accounting policies complied with the requirements of Australian Accounting Standards. For a sample of customer contracts we assessed the Group’s determination as to whether it was acting as Principal or Agent in each contract and whether revenue recognised reflected the underlying contractual arrangement. For a sample of linked customer contracts we assessed the underlying contractual arrangements in order to determine whether they met the criteria of accounting for linked contracts under Australian Accounting Standards. • We assessed the appropriateness of the calculation of the stand-alone selling price for revenue on maintenance services by considering the expected cost to provide these services plus a margin. • We assessed deferred maintenance income by selecting a sample of transactions and agreed amounts recognised to maintenance services billed to customers, to amounts specified in the underlying lease agreements and amounts recorded on bank statements. • We agreed a sample of costs incurred in providing maintenance services to external maintenance supplier invoices. • We assessed the historical accuracy of the Group’s estimate of total contract costs by comparing estimates from prior periods to actual costs incurred in the current period. • We assessed the expected future margin on maintenance expenses, based on actual historical costs incurred and forecast costs to incur. Residual Value Risk Provision Why significant How our audit addressed the key audit matter The Group has entered into agreements with financiers which require the transfer of the ownership of the underlying motor vehicle asset and the associated residual value risk to the Group at the end of applicable leases. It is the Group’s policy to recognise a provision if the forecast sale proceeds of the asset are expected to be less than the guaranteed residual value payable to the financier. Our audit procedures included the following: • • Assessed whether the accounting treatment of both the Group’s historical and revised residual value risk provision was in accordance with Australian Accounting Standards. Assessed the effectiveness of controls surrounding the Group's residual value risk provision determination process. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 82 SG Fleet Group LimitedSG Fleet Group Limited 9595 Why significant How our audit addressed the key audit matter At 30 June 2023 a provision of $18.3m has been recorded as disclosed in Note 24. During the year the Group corrected a prior period error and has restated comparative balances as disclosed in Note 4. The provision considers current and expected market conditions and in particular factors, such as inherent volatility of the asset’s disposal value due to changes in market conditions between balance date and the future dates at which the assets will be disposed. This was considered a key audit matter given the significant judgment involved in estimating the provision as well as the requirement in the current year to address the prior period error and restate comparative information. • • • Considered the market conditions and economic factors assumed in the Group's determination of the probable residual values against external benchmark data. For a sample of motor vehicles included in the provision calculation, compared current residual valuations of comparable motor vehicles against the current market value of these motor vehicles using recent external auction prices achieved or other available market data for comparable vehicles. Assessed the calculation of the restatement required to prior period comparatives and adequacy of the associated financial report disclosure. 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 2023 Annual Report other than the financial report and our auditor’s report thereon. We obtained the directors’ report, Chairman’s report and Chief Executive Officer’s report that are 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 we do not and will 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 83 2023 Annual Report2023 Annual Report 9696 Independent auditor’s report to the members of SG Fleet Group Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 84 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 Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. SG Fleet Group LimitedSG Fleet Group Limited9797 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 85 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 pages 11 to 22 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of SG Fleet Group Limited for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Glenn Maris Partner Sydney 22 August 2023 2023 Annual Report2023 Annual Report9898 Shareholder information 30 June 2023 The shareholder information set out below was applicable as at 31 July 2023. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Bluefin Investments Limited Leaseplan Corporation NV Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd (DRP) J P Morgan Nominees Australia Pty Limited National Nominees Limited HSBC Custody Nominees (Australia) Limited Robert Pinkas Blau Netwealth Investments Limited (Wrap Services A/C) Misamada Nominees Pty Limited (Misamada A/C) MDJZ Fernandes Pty Ltd (Mdjz Fernandes A/C) Shevin Pty Limited (The Shevin A/C) Insync Investments Pty Ltd (Weekley Super Fund No 1 A/C) Peter Mountford Mulcaster Super Fund Pty Ltd (Mulcaster Super Fund A/C) HSBC Custody Nominees (Australia) Limited – A/C 2 Macdonald Gilbert Bell NCH Pty Ltd Tark Family Holdings Pty Limited (Tark Family A/C) Scotch Investments Pty Ltd (Scotch Investments A/C) ORDINARY SHARES Number of holders % of total shares issued 592 759 416 645 50 2,462 366 0.07 0.65 0.95 4.81 93.52 100.00 ORDINARY SHARES Number held 182,028,160 44,588,550 29,483,887 12,806,409 9,439,238 7,986,350 7,874,539 6,149,223 6,144,842 1,901,065 1,330,845 779,732 595,565 580,000 567,204 538,964 465,960 445,017 441,253 400,000 % of total shares issued 53.23 13.04 8.62 3.74 2.76 2.34 2.30 1.80 1.80 0.56 0.39 0.23 0.17 0.17 0.17 0.16 0.14 0.13 0.13 0.12 314,546,803 92.00 SG Fleet Group LimitedSG Fleet Group LimitedUnquoted equity securities Options over ordinary shares Performance rights over ordinary shares 9999 Number on issue 9,726,084 1,992,061 Number of holders 10 98 The following person holds 20% or more of unquoted equity securities: Name Robbie Blau Class Options over ordinary shares Number held 4,244,276 Substantial holders Substantial holders in the Company are set out below: Bluefin Investments Limited Leaseplan Corporation NV Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares ORDINARY SHARES Number held 182,028,160 44,588,550 % of total shares issued 53.23 13.04 On a show of hands every member present at a meeting in person or by proxy, attorney or corporate representative shall have one vote and upon a poll each share shall have one vote. Restricted securities Class Expiry date Fully paid shares held by LeasePlan Corporation NV Escrowed to 1 September 2023 Number of shares 22,294,275 Share buy-back There is no current on-market share buy-back. 2023 Annual Report2023 Annual Report100 Corporate directory Directors Andrew Reitzer – Independent Non-Executive Chairman Robbie Blau – Chief Executive Officer Cheryl Bart AO – Independent Non-Executive Director Peter Mountford – Non-Executive Director Edwin Jankelowitz – Independent Non-Executive Director Kevin Wundram – Chief Financial Officer Tex Gunning – Independent Non-Executive Director Colin Brown – Alternate Director for Peter Mountford Company secretary Tawanda Mutengwa Notice of annual general meeting The annual general meeting of SG Fleet Group Limited will be held virtually at 3:00pm on Tuesday, 17 October 2023. Further details will be provided in the Notice of Meeting. Registered office and Principal place of business Level 2, Building 3 20 Bridge Street Pymble NSW 2073 Share register Auditor Telephone: +61 2 9494 1000 Facsimile: +61 2 9391 5656 E-mail: globalenquiries@sgfleet.com The Registrar Boardroom Pty Ltd Level 8, 210 George Street, Sydney, NSW 2000 Telephone: +61 2 9290 9600 E-mail: enquiries@boardroomlimited.com.au Website: www.boardroomlimited.com.au Ernst & Young 200 George Street Sydney NSW 2000 Stock exchange listing SG Fleet Group Limited shares are listed on the Australian Securities Exchange (ASX code: SGF) Website www.sgfleet.com Corporate Governance Statement The Directors and management are committed to conducting the business of SG Fleet Group Limited in an ethical manner and in accordance with the highest standards of corporate governance. SG Fleet Group Limited has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (‘Recommendations’) to the extent appropriate to the size and nature of its operations. The Group’s Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement can be found on the company’s website at http://investors.sgfleet.com/Investors/?page=Corporate-Governance-Statement. Enquiries investorenquiries@sgfleet.com SG Fleet Group Limited

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