Simonds Group Limited
Annual Report 2022

Plain-text annual report

BUILT STRONG ANNUAL REPORT 2022 Over the last 73 years in business, we at Simonds have weathered many storms and as industry-wide challenges continue, our resilience is tested. We have strong roots that are built on family heritage, enduring partnerships with communities and suppliers, and our commitment to customers and employees. We understand how great the achievement is of building a home. We’ve built thousands of new homes and created over 150 display centres across the country. The Simonds story all started with a passionate family-man, Gary Simonds. It’s still his vision that guides us and what makes a Simonds home more than just a house. As we adapt to the future, we are certain of continuing to help Australians fulfil their dream of owning a quality, affordable home. This enduring focus on quality has led us to where we are today – one of Australia’s leading volume home builders. ii CONTENTS 3 Who We Are 4 Chief Executive Officer’s Report 6 People, Safety and Communities 8 Our People 11 Our Core Values 12 Health and Safety 14 Community 16 Our Board 19 Financials 1 2 WHO WE ARE Simonds Group is one of Australia’s largest volume home builders. With sites and display homes across the Australian eastern seaboard and South Australia, we create homes and spaces where communities thrive. Our growing range includes single and double storey detached residential homes throughout Australia’s state capitals and large regional centres. OUR PURPOSE To deliver the shareholder value needed to ensure we can honour our heritage and continue to help Australians fulfil their dream of owning a quality, affordable home. OUR MISSION To design and build quality, affordable homes and deliver the entire experience our customers expect based on the great value and great service that’s foundational to our core values. 3 BUILT STRONG RHETT SIMONDS CEO AND EXECUTIVE CHAIRMAN Dear Shareholder On behalf of the Board, I present the 2022 Simonds Group Limited Annual Report. The Great Australian Builder Over the past year, we have seen the return of ‘The Great Australian Builder’ as our key message to customers. It captures the strength, resilience and leadership earned through our rich legacy and the recent sector-wide challenges. It is also a nod to our extensive reach in education and training, community engagement and our commitment to building quality and affordable homes for all Australians. Our company The past year has been confronting for the construction industry. This is the result of a global construction boom, unprecedented supply chain issues, skill shortages, severe weather events in QLD and NSW, ongoing price increases and lingering impacts of the COVID-19 pandemic. These pressures have been difficult, and I am grateful for the hard work and resilience of the Simonds Team and the patience and kindness of our valued customers during this time. Our strategy To adapt and better equip our business for the multiple challenges we face, Simonds Group have reset our organisational structure and approach. We have a new Executive Team and a focus on proactive decision making, customer service, enhancing systems and innovation. We have a 73-year track record of delivering value to our customers safely and sustainability and the transformation strategy will firstly focus on our core business operations with the aim of Simonds ultimately becoming an innovative industry leader. As we embark on this new way of operating, this powerful quote by leadership expert Peter Drucker motivates me every day: “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Builders Academy Australia In response to challenges presented over the past year, Simonds Group completed the sale of Builders Academy Australia (BAA) for $10.3 million*. *Total consideration of $10.3 million included net debt of the divested business of $1.3 million. The adjusted consideration received in cash was $9.0 million. 4 The sale was completed on 30 November 2021 of its wholly owned subsidary, House of Learning Pty Ltd to UP Education Australia Pty Ltd, a private education provider. The BAA team continues to expand its education and training services to people seeking to enter the construction industry or to enhance their skills. We wish them all the best for the future. Financial performance Despite our uncertain world, I am proud to report that Simonds is in a financially stable position with a positive outlook ahead. The Simonds Group achieved $687.5 million in revenue, an increase of $25.9 million on last year. Site starts of 2,376 were 13% lower than FY21 given land title delays and supply chain challenges, but this was offset by the increased values of jobs going to site. The EBITDA ($3.7 million) for the period remained positive. During FY22, the Company responded to rapidly rising inflation and supply challenges by increasing prices and focusing on profitable work. The resulting orders on hand have a significantly higher average contract value, with efficient delivery continuing to preserve profit margins. The working capital position reflects effective management of resources, including the disposal of BAA, which supported working capital and cash balances. As the Company has no core debt and net available cash of $11 million as at 30 June, it is in a strong position to trade through the current downturn. Near term challenges remain, but the Company is refocusing its approach to strengthen core operations and improve profitability through the right sizing of its cost base. This will result in a healthy and sustainable business that can continue to support its employees and customers for years to come. People, safety and communities Our greatest asset is our people. We strive for an inclusive culture where all employees feel valued and safe and diversity is supported. We have introduced improved training programs that provide digital and customised solutions to ensure our people are best equipped to be healthy and safe at work. Simonds has had a stellar year of nurturing community initiatives to help our employees get behind the charities that matter most to them as well as make broader positive impacts. NET OPERATING REVENUE (CONTINUING OPERATIONS) $687.5 million EBITDA (CONTINUING OPERATIONS) $3.7 million NET ASSETS $13.5 million NEW HOME STARTS 2,376 Environment, social and governance performance We advocate for environment, social and governance (ESG) performance across our value chain to make a lasting impact. We work with our suppliers to promote sustainable sourcing and we are striving to find new opportunities to reduce, reuse and recycle waste. As a large volume builder, Simonds is committed to exploring innovative ways to reduce emissions and mitigate climate change. Outlook As always, we are looking for ways to expand and diversify via our marketing and sales channels to improve our operating margins. We aim to strengthen relationships with developers, keep establishing display homes in major growth zones, and consolidate and modernise our product range. We are confident in our approach and where it will take us. Since the very beginning, my grandfather Gary’s work ethic and commitment to helping people build their own homes has been unwavering. He is one of the longest-serving individuals in the industry, and it is an honour to continue his legacy in making Simonds the preferred home builder for Australians. Murnane 32, Coomera, QLD Acknowledgements Our commitment to family extends to our loyal and talented staff, sub-contractors, suppliers and industry partners. Thank you for your loyalty in recent challenging times. The construction industry supply shortage reinforced how much we value our long-term partnerships as they were critical to meet demands and deliver on the Federal Government’s Home Builder commitments. Thank you to the Board and Shareholders of Simonds Group for your valuable input and strategic counsel. Finally, thank you to our customers and communities who continue to put faith in us to help fulfil the dream of owning your own home. We are built strong and proud to serve you. RHETT SIMONDS CEO and Executive Chairman, Simonds Group Limited 5 PEOPLE, SAFETY AND COMMUNITIES 6 BUILT TO LAST As we honour our strong heritage and build for the future, we are firmly focused on doing what’s right for our people, communities and the environment. We care about everyone impacted by our work, and that starts with the health, safety and wellbeing of our extended workforce. As we emerged from COVID-19 lockdowns, we reunited our people Australia-wide and worked with our valued, long-term partners to deliver responsible, sustainable homes where people and communities can thrive. 7 750 FULL TIME EMPLOYEES 5100+ SUBCONTRACTORS 7.9 EMPLOYEE ENGAGEMENT SCORE OUR PEOPLE We strive to support our people by providing a safe, supportive and rewarding work environment. The Simonds family of employees, suppliers and contractors all make our success possible. Diversity, inclusion and equity key Simonds supports an inclusive culture where employees are valued for their diverse experiences and backgrounds. We have a range of initiatives to encourage equity, starting with our recruitment and selection process, and continuing throughout our employee’s journey with us. We strive for continuous improvement and believe respect reflects how we: • work together • do business • serve our customers • contribute to our communities Learning and development training A key driver of our transformation project ‘Synergy by Simonds’ is about ‘fixing the core’ whereby we align our people, systems and customer service to achieve our central objectives. To deliver on our commitment, we purchased a Learning Management System (LMS) to support the development and training of staff from onboarding through to career development, elevate employee skills and offer training initiatives that invest in our people, and our brand. Many of our employees are undertaking a variety of tailored courses and workshops including leadership and management training. Leadership team shares new transformation strategy We were fortunate to come together as an entire national team for the first time since 2019 to reconnect and share our transformation strategy presentation: ‘Adapting to the Future’. Our Victorian staff joined the event at Hoyts Melbourne Central where it was live streamed to New South Wales, Queensland and South Australia. The purpose of the meeting was to share the new three-year transition plan plus reflect on recent issues that the sector has faced. Next steps involve leadership change readiness workshops and training courses to support our new learning management system. 8 Gary Simonds speaking at the ‘Adapting to the Future’ event in Melbourne. “For the last 73 years, every staff member has contributed something to make Simonds what it is today. The people are what makes a business.” GARY SIMONDS AM Founder of Simonds Group Ltd 9 10 OUR CORE VALUES In March 2021, we launched a new transformation strategy that includes our refreshed core values, mission and purpose. Our values are underpinned by our commitment to safety. At Simonds we have a prevention culture where we value informed behaviour when dealing with work health and safety risks. OUR ORGANSATION’S CORE VALUES ARE: 1 CUSTOMER CENTRIC Our customers are the most important visitors to our home. Our focus is to make each and every one of them feel welcome and special. 2 HONESTY AND ACCOUNTABILITY We are responsible and accountable for the choices we make, the actions we take and the outcomes we deliver. 3 TEAMWORK We always work as a team and acknowledge that our goals can only be achieved when every team member plays their role. 4 GREAT COMMUNICATION Candid and constructive communication is vital in keeping us informed, aligned and connected. 5 INNOVATION Innovation is key to our success. If there’s a better way, we need to know about it and work together to make it happen. 6 FINANCIAL RESPONSIBILITY We are smart with what we have and always try to accomplish more with less. 7 SAFETY Safety is part of everything we do. The physical and mental wellbeing of all our people is vitally important and is infused into all elements of our business. 11 HEALTH AND SAFETY Training and alliances The WHS Team have been providing training to the Construction Team with a focus on identifying common scaffolding hazards, safe work methods, high risk construction activities and working with power. Victoria, South Australia and New South Wales have completed this training, and Queensland will complete their state’s training by September 2022. We maintain a strong voice in the industry through our involvement with the Volume Home Builders Safety Alliances in each state. The purpose of these alliances is to share problems, industry issues, safety concerns and solutions. They allow us to participate in industry improvement programs and maintain positive relationships with regulators. Wellbeing focus and technology for staff We support our team members and their families via the Simonds Employee Assistance Program (EAP), together with our commitment to daily communication and proactive initiatives to help our teams feel safe, connected and supported. In September 2021 our EAP Partner, Assure, launched their Wellbeing Gateway app – an easy way for staff to access wellbeing resources, coaching and support including: • a wide range of engaging programs and activities • articles, videos and audios about parenting, home and family, health, emotional issues, work life, money matters and much more • relaxation tools to encourage good health • a chat feature with an experienced health professional at the touch of a button. The health, wellbeing and safety of our employees and contractors is paramount. Whether working remotely, on site or in the office, our goal is for zero work related injuries and illnesses for Simonds employees and contractors. Safety management systems Simonds are internationally accredited in Workplace Health and Safety, Quality and Environment with the following standards in place: ISO 45001 WHS, ISO 9001 Quality and ISO 14001 Environmental. These systems are externally audited by professional, independent auditing businesses who vigorously measure us against international standards and criteria. The Workplace Health and Safety (WHS) Team use customised solutions to improve productivity, quality and safety in their regions through inspection reports coupled with photographic evidence to maintain transparency and accountability. We actively use an application called QIN CodeSafe. CodeSafe uses a proven methodology to create and deliver visual resources and digital solutions, customised to solve workplace health and safety challenges in the residential construction sector. LOST TIME INJURY FREQUENCY RATE (LTIFR) AND TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) INTERNAL STAFF – 12 MONTH ROLLING AVERAGE d e k r o w s r u o h n a m n o i l l i m r e p s e i r u n I j 20 18 16 14 12 10 8 6 4 2 0 11.3 11.5 12.4 3.0 0.8 0.7 JAN 2020 JAN 2021 JAN 2022 LOST TIME INJURY FREQUENCY RATE (LTIFR) TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) This year, safety has improved recording a decrease in lost time injuries from 0.8 to 0.7. Furthermore, our total recordable injury frequency rate (TRIFR) has decreased from 12.4 to 11.5 over the past year. 12 Working from home and returning to the office Employee wellness remained a strong focus of our health and safety initiatives, as we continued to support our people through the COVID-19 pandemic. When employees were advised to work from home they did so with agility. Our People and Culture Team organised virtual fitness sessions throughout October 2021 with Fit2Box Boxing Studio, giving employees an opportunity to get together virtually and unwind over lunchtime. When we returned to the office after working from home, the new SimSocial Committee aimed to foster and maintain interpersonal connections amongst staff and between departments. The committee organised Monthly Mingles and Coffee Karma fundraising events like our Biggest Morning Tea to bring staff together and build a strong team environment. 13 COMMUNITY Our mission for building homes and futures requires far more than just bricks and mortar. It requires a commitment to respect and care for the communities where we live and work, with the aim to boost their wellbeing and prosperity. Across Australia, Simonds is committed to actively nurturing and supporting many community initiatives to help our employees get behind the charities that matter most to them as well as make broader positive impacts. WHETHER IT IS THROUGH LARGE SCALE PROJECTS THAT ARE YEARS IN THE MAKING OR THROWING OUR SUPPORT BEHIND GRASSROOTS INITIATIVES, WE’RE PROUD TO HAVE RAISED THOUSANDS FOR CHARITABLE ORGANISATIONS IN FY21-FY22. Kicking goals with Western United Football Club Raising funds to support medical research and improve patient care As the principal partner of Western United Football Club (WUFC), we are proud to support a team who lives and breathes their community values, both on and off the field. Claiming victory in a history-making A-League Grand Final in their third season as a franchise is a testament to the dedication and talent of the squad, as well as everyone working behind the scenes. Based in our heartland of Melbourne’s West, we look forward to continuing our close partnership with WUFC, winning more championships, and building the future of the West together, for years to come. From the soccer pitch to life-changing advances in medical research and treatment, we are proud to be partnering closely with Flinders Foundation through our newly built charity home in Lightsview, South Australia. The auction proceeds will be going towards the Foundation’s mission of preventing, curing and caring for patients across the Flinders medical precinct. We are looking forward to the upcoming completion and auction of the charity home and thank all of those involved who have been instrumental to this project. 14 SUPPORTING MOVEMBER AND HELPING RAISE AWARENESS OF MEN’S HEALTH ISSUES THROUGH OUR MONTHLY COFFEE KARMA INITIATIVE. This year, we surpassed our Biggest Morning Tea fundraising goal of $1,000 to raise $1,554. Cycling for the greater good and supporting causes we are passionate about As part of our monthly Coffee Karma initiative, Queensland Simonds team members Ricky Cassells, Dallas Woods and Cameron Archibald took part in the August 2021 Noosa Classic Cycling Event. They rode 160km each to raise funds for Beyond Blue, aiming to break down the stigma associated with men suffering from mental health issues. Each month, our employees raise funds for charities through our Coffee Karma fundraising initiative. Over the last year, we’ve donated to Cystic Fibrosis Australia, Movember, the Cancer Council, the Smith Family’s Toy and Book Appeal, Beyond Blue, Foodbank Victoria and more. This is an opportunity to give back to causes close to our staff’s hearts and to those in need. Local sports partnerships This last year, we have supported clubs across the country including the Huntly Hawks, Sandhurst Cricket Club, Bright Football and Netball Club, Walkerville Netball Club, Loddon Valley Football Netball League, Collegians Football Club, Altona Football Club, Koo Wee Rup Football Club and more. 15 OUR BOARD Rhett Simonds, Chief Executive Officer (CEO) and Executive Chairman Rhett joined the business in 2005. He has a strong focus on the property and construction sector, where he sits on several private company boards and executive management teams. Rhett is also a director of and investor in several technology and finance-related businesses. He has a Bachelor of Commerce from Deakin University. Mark Simonds, Executive Director For over 40 years, Mark has been immersed in the volume home building industry. He holds a registered builder’s license in Victoria, New South Wales, Queensland and South Australia. Prior to 2014, when Simonds Group limited was ASX listed, Mark was engaged in the day-to-day executive management of Simonds Homes. From 1973 until its listing, Mark worked alongside his father Gary Simonds, and understands what is required for a successful volume building business. Mark is the Deputy Chairman of Simonds Consolidated, primarily focused on venture capital and private equity building and construction, real estate, and vocational education. Iain Kirkwood, Independent Non-Executive Director Iain is an experienced, listed-company Non-Executive Director and Chairman, and has worked as a Senior Executive and Non-Executive Director across a range of industries including auditing, resources, manufacturing and healthcare in Australia, the United States and Britain. Iain is Chairman of Bluechip Ltd, former Chairman of Novita Healthcare Limited and has held Non-Executive Director roles with Medical Developments International Ltd and Vision Eye Institute Ltd. Iain is the Chair of the Group’s Audit & Risk Committee and is a member of the Group’s Nomination & Remuneration Committee. Piers O’Brien, Non-Executive Director Piers is a qualified lawyer with over 20 years of professional experience. For the last 12 years, he has worked in-house as both General Manager Legal and General Counsel. During this time, Piers managed the legal function at ASX 200 company Skilled Group Ltd for approximately eight years. Piers started his career in private practice with K&L Gates Lawyers (and its predecessor firms), where he specialised in mergers and acquisitions, corporate transactions, and board advisory work. He is a member of the Group’s Audit & Risk, and Nomination & Remuneration Committees. Andrew Bloore, Non-Executive Director Andrew is an experienced Non-Executive Director, entrepreneur and farmer. He has designed, built and sold a number of businesses focused on the development of key disruptive technologies and distribution services in traditional markets including Smartsuper, SuperIQ and Class Super. Andrew is currently Chairman of Guild Group and an independent, Non-Executive Director of IOOF Limited. Andrew is also a Non-Executive Director of Simonds Family Office Pty Ltd. Andrew has been appointed as the Chair of the Group’s Nomination & Remuneration Committee and is a member of the Group’s Audit & Risk Committee. David Denny, Independent Non-Executive Director David Denny is a former partner at PwC, where he was a leader of mergers and acquisitions, and corporate finance advisory businesses for Australia and the Asia Pacific region. David has international business experience including cross- border transactions, international leadership roles and a secondment to Asia. He has provided strategic, transactional and financial advice to many businesses operating in a diverse range of industries, including construction and home building. 16 TOUGH TIMES MAKE US STRONGER We have been building for over 70 years. In that time, we have built tens of thousands of homes for families just like your family and mine. We are the most awarded builder in Australia. We have been recognised by the Federal Government with the Order of Australia for exceptional achievement. To be where we are today has taken a lot of hard work and dedication. I would leave home in the dark and come home in the dark. Despite this I never wanted to be the biggest builder. I never wanted to be the richest. But I badly wanted to be the best builder. Today, we still have the aim to be the best builder in Australia. I am fortunate to have seen our business grow and expand and am incredibly proud to have had my son, Mark, and grandson, Rhett, at the helm. We have experienced a tough period with COVID-19, but we have been through tough times before, and they made us stronger. We are very confident in going forward. As we embark on our new transformation strategy, I feel excited for the future of Simonds. Our mission to support Australians to build and own a home is as relevant as ever. Our potential to imagine and innovate is needed more than ever. The big thing about achieving what you want to achieve is people, people, people. My grandson, son and I oversee the work at Simonds, but you have got to have good people. The people are what makes a business. For the last 73 years, every staff member has contributed something to make Simonds what it is today. Although we are a public company, I still consider Simonds a family business. I consider my staff as part of my family and appreciate all of their hard work. Thank you to my wonderful Simonds family for another successful year. GARY SIMONDS AM FOUNDER OF SIMONDS GROUP LTD 17 18 FINANCIALS 20 Directors’ Report 44 Auditor’s Independence Declaration 45 Independent Auditor’s Report 49 Directors’ Declaration 50 Consolidated Statement of Profit or Loss and Other Comprehensive Income 51 Consolidated Statement of Financial Position 52 Consolidated Statement of Changes in Equity 53 Consolidated Statement of Cash Flows 54 Notes to the Consolidated Financial Statement 96 Shareholder Information 99 Corporate Directory 19 DIRECTORS’ REPORT The directors of Simonds Group Limited (the “Company”) submit herewith the annual financial report of the consolidated entity consisting of the Company and the entities it controlled (the “Group”) for the financial year ended 30 June 2022. To comply with the provisions of the Corporations Act 2001, the directors report as follows: Information about the directors The names of the directors of the Company during or since the end of the financial year are: Current Directors Name Date appointed Current Position Rhett Simonds 20 April 2016 Chief Executive Officer (CEO) and Executive Chairman1 Mark Simonds Iain Kirkwood Piers O’Brien 20 September 2017 20 September 2017 20 September 2017 Executive Director Independent Non-Executive Director2 Non-Executive Director Andrew Bloore 27 July 2021 Non-Executive Director David Denny3 1 November 2021 Independent Non-Executive Director Former Directors Name Date appointed Date resigned Current Position Delphine Cassidy4 Neil Kearney4 20 September 2017 20 September 2017 27 July 2021 Independent Non-Executive Director 27 July 2021 Independent Non-Executive Director 1On 27 July 2021, Rhett Simonds became Executive Chair of the Company’s Board effective 27 July 2021 while retaining his role as CEO. 2On 27 July 2021, Simonds announced Iain Kirkwood stepped down as Chair of the Company’s Board effective from the date of the announcement. 3On 1 November 2021, David Denny was appointed as an Independent, Non-Executive Director of the Company. 4On 27 July 2021, Simonds announced both Neil Kearney and Delphine Cassidy had resigned as non-executive directors effective 27 July 2021. 20 The particulars of the directors are as follows: Name Rhett Simonds Experience and Directorships • • • • Rhett is the Chief Executive Officer (CEO) and Executive Chairman of the Board. Rhett holds a Bachelor of Commerce from Deakin University. Rhett has been involved with the business since joining the Simonds Group of Companies in 2005. Rhett has a strong focus on the property and construction sector, where he sits on a number of private company boards. In addition to his experience in the property and construction sector, Rhett is a director of and investor in a number of technology and finance related businesses. Mark Simonds • Mark holds a registered builder’s licence in Victoria, New South Wales, Queensland and South Australia. Mark has spent over 40 years immersed in the volume home building industry. Iain Kirkwood Piers O’Brien • Prior to Simonds Group Limited listing in 2014, Mark was fully engaged in the day-to- day executive management of Simonds Homes. From 1973 until its listing, Mark worked alongside his father Gary Simonds, and understands what is required for a successful volume building business. • Mark is the Deputy Chairman of Simonds Consolidated, which is primarily focussed on venture capital, private equity, building and construction and the broader real estate sector. • • • • • • • • • Iain was educated at Glenalmond College in Scotland and holds a Master of Arts from Oxford University. Iain is a Fellow of CPA Australia (FCPA). Iain is the Chair of the Group’s Audit & Risk Committee and is a member of the Nomination & Remuneration Committee. Iain is an experienced listed company Non-Executive Director & Chairman and has worked as a senior Executive and Non-Executive Director across a range of industries, including auditing, resources, manufacturing and latterly healthcare in Australia, the USA and Britain. Iain is Chairman of Bluechip Ltd, former Chairman of Novita Healthcare Limited and has held Non-Executive Director roles with Medical Developments International Ltd and Vision Eye Institute Ltd. Iain began his business career with Arthur Andersen & Co in London and went on to hold several senior financial and general management positions in Woodside Petroleum Ltd, Santos Ltd, Pilkington Plc, F.H Faulding & Co Ltd and Clinuvel Pharmaceuticals Ltd. Piers is a qualified lawyer with over 20 years’ professional experience. Piers is a member of the Group’s Audit & Risk Committee and Nomination & Remuneration Committee. Piers is the Chief Operating Officer of the Simonds Family Office before which he spent the previous 12 years working in in-house legal roles as both General Manager Legal and General Counsel. During this time, he managed the legal function at ASX 200 company Skilled Group Limited for approximately eight years. Piers started his career in private practice with K&L Gates Lawyers (and its predecessor firms) where he spent eight years specialising in mergers and acquisitions, corporate transactions and board advisory work. 21 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT (CONT’D) Name Experience and Directorships Andrew Bloore • • • • • Andrew is an experienced Non-Executive Director, entrepreneur, and farmer. He has designed, built and sold a number of businesses focussed on the development of key disruptive technologies and distribution services in traditional markets, to create business efficiencies including Smartsuper, SuperIQ and Class Super. Andrew has worked on a range of Senate and Treasury Committees, and with the Australian Taxation Office Regulations Committee on regulation of the superannuation industry. In 2016, Andrew sold his superannuation administration business to AMP, stepped down from the Senate and Treasury Committees and is now focussed on contributing to the organisations as a Non-Executive Director. Andrew is currently Chairman of Guild Group and an independent, Non-Executive Director of Insignia Financial Limited. Andrew is also a Non-Executive Director of Simonds Family Office Pty Ltd. Andrew has been appointed as the Chair of the Group’s Nomination & Remuneration Committee and is a member of the Group’s Audit & Risk Committee. David Denny • David was appointed as an Independent, Non-Executive Director of Simonds Group Limited on 1 November 2021. • David was a Partner of PriceWaterhouseCoopers (PwC) for 21 years, including as the practice leader of PwC’s Mergers & Acquisition advisory and Corporate Finance advisory businesses in Australia and the Asia-Pacific region. • David has extensive international experience, including cross-border transactions, international leadership roles and a secondment to Asia. Neil Kearney • Neil holds a Bachelor of Economics from Monash University, has completed the Advanced Management Program at INSEAD and is a Graduate of the Australian Institute of Company Directors. • Neil has held senior executive roles in Australian and International companies, including Goodman Fielder Limited and National Foods Limited (including as Chief Financial Officer & Chief Strategy Officer). • Neil is currently Chairman of Huon Aquaculture Group Ltd, Chairman of Youfoodz Holdings Ltd, Chairman of Felton, Grimwade & Bosisto’s Pty Ltd and a Non-Executive Director of Craig Mostyn Group. Delphine Cassidy • Delphine is an accountant with over 20 years’ experience specialising in financial, accounting and treasury roles. • Delphine has become an investor relations expert, working as a senior executive in this field for several ASX 200 Companies. • Delphine has been a member of the Australasian Investor Relations Association (AIRA) Issues Committee and the ASX Issuer Services Working Group. • Delphine is currently Chief Communications Officer at Orica Limited. 22 Directors’ Shareholding The following table sets out each of the directors’ relevant interest in shares and rights or options on shares of the Company or related body corporate as at the date of this report: Directors Rhett Simonds Mark Simonds Iain Kirkwood Piers O’Brien Andrew Bloore David Denny Neil Kearney Delphine Cassidy Fully Paid Ordinary shares (Number) 14,044 56,741 75,000 - - - 90,000 30,000 Share options (Number) 633,824 1 - - - - - - - 1These rights may be settled in either shares in the Company or the equivalent value in cash, at the discretion of the Board. Remuneration of key management personnel Information about the remuneration of key management personnel is set out in the remuneration report section of this directors’ report. The term ‘key management personnel’ refers to those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Company Secretary Amanda Jones was appointed Company Secretary of Simonds Group Limited on 27 June 2022. Amanda is a member of the Executive Leadership Team and the Group’s General Counsel and Company Secretary. Amanda holds a Bachelor of Arts /Bachelor of Laws (Hons) from Monash University and is a Fellow of the Governance Institute of Australia. Prior to joining the Group, Amanda held the roles of General Counsel & Company Secretary and General Manager Corporate Services at MaxiPARTS Limited (ASX:MXI, formerly MaxiTRANS Industries Limited). Operating and Financial Review Principal activities The Group’s principal activities during the financial year were the design, sale and construction of residential dwellings and providing registered training courses through Registered Training Organisation which has now been discontinued. Business Overview Building homes since 1949, Simonds Homes is one of Australia’s largest volume homebuilders, with display homes located across the Australian eastern seaboard and South Australia. Simonds Homes product range includes single and double storey detached homes, with a target market being first and second home families in the metropolitan areas and large regional cities. Builders Academy Australia (BAA) is a Registered Training Organisation with a focus on offering nationally accredited qualifications in building and construction. In previous years, the Simonds Group consisted of Simonds Homes and BAA which was embedded into the company as a registered training organisation. On 30 November 2021 the Group sold its wholly owned BAA business to UP Education Australia Pty Ltd for an adjusted cash consideration of $8.980 million1. 1 Consideration of $10.300m less net debt of the divested business of $1.320m. 23 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT (CONT’D) The Group also maintains a small development land portfolio via direct land ownership, and participation in other development land projects via indirect holdings. Operations Group revenue from continuing operations for the period was $687.493 million compared to the previous corresponding period of $661.586 million. Simonds Homes recorded 2,376 site starts for the period, 343 or 13% down on the previous corresponding period. The increase in Group revenue reflects the impact of increased site start values of jobs going to site. However, this was offset by the cost impact of the challenges faced by the construction industry during this period. Earnings per share The calculation of earnings per share (EPS) is presented in Note 11. EPS has been calculated in accordance with the requirements of Accounting Standards based on: • profit after tax attributable to shareholders (Statutory profit); and • the weighted average number of ordinary shares outstanding during the year ended 30 June 2022 of 146,258,855 (2021: 143,841,655). EPS from continuing operations Basic Balance sheet 30 June 2022 Cents per share 30 June 2021 Cents per share Note 11 (8.33) 2.59 The Group working capital position continues to reflect the effective management of resources despite the unprecedented challenges faced by the construction industry. The financial results were materially impacted by the cost implications of government imposed COVID shutdown in October 2021 and the subsequent worksite restrictions. The construction industry also faced supply delays, high supply cost inflation and trade labour shortages impacting productivity. In addition, severe weather events impacted operations in Queensland and New South Wales. These factors negatively impacted profitability which resulted in the net assets of the Group reducing from $22.249 million at 30 June 2021 to $13.452 million at 30 June 2022. The Group’s financial position remains strong, enabling it to trade through these short-term challenges and management is re-aligning the operations to be more efficient and profitable in the near future. Despite a negative operating result, the Group maintained a relatively strong net cash position (measured by cash and cash equivalents) of $11.133 million at 30 June 2022, achieved through the sale of BAA and effective working capital management. During the year, the Group continued to operate within its banking covenants. Refer to Note 3 for further details. Operating cash flows The lower operating result for the financial period is reflected in the reduced operating cash flows of ($2.335) million (2021: surplus of $13.731 million). Collections from customers remained strong but was offset by the significant increases in supply and labour input costs during the period. The lower operating cash position was offset by an inflow of cash from investment activities through the receipt of $8.972 million from the disposal of BAA. 24 Future developments Near term challenges remain and the industry still experiences land title delays, but this is expected to improve during the first half of FY23. Management is working closely with suppliers to diversify the supply base and reduce the risk of further building cost inflation. As part of its strategic response to the current market conditions, the Group is refocusing its approach to strengthen core operations and is actively taking steps to improve profitability through the right sizing of the entire cost base. Although these decisions are never taken lightly, given the impact it will have on our people, it will result in a healthy and sustainable business that can continue to support its employees and customers for years to come. Summary of key business risks The Board remains optimistic about the Group’s future trading performance but acknowledges there are certain factors that may pose a risk to the achievement of the Group’s business strategies and future performance, in particular the potential ongoing impact of supply chain and trade labour shortages. The Group’s risk management approach is to identify, evaluate, and mitigate or manage its financial, operational and business risks. Our risk assessment approach includes an estimation of the likelihood of risk occurrence and potential impacts on the financial results. Risks are assessed across the business and reported to the Audit & Risk Committee and to the Board where required under the Group’s Risk Management Framework. Supply chain delays Supply chains continue to remain under pressure due to demand pressure and external international factors such as the war in Ukraine and the impact of COVID lockdowns in China. The local industry is facing a severe shortage in trade labour due to the impact of reduced migration during the COVID period. The Group seeks to reduce the impact of supply constraints by leveraging its long-term relationships and is pro-actively expanding its supply base to ensure competitive pricing and continued allocation of supplies across the jobs going to site. Deterioration in economic conditions resulting in a fall in demand There are several general economic conditions, such as interest rate movements, overall levels of demand for housing because of the reduced migration of the last two years, that can impact the level of consumer confidence and demand, thereby affecting revenue from sales to customers. While general economic conditions are outside the Group’s control, the Group has a strong pipeline of jobs that were generated over the last 12 months and is being processed to site start over the next 12 months. Management continues to reduce its exposure to these risks by monitoring closely both internal and external sources of information that provide insights to changes in demand within the markets and regions in which it operates. Subsequent events Subsequent to year end, the Group has obtained conditional approval on a new borrowing facilities term sheet of $34.500 million, dated 26 August 2022, including revised related debt covenants, which aims to extend the Group’s current borrowing facilities from September 2023 until 31 December 2023. The Directors expect to sign the final borrowing documentation in the coming weeks in substantially the same form as the conditionally approved term sheet. Apart from this, there are no other events that occurred subsequent to the reporting date that may significantly affect Group’s operations, results or state of affairs in future periods. Dividends Given the financial results of the Group for the current financial year combined with the ongoing industry related challenges, the directors have determined that no dividend will be paid in relation to the 2022 financial year (2021: nil). Future dividends will be subject to the directors’ assessment of the Company’s financial position at the appropriate time. 25 SIMONDS GROUP ANNUAL REPORT 2022Indemnification of officers and auditors During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the Company secretary, and all executive officers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Directors’ meetings The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year, 9 Board meetings, 3 Nomination & Remuneration Committee meetings and 4 Audit & Risk Committee meetings were held. Directors Rhett Simonds Mark Simonds Iain Kirkwood Piers O’Brien Andrew Bloore David Denny Neil Kearney Delphine Cassidy Board of Directors Nomination & Remuneration Committee Audit & Risk Management Committee Held* Attended Held* Attended Held* Attended 9 9 9 9 9 4 - - 9 8 9 9 9 4 - - 2 2 3 3 3 1 - - 2 2 3 3 3 1 - - 2 2 4 3 3 1 1 1 2 2 4 3 2 1 1 1 * Meetings held has been adjusted to reflect the number of meetings since the date of appointment, and to exclude meetings where there was conflict of interest for each director. Non-audit services Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 32 to the financial statements. The directors are satisfied that the provision of non–audit services, during the 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 32 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit & Risk Committee, 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 undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditors own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. 26 DIRECTORS’ REPORT: REMUNERATION REPORT Remuneration Report Dear Shareholder, On behalf of the Board I am pleased to present our Remuneration Report for the 2022 financial year. 2022 started with much promise as we hoped to see easing of restrictions and a more normal existence. The year was one of varied and significant challenges, with supply issues, rapid and significant price rises as well as the continuing effects of COVID-19 on our work force. Simonds, of course was not alone in this. Simonds recognises the strains this has put on our customers, our staff and our shareholders. People are at the heart of everything we do. To us, “our people” is an all-encompassing term, reflecting the commitments we make to each other, our shareholders, customers, suppliers, and other stakeholders. It is this premise that shapes this year’s remuneration report. During FY22, we adapted our targeted COVID-19 pandemic response constantly to work with the ongoing needs of our stakeholders, ensuring COVID-safe operations and workplace safety generally remained our primary focus throughout the year. The increase in stimulus-driven sales through FY21 has been positive for the business in FY22. As a result there has been a strong focus on the retention of appropriate people and the development of high performing talent in the business to ensure a positive culture that has had to adapt and change to the conditions faced during FY22. The Board continues to review our approach to executive remuneration, to ensure it is fit for purpose. Notable changes to the framework include: This effort has resulted in a strong, continual focus on our customers, process improvements, and agile and practical responses to look after our people. 1. A 25 per cent reduction in Directors' fees which was maintained for the six months till December 2020 whilst the COVID-19 effect on the industry was being understood. FY22 Remuneration 2. A Performance Framework has been developed to be adopted throughout the Company in FY22. No amounts were paid as STI payments for FY22, given the financial performance of the Company during the financial year. 3. Our STI program has been reviewed and a number of changes will take effect in FY22. At the time of the writing of this report the business has commenced a number of Key Management There were no increases in directors’ fees in FY22 and none have been recommended for FY23. Personnel changes and notes the commencement of the evolution of the remuneration structure for FY22 as outlined. The Board continues to review our approach to executive remuneration, to ensure it is fit for purpose. As a result, the directors believe that the Company's remuneration framework and levels are appropriate for a company of its size and nature. The directors believe that the Company’s remuneration framework and levels are appropriate for a company of its size and nature. Yours sincerely Yours sincerely R A Bloore R A Bloore Chair, Nomination & Remuneration Committee Chair, Nomination & Remuneration Committee 27 14 SIMONDS GROUP ANNUAL REPORT 2022 DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Introduction This remuneration report, which forms part of the directors’ report, sets out information about the remuneration of Key Management Personnel (KMP) for the year ended 30 June 2022. KMP are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The KMP of the Group for the year ended 30 June 2022 disclosed in this report are listed in the table below: Non-Executive Directors (NED) Name Iain Kirkwood Piers O’Brien Position Independent Non-Executive Director1 Non-Executive Director Andrew Bloore Non-Executive Director David Denny2 Independent Non-Executive Director Former Non-Executive Directors (NED) Appointment Date 20 September 2017 20 September 2017 27 July 2021 1 November 2021 Name Position Appointment Date Resignation Date Delphine Cassidy Independent Non-Executive Director 20 September 2017 Neil Kearney Independent Non-Executive Director 20 September 2017 27 July 2021 27 July 2021 Executive Directors (ED) Name Position Appointment Date Rhett Simonds Group Chief Executive Officer (CEO) & Executive Chairman3 1 January 2021 Mark Simonds Executive Director 20 September 2017 Current Senior Executives Name Position Bertus Strydom Interim Group Chief Financial Officer (CFO) Tim Bradfield Group Chief Financial Officer (CFO) Cameron Worth Chief Experience Officer (CXO) Duncan Brand Chief Operating Officer (COO) Former Senior Executives Appointment Date 3 June 2022 4 October 20214 1 August 2021 1 June 2022 Name Position Appointment Date Resignation Date Michael Myers Group Chief Financial Officer (CFO) 30 May 2016 1 October 2021 1On 27 July 2021, Simonds announced Iain Kirkwood stepped down as Chair of the Company’s Board effective from the date of the announcement. 2 On 1 November 2021, David Denny was appointed as an Independent, Non-Executive Director of the Company. 3 On 27 July 2021 Simonds announced Rhett Simonds became Executive Chair of the Company’s Board effective 27 July 2021 while retaining his role as CEO. 4 On 3 June 2022 Simonds announced Tim Bradfield will be leaving on 3 September 2022. 28 Remuneration Policy Summary The Simonds Group Limited remuneration policy has been designed to ensure its remuneration practices attract, motivate and retain top talent from a diverse range of backgrounds with the experience, knowledge, skills and judgment to drive the Group’s performance and appropriately reward their contribution towards shareholder wealth creation. The key principles that support the remuneration policy are as follows: • employees are rewarded fairly and competitively according to job level, market trends and individual skills, experience and performance; • the reward strategy is in line with the overall business strategy in relation to acquisition, growth and retention of talent; • the reward strategy encompasses elements of salary, benefits, recognition and incentives to support talent management for business and shareholder outcomes; • • • it is simple, flexible, consistent and scalable across the business allowing for sustainable business growth; it supports the business strategy whilst reinforcing our culture and values; and it is regularly reviewed for relevance and reliability. Executive Remuneration Principles and Strategy A key principle of the Group’s approach to executive remuneration is that it should demonstrate strong links with Group performance and shareholder returns. Remuneration is aligned with Group performance by requiring a significant portion of remuneration to vary with short-term and long-term performance. The remuneration of KMP is structured considering the following factors: • the principles highlighted above; • the level and structure of remuneration paid to executives of other comparable publicly listed Australian companies of a similar size; • the position and responsibilities of each executive; and • other appropriate benchmarks and targets to reward senior executives of the Group and individual performance. Remuneration Governance The Board reviews its remuneration policy and practices on a regular basis. The objectives of the Board’s remuneration policy are to: • create a consistent and sustainable system of determining the appropriate level of remuneration of all levels of the Group, including KMP; • encourage KMP to perform to their highest level; and • align the remuneration of KMP with the performance of the business. The policy details the types of remuneration to be offered by the Group and factors to be considered by the Board, Nomination & Remuneration Committee (the Committee) and executives in determining the appropriate remuneration strategy. 29 SIMONDS GROUP ANNUAL REPORT 2022 DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) The Board’s Role in Remuneration The Board approved the Nomination & Remuneration Committee Charter on 17 November 2014. The decisions of the Committee are subject to approval by the Board. The Board also has the authority to directly seek independent, professional and other advice as required for the Board to carry out its responsibilities. The Board appoints, removes and/ or replaces members of the Committee at its discretion. The Nomination & Remuneration Committee (the Committee) The role of the Committee is to assist the Board by providing advice in relation to the remuneration packages for KMP, which includes non-executive directors. It also oversees management succession planning, performance targets and the remuneration of employees generally. The Committee also reviews and makes recommendations to the Board on the Group’s overall remuneration strategy, policies, and practices, and monitors the effectiveness of the Group’s overall remuneration framework in achieving the Group’s remuneration strategy. The Committee reviews the remuneration strategy and policy on a regular basis and has the authority to engage external professional advisers with the approval of the Board. Any remuneration recommendations have been made free from undue influence by members of the Group’s KMP. The Committee engages external remuneration consultants from time to time to provide advice on remuneration related issues. During the year ended 30 June 2022, no remuneration recommendations were provided (as defined by the Corporations Act 2001). The Committee met three times during the year. The Executive Chair and Group CEO, and the remaining directors who were not members of the Committee, are also regularly invited to attend meetings. No individuals are present during any discussions related to their own remuneration arrangements. During the period from 1 July 2021 to September 2021, the Committee was at all times comprised of at least two Non-Executive Directors. From September 2021, all Directors are now members of the Committee. Further details of the Committee’s responsibilities are outlined in the Corporate Governance Statement, available from the Group’s website at www.simondsgroup.com.au. Non-Executive Director Remuneration Non-Executive Directors are remunerated by way of fixed fees in the form of cash and superannuation in accordance with Recommendation 8.2 of the ASX Corporate Governance Council’s Principles and Recommendations (4th Edition). During the year ended 30 June 2022, fees paid to Non-Executive Directors totalled $378,392 (exclusive of superannuation and cash salary and fees). There were no increases in director’s fees in FY22 and none have been recommended for FY23. Shareholdings of Non-Executive Directors are set out on page 41 of the directors’ report. The Company and each of the Non-Executive Directors have agreed terms of appointment (in accordance with Recommendation 1.3 of the ASX Corporate Governance Council’s Principles and Recommendations (4th edition)). Non-Executive Directors are not appointed for a specific term and their appointment may end by notice from the individual director or otherwise pursuant to section 203B or 203D of the Corporations Act 2001 and the Company’s constitution. The maximum annual aggregate for fees paid to Non-Executive Directors is $750,000. This limit was approved at the Annual General Meeting of Simonds Group Limited held on 2 October 2014. Remuneration tables for Non-Executive Directors for the year ended 30 June 2022 are set out commencing on page 34 of this remuneration report. 30 KMP Remuneration Framework The KMP remuneration framework comprises three principal elements: • a total fixed remuneration (TFR) comprising a fixed component, consisting of a base salary, superannuation contributions and other related allowances; • a performance based, variable ‘at risk’ component, comprising cash and/or equity settled short-term incentives (STI); and • a performance and service based, variable ‘at risk’ component, comprising of options and/or performance rights and/ or cash equivalents referred to as long-term incentives (LTI). Executive Remuneration Components TFR overview TFR is benchmarked against the market median, also known as the 50th percentile, referencing market practice and comparable and similar sized organisations. While comparative levels of remuneration are monitored on a periodic basis, there is no contractual requirement or expectation that any adjustments will be made. STI overview Given the financial results of the Group for FY22, no STI payments were made in relation to FY22. LTI overview The Group’s LTI Plan ensures that a proportion of remuneration is linked to Group performance over the long term and measured annually in line with the financial year. Executives can only realise their LTI at-risk component if challenging pre- determined objectives are achieved. This aligns executive interests with shareholder interests and focuses executive performance on sustainable shareholder wealth. LTI’s consists of the granting of Performance Rights and/or options and/or cash equivalents that vest after a defined period, subject to Group and individual financial and non-financial performance hurdles. Vesting conditions may be waived at the absolute discretion of the Board. The LTI payment is cash based or in shares at the Board’s discretion as part of the annual remuneration review after finalisation of the Group’s audited results. No LTIs were offered during FY22. 31 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Long term Incentive Key Features Award Structure FY2021 Cash Rights Consideration for the Performance Rights Grant Date Vesting Period Performance Measure The Cash Rights will be granted for nil consideration. 25 June 2021 Each right has a vesting period of approximately three years. Vesting of Performance Rights is dependent on one discrete performance measure (hurdle): FY2023 EPS The performance measure is to achieve an EPS target for the financial year ending 30 June 2023. This performance measure was not met, and the rights will not vest. CAGR EPS Vesting Schedule FY2023 EPS Below 6.00 cps Between 6.01cps and 8.93 cps Between 8.94 cps and 9.58 cps Percentage of Performance Rights to vest: None Straight line pro-rata vesting between 25% and 50% Straight line pro-rata vesting between 51% and 100% At or above 9.59 cps 100% Service Vesting Condition The Service Vesting Condition is continuous employment with the Company from Grant date to vesting date. Other conditions These rights may be settled in either shares in the Company or the equivalent value in cash, at the discretion of the Board. Award Structure FY2020 Cash Rights Consideration for the Performance Rights Grant Date Vesting Period Performance Measure CAGR EPS Vesting Schedule The Cash Rights will be granted for nil consideration. 9 March 2020 Each right has a vesting period of approximately three years. Vesting of Performance Rights is dependent on one discrete performance measure (hurdle): CAGR EPS The Measurement Period for the Compound Annual Growth Rate (CAGR) EPS Hurdle is across the three financial years across the period 1 July 2019 to 30 June 2022. CAGR in EPS Percentage of Performance Rights to vest: Less than 7.5% per annum None Between 7.5% and 10% per annum Straight line interpolation applies At or above 10.0% per annum 100% Service Vesting Condition The Service Vesting Condition is continuous employment with the Company from Grant date to vesting date. Other conditions These rights may be settled in either shares in the Company or the equivalent value in cash, at the discretion of the Board. 32 Remuneration Structure and Performance/Shareholder Wealth Creation The Group’s annual financial performance and indicators of shareholder wealth are summarised below. Financial Performance Revenue EBITDA NPAT Share Price at beginning of period ($) Share Price at end of period ($) Dividends (cents per share) EPS (cents per share)3 FY2022 FY20214 FY2020 FY2019 FY2018 Statutory Actual2 Statutory Actual2 Statutory Actual2 Statutory Actual2 Statutory Actual2 $m 687.5 3.71 (9.7) 0.60 0.20 - (8.33) $m 661.6 27.5 4.7 0.35 0.60 - 2.59 $m 664.8 31.5 5.5 0.33 0.35 - 4.95 $m 687.7 23.2 11.7 0.36 0.33 - 8.16 $m 605.2 13.7 4.8 0.31 0.36 - 3.31 1 Statutory EBITDA is net loss after tax from continuing operations ($12.190m) before financing items $2.021m, tax benefit ($6.440m), and depreciation and amortisation $20.296m. 2 The Madisson business was discontinued on 21 January 2016 and is classified as a discontinued operation after this date. As the Madisson business is a discontinued operation it is not reflected in the results presented above for FY2017-2022. The Group’s wholly owned subsidiary, Builders Academy Australia was disposed 30 November 2021. BAA was classified as a discontinued operation for current financial year with comparative information re- presented. 3 EPS is based on Earnings for continuing operations only. 4 Comparative figures have been re-presented to classify discontinued operations consistently with current year disclosure. 33 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Remuneration Tables – Details of KMP Remuneration Details of the remuneration of KMP, including directors (as defined in AASB 124 ‘Related Party Disclosures’) of the Group are set out in the following tables. Comparative informationis also included below. FY2022 Current Non-Executive Directors I Kirkwood P O’Brien A Bloore D Denny Former Non-Executive Directors D Cassidy N Kearney Total Current Executive Directors R Simonds1 M Simonds Total Current Senior Executives B Strydom T Bradfield2 C Worth D Brand Former Senior Executives M Myers Total TOTAL KMP Short Term Employee Benefits Directors Fees $ Cash Salary and Fees $ Short Term Incentive $ Non- monetary Benefits $ Annual Leave $ 113,394 86,758 102,137 57,839 9,132 9,132 378,392 - - - - - - - - 676,432 91,324 91,324 - 676,432 - - - - - - 23,074 298,269 373,036 39,703 94,108 828,190 469,716 1,504,622 - - - - - - - - - - - - - - - - - - - - - - - - 9,384 - 9,384 787 6,285 8,615 787 2,307 18,781 28,165 - - - - - - - 60,802 8,085 68,887 1,959 22,944 42,444 3,537 6,954 77,838 146,725 1 On 27 July 2021, Rhett Simonds became Executive Chair of the Company’s Board while retaining his role as CEO. Rhett Simonds does not receive additional remuneration for becoming the Executive Chair. 2 On 3 June 2022 Simonds announced Tim Bradfield will be leaving on 3 September 2022. 34 Termination Employment Benefits Benefits Long-Term Benefits Post Share-based Payments (SBP) Percentage of remuneration fixed and at risk Termination Payments $ Long Service Performance Leave Rights/Options Super $ 11,339 8,676 10,214 5,784 913 913 37,839 23,568 9,132 32,700 1,247 17,676 19,894 3,970 5,892 48,679 119,218 $ - - - - - - - 11,457 2,490 13,947 18 - 38 12,804 $ - - - - - - - - - - - - (102,031) (102,031) Total $ 124,733 95,434 112,351 63,623 10,045 10,045 416,231 679,612 111,031 790,643 27,085 472,220 456,793 48,035 (28,106) (15,246) (1,299) (192,901) (192,901) (294,932) 116,490 1,120,623 2,327,497 Fixed % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% At Risk % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% - - - - - - - - - - - - - 127,046 228,236 355,282 355,282 Current Non-Executive Directors Former Non-Executive Directors FY2022 I Kirkwood P O’Brien A Bloore D Denny D Cassidy N Kearney Total R Simonds1 M Simonds Total B Strydom T Bradfield2 C Worth D Brand M Myers Total TOTAL KMP Current Executive Directors Current Senior Executives Former Senior Executives Short Term Employee Benefits Directors Cash Salary Short Term and Fees Incentive Non- monetary Benefits $ Annual Leave $ Fees $ 113,394 86,758 102,137 57,839 9,132 9,132 378,392 91,324 91,324 - - - - - - - $ - - - - - - - - 676,432 676,432 23,074 298,269 373,036 39,703 94,108 828,190 469,716 1,504,622 $ - - - - - - - - - - - - - - - - - - - - - - - - - 9,384 9,384 787 6,285 8,615 787 2,307 18,781 28,165 - - - - - - - 60,802 8,085 68,887 1,959 22,944 42,444 3,537 6,954 77,838 146,725 Termination Benefits Termination Payments $ - - - - - - - - - - - 127,046 - - 228,236 355,282 355,282 Post Employment Benefits Long-Term Benefits Share-based Payments (SBP) Percentage of remuneration fixed and at risk Super $ 11,339 8,676 10,214 5,784 913 913 37,839 23,568 9,132 32,700 1,247 17,676 19,894 3,970 5,892 48,679 119,218 Long Service Leave $ Performance Rights/Options $ - - - - - - - 11,457 2,490 13,947 18 - 12,804 38 - - - - - - - (102,031) - (102,031) - - - - Total $ 124,733 95,434 112,351 63,623 10,045 10,045 416,231 679,612 111,031 790,643 27,085 472,220 456,793 48,035 (28,106) (15,246) (1,299) (192,901) (192,901) (294,932) 116,490 1,120,623 2,327,497 Fixed % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% At Risk % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 35 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) FY2021 Current Non-Executive Directors I Kirkwood P O’Brien1 D Cassidy1 N Kearney1 Total Current Executive Directors R Simonds2 M Simonds1 FormerExecutive Director K Ryan Total Current Senior Executives M Myers Total TOTAL KMP Short Term Employee Benefits Directors Fees $ Cash Salary and Fees $ Short Term Incentive $ Non- monetary Benefits $ Annual Leave $ 141,552 79,909 110,000 100,457 431,918 - - - - - - - - - - - 532,384 450,000 81,068 - - - 211,531 150,000 81,068 743,915 600,000 - - - - - - - - - - - 357,653 357,653 512,986 1,101,568 125,000 125,000 725,000 9,120 9,120 9,120 - - - - - 38,965 6,393 13,085 58,443 30,907 30,907 89,350 1. Given the prolonged impact of COVID-19, the Director agreed to take a 25% reduction in Directors fees commencing 1 May 2020 to 31 December 2020. 2. On 10 December 2020 Simonds announced the appointment of Rhett Simonds as Group CEO and Managing Director with effect from 1 January 2021. Prior to this date, Rhett Simonds was the Joint CEO and Managing Director and was a non-executive director appointed to the Board on 20 April 2016. On 27 July 2021 Simonds announced Rhett Simonds will be Executive Chair of the Company’s Board effective 27 July 2021 while retaining his role as CEO. Rhett Simonds will not receive additional remuneration for becoming the Executive Chair. Termination Employment Benefits Benefits Long-Term Benefits Post Share-based Payments (SBP) Percentage of remuneration fixed and at risk Termination Payments $ Long Service Performance Leave Rights/Options Super $ 13,448 7,591 - 9,543 30,582 21,694 8,242 10,847 40,783 21,694 21,694 93,059 - - - - - - - - - - - - $ - - - - - - 7,864 2,315 10,179 8,442 8,442 18,621 $ - - - - - - 140,558 456,395 596,953 167,333 167,333 764,286 Total $ 155,000 87,500 110,000 110,000 462,500 1,191,465 98,018 841,858 2,131,341 720,149 720,149 3,313,990 Fixed % 100% 100% 100% 100% 50% 100% 28% At Risk % 0% 0% 0% 0% 50% 0% 72% 59% 41% 36 Current Non-Executive Directors FY2021 I Kirkwood P O’Brien1 D Cassidy1 N Kearney1 Total R Simonds2 M Simonds1 K Ryan Total M Myers Total TOTAL KMP Current Executive Directors FormerExecutive Director Current Senior Executives Short Term Employee Benefits Directors Cash Salary Short Term and Fees Incentive Annual Leave Non- monetary Benefits $ $ - - - - - - $ - - - - - - 532,384 450,000 211,531 150,000 81,068 743,915 600,000 Fees $ 141,552 79,909 110,000 100,457 431,918 81,068 - - - - 357,653 357,653 125,000 125,000 725,000 512,986 1,101,568 9,120 9,120 9,120 - - - - - - - - - $ - - - - - 38,965 6,393 13,085 58,443 30,907 30,907 89,350 Termination Benefits Termination Payments $ - - - - - - - - - - - - Post Employment Benefits Long-Term Benefits Share-based Payments (SBP) Percentage of remuneration fixed and at risk Super $ 13,448 7,591 - 9,543 30,582 21,694 8,242 10,847 40,783 21,694 21,694 93,059 Long Service Leave $ Performance Rights/Options $ - - - - - 7,864 2,315 - 10,179 8,442 8,442 18,621 - - - - - 140,558 - 456,395 596,953 167,333 167,333 764,286 Total $ 155,000 87,500 110,000 110,000 462,500 1,191,465 98,018 841,858 2,131,341 720,149 720,149 3,313,990 Fixed % 100% 100% 100% 100% 50% 100% 28% At Risk % 0% 0% 0% 0% 50% 0% 72% 59% 41% 37 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Key terms of the Executive Services Agreement Group Chief Executive Officer (CEO) & Managing Director The material terms of the Executive Services Agreement between Rhett Simonds and the Company for the role of Group CEO & Managing Director are as follows: Term: No fixed term. Ongoing until terminated by either party in accordance with the Agreement. Total Fixed Remuneration (TFR): Short Term Incentive (STI) for FY21: $700,000 per annum (including superannuation) STI eligibility up to $600,000 per annum, subject to performance. No STI payment was made in relation to FY22. Long Term Incentive (LTI) for FY21: LTI eligibility up to the value of $300,000 per annum may be offered pursuant to the Simonds Group Employee Share Plan. Notice Period / Termination Entitlements: LTI participation and terms are at the discretion of the Board. No LTI offer was made in FY22. The notice of termination periods in Mr Simonds’ employment are: • • 3 months if notice is provided by Mr Simonds to the Company; and 6 months if notice is provided by the Company to Mr Simonds. Employment may be ended immediately in certain circumstances including misconduct, incapacity, mutual agreement or in the event of a fundamental change in the Group CEO’s role or responsibilities. The Company may elect to make a payment in lieu of any unserved notice period. A 12-month post-employment restraint provision applies. Post-Employment Restraint: Executive Service Agreements other key terms Name R Simonds M Simonds B Strydom T Bradfield (Resigned 3 September 2022) C Worth D Brand Contract Length Termination by Executive Termination by Company Minimum Notice Period No fixed term No fixed term No fixed term No fixed term No fixed term No fixed term 3 months 1 month 2 months 3 months 2 months 3 months 6 months 1 month 2 months 3 months 2 months 3 months STI Payments to KMP No STIs were paid to KMP in respect of FY22. 38 KMP LTI The following tables provide details of performance rights allocated to KMP pursuant to the LTI Plan. Number of cash settled performance rights granted, vested, and expired/forfeited FY2022 Name R Simonds M Myers TOTAL FY2021 Name K Ryan R Simonds M Myers TOTAL Performance Rights 1 July 2021 Performance Rights Granted Performance Rights Vested Performance Rights Expired / Forfeited 633,824 617,647 1,251,471 - - - - - - - (617,647) (617,647) Other Balance 30 June 2022 - - - 633,824 - 633,824 Performance Rights 1 July 2020 Performance Rights Granted Performance Rights Vested Performance Rights Expired / Forfeited 698,529 183,824 770,873 1,653,226 150,000 450,000 250,000 850,000 - - - - (201,613) (201,613) (201,613) (201,613) Other (848,529)1 - - (848,529) Balance 30 June 2021 - 633,824 617,647 1,251,471 1On 10 December 2020 Simonds announced the retirement of Kelvin Ryan as Joint CEO and Managing Director effective from 31 December 2020. So as at 30 June 2021, Kelvin Ryan has ceased being a KMP. Number of equity settled performance rights granted, vested and expired/forfeited FY2022 Name M Myers TOTAL FY2021 Name K Ryan M Myers TOTAL Performance Rights 1 July 2020 Performance Rights Granted Performance Rights Vested Performance Rights Expired / Forfeited Other Balance 30 June 2021 333,332 333,332 - - (105,367) (105,367) (227,965) (227,965) - - - - Performance Rights 1 July 2020 Performance Rights Granted Performance Rights Vested Performance Rights Expired / Forfeited 2,133,332 333,332 2,466,664 - - Other Balance 30 June 2021 (2,133,332) - (2,133,332) - 333,332 333,332 39 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Value of cash settled performance rights granted, exercised and expired/forfeited Rights Issue Tranche Fair value at grant date $ per right Fair value at 30 June $ per right No. of Per- formance Rights Account- ing Fair Value at grant date $ Exercised / Vested $ Expired/ Forfeited $ Expired / Forfeited % Other $ FY2022 R Simonds FY2021 R Simonds FY2020 M Myers FY2021 M Myers FY2020 FY2021 K Ryan K Ryan FY2021 FY2020 R Simonds FY2021 R Simonds FY2020 M Myers FY2021 M Myers FY2020 M Myers FY2018 EPS EPS EPS EPS EPS EPS EPS EPS EPS EPS TSR EPS 0.50 0.34 0.50 0.34 0.50 0.34 0.50 0.34 0.50 0.34 0.19 0.30 0.20 0.20 - - 450,000 225,000 183,824 62,500 250,000 125,000 367,647 125,000 0.595 150,000 75,000 0.595 698,529 237,500 0.595 450,000 225,000 0.595 183,824 62,500 0.595 250,000 125,000 0.595 367,647 125,000 201,613 38,306 - - (75,000) (237,500) (125,000) (125,000) 100% 100% - - - - - - - - - - - - - (38,306) - - - - - - 50% - 201,613 60,484 (60,484) 2 - 1 Our assessment indicates that probability of rights vesting is 0%. As such, no accrual was made at 30 June 2022. 2 Rights were settled in cash at a value of $0.348 per right equating to a total cash settlement of $70,255. Rights under plans FY2021 and FY2020 may be settled in either shares in the Company or the equivalent value in cash, at the discretion of the Board. These are shown as “cash settled” in the table above. Value of equity settled performance rights granted, exercised and expired/forfeited Rights Issue Tranche FY2022 M Myers FY2019 FY2021 K Ryan FY2019 M Myers FY2019 TSR EPS TSR EPS TSR EPS Fair value at grant date $ per right 0.27 0.38 Account- ing Fair Value at grant date $ No. of Per- formance Rights Exercised / Vested $ Expired/ Forfeited $ Expired/ Forfeited % Other $ 166,666 45,000 (27,900)1 (17,100) 166,666 63,333 (773) (62,560) 38% 99% - - 0.27 1,066,666 288,000 0.38 1,066,666 405,333 0.27 0.38 166,666 45,000 166,666 63,333 - - - - - - - - - - - - (288,000) (405,333) - 42,575 - 63,333 Accrued Fair Value at 30 June $ 59,973 -1 - - - - - - - - 89,087 72,917 49,493 145,833 - - Accrued Fair Value at 30 June $ - - - - 1 A set dollar amount to vest was agreed upon resignation of M Myers (Former CFO). 40 KMP Shareholdings Shareholdings of KMP are set out below: FY2022 Name Non-executive Directors I Kirkwood Former Non-executive Directors N Kearney D Cassidy Total Non-Executive Directors Executive Directors R Simonds M Simonds Total Executive Directors Former Senior Executives M Myers Total Senior Executive TOTAL KMP FY2021 Name Non-executive Directors I Kirkwood N Kearney D Cassidy Total Non-Executive Directors Executive Directors R Simonds M Simonds Former Executive Directors K Ryan Total Executive Directors Senior Executives M Myers Total Senior Executive TOTAL KMP Loans to Director Opening Balance Acquired Other Closing Balance Number of Shares 75,000 90,000 30,000 195,000 14,044 56,741 70,785 20,000 20,000 285,785 - - - - - - - 105,368 105,368 105,368 Number of Shares - - - - - - - - - - 75,000 90,000 30,000 195,000 14,044 56,741 70,785 125,368 125,368 391,153 Opening Balance Acquired Other Closing Balance 75,000 90,000 30,000 195,000 14,044 56,741 61,623 132,408 20,000 20,000 347,408 - - - - - - - - - - - - - - - - - - - - - - 75,000 90,000 30,000 195,000 14,044 56,741 61,623 132,408 20,000 20,000 347,408 The Group has not provided any loans to directors or their related parties during the year ended 30 June 2022 (2021: Nil). 41 SIMONDS GROUP ANNUAL REPORT 2022DIRECTORS’ REPORT: REMUNERATION REPORT (CONT’D) Other KMP Transactions During the year group entities entered into the following transactions with related parties which are not members of the Group. Profit for the year includes the following items of revenue and expense that resulted from transactions, other than compensation, loans or equity holdings, with KMP or their related entities: Sales Cost of goods Leases and services rendered Non-cash remuneration 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ Vallence Gary Simonds and related entities: Properties leased on an arms- length basis Advisory fee paid during the year Remuneration for employee services Service payment to The Trustee for the Consolidated Yacht Charter Trust Car park provided Simonds Family Office Pty Ltd 1 Supply payment to Delos Welltek Australia Pty Ltd 2 Latitude Invest Pty Ltd 3 Service payment to Latitude Invest Pty Ltd Mark Simonds and related entities4: Payment for use of building licence Remuneration for employee services Michael Myers and related entities: Property leased on an arms- length basis Property purchased on an arms- length basis - - - - - - - - - - - - - - - - - - - - - - - - - - - 12,313 - 12,313 - - - - - 283,425 305,500 100,457 84,817 69,342 62,630 - - - - - - - - - - - - 18,769 18,240 - 453,224 452,947 18,769 18,240 170,141, 922,580 - 316,290 - - - - - - - - - - 166,667 100,000 11,808 236 178,474 100,236 10,1005 30,188 - 484,250 - - - 484,250 10,100 30,188 - - - - - - - - - - - - - - - - - - - - - - 1 Mark Simonds and Rhett Simonds are directors of Simonds Family Office Pty Ltd. 2 There is a Supply Agreement between Delos Welltek Australia Pty Ltd and Simonds Group for the inclusion of the “DARWIN Essentials Package” into all homes in Victoria. Simonds Family Office Pty Ltd (of which Mark Simonds and Rhett Simonds are directors) hold 25% interest in Delos Welltek Australia Pty Ltd. 3 An interim service agreement between Latitude Invest Pty Ltd and Simonds Group was entered into to provide marketing and sales support in the Wholesale channel. Mark Simonds and Rhett Simonds hold a 50% interest in Latitude Invest Pty Ltd. 4 One family member of Mark Simonds was employed by the Group on a casual basis and remuneration was based on an ‘arm’s length’ basis. 5 Where a person is not a KMP for the full period, related parties are only considered during the period they held a KMP position. 42 Sales Cost of goods Leases and services rendered Non-cash remuneration 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ Tim Bradfield and related entities: Properties leased on an arms- length basis1 10,000 Duncan Brand and related entities: Property leased on an arms- length basis2 - - - - - - - - - - - - - - - Total 10,000 484,250 192,554 1,269,058 631,698 553,183 18,769 18,240 1 Relates to residential building contract entered during FY22 which was on a cost plus 10% agreement, this rate was approved by the Board. 2 Where a person is not a KMP for the full period, related parties are only considered during the period they held a KMP position. The contract was entered in prior year and relates to a residential build. Auditor’s independence declaration Auditor’s independence declaration The auditor’s independence declaration is included after this report on page 33. The auditor’s independence declaration is included after this report on page 44. Rounding of amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Rounding of amounts Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) otherwise indicated. Instrument 2016/191, dated 24 March 2016, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. This directors’ report is signed in accordance with a resolution of directors pursuant to s.298 (2) of the Corporations Act 2001. This directors’ report is signed in accordance with a resolution of directors pursuant to s.298 (2) of the Corporations Act 2001. On behalf of the directors On behalf of the directors Rhett Simonds Rhett Simonds Chief Executive Officer and Executive Chairman Chief Executive Officer and Executive Chairman Melbourne, 30 August 2022 Melbourne, 25 August 2021 43 32 SIMONDS GROUP ANNUAL REPORT 2022 AUDITOR’S INDEPENDENCE DECLARATION Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 477 Collins Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au 30 August 2022 The Board of Directors Simonds Group Limited Level 4, 570 St Kilda Road Melbourne VIC 3000 SSiimmoonnddss GGrroouupp LLiimmiitteedd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Simonds Group Limited. As lead audit partner for the audit of the financial report of Simonds Group Limited for the financial year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely, DELOITTE TOUCHE TOHMATSU Paul Schneider Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 44 INDEPENDENT AUDITOR'S REPORT Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 477 Collins Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee MMeemmbbeerrss ooff SSiimmoonnddss GGrroouupp LLiimmiitteedd RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of Simonds Group Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year then ended; and (ii) 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 & 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. 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 judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 45 SIMONDS GROUP ANNUAL REPORT 2022KKeeyy AAuuddiitt MMaatttteerr CCaasshhffllooww ffoorreeccaassttss As disclosed in Note 3 to the financial statements the directors consider that the Group will be able to meet its debts as and when they fall due and it expects to operate within its agreed debt covenants. The Group is dependent on the generation of forecast positive cash flows from the Group’s operations for at least the 12 months following the approval of the annual financial report and continuing use of its borrowing facilities to maintain adequate working capital. includes The Group’ cash flow forecast as presented by the directors judgements and estimates based on the directors’ input of key market and operational assumptions. Given the current macroeconomic climate and its impact on the construction industry through high supply cost inflation, supply chain and trade labour shortages and increased costs of living, we considered the appropriateness of these cashflows to be a key audit matter. RReeccooggnniittiioonn ooff ccoonnssttrruuccttiioonn rreevveennuuee aanndd rreellaatteedd ccoonnttrraacctt aasssseettss For the year ended 30 June 2022, the Group’s revenue from construction contracts totaled $687.493 million, as disclosed in Note 5. from construction contracts is Revenue recognised over as performance time obligations are fulfilled. Construction revenue is recognised with reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs as disclosed in Note 3. As disclosed in Note 4, significant management estimation the following: - completion on in assessing required the is Percentage of construction contracts. HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr Our audit procedures included, but were not limited to: • • • • • • Obtaining an understanding of the process undertaken by the directors to prepare the cash flow forecast; Challenging the key assumptions in the directors’ forecast cash flows for at least the 12 months following the approval of the financial report; Comparing the cash flow forecasts against the budget approved by the directors and testing the mathematical accuracy of the model; Performing stress tests for a range of reasonably possible scenarios on the cash flow and the compliance with covenants for at least the 12 months following the approval of the financial report; Challenging the Group’s plans for mitigating any identified exposures; and Assessing the revised borrowing facilities term sheet obtained subsequent to year end. We also assessed the appropriateness of the disclosures in Notes 3 and 38 to the financial statements. Our audit procedures included, but were not limited to: • • • • • • • • Obtaining an understanding of the process undertaken by management to account for the recognition of revenue and contract assets; Testing relevant controls in respect of the revenue process; Assessing management’s determination of the percentage of completion allocated to each stage of the build process against historical cost profiles; Testing a sample of inputs into management’s model used to establish the percentage of completion allocated to each stage; Assessing management’s estimation of costs complete, performance against forecast; Recalculating on a sample basis, revenue recognised based on the stage of completion of selected jobs; Challenging contracts which exhibited heightened risk characteristics; and Agreeing on a sample basis, job data back to source documentation, including customer contracts, approved variations and job costs. to comparing historical actual including We also assessed the appropriateness of the disclosures in Notes 3, 4 and 5 to the financial statements. 46 INDEPENDENT AUDITOR’S REPORT (CONT’D) Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report, ASX announcements and full year results presentation which we obtained prior to the date of the auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): the CEO and Executive Chairman’s Letter, Financial Highlights and additional securities exchange information, which is expected to be made available to us after that date. 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. In connection with our audit of the financial report, our responsibility is to read the other information identified above 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 that we 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 ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement 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. 47 SIMONDS GROUP ANNUAL REPORT 2022• 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’s audit. We remain solely responsible for our audit opinion.. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period 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. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 27 to 43 of the Directors’ Report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Simonds Group Limited, for the year ended 30 June 2022, 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. DELOITTE TOUCHE TOHMATSU Paul Schneider Partner Chartered Accountants Melbourne, 30 August 2022 48 DIRECTORS’ DECLARATION The Directors declare that: a. in the directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable b. in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 3 to the financial statements; c. in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Group; and Auditor’s independence declaration The auditor’s independence declaration is included after this report on page 33. d. the directors have been given the declarations required by s.295A of the Corporations Act 2001. Rounding of amounts At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The The Company is a company of the kind referred to in ASIC Corporations (Rounding in nature of the deed of cross guarantee is such that each company which is party to the deed, guarantees to each creditor Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that payment in full of any debt in accordance with the deed of cross guarantee. Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC This directors’ report is signed in accordance with a resolution of directors pursuant to s.298 (2) of the Class Order applies, as detailed in note 3 to the financial statements will, as a group, be able to meet any obligations or Corporations Act 2001. liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001. On behalf of the directors On behalf of the Directors Rhett Simonds Rhett Simonds Chief Executive Officer and Executive Chairman Chief Executive Officer and Executive Chairman Melbourne, 25 August 2021 Melbourne, 30 August 2022 32 49 SIMONDS GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Continuing operations Revenue Cost of sales Gross profit Expenses Profit before financing items, depreciation and amortisation Depreciation and amortisation charges Profit before financing items and tax Financing items Interest expense Net financing cost (Loss) / Profit before tax Income tax benefit / expense (Loss) / Profit from continuing operations after tax Discontinued operations Loss from discontinued operations after tax (Loss) / Profit after tax for the year Other comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss Total comprehensive income for the year Earnings per share From continuing operations Basic (cents per share) Diluted (cents per share) From continuing and discontinued operations Basic (cents per share) Diluted (cents per share) Notes 30 June 2022 $’000 30 June 2021 $’000 5 10 16,17,36 7 8 9 11 11 11 11 687,493 661,586 (551,645) (506,278) 135,848 (132,161) 3,687 (20,296) (16,609) (2,021) (2,021) (18,630) 6,440 (12,190) 2,521 (9,669) 155,308 (127,789) 27,519 (19,927) 7,592 (1,563) (1,563) 6,029 (2,304) 3,725 968 4,693 (9,669) 4,693 (8.33) (8.33) (6.61) (6.61) 2.59 2.55 3.26 3.21 The accompanying notes form part of these financial statements. Comparative figures have been re- presented to classify discontinued operations consistently with current year disclosure. 50 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Assets Current Assets Cash and cash equivalents Trade and other receivables Tax receivable Accrued revenue Inventories Other assets Total current assets Non-Current Assets Property, plant and equipment Intangible assets Right-of-use assets Total non-current assets Total assets Liabilities Current Liabilities Trade and other payables Deferred revenue Customer deposits Borrowings Lease liability Provisions Total current liabilities Non-Current Liabilities Lease liability Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity The accompanying notes form part of these financial statements. Notes 30 June 2022 $’000 30 June 2021 $’000 33 12 8 13 14 18 16 17 36 19 22 20 36 21 36 21 8 23 24 25 11,133 38,210 9,933 67,569 18,442 2,418 147,705 5,980 4,602 25,626 36,208 183,913 91,566 1,788 18,685 286 11,962 15,669 22,781 33,368 2,266 50,698 27,311 1,213 137,637 5,795 8,342 21,867 36,004 173,641 78,513 404 21,153 312 10,042 16,671 139,956 127,095 14,758 9,115 6,632 30,505 170,461 13,452 13,505 21,644 (21,697) 13,452 12,052 10,895 1,350 24,297 151,392 22,249 12,911 22,830 (13,492) 22,249 51 SIMONDS GROUP ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Share based payments reserve $’000 Share buy- back reserve $’000 Accumulated losses $’000 29,725 (7,204) - - - - (7,204) (7,204) - - - - (18,185) 4,693 - - - (13,492) (13,492) (9,669) 620 - 844 - 424 (115) - 30,034 30,034 - (38) (304) (844) 28,848 Total $’000 17,247 4,693 424 (115) - 22,249 22,249 (9,669) 1,176 (304) - (7,204) (21,697) 13,452 Consolidated Balance at 1 July 2020 Profit after tax for the year Employee share plan expense Performance and service rights vested / forfeited Transfer to accumulated losses Balance at 30 June 2021 Balance at 1 July 2021 Loss after tax for the year Employee share plan expense Performance and service rights vested / forfeited Transfer to accumulated losses Balance at 30 June 2022 Notes 30 30 30 30 30 The accompanying notes form part of these financial statements. Issued capital $’000 12,911 - - - - 12,911 12,911 - 594 - - 13,505 52 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Cash generated from operations Finance costs Income taxes refund / (paid) Net cash (used in) / generated from operating activities Cash flows from investing activities Proceeds from disposal of property, plant and equipment Payments for property, plant and equipment Payments for intangibles assets Net cash from disposal of discontinued business Net cash generated from / (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of lease liability Proceeds from issue of equity Net cash used in financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The accompanying notes form part of these financial statements. Notes 30 June 2022 $’000 30 June 2021 $’000 735,610 (738,616) (3,006) (2,275) 2,946 (2,335) 504 (3,858) (2,875) 8,972 2,743 (26) (12,940) 910 (12,056) (11,648) 22,781 11,133 731,343 (706,249) 25,094 (1,563) (9,800) 13,731 30 (2,845) (3,359) - (6,174) (841) (12,217) - (13,058) (5,501) 28,282 22,781 7 33 37 33 33 53 SIMONDS GROUP ANNUAL REPORT 2022 NOTES TO FINANCIAL STATEMENTS 1. General information The Company is incorporated in Australia and is a for-profit entity. The Company’s registered office and principal place of business is as follows: Level 4, 570 St Kilda Road MELBOURNE VIC 3004 These financial statements comprise the consolidated financial statements of the Company and the entities it controls (the “Group”). The entities controlled by the Company are detailed in note 15 to the financial report. The principal activities of the Group are the design and construction of residential dwellings, the development of residential land and providing registered training courses. 2. Application of new and revised accounting standards Amendments to AASBs and the new interpretation that are mandatorily effective for the current year New and amended accounting standards relevant to the Group that are effective for the period are as follows: • Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS9, IAS39, IFRS 7, IFRS 4 and IFRS 16. There are no new standards effective in the current financial year that have a material effect on the financial statements of the Group. Standards and interpretations in issue not yet adopted At the date of signing these financial statements, the Directors have reviewed all Standards and Interpretations on issue but not yet effective and do not expect these Standards and Interpretations to have a material effect on the financial statements of the Group. 3. Significant accounting policies Statement of compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements issued by the Australian Accounting Standards Board (AASB) and comply with other requirements of the law. The financial statements comprise the consolidated financial statements of the Group. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (IASB). Consequently, this financial report has been prepared in accordance with and complies with IFRS as issued by the IASB. The financial statements were authorised for issue by the directors on 30 August 2022. Basis of preparation The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated 54 using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 16, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 or value in use in AASB 136. Comparatives have been reclassified where appropriate to ensure consistency and comparability with the current period. Rounding of amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Going concern The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Group has incurred a net loss after tax of $9.669 million (2021: profit $4.693 million) and negative operating cash flows of $2.335 million (2021: positive operating cash flows of $13.731 million) for the year ended 30 June 2022. These results were impacted by the continuing global COVID-19 pandemic, which resulted in pandemic restrictions and shutdowns across various states during the year, and ongoing economic challenges faced by the residential construction industry, including high supply cost inflation, rising interest rates, supply chain and trade labour shortages. The Group has a positive net asset value position of $13.452 million (2021: $22.249 million) as at 30 June 2022. The residential construction industry will continue to face challenges through the coming year with continued supply constraints and price increases for building materials, labour shortages and the broader impact of inflation on the cost of living. In response to these ongoing challenges, the directors have: • Assessed and challenged the detailed cash flow forecasts prepared by management for the 12 months following the date of signing this financial report; • Commenced immediate implementation of an organisational wide transformation project to reduce overheads and - increase the efficiency of the Group’s delivery of completed housing to its customers, which includes, amongst others: ongoing focused management of sales contracts including their respective costing and re- pricing mechanisms - and timing of site starts; executing operational improvements designed to maximise productivity and enhance profitability on each contracted build; continuing drive to diversify, reduce costs and secure supply in partnership with the Group’s major suppliers. The Group has successfully managed to achieve this in the past through its ongoing operations during the global COVID-19 pandemic; and - • Obtained conditional approval on a new borrowing facilities term sheet of $34.500 million, dated 26 August 2022, including revised related debt covenants, which aims to extend the Group’s current borrowing facilities from 30 September 2023 until 31 December 2023. The Directors expect to sign the final borrowing documentation in the coming weeks in substantially the same form as the conditionally approved term sheet. As described in Note 20, the Group has $23.201 million in unused facilities (excluding finance leases) within its existing borrowing facilities of $37.060 million available as at 30 June 2022. Depending on the rate of completion and corresponding billing receipts for the house builds and other working capital movements, the cash balance of the Group at any point in time will be subject to a degree of volatility. 55 SIMONDS GROUP ANNUAL REPORT 2022 NOTES TO FINANCIAL STATEMENTS (CONT'D) The Group will, if necessary, employ all operational and financial tools available to it to minimise the impact of any further residential construction industry decline, which may impact the Group’s ability to generate positive cash flows. As a result, the Directors have concluded that these cash flow forecasts, along with the continued support of its bankers, show that the Group has sufficient forecast liquidity, undrawn borrowing facilities and an active and ongoing capital management strategy to continue to operate to enable it to pay its debts as and when they become due and payable. The Group expects to operate within the proposed covenants of the new borrowing facilities term sheet. Based on the available information to the Directors at the date of signing this financial report, the Directors are of the opinion that the Group will be able to pay its debts as and when they fall due and accordingly the Directors consider it appropriate for the financial report to be prepared on the going concern basis. Basis of consolidation Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Shares in subsidiary companies are measured at cost less any impairment in the parent entity only financial statements (refer to Note 34). Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their fair value, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively; • liabilities or equity instruments related to share-based payment arrangements of the acquiree, or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and • assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non- current Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business less accumulated impairment losses, if any. 56 For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Revenue recognition Construction contracts Contracts entered into are for the construction of residential homes. The construction of each dwelling is taken to be one performance obligation. The transaction price is normally fixed at the start of the contracts. When a variation for the building works is required and agreed upon per the contract the variation will be included in the transaction price and accounted for accordingly. As a result, the one performance obligation is recognised and fulfilled over time and as such revenue is recognised over time. Revenue earned is referenced to the stage of completion of the contract activity, based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. Our customers are invoiced on achievement of each key milestone in the build program. Invoices are paid on normal commercial terms. Deposit payments received prior to work being performed are recognised as deferred revenue on the balance sheet. Display homes Revenue in respect of the sale of display homes is recognised at a point in time when control is transferred to customer. Revenue is measured at the transaction price agreed under the contract. Registered training courses – (discontinued during the current year) The Group derives revenue by providing training courses to students. The performance obligation is fulfilled over the duration of the course. The transaction price is determined and agreed at the beginning of the course and is not variable unless the student stops part way through the course. Revenue is recognised in the accounting period in which the courses are delivered and when the Group is entitled to claim course funding from the relevant federal or state government body. This funding is not considered a state government grant. Funding received in respect of courses is in relation to specific students completing a period of study for a specific course. Payment is received following invoice on normal commercial terms. Development The Group generates revenue from the sale of land developments for residential homes. Revenue in respect of the sale of land developments is recognised when control passes to a third party along with fulfillment of all performance obligations on a contract. Revenue is measured at the transaction price agreed under the contract. Payment is received on actual settlement of individual parcels of land when control is transferred to the customer. Costs in relation to individual settlements are recognised in proportion to the total costs for the project and based on the percentage of revenue recognised for each settled unit. 57 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Variable consideration Where consideration in respect of a contract is variable, the expected value of revenue is only recognised when the uncertainty associated with the variable consideration is subsequently resolved (as this is the point in time when there can be reasonable assurance that there will be significant reversal) known as “constraint” requirements. The Group assesses the constraint requirements on a periodic basis when estimating the variable consideration to be included in the transaction price. The estimate is based on all available information including historic performance. Where variations in design or requirements are entered into, the transaction price is updated to reflect these when the variation has been agreed. Contract assets and liabilities The Group has adopted the terms accrued revenue for ‘contract assets’ and deferred revenue for ‘contract liabilities’ as defined within AASB 15 ‘Revenue from Contracts with Customers’. A contract asset is the Group’s right to payment for goods and services transferred to a customer if that right to payment is conditional on something other than passage of time. A contract liability is the Group’s obligation to transfer goods or services to a customer at the earlier of (a) when the customer pays consideration or (b) the time that the customer’s consideration is due for goods and services the Group will yet provide. Contract fulfilment costs Costs incurred prior to the commencement of construction of building may arise due to feasibility studies, environmental impact studies and preliminary design activities as these are costs incurred to fulfil a contract. Where these costs are expected to be recovered, they are capitalised and amortised over the course of the contract consistent with the transfer of service to the customer. Where the costs, or a portion of these costs, are reimbursed by the customer, the amount received is recognised as deferred revenue and allocated to the performance obligations within the contract and recognised as revenue over the course of the contract. Incremental costs Commissions payable to sales consultants in respect of contracts to build are recognised as an asset when expected to be recovered and released over the period of the build. Financing components The Group does not have any contracts where the period between the transfer of the promised goods or services to the customer represents a financing component. As a consequence, the Group does not adjust any of the transaction prices for the time value of money. Other revenue Interest revenue is recognised on an accruals basis. Dividend income is recognised when the dividend is declared. Revenue received in respect of the Group arranging a purchaser to acquire land from a land developer is recognised once all benefits of owning the land are transferred to the new owner. Financial instruments Non-derivative financial instruments Classification The Group has classified its financial assets in the following measurement categories: • Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and 58 • Those to be measured at amortised cost. The classification depends on the Group’s business model for managing financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Measurement of cash and cash equivalents, trade receivables, loan and other receivables remain at amortised cost consistent with the comparative period. Impairment For trade receivables, loan and other receivables, the Group applies the simplified approach permitted by AASB 9 ‘Financial Instruments’, which requires expected lifetime loss to be recognised from initial recognition of the receivables. For all other financial instruments, the Group assesses expected credit loss on a forward-looking basis and the impairment methodology applied will depend on whether there has been a significant increase in credit risk. Non-derivative financial liabilities Interest bearing liabilities All loans and borrowings are initially recognised at fair value, being the amount received less attributable transaction costs. After initial recognition, interest bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of profit or loss over the period of the borrowings on an effective interest basis. Trade and other payables Liabilities are recognised for amounts to be paid for goods or services received. Trade payables are settled on terms aligned with the normal commercial terms in the Group’s countries of operation. Leases The Group as lessee Definition of a lease The Group assesses whether a contract is or contains a lease based on the definition of a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in AASB 16 ‘Leases’. At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. The Group assesses whether a contract is or contains a lease, at inception of the contract. 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 any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the 59 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The Group applies AASB 136 ‘Impairment of Assets’ to determine whether a right-of-use assets is impaired. The lease liability is initially measured at the present value of the lease payments that are not paid at the initial application date or 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. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early The lease liability is subsequently measured by adjusting the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. For leases of low value and short-term leases the Group recognise the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the lease assets are consumed. Employee benefits Short-term and Long-term employee benefits Short term employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required, and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Other Long-term employee benefits Liabilities for annual leave and long service leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, are recognised in the provision for employee entitlements and are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Consideration is given to expected future wage and salary levels, departures and periods of service. 60 These employee benefits entitlements are presented as current liabilities in the balance sheet if the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur. Superannuation contributions Contributions to defined contribution superannuation plans are expensed when employees have rendered services entitling them to the contributions. Termination benefit A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs. Bonus entitlements A liability is recognised for bonus entitlements where contractually obliged or where there is a past practice that has created a constructive obligation. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax Current tax payable / (recoverable) is based on the financial result for the year. Taxable profit / (loss) differs from profit / (loss) as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s asset / liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Adjustments are made for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the Group or that have a different tax consequence at the level of the Group. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Adjustments are made for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the Group or that have a different tax consequence at the level of the Group. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 61 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Tax consolidation The entities, except the trusts within the Group have formed a tax-consolidated group with effect from 1 July 2010 and are therefore taxed as a single entity from that date. The head entity within the tax- consolidated group is Simonds Group Limited. Current tax expense/(income), deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in those entities using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation. The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/(from) the head entity equal to the current tax liability/(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable/(payable) equal in amount to the tax liability/(asset) assumed. The inter-entity receivable/(payable) are at call. Contributions to fund the tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. Property, plant and equipment The carrying amount of property, plant and equipment which is valued on the cost basis, is subject to impairment testing and is reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of property, plant and equipment exceeds its recoverable amount, the asset is written down to its recoverable amount. The write-down is expensed in the reporting period in which it occurs. Depreciation is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. 62 The following estimated useful lives are used in the calculation of depreciation: Leasehold improvements Computer equipment Office furniture and fittings Display home furniture, fixtures and fittings Motor vehicles Plant and equipment Intangible assets Intangible assets acquired separately Useful Life 5 years or the period of the lease 3 - 5 years 5 years 2 years 5 years 5 years Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. The following estimated useful lives are used in the calculation of depreciation: Computer Software Capitalised Courses RTO Licence Useful Life 3 years 2-3 years Source External External / Internal Over the life of the licence External Capitalised Product Designs 3 years External / Internal Right of use lease asset Over the life of the lease External Internally-generated intangible assets – research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. 63 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of tangible and intangible assets other than goodwill, the Group takes into account the characteristics of the asset if market participants would take those characteristics into account when pricing the asset at the measurement date. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash- generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first- out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Land at cost Cost includes the costs of acquisition, development, borrowings and all other costs directly related to specific projects. Speculative Homes and Displays Cost includes direct costs of building the speculative and display homes. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that 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 end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Maintenance and warranty Provisions for the cost of maintenance and warranty is the directors’ best estimate of the expenditure required to settle the Group’s obligations under legislative requirements. Make good Provisions for make good are based on the directors’ best estimates of the costs required to reinstate the display homes under legislation; or requirement to be at a saleable standard. 64 Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: a. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or b. for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the Statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. Share-based payment transactions Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve. For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year. 4. Critical accounting judgements and key sources of estimation uncertainty In the application of the Company’s accounting policies, which are described in note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Percentage of completion on the construction contracts Percentage complete is based on the estimated cost to construct a building incurred to date, compared against the total estimated cost of completing that building. The total cost of that build is based on a historical average of similar builds. The amount of revenue recognised during the build is based on this percentage complete calculation. This historical average is reviewed annually to ensure that it is a materially accurate reflection of current build costs. Estimate of construction contracts on a percentage completion basis, in particular with regard to accounting for variations of cost, the timing of profit recognition and the amount of profit recognised can often result in an adjustment to the reported revenues and expenses and/or the carrying amount of assets and liabilities. Provision for maintenance and warranties At each year end the Group considers its legal and constructive obligations for warranties and maintenance on properties constructed. Typically, the Group makes provision for warranties for a period of up to ten years following the completion of a construction contract. The directors take into account the annual build program, history of defects relating to materials used or in services provided and the historical liabilities the Group has assumed in respect of warranties in estimating the provision for warranties. The directors use a present value methodology to recognise the best estimate of the expenditure required to settle the Group’s obligation. 65 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) The Group use an actuarial model based on historical maintenance and warranty spend to provide an estimate for the maintenance and warranty provision. Key assumptions in this model were developed by an independent actuary and are reviewed internally regularly, to ensure they remain appropriate for calculating the maintenance and warranty provision as at 30 June 2022 There has been no significant change to the model assumptions to those used in the prior financial year. Measurement of net realisable value of land development The Group holds land stock for development, which is recorded as inventory in the financial statements. The directors assess the net realisable value at 30 June 2022 of the land stock inventory, referencing contracts, other documentary evidence and comparative sales data to determine valuations of certain land titles. 5. Revenue The following is an analysis of the Group’s revenue for the year. Continuing operations Revenue from residential construction contracts Discontinued operations 1 Comparative information has been re-presented due to the disposal of BAA. 6. Segment information 30 June 2022 $’000 30 June 20211 $’000 687,493 687,493 6,357 693,850 661,586 661,586 14,496 676,082 Products and services from which reportable segments derive their revenue Information on segment performance focuses on the types of products and services the Group provides. No operating segments have been aggregated in arriving at the reportable segments of the Group. Specifically, the Group’s reportable segments under AASB 8 Operating Segments are as follows • Residential construction - this includes activities relating to contracts for residential home construction, speculative home building and the building of display home inventory. • Development - this includes activities relating to land development and sales. • Discontinued operations o o House of Learning Pty Ltd and City-Wide Building and Training Services Pty Ltd previously formed the registered training segment which was divested on 30 November 2021 and as such are presented as a discontinued operation in this year’s annual financial report (refer note 9 for more information). Madisson Homes is a subsidiary of the Group and in the prior years formed part of the residential construction segment. Madisson Homes operated in the medium density market, building apartments and townhouses for commercial developers using the concepts, designs and specifications provided by the developers. Consistent with the prior reporting period, this business unit has been presented as a discontinued operation (refer note 9 for more information). 66 Segment revenues and results The following is an analysis of the Group’s revenue and results by reportable segment. Segment revenue Segment (Loss) / Profit before Tax Continuing operations Residential construction Land development Discontinued Operations Consolidated segment revenue and profit/ (loss) before tax for the period Segment assets and liablities 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 687,493 661,586 - 687,493 6,357 693,850 - 661,586 14,496 676,082 (18,611) (19) (18,630) 3,603 (15,027) 6,034 (5) 6,029 1,388 7,417 Continuing operations Segment assets Residential construction Land development Discontinued operations Total segment assets Total assets Segment liabilities Residential construction Land development Discontinued Operations Total segment liabilities Total liabilities 30 June 2022 $’000 30 June 2021 $’000 182,471 586 183,057 856 183,913 183,913 145,309 7,741 153,050 17,411 170,461 170,461 168,836 1,128 169,964 3,677 173,641 173,641 126,485 8,262 134,747 16,645 151,392 151,392 For the purposes of monitoring segment performance and allocating resources between segments, all assets and liabilities are allocated to reportable segments. 67 SIMONDS GROUP ANNUAL REPORT 2022 NOTES TO FINANCIAL STATEMENTS (CONT'D) Other segment information Continuing operations Residential construction Land development Discontinued Operations Total Continuing operations Residential construction Registered training Discontinued Operations Interest expense Depreciation and Amortisation 30 June 2022 $’000 30 June 2021 $’000 30 June 2022 $’000 30 June 2021 $’000 1,888 133 2,021 254 2,275 1,563 - 1,563 - 1,563 18,875 1,421 20,296 252 20,548 19,927 - 19,927 688 20,615 30 June 2022 $’000 30 June 2021 $’000 16,719 252 16,971 342 17,313 13,862 - 13,862 775 14,637 Revenue by Geographical region The Group operates in one geographical area – Australia. The Group’s revenue and profits are all generated from this region. Information about major customers No single customer contributed 10% or more to the Group’s revenue for the year ended 30 June 2022 and the year ended 30 June 2021. 7. Finance costs Interest on bank overdrafts, loans and lease liability under AASB 16 Continuing operations Discontinued operations Total 30 June 2022 $’000 30 June 2021 $’000 2,021 254 2,275 1,563 - 1,563 68 8. Income taxes Income tax recognised Current tax (Benefit) / expense in respect of the current year (Benefit) in respect of prior years Deferred tax Expense/(benefit) in respect of the current years Expense/(benefit) in respect of prior years Consolidated income tax expense recognised in the current year Income tax (benefit) / expense from continuing operations Income tax expense from discontinued operations The income tax expense can be reconciled to the accounting profit as follows: (Loss) / profit before tax from continuing operations (Loss) / profit before tax from discontinued operations Profit before tax Income tax (benefit) / expense calculated at 30% (2021: 30%) Effect of Executive Share Based Payments non-deductible Effect of expenses that are not deductible in determining taxable profit Adjustments recognised in the current year in relation to deferred and current tax of prior years Income tax (benefit) / expense recognised in profit or loss Income tax (benefit) / expense from continuing operations Income tax (benefit) / expense from discontinued operations 30 June 2022 $’000 30 June 2021 $’000 (10,010) (631) (10,641) 4,787 495 5,282 (5,359) (6,440) 1,081 (5,359) 893 (75) 818 1,952 (46) 1,906 2,724 2,304 420 2,724 30 June 2022 $’000 30 June 2021 $’000 (18,630) 3,603 (15,027) (4,508) (645) (50) (5,203) (156) (5,359) (6,440) 1,081 (5,359) 6,029 1,388 7,417 2,225 354 267 2,846 (122) 2,724 3,337 (613) 2,724 The tax rate used for the 2022 and 2021 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. 69 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Current tax assets and liabilities Income tax refundable 30 June 2022 $’000 30 June 2021 $’000 9,9331 9,933 2,266 2,266 1 The Group will be utilising the loss carry back measures and carry back its tax loss made in the current year against its income tax liability in the preceding years, having regards to the amount of tax paid in those tax periods. Under these measures, the Group will be eligible to carry back up to $9.933m as this represents the tax paid during the last two preceding years. Deferred tax balances Amounts recognised in profit or loss Deferred tax assets Deferred tax liabilities Amounts recognised in other comprehensive income Deferred tax liabilities Net deferred tax 2022 Construction Contracts income Capitalised Courses and Product Design Property, Plant, Equipment & Intangibles Provision for warranty and contract maintenance Employee Entitlements DTA on losses Other Opening Balance $’000 (7,215) Under / Over $’000 Recognised in profit or loss $’000 (5,497) (609) 1,977 1,067 2,896 - 534 (1,350) 137 (692) (198) (875) 1,889 449 (4,787) (494) (1) (495) 30 June 2022 $’000 30 June 2021 $’000 14,112 (20,744) (6,632) - (6,632) Recognised in other comprehensive income $’000 - - - - - - - - 14,594 (15,944) (1,350) - (1,350) Closing Balance $’000 (12,712) (472) 791 869 2,021 1,889 982 (6,632) 70 Opening Balance $’000 (5,466) (749) 1,580 1,081 3,197 913 556 Under / Over $’000 - - (17) - 56 7 46 Recognised in profit or loss $’000 (1,749) 140 414 (14) (357) (386) (1,952) Recognised in other comprehensive income $’000 - - - - - - - Closing Balance $’000 (7,215) (609) 1,977 1,067 2,896 534 (1,350) 2021 Construction Contracts income Capitalised Courses and Product Design Property, Plant, Equipment & Intangibles Provision for warranty and contract maintenance Employee Entitlements Other 9. Discontinued Operations Madisson Business Following a comprehensive review initiated by the Directors on 16 November 2015, the Group announced a plan for the orderly closure of the Madisson business unit of the Group on 21 January 2016 upon completion of the remaining projects. All projects were completed in financial year ended 30 June 2017. As part of the warranty rules under the statutory regulations, the business is still incurring warranty claims. As such, the expenses are predominantly related to warranty and related activities. Loss for the year from the Madisson business Revenue Expenses Loss before tax Attributable income tax benefit Loss for the year Statement of Cash Flows from the Madisson business Cash flows from operating activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 30 June 2022 $’000 30 June 2021 $’000 - (1,822) (1,822) 547 (1,275) (1) (1) 5 4 - (2,044) (2,044) 613 (1,431) 2 2 3 5 71 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Builders Academy Australia On 30 September 2021, the Group entered into a sale agreement to dispose its wholly owned subsidiaries, Builders Academy Australia (BAA) and City-Wide Building & Training Services Pty Ltd (CWBTS), collectively referred to as House of Learning Pty Ltd (HOL), which operated as a registered training organisation. The disposal was completed on 30 November 2021, on which date control of BAA passed to the acquirer UP Education Australia Pty Ltd. Details of the assets and liabilities disposed of, and the calculation of the profit or loss on disposal, are disclosed in note 37. The result of the discontinued operations, which have been included in the profit for the year, was as follows: Profit for the year from Registered training operations are summarised as follows: Revenue Expenses (Loss)/ profit before tax Attributable tax benefit / (expense) Profit from disposal of BAA Attributable tax expense Net profit after tax for the period Cash flow from Registered training operations during the year Cash flow used in operating activities Cash flow from investing activities Cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period 10. Expenses for the year Profit/ (loss) on disposal of property, plant and equipment and intangible assets Marketing and selling expenses Corporate and administrative expenses Employee benefits expense Transformation expenses (i) 30 June 2022 $’000 30 June 2021 $’000 6,357 (6,974) (617) 185 6,041 (1,813) 3,796 (680) 342 344 6 2 8 14,496 (11,064) 3,432 (1,033) - - 2,399 3,222 (579) (2,639) 4 (2) 2 30 June 2022 $’000 30 June 2021 $’000 304 (23,443) (21,997) (84,622) (2,403) (132,161) (49) (22,954) (19,468) (85,318) - (127,789) (i) The transformation costs include expenses attributable to non-underlying activities which are outside of ordinary course of the business such as restructure of the business. Included within transformation expenses are employee benefits expense of $2.184m and corporate and administrative expenses of $0.219m, which are excluded from expenses lines above. 72 11. Earnings per share From continuing operations Total basic (loss) / profit per share Total diluted (loss) / profit per share From continuing and discontinued operations Total basic (loss) / profit per share Total diluted (loss) / profit per share Basic earnings per share 30 June 2022 Cents per share 30 June 2021 Cents per share (8.33) (8.33) (6.61) (6.61) 2.59 2.55 3.26 3.21 The earnings and weighted average number of ordinary shares used in the calculation of basic earnings are as follows: From continuing operations (Loss) / profit for the year attributable to owners of the Company (12,190) 3,725 30 June 2022 $’000 30 June 2021 $’000 From continuing and discontinued operations (Loss) / profit for the year attributable to owners of the Company (9,669) Shares 4,693 Shares Weighted average number of ordinary shares for the purposes of the basic earnings per share 146,258,855 143,841,655 Diluted earnings per share From continuing operations 30 June 2022 $’000 30 June 2021 $’000 (Loss) / profit for the year attributable to owners of the Company (12,190) 3,725 From continuing and discontinued operations (Loss) / profit for the year attributable to owners of the Company Weighted average number of ordinary shares for the purposes of the basic earnings per share Shares deemed to be issued for no consideration in respect of: • Performance Rights / Options / Service Rights Weighted average number of ordinary shares for the purposes of the diluted earnings per share (9,669) Shares 4,693 Shares 146,258,855 143,841,655 4,195,890 - - 2,190,048 150,454,746 146,031,703 The following potential ordinary shares are excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share. Performance Rights - 1,866,666 These shares have been excluded from the diluted earnings per share (EPS) calculation on the basis that the exercise price of the options is higher than the average share price or the performance conditions are yet to be met at the end of the reporting period. 73 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 12. Trade and other receivables Current Trade receivables (i) Other receivables 30 June 2022 $’000 30 June 2021 $’000 37,572 37,572 638 38,210 32,833 32,833 535 33,368 (i) The amounts pertaining to related party receivables are disclosed within note 29. Trade receivables The average settlement terms for progress invoices in relation to residential contracts are between 7 and 45 days. The Group has written off all receivables that are known to be uncollectable or there is objective evidence that the Group will not be able to collect the outstanding amount. Prior to accepting a new customer for the construction of a dwelling, the Group ensures that appropriate contractual terms are in place with the customer and that the customer has secured financing in advance of the commencement of construction. In determining the recoverability of a trade receivables, the Group considers any change in the credit quality of the trade receivable from the date the credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated and dwellings constructed for customers serving as a security against the receivable. Age of receivables from continuing operations that are past due but not impaired 46 - 60 days 61 - 90 days 91 - 120 days Over 120 days Total Average age (days) 30 June 2022 $’000 30 June 2021 $’000 1,186 1,622 1,447 2,574 6,829 114 289 1,985 805 1,079 4,158 109 Receivables past due but not impaired primarily relate to final settlement payments upon completion of construction and supplier rebates, where terms vary. The Group has included in its considerations for any expected credit loss of these receivables, impacts of the current pandemic with no current material indication requiring a provision as at 30 June 2022. 13. Accrued Revenue Work in progress on residential construction contracts 30 June 2022 $’000 30 June 2021 $’000 67,569 50,698 74 14. Inventories Display homes, land stock Provision for impairment of inventories 30 June 2022 $’000 30 June 2021 $’000 18,442 - 18,442 27,427 (116) 27,311 The impairment provision of display homes above is assessed using recent market values. This assessment includes current independent valuations, current offers to purchase the display homes, and current asking prices to sell these display homes. In conducting the assessment as at 30 June 2022, current market conditions have been taken into account and no adjustment was deemed necessary. 15. Subsidiaries Details of the Group’s subsidiaries at the end of the reporting period are as follows. Place of Incorporation and operation Australia Australia Australia Australia Australia Australia Australia Name Principal Activity Simonds Homes Victoria Pty Ltd Residential – Victoria Simonds Homes NSW Pty Ltd Residential – NSW Simonds Queensland Constructions Pty Ltd Residential – Queensland Simonds SA Pty Ltd Simonds WA Pty Ltd Residential – South Australia Residential – Western Australia Australia Madisson Homes Australia Pty Ltd Residential – Victoria Simonds Personnel Pty Ltd Simonds Assets Pty Ltd Simonds IP Pty Ltd Payroll service entity Asset service entity Intellectual property service entity Australia Simonds Corporate Pty Ltd Asset service entity Jackass Flat Developments Pty Ltd Land development and sales Simonds Land Development Pty Ltd Land development and sales Bridgeman Downs Land Project Pty Ltd Land development and sales Discover Developments Pty Ltd Land development and sales Discover Gisborne Pty Ltd Land development and sales Australia Australia Australia Australia Australia Australia • Simonds Group Limited is the head entity within the tax consolidated group. • All Group subsidiaries are members of the tax consolidated group. Proportion of ownership interest and voting power held by the Group 2022 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% • Simonds Group Limited and its subsidiaries have entered into a deed of cross guarantee with Simonds Group Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. • No subsidiaries have been acquired or incorporated during the year ended 30 June 2022 (30 June 2021: None). • The above companies represent a “Closed Group” for the Class Order. The closed Group’s Statement of Profit or loss and Other Comprehensive Income for the year and closed group’s Statement of Financial Position as at 30 June 2022 are the same as the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year and the Consolidated Statement of Financial Position as at 30 June 2022 disclosed on pages 50-51. 75 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 16. Property, plant and equipment Leasehold improve- ments $’000 Computer equipment $’000 Office furniture & fittings $’000 Display home furniture, fixtures & fittings $’000 Motor Vehicles $’000 Plant and equip- ment $’000 Cost Balance at 1 July 2020 Additions Disposals Balance at 30 June 2021 Cost Balance at 1 July 2021 Additions Disposals Divestment of discontinued business 6,219 69 (32) 6,256 6,256 682 - (71) 4,295 986 - 3,220 95 (93) 5,281 3,222 5,281 1,871 (6) (83) 3,222 104 - (51) 2,418 1,658 (94) 3,982 3,982 1,190 (12) - 970 - (61) 909 909 - (290) (36) Total $’000 17,482 2,845 (302) 20,025 360 37 (22) 375 375 20,025 12 - (58) 3,859 (308) (299) Balance at 30 June 2022 6,867 7,063 3,275 5,160 583 329 23,277 Accumulated depreciation Balance at 1 July 2020 Depreciation expense Disposals (4,356) (684) 32 (2,786) (908) - (1,773) (408) 93 (1,456) (1,062) 94 (731) (116) 59 (186) (64) 22 (11,288) (3,242) 300 Balance at 30 June 2021 (5,008) (3,694) (2,088) (2,424) (788) (228) (14,230) Accumulated depreciation Balance at 1 July 2021 Depreciation expense Disposals Divestment of discontinued business (5,008) (596) (3,694) (1,078) (2,088) (358) 3 30 11 42 1 33 (2,424) (1,325) - - (788) (228) (14,230) (56) 247 31 (68) (3,481) 3 13 265 149 Balance at 30 June 2022 (5,571) (4,719) (2,412) (3,749) (566) (280) (17,297) Net book value As at 30 June 2021 As at 30 June 2022 1,248 1,296 1,587 2,344 1,134 863 1,558 1,411 121 17 147 49 5,795 5,980 76 17. Intangible Assets Cost Balance at 1 July 2020 Additions Disposals Balance at 30 June 2021 Cost Balance at 1 July 2021 Additions Disposals Divestment of discontinued business Computer Software $’000 Capitalised courses $’000 Goodwill from acquisitions $’000 RTO Licence $’000 Capitalised Product Designs $’000 5,434 1,493 (324) 6,603 6,603 1,097 (257) (51) 2,406 542 - 2,948 2,948 261 (2,271) (938) 2,603 1,245 - - - - 2,603 1,245 2,603 1,245 - - - - (2,603) (1,245) 4,053 1,324 (560) 4,817 4,817 1,517 (522) - Total $’000 15,741 3,359 (884) 18,216 18,216 2,875 (3,050) (4,837) Balance at 30 June 2022 7,392 - (1,894) (670) - (2,564) (2,564) (225) 2,271 518 - 384 - Accumulated amortisation Balance at 1 July 2020 Amortisation Expense Disposal Balance 30 June 2021 Accumulated amortisation Balance at 1 July 2021 Amortisation Expense Disposals Divestment of discontinued business (1,734) (1,824) 324 (3,234) (3,234) (1,932) 1 49 Balance 30 June 2022 (5,116) 3,369 2,276 Net Book Value As at 30 June 2022 As at 30 June 2022 18. Other assets Prepayments Loan to sales consultants Other assets - - - - - - - - - - 2,603 - - 5,812 13,204 (1,245) - - (1,245) (1,245) - - 1,245 - - - (2,070) (1,182) 421 (2,831) (2,831) (1,132) 477 - (6,943) (3,676) 745 (9,874) (9,874) (3,289) 2,749 1,812 (3,486) (8,602) 1,986 2,326 8,342 4,602 30 June 2022 $’000 30 June 2021 $’000 2,191 42 185 2,418 1,065 123 25 1,213 77 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 19. Trade and other payables Trade payables Construction accruals Goods and services tax payable Other payables and accruals 20. Borrowings Current Other borrowings Summary of borrowing arrangements Details of the Group’s borrowing facility as at 30 June 2022 are as follows: 30 June 2022 $’000 30 June 2021 $’000 61,817 24,041 894 4,814 91,566 54,638 15,644 922 7,309 78,513 30 June 2022 $’000 30 June 2021 $’000 286 286 312 312 Utilised $’000 Nil 2,299 Unutilised $’000 Interest Charge Description 3,000 Fixed Market Rate 2,701 Fixed Market Rate ThThe Group’s facilities are secured by all Simonds Group Limited corporate entities. Maturity Date 30 September 2023 Facility Market Rate Loan Bank Guarantees Overdraft Facility Business Corporate Credit Card Facility Nil 17,500 Variable 1,560 Market Rate - Option Index Rate Finance Lease 7,8301 2,170 Fixed Market Rate Charged Card facility made available to Simonds Group 30 September 2023 Asset under finance leases are secured by the assets leased with repayments periods not exceeding 5 years. Repayment periods are not exceeding 5 years Total 11,689 25,371 1 Finance lease with CBA were previously classified as finance leases under AASB 117, these are now shown under the more generic term of lease liabilities under AASB 16. 78 In addition to the debt facility outlined above, the Group has additional facilities as below: Facility Microsoft Financing Utilised $’000 286 Unutilised $’000 Interest Charge Description - Fixed Interest Rate The Group entered into a Master Instalment Payment Agreement with De Lage Landen Pty Ltd, which covers license subscription for Microsoft products for the period from January 2022 to December 2022 Maturity Date 31 December 2022. Total 286 21. Provisions Provision for employee benefits (i) Cash settled share-based payment Provision for warranty and contract maintenance (ii) Provision for make good (iii) Current Non – current 30 June 2022 $’000 30 June 2021 $’000 10,521 80 12,967 1,216 24,784 15,669 9,115 24,784 11,274 1,602 13,295 1,395 27,566 16,671 10,895 27,566 i. The provision for employee benefits represents annual leave and long service leave entitlements accrued and compensation claims made by employees. The measurement and recognition criteria for employee benefits have been included in note 3 of the financial statements. ii. The provision for warranty claims represents the present value of the directors’ best estimate of the future outflow of economic benefits that will be required under the Group’s obligations for warranties related to residential construction. The estimate has been made on the basis of historical warranty trends and may vary as a result of the annual build program, the history of defects relating to materials used or in the nature of services provided. iii. Provisions based on the directors’ best estimates of the costs required to reinstate the display homes under legislation; or requirement to be at a saleable standard. The movement in provisions during the financial year is as below: 2022 At 30 June 2021 Additional provision recognised during the year Credited to profit or loss At 30 June 2022 Employee benefits $’000 Cash settled share-based payment $’000 Warranty and contract maintenance $’000 Make good $’000 11,274 3,810 (4,563) 10,521 1,602 132 (1,654) 80 13,295 4,917 (5,245) 12,967 1,395 473 (652) 1,216 Total $’000 27,566 9,332 (12,114) 24,784 79 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 2021 At 30 June 2020 Additional provision recognised during the year Credited to profit or loss At 30 June 2021 22. Customer deposits Arising from construction contracts 23. Issued capital Employee benefits $’000 Cash settled share-based payment $’000 Warranty and contract maintenance $’000 Make good $’000 9,153 4,241 (2,120) 11,274 730 1,073 (201) 1,602 13,994 4,084 (4,783) 13,295 1,284 802 (691) 1,395 Total $’000 25,161 10,200 (7,795) 27,566 30 June 2022 $’000 30 June 2021 $’000 18,685 21,153 30 June 2022 $’000 30 June 2021 $’000 13,505 13,505 12,911 12,911 147,234,268 fully paid ordinary shares (June 2021: 143,841,655 ) Number of Shares Share Capital ($’000) 30 June 2022 30 June 2021 30 June 2022 30 June 2021 Balance at beginning of the period 143,841,655 143,841,655 Movement in treasury shares Balance at end of the period 3,392,613 - 147,234,268 143,841,655 12,911 594 13,505 12,911 - 12,911 24. Reserves Share Buy-back Reserve Share Based Payment Reserve Share Buy-back Reserve 30 June 2022 $’000 30 June 2021 $’000 (7,204) 28,848 21,644 (7,204) 30,034 22,830 On 20 August 2015, the Group announced its intention to undertake an on-market share buy-back (“buy-back”) to enable the Group to acquire up to a maximum of 7.570m shares within a 12-month period. The buy-back was part of the Group’s ongoing capital management strategy and determined by the Directors to be an appropriate use of Group capital resources given current market conditions at the time. The Group bought back 7.570m of its issued shares and as a result, the balance between the total buy-back and the amount deemed a reduction in capital was recorded in the share buy- back reserve. Share Based Payment Reserve This reserve is used to recognise the value of equity settled benefits provided to employees and directors as part of their remuneration. 80 25. Accumulated losses Balance at the beginning of the year Profits attributable to owners of the Group (net of tax) Performance and service rights vested / forfeited Transfers between reserves Balance at the end of the year 26. Dividends paid or payable 30 June 2022 $’000 30 June 2021 $’000 (13,492) (9,669) 620 844 (18,185) 4,693 - - (21,697) (13,492) During the year, Simonds Group Limited made the following dividend payments: Final dividend - - - - The company’s adjusted franking account balance as at 30 June 2022 is $19.693m (2021: $22.638m). Year ended 30 June 2022 Year ended 30 June 2021 Cents per share Total $’000 Cents per share Total $’000 27. Financial Instruments Capital risk management Directors review the capital structure on an ongoing basis. As a part of this review the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through the payment of dividends, new share issues, and the issue or repayment of debt. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 20, cash, and equity attributable to equity holders of the parent, comprising issued capital, accumulated losses and dividends, as disclosed in notes 23, 24 and 25. Financial risk management The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use of financial instruments is governed by the Group’s policies which are approved by the directors. The Chief Financial Officer is responsible for managing the Group’s treasury requirements in accordance with this policy. The Group hold the following financial instruments: Financial Assets Cash and Cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Lease liabilities Borrowings 30 June 2022 $’000 30 June 2021 $’000 11,133 38,210 49,343 91,566 26,720 286 118,572 22,781 33,368 56,149 78,513 22,094 312 100,919 81 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Market risk i. Interest rate risk management Refer to note 20 for details of debt facilities the Group holds as at 30 June 2022. The Group is exposed to interest rate risk as the entities in the Group borrow funds at both fixed and variable interest rates. There is an interest rate exposure for these utilised facilities when they are used during each financial year (Refer to note 20 for details of these facilities). A sensitivity analysis has been determined based on the exposure to interest rates at the end of the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 30 June 2022 would decrease/increase by $0.032m (2021: $0.002m). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. ii. Price risk The Group has no foreign exchange exposure or price risk on equity securities. Credit risk Credit risk arises from financial assets which comprise cash and cash equivalents, trade and other receivables and the granting of financial guarantees. Exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of the financial assets as well as in relation to financial guarantees granted. Construction contracts require the customer to obtain finance prior to starting the build. Contracts for Speculative Housing, Displays and Land require payment in full prior to passing of title to customers. The Group has no significant concentrations of credit risk and does not hold any credit derivatives to offset its credit exposure. At the reporting date there are no significant concentrations of credit risk relating to loans and receivables at fair value through profit or loss. The carrying amount reflected in the statement of financial position represents the Group’s maximum exposure to credit risk for such loans and receivables. Liquidity risk The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. i. Financial arrangements The Group had access to the following debt facilities at the end of the reporting period: Expiring within 1 year Expiring beyond 1 year Utilised Unutilised Total 2022 $’000 6,067 2,049 8,116 2021 $’000 1,059 496 1,555 2022 $’000 - 22,670 22,670 2021 $’000 29,137 - 2022 $’000 6,067 24,719 29,317 30,786 2021 $’000 30,376 496 30,872 82 ii. Maturities of financial liabilities The table below analyses the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balance due within 12 months equal their carrying balances as the impact of discounting is not significant. Year ended 30 June 2022 Financial Liabilities Trade and other payables Lease liabilities Borrowings Year ended 30 June 2021 Financial Liabilities Trade and other payables Lease liabilities Borrowings < 6 months $’000 6 -12 months $’000 >1 -5 years $’000 91,566 1,085 286 92,865 - 11,439 - 11,439 - 15,908 - 15,908 < 6 months $’000 6 -12 months $’000 >1 -5 years $’000 78,513 1,817 312 80,642 - 9,172 - 9,172 - 14,585 - 14,585 Total $’000 91,566 28,432 286 120,212 Total $’000 78,513 25,574 312 104,399 28. Key management personnel compensation The aggregate compensation made to directors and other members of key management personnel of the Company and the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments 30 June 2022 $’000 30 June 2021 $’000 2,149,228 2,438,024 119,218 (1,299) 355,282 (294,932) 2,327,497 93,059 18,621 - 764,286 3,313,990 83 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 29. Related party transactions Trading Transactions During the year group entities entered the following transactions with related parties which are not members of the Group. Sales Cost of goods Leases and services rendered Non-cash remuneration 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ Vallence Gary Simonds and related entities: Properties leased on an arms- length basis Advisory fee paid during the year Remuneration for employee services Service payment to The Trustee for the Consolidated Yacht Charter Trust Car park provided Simonds Family Office Pty Ltd 1 Supply payment to Delos Welltek Australia Pty Ltd 2 Latitude Invest Pty Ltd 3 Service payment to Latitude Invest Pty Ltd Mark Simonds and related entities 4: Payment for use of building licence Remuneration for employee services Michael Myers and related entities: Property leased on an arms- length basis Property purchased on an arms-length basis - - - - - - - - - - - - - - - - - - - - - - - - - - - 12,313 - 12,313 - - - - - - 283,425 305,500 100,457 84,817 69,342 62,630 - - - - - - - - - - - - 18,769 18,240 453,224 452,947 18,769 18,240 170,141 922,580 316,290 - - - - - - - - - - - 166,667 100,000 11,808 236 178,474 100,236 10,1005 30,188 - 484,250 - - - 484,250 10,100 30,188 - - - - - - - - - - - - - - - - - - - - - - 1 Mark Simonds and Rhett Simonds are directors of Simonds Family Office Pty Ltd. 2 There is a Supply Agreement between Delos Welltek Australia Pty Ltd and Simonds Group for the inclusion of the “DARWIN Essentials Package” into all homes in Victoria. Simonds Family Office Pty Ltd (of which Mark Simonds and Rhett Simonds are directors) hold 25% interest in Delos Welltek Australia Pty Ltd. 3 An interim service agreement between Latitude Invest Pty Ltd and Simonds Group was entered into to provide marketing and sales support in the Wholesale channel. Mark Simonds and Rhett Simonds hold a 50% interest in Latitude Invest Pty Ltd. 4 One family member of Mark Simonds was employed by the Group on a casual basis and remuneration was based on an ‘arm’s length’ basis. 5 Where a person is not a KMP for the full period, related parties are only considered during the period they held a KMP position. 84 Sales Cost of goods Leases and services rendered Non-cash remuneration 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ 30 June 2022 $ 30 June 2021 $ Tim Bradfield and related entities: Property purchased on a non arms-length basis1 10,000 Duncan Brand and related entities: Property purchased on an arms length basis2 - - - - - - - - - - - - - - - 10,000 484,250 192,554 1,269,058 631,698 553,183 18,769 18,240 1 Relates to residential building contract entered during FY22 which on a cost plus 10% agreement, this rate was approved by the Board 2 Where a person is not a KMP for the full period, related parties are only considered during the period they held a KMP position. The contract was entered in prior year and relates to residential build. As such, there is no disclosure for the current period. At 30 June 2022, there were no balances outstanding from related parties (2021: nil). Loans to related parties During the year ended 30 June 2022 there were no loans to related parties outside the Group (2021: Nil). Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated upon consolidation and disclosed in this note. 85 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 30. Share based payments Employee share plan A range of different employee share scheme (ESS) interests were created as part of the Simonds Group Employee Share Plan. The Share plan has been created to promote employee share ownership amongst staff members and to encourage retention and appropriate reward for executives and employees. During the current financial year: • Share based payments made to key management personal and other employees amounted to$0.594m (2021: $1.405m). • No performance rights (2021: 2,050,000) were granted to any senior executives (2021: 8) as at 30 June 2022, 1,482,353 performance rights remain. • As at 30 June 2022, performance rights / performance options remaining on issue are: - FY2020 Plan: 882,353 (performance rights) - FY2021 Plan: 600,000 (performance rights) • No options were granted (2021: Nil) during the period. Incentives Financial Year Cash Settled FY 2021 FY 2020 Notes: Tranche Grant Date Fair Value at Grant Date Vesting Date Expiry Date Other Vesting Condition 1 1 25 Jun’ 2021 $0.50 30 Jun’ 2023 30 Jun’ 2023 Non-market (1), (2) 9 Mar’ 2020 $0.34 30 Sep’ 2022 30 Sep’ 2022 Non-market (1), (3) 1. 2. 3. Gateway Hurdle Condition exists whereby FY20 Performance Rights may not vest unless the individual remains employed up to and including 30 September 2022. These Performance Rights are settled either as shares in the Company or as cash at the discretion of the Board. Vesting condition linked to the Group's Total Shareholder Return (TSR) and the percentile ranking against the constituent companies within the S&P / ASX Small Ordinaries Index. Vesting condition linked to compound annual growth rate in Earnings Per Share (EPS) where EPS is calculated based on Net Profit Before Tax for the relevant period with the specific EPS methodology to be determined by the board. The following table outlines the share-based expense (excluding forfeitures and lapses) under the management incentive and employee share plan for the year ended 30 June 2022: Employee share plan Share based expense (excluding forfeitures) 30 June 2022 $’000 30 June 2021 $’000 (38) (38) 424 424 86 Fair value of performance rights, service rights and options granted in the year Cash rights subject to market-based vesting conditions. Fair value model inputs and assumptions Fair value at grant date Exercise Price Expected life of instruments (days) Expected volatility Expected dividend yield Risk - free rate FY 2021 Cash rights: Tranche 1 1 FY 2020 Cash rights: $0.50 $0.00 Tranche 1 2 $0.34 $0.00 1 The fair value at 30 June 2022 is $0.20 2 The fair value at 30 June 2022 is $0.20. n/a n/a n/a n/a n/a n/a n/a n/a Movements in performance rights, service rights and options during the year The following reconciles the cash rights, performance rights and option rights outstanding at the beginning and end of the financial year: Opening balance Granted during the year Vested during the year Forfeited during the year Financial Year Issued Number of rights Number of rights Weighted average fair value Number of rights Weighted average fair value Number of rights Weighted average fair value Closing balance Total number of rights 2022 Cash Rights Tranche 1 Tranche 2 FY 2021 2,050,000 FY 2020 3,014,707 Performance Rights Tranche 1 Tranche 2 FY 2019 FY 2019 1,866,666 1,866,666 CEO Options EPS Total FY 2017 2,275,720 11,073,759 - - - - 1,450,000 2,132,354 0.38 600,000 0.38 882,353 1,095,333 21,559 0.27 0.38 771,333 1,845,107 0.27 0.38 - - - - - - - - - - - - 2,275,720 3,392,612 - - - 0.53 - - 0.44 6,198,794 0.37 1,482,353 87 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Opening balance Granted during the year Vested during the year Forfeited during the year Closing balance Financial Year Issued Number of rights Number of rights Weighted average fair value Number of rights Weighted average fair value Number of rights Weighted average fair value Total number of rights FY 2021 - 2,050,000 0.50 - - 2,050,000 - - - - - - - - - - - - 735,294 645,162 - - - 645,160 0.35 - 0.39 3,014,707 0.11 - - - - - - - - - - - - 229,008 229,008 0.27 1,866,666 0.38 1,866,666 - - 2,275,720 11,507,391 2,050,000 0.50 645,160 0.35 1,838,472 0.27 11,073,759 2021 Cash Rights Tranche 1 Tranche 1 Tranche 1 Tranche 2 FY 2020 3,750,001 FY 2018 FY 2018 645,162 645,160 Performance Rights Tranche 1 Tranche 2 FY 2019 2,095,674 FY 2019 2,095,674 CEO Options EPS Total FY 2017 2,275,720 Cash rights outstanding at the end of the current financial year had an exercise price of $nil (2021: nil). The weighted average contractual life of cash rights was 835 days (2021: 557). The weighted average contractual life of performance rights was 944 days (2021: 883 days). Performance and service rights vested during the year 1,116,892 (2021: 645,160) performance rights and 2,275,720 (2021: nil) options were vested during the year ended 30 June 2022, 3,392,613 were settled in shares, while nil were settled with cash. Performance and service rights forfeited during the year There were 3,582,354 (2021: 1,380,456) cash rights and 2,616,440 (2021: 458,016) performance rights forfeited during the year. Share based payments reserve Balance at the beginning of the year Amounts expensed Performance rights vested Performance rights forfeited Transfer to accumulated losses Balance at the end of the year 30 June 2022 $’000 30 June 2021 $’000 30,034 29,725 (38) (304) - (844) 28,848 424 - (115) - 30,034 88 31. Commitments for expenditure Lease commitments Non – cancellable operating lease payments No longer than 1 year Longer than 1 year and not longer than 5 years 32. Auditor’s remuneration Deloitte and related network firms* Audit or review of financial statements -Group -Subsidiaries-House of Learning Pty Ltd Statutory assurance services required by the legislation to be provided by the auditor Other services -Tax services -Financial advisory services *The Group’s auditor is Deloitte Touche Tohmatsu. 30 June 2022 $’000 30 June 2021 $’000 - - - - 1,061 1,061 - 1,061 30 June 2022 30 June 2021 - 281,500 18,500 300,000 15,000 148,295 - 463,295 315,000 - 315,000 35,500 169,807 165,658 685,965 89 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 33. Cash and cash equivalents For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows: Cash and cash equivalents Notes 30 June 2022 $’000 30 June 2021 $’000 11,133 11,133 22,781 22,781 Reconciliation of profit for the year to net cash flows from operating activities Cash flows from operating activities Net (Loss) / profit after tax for the year Add / (deduct): Income tax expense recognised in profit or loss Finance costs recognised in profit or loss Gain on disposal of discontinued operation Management incentive and share based payments Depreciation and amortisation of non-current assets Movements in working capital (Increase) in trade and other receivables Decrease in inventories (Increase) in other assets Increase / (decrease) in trade and other payables Decrease / (increase) in provisions (Decrease) / increase in other liabilities Cash (used in)/ generated by operating activities Net interest paid Income taxes refund / (paid) (9,669) 4,693 (5,359) 2,275 (6,041) (1,186) 20,548 568 (5,775) 8,869 (18,041) 14,750 (2,291) (1,086) (3,006) (2,275) 2,946 2,724 1,563 - 309 20,615 29,904 (4,080) 6,937 (15,713) (2,305) 2,405 7,946 25,094 (1,563) (9,800) Net cash (used in) / generated from operating activities (2,335) 13,731 Non-cash transactions The Group acquired $10.579m of right-of-use assets during the financial ended 30 June 2022. The additions are non-cash and not included within investing activities in the consolidated statement of cash flows. 90 Changes in liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non- cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated cash flow statement as cash flows from financing activities. Notes 20 36 30 June 2021 $’000 Financing cash flows $’000 312 22,094 22,406 (26) (12,940) (12,966) Non-cash changes New finance leases $’000 - 17,566 17,566 30 June 2022 $’000 286 26,720 27,006 Other borrowings Finance lease liabilities Total liabilities from financing activities 34. Parent entity information The parent entity is Simonds Group Limited. The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Statement of financial position Current Assets Non-current Assets Total assets Current Liability Non-current Liability Total liabilities Net assets Issued capital Reserves Accumulated profit Total equity Income statement Dividends from subsidiaries Operating profit / (loss) before tax Tax (expense) / refund Profit / (Loss) for the year 30 June 2022 $’000 30 June 2021 $’000 14,753 2,001 16,754 4,329 2,120 6,449 10,305 13,505 (35,048) 31,848 10,305 4,390 1,558 (2,435) 3,513 7,579 2,874 10,453 1,383 1,686 3,069 7,384 12,911 (33,862) 28,335 7,384 7,250 (1,551) 111 5,810 91 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) 35. Contingent liabilities and contingent assets Contingent Liabilities Other guarantees (i) 30 June 2022 $’000 30 June 2021 $’000 2,299 1,920 (i) Represents guarantees for property rentals, project contracts, crossing deposits and merchant facility. Litigation There are a small number of legal matters relating to the construction of residential dwellings and personal injury claims from employees, contractors or the public that are the subject of litigation or potential litigation. A provision is raised in respect of claims where an estimate may be reliably established, and legal or other advice indicates that it is probable that the Group will incur costs either in progressing its investigation of the claim or ultimately in settlement. Building Contracts The Group has entered into a fixed price agreement with Development Victoria (DV) to build 86 units. Given delays in the commencement coupled with unprecedented cost and supply chain pressure, the Group has approached DV with alternative pricing proposals to offset the impact of the higher building cost. The outcome of the negotiations is unknown but if not successful could result in losses when these units are constructed. Given that the outcome of the negotiation is unknown the obligation cannot be measured reliably and has been classified as a contingent liability. Other Contracts The Group has entered contracts to acquire properties. In the normal course of business, third parties will be assigned to purchase the property, however if no third party can be reassigned, then the Group faces an exposure of $1.360m (2021: $2.410m). 36. Leases The Group leases commercial offices, display homes, display home furniture, IT equipment and motor vehicles. The leases are typically with an option to renew and lease payments are reviewed when approaching the lease expiry date to reflect market rentals. The Group also leases equipment with contract terms of one to three years. These leases are short- term and/or leases with value at or below $10,000. The Group has elected not to recognise right-of- use assets and lease liabilities for these leases. Information about leases for which the Group is a lessee is presented below. 92 Right of use assets Cost Balance at 1 July 2020 Additions Changes in value from lease modification and cancellation Disposal of assets Balance at 30 June 2021 Cost Balance at 1 July 2021 Additions Changes in value from lease modification and cancellation Disposal of assets Balance at 30 June 2022 Accumulated amortisation Balance at 1 July 2020 Charge for the year Changes in value from lease modification and cancellation Disposal of assets Balance 30 June 2021 Accumulated amortisation Balance at 1 July 2021 Charge for the year Changes in value from lease modification and cancellation Disposal of assets Balance 30 June 2022 Carrying amount As at 30 June 2021 As at 30 June 2022 Commercial offices $’000 16,067 - 4,824 (2,464) 18,427 18,427 945 1,134 (1,590) 18,916 (2,871) (4,246) (2) 1,189 (5,930) (5,930) (4,295) (10) 1,516 (8,719) 12,497 10,197 Display homes $’000 5,640 4,047 885 (3,634) 6,938 6,938 4,073 311 (3,575) 7,747 (2,971) (4,443) 26 3,514 (3,874) (3,874) (3,937) - 3,445 (4,366) 3,064 3,381 5,091 2,309 121 (1,939) 5,582 5,582 1,967 - (2,995) 4,554 (2,038) (2,967) 56 1,836 (3,113) (3,113) (2,375) - 2,934 (2,554) 2,469 2,000 Display home furniture $’000 IT equipment $’000 Motor vehicles $’000 Total $’000 33,338 8,433 5,863 (8,243) 39,391 39,391 10,579 7,461 5,061 2,077 33 (206) 6,965 6,965 3,328 - (981) 9,312 (10,620) 46,811 (2,084) (1,357) 1 (10,638) (13,696) 81 190 6,729 1,479 - - - 1,479 1,479 266 6,016 (1,479) 6,282 (674) (683) - - (1,357) (3,250) (17,524) (1,357) (1,203) - 1,357 (1,203) 122 5,079 (3,250) (1,968) - 875 (4,343) 3,715 4,969 (17,524) (13,778) (10) 10,127 (21,185) 21,867 25,626 93 SIMONDS GROUP ANNUAL REPORT 2022NOTES TO FINANCIAL STATEMENTS (CONT'D) Amount recognised in profit or loss Lease under AASB 16 Interest on lease liabilities Depreciation expense on right-of-use assets Expenses relating to short-term leases Expenses relating to low value assets Gain on lease modification and cancellation 30 June 2022 $’000 30 June 2021 $’000 (1,594) (13,788) (3,779) (323) 11 (1,100) (13,696) (1,644) (317) 349 (19,463) (16,408) Commitment for short-term leases and low value assets Relating to leases classified as short-term and/or low value leases, the Group is committed to payments of $0.237m for leases under 1 year in duration and $nil for leases between 1 year and 5 years. The total cash outflow for leases amounts to $14.534m (2021: $14.150m). Lease liabilities Current Non-current Leases expiring less than one year Leases expiring between one and five years Leases expiring more than five years 37. Disposal of subsidiaries 30 June 2022 $’000 30 June 2021 $’000 11,962 14,758 26,720 11,962 14,758 - 10,042 12,052 22,094 10,042 12,052 - On 30 November 2021, the Group announced that it completed the sale of its wholly owned BAA business to Up Education Australia Pty Ltd for an adjusted cash consideration of $8.980m1 . Consideration received Consideration received in cash and cash equivalents Total Consideration 1 Consideration of $10.300m less net debt of the divested business of $1.320m. 30 June 2022 $’000 8,980 8,980 94 Net assets of BAA at the date of disposal 30 June 2022 $’000 Current Assets Cash and cash equivalents Trade receivables Other Assets Deferred Tax Assets Non - Current Assets Property, plant and equipment Intangible assets Goodwill Current Liability Trade and payables Deposit and income in advance Provisions Non - Current Liability Provisions Net assets disposed Profit on disposal of BAA Net consideration Net assets disposed Cost of divestment Profit on disposal Net cash inflow on BAA Consideration received in cash and cash equivalents Less cash and cash equivalent balance disposed Net cash generated from disposal of discontinued business- BAA 38. Subsequent Events 8 933 143 28 150 422 2,602 (370) (13) (1,663) (155) (2,085) 30 June 2022 $’000 8,980 (2,085) (854) 6,041 30 June 2022 $’000 8,980 (8) 8,972 Subsequent to year end, the Group has obtained conditional approval on a new borrowing facilities term sheet of $34.500 million, dated 26 August 2022, including revised related debt covenants, which aims to extend the Group’s current borrowing facilities from September 2023 until 31 December 2023. The Directors expect to sign the final borrowing documentation in the coming weeks in substantially the same form as the conditionally approved term sheet. Apart from this, there are no other events that occurred subsequent to the reporting date that may significantly affect Group’s operations, results or state of affairs in future periods. 95 SIMONDS GROUP ANNUAL REPORT 2022SHAREHOLDER INFORMATION In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders not elsewhere disclosed in this Annual Report. The information provided is current as at 31 August 2022 (Reporting Date). Corporate governance statement The Company has prepared a Corporate Governance Statement which sets out the corporate governance practices that were in operation throughout the financial year for the Company. In accordance with ASX Listing Rule 4.10.3, the Corporate Governance Statement will be available on Simonds website www.simondsgroup.com.au and will be lodged with ASX at the same time that this Annual Report is lodged with ASX. Distribution of equity securities The distribution and number of holders of equity securities on issue in the Company as at the Reporting Date, and the number of holders holding less than a marketable parcel of the Company’s ordinary shares, based on the closing market price as at the Reporting Date, is as follows: Ordinary shares Performance rights Performance options Class of equity security Holders No. of shares % Holders No. of performance rights Holders No. of performance options 529 90 53 123 50 212,268 242,431 394,417 4,466,294 0.14 0.16 0.27 3.03 141,918,858 96.39 - - - - - - - - - - - - 2 2 1,482,353 1,482,353 Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total 845 147,234,268 100 There were 581 holders of less than a marketable parcel of ordinary shares ($500). 96 Twenty largest quoted equity security holders The Company only has one class of quoted securities, being ordinary shares. The names of the twenty largest holders of ordinary shares, the number of ordinary shares and the percentage of capital held by each holder is as follows: Name McDonald Jones Homes Simonds Custodians Pty Ltd Simonds Constructions Pty Ltd FJP Pty Ltd Simonds Corporation Pty Ltd Mr Robert Geoffrey Stubbs Moat Investments Pty Ltd Madisson Constructions Pty Ltd Poal Pty Ltd Mast Financial Pty Ltd Mr Michael Bonadio & Ms Mary Bonadio Gliocas Investments Pty Ltd Kelvin Ryan Sutton Gardner Pty Ltd Mr Kim Bee Tan & Mrs Verna Suiat Wah Tan Dr Howard Vincent Bertram & Dr Gijsberdina Bertram BNP Paribas Nominees Pty Ltd Jet Invest Pty Ltd April Pamela Waddell Mr Peter Hollick & Ms Helen Pattinson Other shareholders Total shareholders Number held 38,999,367 32,800,020 25,747,701 20,370,660 6,933,621 2,124,496 2,089,560 1,572,678 1,020,000 869,064 830,000 715,750 674,350 600,000 550,000 467,145 378,831 350,000 310,000 300,00 Percentage of issued shared 26.48% 22.28% 17.49% 13.84% 4.71% 1.44% 1.42% 1.07% 0.69% 0.59% 0.56% 0.47% 0.46% 0.41% 0.37% 0.32% 0.26% 0.24% 0.21% 0.20% 137,703,243 9,531,025 147,234,268 93.53% 6.47% 100.00% 97 SIMONDS GROUP ANNUAL REPORT 2022 SHAREHOLDER INFORMATION (CONT'D) Substantial Shareholders As at the Reporting Date, the names of the substantial holders of Simonds and the number of equity securities in which those substantial holders and their associates have a relevant interest, as disclosed in substantial holding notices given to Simonds, are as follows: Name Vallence Gary Simonds McDonald Jones Homes Pty Ltd F.J.P. Pty Ltd Total Voting Rights Numbers held 66,190,419 38,999,367 20,370,660 125,560,446 Percentage of issued shared 46.02% 26.69% 14.16% 86.87% The voting rights attaching to each class of equity security are set out as follows: Ordinary Shares At a general meeting of Simonds, every holder of ordinary shares present in person or by proxy, attorney or representative has one vote on a show of hands and on a poll, one vote for each ordinary share held. Performance Rights Performance rights do not carry any voting rights. Performance Options Performance options do not carry any voting rights. Unquoted equity securities 1,482,353 unlisted performance rights have been granted to two people. There are no people who hold 20% or more performance rights or performance options that were not issued or acquired under an employee incentive scheme. On-market buy-back The Company is not currently conducting an on-market buy-back. 98 Share register Boardroom Pty Ltd Level 12, 255 George Street Sydney, NSW 2000 Postal Address: GPO Box 3993 Sydney, NSW 2001 Telephone: 1300 737 760 International: +61 2 9290 9600 Email: simonds@boardroomlimited.com.au Auditor Deloitte Touche Tohmatsu 477 Collins Street Melbourne, VIC 3000 Stock exchange listing Simonds Group Limited shares are listed on the Australian Securities Exchange (ASX code: SIO) Corporate website simondsgroup.com.au CORPORATE DIRECTORY Directors Rhett Simonds (Chief Executive Officer and Executive Chairman) Iain Kirkwood (Independent, Non-Executive Director) Piers O’Brien (Non-Executive Director) Mark Simonds (Executive Director) Andrew Bloore (Non-Executive Director) David Denny (Independent, Non-Executive Director) Company Secretary Amanda Jones Notice of annual general meeting The details of the annual general meeting of Simonds Group Limited are: 11 November 2022 11.30am (AEDT) Date: Time: Venue: The View Hotel, 562 St Kilda Road, Melbourne, Victoria 3004 Registered office Level 1, 570 St Kilda Road Melbourne, VIC 3004 Postal Address: Locked Bag 4002 South Melbourne, VIC 3205 Telephone: +61 3 9682 0700 ABN 54 143 841 801 Email: company.secretary@simonds.com.au 99 SIMONDS GROUP ANNUAL REPORT 2022simondsgroup.com.au 

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