CTI LOGISTICS LIMITED

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ABN 69 008 778 925

FULL YEAR STATUTORY ACCOUNTS 30 JUNE 2021

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1 Directory
2-7 Directors’ Report
8 Lead Auditor’s Independence Declaration
9 Consolidated Statement of Profit or Loss and other
Comprehensive Income
10 Consolidated Statement of Financial Position
11 Consolidated Statement of Changes in Equity
12 Consolidated Statement of Cash Flows
13-43 Notes to the Financial Statements
44 Directors’ Declaration
45-48 Independent Auditor’s Report

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David Robert Watson (Executive Chairman)

David Anderson Mellor (Executive)

Bruce Edmond Saxild (Executive) Peter James Leonhardt (Non-Executive)

Owen Roy Venter

KPMG 235 St. Georges Terrace Perth WA 6000 Telephone (08) 9263 7171

Computershare Investor Services Pty Ltd Level 11, 172 St. Georges Terrace Perth WA 6000 Telephone (08) 9323 2000

1 Drummond Place West Perth WA 6005 Telephone (08) 9422 1100 E-mail [email protected] Web www.ctilogistics.com

The financial report covers the Group consisting of CTI Logistics Limited and its subsidiaries.

The financial report is presented in Australian dollars.

The financial report was authorised for issue by the directors on 30 August 2021.

CTI Logistics Limited is a company limited by shares, incorporated and domiciled in Australia.

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Page 1

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Directors of the Company who were in office during the financial year and up to the date of this report are:

Mr Watson is the founder, executive chairman and chief executive officer of the Group. Mr Watson is a member of the remuneration and nomination committee. Mr Watson has not held any other directorships in listed companies over the past 4 years.

Mr Mellor is a Chartered Accountant who has been with the Group since 1978. He is responsible for the Group’s finances and accounts. Mr Mellor has not held any other directorships in listed companies over the past 4 years.

Mr Saxild has been with the Group since 1977. He is responsible for the Group’s logistics and transport operations. He is a member of the audit and risk committee. Mr Saxild has not held any other directorships in listed companies over the past 4 years.

Mr Leonhardt is a non-executive director of CTI Logistics Limited and has been with the Group since 1999. During the past 4 years Mr Leonhardt has served as Chairman of Carnarvon Petroleum Limited. Mr Leonhardt is a former managing partner of Coopers & Lybrand (now PricewaterhouseCoopers). Mr Leonhardt is the chairman of the audit and risk committee and the remuneration and nomination committee.

The principal activities of the Group during the year were the provision of logistics and transport services, rental of property, specialised flooring logistics and provision of security services.

Dividends paid or declared by the Company to members since the end of the previous financial year were:

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Final 2020 Ordinary nil nil n/a Interim 2021 Ordinary 2.0 $1,500,548 Franked 28 April 2021

After the balance sheet date the directors have declared the following dividend. The dividend has not been provided and there are no income tax consequences.

Final 2021 Ordinary 2.0 $1,503,833 Franked 12 November 2021

The financial effect of this post year dividend has not been brought to account in the financial statements for the year ended 30 June 2021 and will be recognised in subsequent financial reports.

The Group is a Western Australian based transport and logistics provider. Transport operations cover couriers and taxi trucks, B2B and B2C parcel distribution, container handling, fleet management, WA regional road freight and interstate freight. Logistics includes 3PL, 4PL, supply chain and DC warehousing, flooring logistics, E-commerce fulfilment, temperature-controlled warehousing, minerals and energy supply base services, quarantine and preservation wrapping and fumigation, document storage, media destruction and recycling. The Group also has a security business providing installation, maintenance and monitoring of alarms, CCTV visual verification and lone worker protection.

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During the year the Company has invested in growing our national freight operations in Sydney, Adelaide and Perth, including the relocation of two transport depots in Perth and Sydney and a warehouse in South Australia. Investment has continued in information technology at GMK (specialised flooring logistics) and warehousing divisions to enhance our operating systems and performance as well as a cyber security investment in ongoing managed services to protect our IT systems network.

For the year ended 30 June 2021 revenue from operations was up 11.1% to $239,044,247.

The Group implemented the requirements of AASB 16 Leases at 1 July 2019 and the following key financial data is provided to show the current period and prior period excluding the impacts of AASB 16 Leases and the non-cash impairment on the vacant land at Hazelmere of $5,771,500 in the prior year.

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30 June 2021 30 June 2020 Movement
Statement of profit or loss Excluding Impact As reported Excluding Impact Impairment As reported Excluding
and other comprehensive AASB 16 of AASB 16 and of charges adjustments
income AASB 16 Impairment AASB 16
$000 $000 $000 $000 $000 $000 $000
Revenue from operations 239,044 - 239,044 215,209 - - 215,209
Other income 1,724 644 2,368 892 636 - 1,528
Impairment prior year - - - - - (5,772) (5,772)
Motor vehicle and transport
costs (29,367) 1,125 (28,242) (27,682) 918 - (26,764)
Property costs (18,367) 14,038 (4,329) (16,109) 13,245 - (2,864)
Other costs (171,040) - (171,040) (158,303) - - (158,303)
Results from operating
activities excluding interest,
depreciation and amortisation
(“EBITDA”) 21,994 15,807 37,801 14,007 14,799 (5,772) 23,034 57%
Depreciation and amortisation (9,303) (13,203) (22,506) (9,832) (11,986) - (21,818)
Net finance costs (1,126) (2,906) (4,032) (1,704) (3,393) - (5,097)
Profit (loss) before tax 11,565 (302) 11,263 2,471 (580) (5,772) (3,881) 368%
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*represents all other expenses in the consolidated statement of profit or loss which have not been impacted by the adjustments noted above.

After adding back the impairment of properties in the previous year and excluding the impact of AASB 16 in the current and previous year, the profit before tax and EBITDA were up 368% and 57% respectively on the previous year. The results for the year have been impacted by:

Strong revenue growth in transport volumes including interstate from Sydney, WA regional freight and WA metro freight activity
Strong revenue growth in both flooring logistics and warehousing volumes across all sites
Improved margins as a result of volume increases, a focus on quality revenue and cost savings as a result of ongoing cost control measures offset in part by increasing wage costs in particular due to lack of available staff, site relocations and ongoing issues with interstate linehaul services
Productivity gains flowing from ongoing improvements from successful system implementations

The COVID 19 pandemic has seen various impacts within the Group. The freight, flooring and warehouse businesses within the Group have generally increased revenue, albeit with ongoing pressure on margin in particular in the interstate business. The Group’s couriers and security businesses have seen reductions in revenues as a result of the pandemic.

Despite the challenging market conditions, operating cash flow has remained strong at $31,087,414 for the year, being a 33% improvement on the prior year. The Group’s receivables and cash flow management remained well controlled with debtors’ days outstanding in line with the prior year. With a diverse and large customer base, the strength of the Group’s focus on receivables management is reflected in the value of receivables written off during the year representing only 0.02% of revenue.

The Company decreased interest bearing debt by $10,865,000 and has further reduced the gearing ratio of the Group from 58% to 54% while maintaining an available cash balance of $6,493,618 at 30 June 2021.

Although current market conditions have been challenging, the Company continues to generate strong cash flow and is poised to take advantage of and benefit from any upturn in the economy.

No other significant changes in the state of affairs of the Group have occurred other than those matters referred to elsewhere in this report.

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The directors are not aware of any other matters or circumstances that have significantly or may significantly affect the operations of the Group, the results of those operations, or the affairs of the Group in subsequent financial years.

The major objectives encompassed in the Business Plan of the Group are:

(i) expansion of existing operations by aggressive marketing and by acquisition;
(ii) establishment or acquisition of businesses in fields related to or compatible with the Group’s existing core operations; and (iii) to maximise the profits and returns to shareholders by constant review of existing operations.

The company secretary is Mr O Venter. He was appointed to the position on 26 August 2016.

The number of directors’ meetings held in the period each director held office during the financial year and the number of meetings attended by each director were:

P J Leonhardt	13	13
D A Mellor	13	13
B E Saxild	13	13
D R Watson	13	13
P J Leonhardt	3	3
B E Saxild	3	3
P J Leonhardt	2	2
D R Watson	2	2

The relevant interest of each director in the shares issued by the Company as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

P J Leonhardt	-	666,310
D A Mellor*	522,080	3,182,102
B E Saxild*	347,120	2,980,843
D R Watson	18,062,683	7,273,093

The above do not include Employee Share Plan shares (refer page 7)

The Company’s directors’ and officers’ indemnity insurance policy indemnifies the directors named in this report in respect of their potential liability to third parties for wrongful acts committed by them in their capacity as directors (as defined in the policy). The disclosure of the premium paid in respect of the insurance policy is prohibited under the terms of the policy.

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The operations of CTI Logistics Limited and its controlled entities are not subject to any particular or significant environmental regulation. However, the board believes that CTI Logistics Limited and its controlled entities have adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to CTI Logistics Limited and its controlled entities.

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the Group are important.

Details of the amounts paid or payable to the auditor, KPMG, for audit services provided during the year are set out in Note 20 of the financial statements. There were no non-audit services provided during the year. The directors are satisfied the auditor did not compromise the auditor independence requirements of the Corporations Act 2001.

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 8.

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The remuneration report is set out under the following main headings:

A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Service agreements
D. Key management personnel transactions
E. Additional information

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration Executive directors

The remuneration committee makes specific recommendations on remuneration packages and other terms of employment for executive directors. Remuneration is set to competitively reflect market conditions for comparable roles. There are no guaranteed base pay increases each year, no element of the remuneration is based upon the Company’s performance and no bonus schemes operated during the financial year.

Non-executive directors

Remuneration of non-executive directors is determined by the board within the maximum amount of $300,000, approved by shareholders at the annual general meeting on 26 November 2009.

B. Details of remuneration Details of the nature and amount of each element of the emoluments of each director of the Company and the Group is set out in the following table.

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J Leonhardt A Mellor E Saxild R Watson J Leonhardt A Mellor E Saxild R Watson	72,500 - - 72,500 447,712 13,115 24,960 485,787 532,634 14,949 24,960 572,543 500,640 19,357 24,960 544,957 1,553,486 47,421 74,880 1,675,787
	70,000 - - 70,000 469,864 11,831 24,960 506,655 540,019 14,599 24,960 579,578 500,640 17,862 24,960 543,462 1,580,523 44,292 74,880 1,699,695

*The cash salary and fees of the Executive Directors has not changed for the last seven financial years. Any movement up or down is due to variations in the amount of accrued leave taken or not taken during the financial year by the director concerned.

C. Service agreements

There are no service agreements in existence and entitlements on termination would be subject to assessment by the remuneration and nomination committee within legislative framework at the time.

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D. Key management personnel transactions Movement in shares

The number of ordinary shares in the Company held during the financial year by each director of CTI Logistics Limited, including their personally-related entities, are set out below. There were no shares granted during the reporting period as remuneration, additions relate to additional shares purchased during the year or issued as part of the dividend reinvestment plan.

P J Leonhardt	651,338	14,972	-	666,310
D A Mellor	4,271,340	-	(567,158)	3,704,182
B E Saxild	3,327,963	-	-	3,327,963
D R Watson	25,902,933	-	(567,157)	25,335,776

E. Consequences of performance on shareholder wealth

As there is no remuneration link between management compensation and the performance of the Company on the Australian Securities Exchange disclosure of the past four years results is deemed not necessary.

Having regard to the size and structure of the Group, the nature of its operations, and the close involvement of the three executive directors, it is the opinion of the directors that there are no other key management personnel apart from the directors.

ESP shares

The number of ESP shares in the Company held during the financial year by each director of CTI Logistics Limited, including their personally-related entities, are set out below.

D A Mellor	(issued	05/12/11,	01/12/14)	330,000	-	-	330,000
B E Saxild	(issued	05/12/11,	01/12/14)	330,000	-	-	330,000

The shares vested 2 years after issue and may be purchased with the assistance of an interest-free, limited recourse loan for a term of 10 years. The shares were priced using a Black-Scholes pricing model to determine the fair value and amortised through the statement of profit or loss and other comprehensive income.

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DAVID WATSON Director

Perth, WA 30 August 2021

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of CTI Logistics Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of CTI Logistics Limited for the financial year ended 30 June 2021 there have been:

i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.

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KPMG

Jane Bailey Partner Perth 30 August 2021

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.

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rations 5 6 ories of finished goods and work in progress d consumables used expense ense amortisation expense 7 transport costs 14 ating activities 7 e income tax se 8 ive income t be reclassified to profit or loss s at FVOCI – net change in fair value	239,044,247 215,209,363 2,367,612 1,527,970 132,599 31,014 (1,053,292) (1,071,721) (74,869,047) (71,374,148) (80,271,717) (71,199,715) (22,506,025) (21,817,627) (28,241,637) (26,764,106) - (5,771,500) (4,329,009) (2,863,822) (14,978,917) (14,689,728)	239,044,247 215,209,363 2,367,612 1,527,970 132,599 31,014 (1,053,292) (1,071,721) (74,869,047) (71,374,148) (80,271,717) (71,199,715) (22,506,025) (21,817,627) (28,241,637) (26,764,106) - (5,771,500) (4,329,009) (2,863,822) (14,978,917) (14,689,728)	239,044,247 215,209,363 2,367,612 1,527,970 132,599 31,014 (1,053,292) (1,071,721) (74,869,047) (71,374,148) (80,271,717) (71,199,715) (22,506,025) (21,817,627) (28,241,637) (26,764,106) - (5,771,500) (4,329,009) (2,863,822) (14,978,917) (14,689,728)	239,044,247 215,209,363 2,367,612 1,527,970 132,599 31,014 (1,053,292) (1,071,721) (74,869,047) (71,374,148) (80,271,717) (71,199,715) (22,506,025) (21,817,627) (28,241,637) (26,764,106) - (5,771,500) (4,329,009) (2,863,822) (14,978,917) (14,689,728)
	15,294,814 1,215,980
	3,323 15,250 (4,035,425) (5,111,900)
	(4,032,102) (5,096,650)
	11,262,712 (3,880,670) (3,094,013) (468,169)

	6,084 2,306


ss) per share 25a loss) per share 25b	Cents Cents 10.88 (5.79) 10.88 (5.79)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

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d cash equivalents nd other receivables 9 ries urrent assets nvestments y, plant and equipment 10 f-use assets 11 ent properties 12 d tax assets 8 ble assets 13 on-current assets nd other payables 15 abilities 16 tax liabilities ee benefits provision urrent liabilities abilities 16 nd borrowings 16 ee benefits provision on-current liabilities uted equity 17 s d profits	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359	6,493,618 7,611,064 33,073,591 29,936,811 297,958 165,359
	39,865,167 37,713,234
	52,836 44,144 88,101,780 90,001,535 45,350,001 43,233,588 2,207,021 2,207,021 3,170,678 4,003,829 31,118,628 32,797,412
	170,000,944 172,287,529
	209,866,111 210,000,763
	18,650,995 17,532,246 17,404,357 14,915,331 1,407,694 137,864 6,914,405 6,713,668
	44,377,451 39,299,109
	42,505,951 44,157,058 31,905,000 42,770,000 2,646,392 2,160,411
	77,057,343 89,087,469
	121,434,794 128,386,578


	27,390,922 27,248,025 1,932,562 1,926,478 59,107,833 52,439,682

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

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alance at 1 July 2019 tal comprehensive income for the year ansactions with equity holders in their capacity equity holders: are-based payment transactions alance at 30 June 2020 alance at 1 July 2020 tal comprehensive income for the year ansactions with equity holders in their capacity equity holders: ontributions of equity/share issue 17 ividends provided for/paid 18 alance at 30 June 2021	27,248,025 1,893,175 56,788,521 85,929,721 - 2,306 (4,348,839) (4,346,533) - 30,997 - 30,997
	27,248,025 1,926,478 52,439,682 81,614,185
	27,248,025 1,926,478 52,439,682 81,614,185 - 6,084 8,168,699 8,174,783 132,553 - - 132,553 10,344 - (1,500,548) (1,490,204) 27,390,922 1,932,562 59,107,833 88,431,317

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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customers (inclusive of goods and services tax) suppliers and employees (inclusive of goods and services tax) eived ved paid net of income tax refunded w from operating activities 24 property, plant and equipment intangibles - security lines intangibles - software sale of investment sale of property, plant and equipment low from investing activities borrowings borrowings lease liabilities to Company’s shareholders net of Dividend Bonus share plan shares issued low from financing activities )/increase in cash and cash equivalents h equivalents at the beginning of the financial year h equivalents at the end of the financial year	260,641,772 238,029,899 (224,793,899) (209,201,046) 2,212 2,382 3,323 15,250 (3,767,254) (4,782,804) (998,740) (731,532)
	31,087,414 23,332,149
	(4,640,941) (1,729,754) (28,173) (71,575) (104,136) (886,150) - 16,668 911,952 692,788
	(3,861,298) (1,978,023)
	13,905,000 9,500,000 (24,770,000) (11,030,000) (16,120,911) (14,399,403) (1,357,651) -
	(28,343,562) (15,929,403)
	(1,117,446) 5,424,723 7,611,064 2,186,341 6,493,618 7,611,064

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

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CTI Logistics Limited (the “Company”) is a company domiciled in Australia. The address of the Company’s registered office is 1 Drummond Place, West Perth, Western Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2021 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Group is a for-profit entity and is primarily involved in the provision of logistics and transport services, rental of property and provision of security services.

As the COVID-19 pandemic continues to impact Australia and the world, the Group’s focus remains on keeping its people well, and maintaining safe and reliable operations. The Group has considered the impact of COVID-19 on each of its significant accounting judgements and estimates, particularly with respect to assumptions used in determining expected credit losses on receivables, impairment of non-current assets and going concern. At this stage no further significant estimates have been identified as a result of COVID-19, however management is monitoring the increased level of uncertainty in all future cash flow forecasts used in asset valuation and financial viability.

The principal accounting policies adopted in the preparation of the consolidated financial report are set out below. These policies have been consistently applied to all the years presented, except as described below. The financial report is for the consolidated entity consisting of CTI Logistics Limited and its subsidiaries.

This general purpose financial report has been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board and the Corporations Act 2001.

Compliance with IFRS

The consolidated financial statements of the CTI Logistics Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements were authorised for issue by the board of directors on 30 August 2021.

Historical cost convention

These financial statements have been prepared under the historical cost convention except for “Fair value through other comprehensive income” (FVOCI) investments which are measured at fair value.

Functional and presentation currency

All Group entities are based in Australia. The consolidated financial statements are presented in Australian dollars, which is the Company’s and subsidiaries’ functional currency and the Group’s presentation currency.

Subsidiaries

The financial statements incorporate the assets and liabilities of all entities controlled by CTI Logistics Limited as at 30 June 2021 and the results of all subsidiaries for the period the Company controlled them during the year then ended.

Subsidiaries are entities controlled by the Group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(f)).

Intercompany transactions, balances and unrealised gains on transactions within the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.

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Determination and presentation of operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s Executive Chairman to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group’s Executive Chairman include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly parent company and items that cannot be allocated to specific segments in respect of revenue, profit, assets and liabilities.

Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Tax consolidation

CTI Logistics Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

At inception of a contract, the Group assesses whether a contract is, or contains, 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.

i. As a lessee

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. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

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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 compromises 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 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, plant 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 lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if the rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The 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;
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 measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of use has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ or ‘right-of-use assets’ and lease liabilities in ‘loans and borrowings’ in the statement of financial position.

Short-term leases and leases of low-value assets

The Group has elected not to recognise the right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

ii. As a lessor

At inception 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 their relative stand-alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease, if not, then it is an operating lease, as part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

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When the Group is an intermediate lessor, it accounts for its interests in the lead lease and the sub-lease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group applies AASB 15 to allocate the consideration in the contract.

The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

Generally, the accounting policies applicable to the Group as a lessor in the comparative period were not different from AASB 16.

The acquisition method of accounting is used to account for all business combinations entities regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisitionby-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

Financial instruments

The Group recognises loss allowances for Expected Credit Losses (“ECLs”) on financial assets measured at amortised cost, being trade and other receivables.

These loss allowances are measured at an amount equal to lifetime ECLs. Lifetime ECLs are ECLs that result from all possible default events over the expected life of a financial instrument.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any held).

Measurement of ECLs

ECLs are probability-weighted estimates of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

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Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or being more than 60 days past due;
It is probable that the borrower will enter bankruptcy or other financial reorganisation; or
The disappearance of an active market for a security because of financial difficulties.

Presentation of allowance for ECL in the statement of financial position

Loss allowance for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment of customers with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of the amount due.

(i) Assets classified as available-for-sale Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss.

Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

Non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Value-in-use calculations are described in note 14.

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value.

Cost comprises direct materials, direct labour and an appropriated proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Recognition and initial measurement Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

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A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(ii) Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

It is held with the objective to collect contractual cash flows; and
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Subsequent measurement and gains and losses

Financial assets at FVTPL	These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income,are recognised inprofit or loss.
Financial assets at amortised cost	These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income and impairment are recognised in profit or loss. Any gain or loss de-recognition is recognised inprofit or loss.
Equity investments at FVOCI	These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified toprofit or loss.

(iii) De-recognition

The Group de-recognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Property, plant and equipment other than freehold land is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss during the financial period in which they are incurred.

Land is recorded at historical cost and not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost net of their residual values, over their estimated useful lives, as follows:

Buildings	25 - 40 years
Plant and equipment	5 - 15 years
Motor vehicles	5 - 10 years
Furniture and fittings	3 - 8 years

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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(g)).

Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in profit or loss under other income and other expenses.

Investment property, principally comprising freehold land and buildings, is held for long-term rental yields and is not occupied by the Group. Investment property is held at historical cost less depreciation. Investment property includes properties that are under construction for future use as investment property and is carried at historical cost. Investment buildings are depreciated using the straight line method over their estimated useful lives of 10 to 40 years.

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets acquired. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cashgenerating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4). (ii) Security Lines

Security lines have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.

(iii) Software Costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software.

(iv) Trade names

Trade names have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.

(v) Customer relationships

Customer relationships acquired as part of a business combination are recognised separately from goodwill. The customer relationships are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill is recognised in profit or loss as incurred.

Amortisation

Amortisation is calculated over the cost of the asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

Security lines	5 - 7 years
Software	2.5 - 4 years
Trade names	5 - 8 years
Customer relationships	5 - 6 years

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are paid based on the terms of trade which are usually 30 to 60 days from the date of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

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Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

The Group de-recognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date.

(i) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using Group of 100 Discount Rates provided by Milliman at the end of the reporting period with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Retirement benefit obligations Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iv) Bonus

The Group recognises a liability and an expense for bonuses where contractually obliged or when past events have created a constructive obligation.

(v) Share-based payment transactions

An Employee Share Plan (“ESP”) allows certain Group employees to acquire shares of the Company. The grant date fair value of the shares granted to employees is recognised as an employee expense with a corresponding increase in equity, over the period during which the employees become unconditionally entitled to the shares. The fair value of the shares granted is measured using a Black-Scholes pricing model, taking into account the terms and conditions upon which the shares were granted. The amount recognised as an expense is adjusted to reflect the actual number of shares that vest.

Employees have been granted a limited recourse 10 year interest-free loan in which to acquire the shares. The loan has not been recognised as the Company only has recourse to the value of the shares.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

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Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end of the year but not distributed at balance date.

(i) Basic earnings per share

Basic earnings per share is determined by dividing profit for the year by the weighted average number of ordinary shares outstanding during the year.

(ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amounts of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

The financial information for the parent entity, CTI Logistics Limited, disclosed in note 26 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries

Investments in subsidiaries are accounted for at cost less any impairment in the financial statements of CTI Logistics Limited.

(ii) Tax consolidation legislation

CTI Logistics Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

The head entity, CTI Logistics Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, CTI Logistics Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

The entities have also entered into tax sharing and funding agreements. Under the terms of these agreements, the controlled entities will reimburse the Company for any current tax payable by the Company arising in respect of their activities and the Company will reimburse the controlled entities for any tax refund due to the Company arising in respect of their activities. The reimbursements are payable by the Company and will limit the joint and several liability of the controlled entities in the case of default by the Company.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

(iii) Financial guarantees

Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees is not recognised as contributions or as part of the cost of the investment.

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The share-based payment reserve comprises the expenses incurred from the issue of the Company’s share under the Employee Share Plan.

Under AASB 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement. The details of the Group’s revenue recognition for major business activities are set out below:

(i) Logistics and transport Revenue is recognised over the period of time that the goods or services are being delivered to or collected by a customer in accordance with the arrangements made within the Group. The provision of these services and sale of goods is in most cases either performed on the same day, or within a week for long distance freight.

(ii) Security, manufacturing and other A sale is recorded when goods have been despatched to a customer pursuant to a sales order and control has transferred to the customer. A sale is recorded for services over the period of time the service is performed.

Other income outside the scope of AASB 15

(ii) Interest income Interest income is recognised on a time proportion basis using the effective interest method. (iv) Dividends Dividends are recognised as revenue when the right to receive payment is established. (v) Other revenue

Revenue from outside the operating activities includes rent. This revenue is recognised over time on a straight-line basis.

The Group has adopted all new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for the current reporting period.

There are no accounting standards issued but not yet effective at 30 June 2021 which are expected to have a material impact on the financial statements of the Group.

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Estimates, assumptions and judgements may be used to assess the measurement of certain items of income and expense, and assets and liabilities. Such estimates, assumptions and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Where estimates and assumptions are made concerning the future, the resulting accounting estimates may not equal the related actual outcome. The estimates and assumptions which give rise to a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Intangible assets

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations as described in note 14.

The fair value of trade names acquired in a business combination is based on the discounted estimated royalty payments that are expected to be avoided as a result of the trade names being owned. The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows.

Property, plant and equipment and Right-of-use assets

Property, plant and equipment and Right-of-use assets are tested for impairment where there is an indicator of impairment, in accordance with the accounting policy stated in note 1(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations or fair value less cost to dispose as described in note 14.

Overview

The Group has exposure to the following risks from their use of financial instruments:

(a) Market risk

(b) Credit risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Risk management framework

The board of directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management is carried out by the director responsible for finance under the guidance of the board of directors. The board of directors considers principles for overall risk management, as well as determining policies covering specific areas, such as mitigating interest rate and credit risks and investing excess liquidity.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group. These policies are reviewed regularly to reflect changes in market conditions and the Group’s activities.

(i) Price risk

The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the balance sheet as other investments.

The price risk for listed and unlisted securities is immaterial in terms of the possible impact on profit or loss or total equity. Therefore no sensitivity analysis is completed.

The Group is not exposed to commodity price risk, or foreign exchange risk from currency exposure.

(ii) Cash flow and fair value interest rate risk

The Group’s interest rate risk arises from borrowings and cash and cash equivalents. Borrowings and Lease liabilities (hire purchases component only) issued at variable rates expose the Group to cash flow interest rate risk. Borrowings and lease liabilities (hire purchases component only) issued at fixed rates expose the Group to fair value interest rate risk. At the year end 11.98% (2020 – 30.82%) of borrowings and lease liabilities were at fixed rates.

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(iii) Borrowings and cash and cash equivalents At the reporting date the Group had the following borrowings and cash and cash equivalents.

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Cash	and cash equivalents	0.10	6,493,618	0.52	7,611,064
Bank	loans	0.83	31,905,000	1.40	42,770,000
Lease	liabilities	4.33	59,910,308	5.42	59,072,389

An analysis by maturities is provided in 3(c) below.

The Group manages interest rate risk by assessing the appropriateness of fixed or floating rate debt when funding is required.

The Group monitors loan covenants on a regular basis to ensure compliance with agreements.

Group sensitivity

The Group’s main interest rate risk arises from loans and cash and cash equivalents. At 30 June 2021, if the interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been higher/lower by $223,335 (2020 - change of 100bps: $299,390 higher/lower) for loans and higher/lower by $45,455 (2020 - change of 100bps: $53,277 higher/lower) for cash and cash equivalents, mainly as a result of higher/lower interest expense from borrowings and higher/lower interest income from cash and cash equivalents.

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The Group has no significant concentrations of credit risk. Cash transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution.

There is no independent rating of individual customers. Financial institutions have credit ratings of AA and higher at 30 June 2021. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Customers that are graded as “high risk” are placed on a restricted customer list and monitored on a weekly basis. Receivables balances are monitored on an ongoing basis. Standard and Poor credit rating

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as follows:

ash and cash equivalents rade receivables Other receivables	6,493,618 7,611,064 29,133,308 25,526,279 2,253,207 2,751,528 37,880,133 35,888,871

Trade receivables are non-interest bearing and terms of trade are 30 days from month end. At 30 June 2021, 6.56% (2020 – 7.78%) of trade receivables of the Group exceed 30 days.

Other receivables are non-interest bearing and have repayment terms exceeding 30 days but are not considered impaired.

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The ageing of receivables that are past due but not impaired at the reporting date is as follows:

Trade receivables Trade receivables	1,304,449 626,200 1,930,649
	1,238,407 778,291 2,016,698

The Group uses an allowance matrix to measure the expected credit losses (ECLs) of trade receivables from individual customers, which comprise a very large number of small balances.

Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Loss rates are based on actual credit loss experience over the past 5 years, adjusted to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables.

The Group’s monitoring of recoverability of receivables has increased due to the changes in market conditions arising from COVID 19. Credit limits continue to be monitored.

The following table provides information about the ECLs for trade receivables as at 30 June.

1 to 30 days 31 to 60 days Over 60 days Total Provision for expected credit losses Movements in the ECLs of receivables are as follows: Balance 1 July Net loss allowance (reversed)/recognised Receivables written off during the year as uncollectable Balance 30 June	96,407 93,344 41,154 47,135 171,907 268,912 309,468 409,391
	409,391 214,473 (52,070) 235,094 (47,853) (40,176) 309,468 409,391

The creation and release of the ECLs provision has been included in ‘other expenses’ in profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of recovering cash.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of current financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the board of directors aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.

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Financing arrangements

The Group had access to the following undrawn borrowing facilities at the reporting date:

ating rate piring beyond one year (note 16c)	16,692,070 6,000,000 16,692,070 6,000,000

The bank loan facilities may be drawn at any time subject to the continuance of satisfactory credit ratings and are also subject to annual review. The bill acceptance facilities have defined maturity dates.

Maturities of financial liabilities

The table below sets out the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Variable rate borrowings mature between October 2023 and March 2024, and are revised on an ongoing basis. The Group expects these borrowings to be renewed for a further period prior to maturity.

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ade and other payables (Non-inter
ase liabilities
rrowings
tal
ade and other payables (Non-inter
ase liabilities
rrowings
tal

est bearing)
18,650,995
-
-
-
18,650,995
18,650,995
19,878,298
17,043,100
25,863,451
3,701,048
66,485,897
59,910,308
265,188
147,628
32,030,418
-
32,443,234
31,905,000
38,794,481
17,190,728
57,893,869
3,701,048
117,580,126
110,466,303
est bearing)
17,532,246
-
-
-
17,532,246
17,532,246
17,074,938
17,316,890
33,220,053
14,441,334
82,053,215
59,072,388
571,448
42,893,307
-
-
43,464,755
42,770,000
35,178,632
60,210,197
33,220,053
14,441,334
143,050,216
119,374,634

*Lease liability cash flows include fixed rate contractual cash flows of $4,486,080 (2020 - $5,898,000) which are linked to hire purchase liabilities with a carrying value of $4,340,658 (2020 - $5,652,000) (included within lease liabilities).

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The Group has not disclosed the fair value for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values.

The Group’s assets measured and recognised at fair value at 30 June 2021 comprises of ‘Level 1’ equity securities of $52,836 (2020 - $44,144).

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Capital risk management

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistently with others in the industry, the Group monitors capital on the basis of the gearing ratio (a non-IFRS measure). This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position plus net debt.

The gearing ratios at 30 June 2021 and 30 June 2020 were as follows:

otal payables and borrowings 15,16 ess: cash and cash equivalents 9 et debt otal equity otal capital earing ratio	110,466,303 119,374,635 (6,493,618) (7,611,064) 103,972,685 111,763,571 88,431,317 81,614,185 192,404,002 193,377,756 54% 58%

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Management has determined the operating segments based on the reports reviewed by the Group’s Executive Chairman.

The Group’s Executive Chairman considers the business from a product and services perspective and has identified three reportable segments: logistics, transport and property.

The reportable segments operate solely in Australia and are involved in the following operations:

Transport services - includes the provision of courier, taxi truck, parcel distribution and fleet management and line haul freight.
Logistics services - includes the provision of warehousing and distribution, specialised flooring logistics, supply based management services and document storage services.
Property - rental of owner-occupied and investment property.
“Other” segments includes the provision of security services. These segments do not meet any of the quantitative thresholds for determining reportable segments.

The Group does not have a single external customer which represents greater than 10% of the entity’s revenue.

The Group’s Executive Chairman assesses the performance of the operating segments based on segment profit before income tax, as included in internal management reports. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

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Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1(c) and accounting standard AASB 8 Operating Segments.

Inter-segment transfers

Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm’s length basis and are eliminated on consolidation. Segment assets and liabilities

Segment assets are allocated based on the operations of the segment and the physical location of the asset. Segment liabilities are allocated based on the operations of the segment.

Unallocated amounts

Unallocated amounts are made up of the parent company and amounts that cannot be allocated to specific segments in respect of revenue, profit, assets and liabilities.

The segment information provided to the Group’s Executive Chairman for the reportable segments for the year ended 30 June 2021 is as follows:

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Reportable segment revenue
Sales to external customers 139,627,383 93,091,379 174,349 6,108,911 239,002,022
Intra and inter-segment revenue 23,138,148 59,747 3,759,191 625,553 27,582,639
Total segment revenue 162,765,531 93,151,126 3,933,540 6,734,464 266,584,661
Other income 168,540 833,331 - - 1,001,871
Interest expense 555,002 2,593,421 294,956 - 3,443,379
Depreciation and amortisation 7,166,636 13,254,221 821,448 405,876 21,648,181
Reportable segment profit before income tax 5,480,269 6,502,994 1,441,111 607,414 14,031,788
Reportable segment assets 55,894,320 77,507,703 66,019,333 1,590,892 201,012,248
Reportable segment liabilities 32,288,850 53,848,669 30,791,329 1,629,719 118,558,567
Reportable segment revenue
Sales to external customers 126,819,307 82,095,427 161,026 6,007,122 215,082,882
Intra and inter-segment revenue 17,672,349 52,273 3,813,125 688,451 22,226,198
Total segment revenue 144,491,656 82,147,700 3,974,151 6,695,573 237,309,080
Other income 217,421 750,587 - (1,038) 966,970
Interest expense 598,499 3,086,272 520,694 - 4,205,465
Depreciation and amortisation 6,233,101 13,181,451 821,831 520,024 20,756,407
Reportable segment profit before income tax 3,943,990 197,685 (4,587,208) 407,651 (37,882)
Reportable segment assets 51,746,493 79,123,244 66,873,078 1,989,378 199,732,193
Reportable segment liabilities 32,421,176 53,270,771 38,592,450 1,623,229 125,907,626
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evenues otal segment revenue for reportable segments limination of intra-segment and inter-segment revenue nallocated revenue onsolidated revenue 5 rofit/(loss) otal profit/(loss) before tax for reportable segments nallocated amounts onsolidated profit/(loss) before income tax ssets otal assets for reportable segments nallocated amounts onsolidated total assets iabilities otal liabilities for reportable segments nallocated amounts onsolidated total liabilities Other material items nterest Income nallocated amounts onsolidated interest income Other income otal for reportable segments nallocated amounts onsolidated other income nterest expense otal for reportable segments nallocated amounts onsolidated interest expense Depreciation and amortisation otal for reportable segments nallocated amounts onsolidated depreciation and amortisation 7	266,584,661 237,309,080 (27,582,639) (22,226,198) 42,225 126,481
	239,044,247 215,209,363
	14,031,788 (37,882) (2,769,076) (3,842,788) 11,262,712 (3,880,670)
	201,012,248 199,732,193 8,853,863 10,268,570
	209,866,111 210,000,763
	118,558,567 125,907,626 2,876,227 2,478,952
	121,434,794 128,386,578
	3,323 15,250
	3,323 15,250
	1,001,871 966,970 1,365,741 561,000
	2,367,612 1,527,970
	3,443,379 4,205,465 374,555 609,349
	3,817,934 4,814,814
	21,648,181 20,756,407 857,844 1,061,220 22,506,025 21,817,627

The reports provided to the Group’s Executive Chairman with respect to reconciliation of reportable segment revenues, profit/(loss), assets and liabilities are measured in a manner consistent with that of the financial statements.

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The Group generates revenue primarily from the provision of transport, logistics and security services. Other sources of revenue include rental income from investment properties and dividends from other investments (refer note 1(y)).

In the following table, revenue from contracts with customers is disaggregated by major services provided.

Revenue from contracts with customers Sales revenue Transport Logistics Security services Other Other revenue Dividends Rent Net gain on disposal of: motor vehicles plant and equipment obKeeper Other	139,627,383 126,819,307 93,091,379 82,095,427 6,108,911 6,007,122 40,013 124,099
	238,867,686 215,045,955
	2,212 2,382 174,349 161,026
	176,561 163,408 239,044,247 215,209,363
	233,940 170,981 9,940 23,425 1,312,500 561,000 811,232 772,564 2,367,612 1,527,970

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rofit/(loss) before income tax includes the following specific expenses: mployee benefits efined contribution superannuation hare-based payments Depreciation and amortisation uildings lant and equipment and motor vehicles ight-of-use assets ecurity lines oftware rade name and customer relationships inance expenses nterest inance charges urrent tax eferred tax ver provided in prior years ncome tax expense eferred income tax (benefit) included in income tax expense comprises: ecrease/(increase) in deferred tax assets (note 8d) ecrease in deferred tax liabilities (note 8e) rofit/(loss) before income tax expense ax at the Australian rate of 30% (2020 - 30%) ax effect of amounts which are not deductible/(taxable) in calculating taxable income: mortisation mpairment hare-based payment ebatable dividends undry items ver provision in prior years ncome tax expense	5,264,518 5,058,550 - 30,997 1,268,996 1,210,972 6,224,087 6,411,225 13,201,849 11,986,277 24,600 15,855 523,292 922,512 1,263,201 1,270,786
	22,506,025 21,817,627
	3,817,934 4,814,814 217,491 297,086
	4,035,425 5,111,900 2,775,424 1,278,045 834,779 (501,753) (516,190) (308,123) 3,094,013 468,169 (209,974) (538,907) 1,044,753 37,154 834,779 (501,753) 11,262,712 (3,880,670)
	3,378,814 (1,164,201) 112,532 114,808 - 1,731,450 - 9,299 (948) (1,021) 119,805 85,957
	3,610,203 776,292 (516,190) (308,123) 3,094,013 468,169

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Net deferred tax – debited directly to equity (note 8d) 2,608 980
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Doubtful debts 92,840 122,700
Employee benefits 2,868,239 2,662,223
Depreciation and amortisation 377,107 317,962
Right-of-use assets 3,065,895 3,107,135
Other 38,263 22,350
6,442,344 6,232,370
Amounts recognised directly in equity
Other investments 2,608 980
6,444,952 6,233,350
Set-off of deferred tax liabilities (note 8e) (3,274,274) (2,229,521)
Net deferred tax assets 3,170,678 4,003,829
Movements
Balance 1 July 6,233,350 2,760,319
Adoption of AASB 16 - 2,933,144
Credited to profit or loss 209,974 538,907
Debited to equity 1,628 980
Balance 30 June 6,444,952 6,233,350
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Depreciation and amortisaton 2,459,134 1,147,953
Intangible assets 815,140 1,081,568
3,274,274 2,229,521
Set-off of deferred tax assets (note 8d) (3,274,274) (2,229,521)
Net deferred tax liabilities - -
Movements(deferred tax liabilities)
Balance 1 July 2,229,521 2,192,367
Credited to profit or loss 1,044,753 37,154
Balance 30 June 3,274,274 2,229,521
----- End of picture text -----

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----- Start of picture text -----

Trade receivables 29,442,776 25,935,670
Provision for impairment of receivables (note 3(b)) (309,468) (409,391)
29,133,308 25,526,279
Other receivables 2,253,207 2,751,528
Prepayments 1,687,076 1,659,004
3,940,283 4,410,532
33,073,591 29,936,811
Cost 43,899,191 33,184,589 29,878,849 36,338,400 143,301,029
Accumulated depreciation - (5,470,782) (20,331,711) (19,466,895) (45,269,388)
Net book amount 43,899,191 27,713,807 9,547,138 16,871,505 98,031,641
Opening net book amount 43,899,191 27,713,807 9,547,138 16,871,505 98,031,641
Additions - 720,823 1,455,717 3,685,433 5,861,973
Disposals - - (43,771) (454,611) (498,382)
Impairment (note 14) (5,771,500) - - - (5,771,500)
Depreciation charge - (1,210,972) (2,579,055) (3,832,170) (7,622,197)
Closing net book amount 38,127,691 27,223,658 8,380,029 16,270,157 90,001,535
Cost 43,899,191 33,903,003 31,044,069 38,563,485 147,409,748
Accumulated depreciation (5,771,500) (6,679,345) (22,664,040) (22,293,328) (57,408,213)
Net book amount 38,127,691 27,223,658 8,380,029 16,270,157 90,001,535
Opening net book amount 38,127,691 27,223,658 8,380,029 16,270,157 90,001,535
Additions - 360,032 1,427,300 4,496,695 6,284,027
-
Disposals (15,500) (82,869) (592,330) (690,699)
Depreciation charge - (1,268,996) (2,367,125) (3,856,962) (7,493,083)
Closing net book amount 38,127,691 26,299,194 7,357,335 16,317,560 88,101,780
Cost 43,899,191 34,247,535 31,701,349 39,981,994 149,830,069
Accumulated depreciation (5,771,500) (7,948,341) (24,344,014) (23,664,434) (61,728,289)
Net book amount 38,127,691 26,299,194 7,357,335 16,317,560 88,101,780
----- End of picture text -----

includes depreciation and impairment charges

Refer to note 16(b) for information on non-current assets pledged as security.

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The Group leases warehouse and transport depot facilities. These leases typically run for a period of 5 years, however range from 1 year to 12 years, generally with an option to renew the lease after that date. Lease payments increase with CPI or fixed percentages based on the underlying lease, with market reviews generally coming into effect at the time of renewal.

These property leases provide for the payment of outgoings in addition to rent payments. These payments are determined to be variable in nature and have not been included within the calculation of the lease liability.

The Group also leases plant and equipment.

Information about leases for which the Group is a lessee is presented below.

Balance at 1 July 2019	52,213,271	1,317,362	53,530,633
Depreciation for the period	(11,114,012)	(872,265)	(11,986,277)
Additions to right-of-use assets	451,389	1,310,273	1,761,662
Disposal of right-of-use assets	-	(72,430)	(72,430)
Balance at 30 June 2020	41,550,648	1,682,940	43,233,588
Balance at 1 July 2020	41,550,648	1,682,940	43,233,588
Depreciation for the period	(12,140,303)	(1,061,546)	(13,201,849)
Additions to right-of-use assets	14,524,982	793,280	15,318,262
Balance at 30 June 2021	43,935,327	1,414,674	45,350,001

Included within the balance sheet caption Property, plant and equipment are right-of-use assets with a carrying value of $7,690,210 at 30 June 2021 (2020 - $7,648,361), these assets have hire purchase liabilities. Additions to these assets during the year totalled $1,552,123 (2020 - $4,029,219) with depreciation of $1,183,013 (2020 - $1,036,331).

Interest on lease liabilities	3,060,242	3,392,679
Income from sub-leasing right-of-use assets presented in “other income”	(643,740)	(635,930)
Expenses relating to short-term leases	3,432,888	2,542,230
Expenses relating to leases of low-value assets	-	58,847
Variable lease payments excluded from lease liability calculations	2,001,010	1,692,716

Some property leases contain certain extension options exercisable by the Group prior to the end of the non-cancellable contract period. Where practicable, the Group seeks to include the extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

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The Group leases out its investment property. The Group has classified these leases as operating leases, because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.

Rental income recognised by the Group during the period was $174,349 (2020: $161,026).

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Investment freehold land and buildings were recorded at cost (net of prior impairments) at 30 June 2021 at $2,207,021, which approximates fair value (2020 - $2,207,021). The basis of the valuation for impairment testing purposes of investment properties is fair value being the amounts for which the properties could be exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases.

There are no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

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----- Start of picture text -----

Cost 26,461,029 3,726,914 9,178,756 1,526,092 2,553,746 43,446,537
Accumulated amortisation - (1,678,216) (4,896,373) (1,497,737) (1,325,371) (9,397,697)
Net book amount 26,461,029 2,048,698 4,282,383 28,355 1,228,375 34,048,840
Opening net book amount 26,461,029 2,048,698 4,282,383 28,355 1,228,375 34,048,840
Additions - - - 71,575 886,150 957,725
Amortisation charge - (465,456) (805,330) (15,855) (922,512) (2,209,153)
Closing net book amount 26,461,029 1,583,242 3,477,053 84,075 1,192,013 32,797,412
Cost 26,461,029 3,726,914 9,178,756 1,597,667 2,812,041 43,776,407
Accumulated amortisation - (2,143,672) (5,701,703) (1,513,592) (1,620,028) (10,978,995)
Net book amount 26,461,029 1,583,242 3,477,053 84,075 1,192,013 32,797,412
Opening net book amount 26,461,029 1,583,242 3,477,053 84,075 1,192,013 32,797,412
Additions - - - 28,173 104,136 132,309
Amortisation charge - (457,871) (805,330) (24,600) (523,292) (1,811,093)
Closing net book amount 26,461,029 1,125,371 2,671,723 87,648 772,857 31,118,628
Cost 26,461,029 3,726,914 9,178,756 1,625,840 2,916,177 43,908,716
Accumulated amortisation - (2,601,543) (6,507,033) (1,538,192) (2,143,320) (12,790,088)
Net book amount 26,461,029 1,125,371 2,671,723 87,648 772,857 31,118,628
----- End of picture text -----

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The segment-level summary of goodwill allocation is presented below.

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----- Start of picture text -----

|||||
|---|---|---|---|
|8,548,942|17,868,016|44,071|26,461,029|
|8,548,942|17,868,016|44,071|26,461,029|

----- End of picture text -----

The Group annually tests whether cash-generating units (CGUs) that include goodwill has suffered any impairment. At year end the Group identified an impairment indicator for the Group as a whole due to the ongoing deficit between the Group’s market capitalisation as well as the ongoing uncertainty within the national economy due to the COVID 19 pandemic. CGUs within the transport, logistics and other segments were tested for impairment utilising value-in-use calculations whilst vacant land within the property segment was tested against market valuations. Cash flows from value-in-use models indicate that the carrying amounts of the CGUs do not exceed their recoverable amounts and that there is no impairment. At the prior year end an impairment of $5,771,500 was recognised on vacant land within the property segment.

The summary of assets tested for impairment is presented below.

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|||||
|---|---|---|---|
|Property, plant and equipment|88,101,780|95,773,035|
|Right-of-use assets|45,350,001|43,233,588|
|Intangible asset –|Goodwill|26,461,029|26,461,029|
|Intangible assets –|Other|4,657,599|6,336,383|
|Segment assets subject to testing|164,570,409|171,804,035|
|Impairment loss recognised|-|(5,771,500)|
|Segment assets after impairment|164,570,409|166,032,535|

----- End of picture text -----

Transport, Logistics and other segments - Key assumptions used for value-in-use calculations Key assumptions utilised in the value-in-use calculations are as follows:

Cash flows for year 1 are based on the 30 June 2022 budgets. This budget represents the current forecast sustainable earnings of CGUs as approved by the Board. The budget does not forecast any significant improvement in cash flows due to the COVID 19 pandemic, and excludes costs associated with significant events during the 30 June 2021 year end.
Cash flows for years 2 to 5 are extrapolated based on the budget, adjusted for changing market conditions, with a growth rate between nil% to 2.0% (2020 – nil to 2.0%). Terminal value calculations utilise a long term expected growth rate of 2.5% (2020 – 2.5%).
Nominal post tax discount rate of 8.5% (2020 – 8.5%) is used to discount the forecast future attributable post-tax cash flows when performing the value-in-use calculations.

Cash flows indicate that the carrying amounts are recoverable and that there is no impairment.

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Management considered reasonably possible changes of assumptions associated with the CGUs as a 1% (2020 - 1%) increase in the discount rate, or a 7.5% (2020 - 7.5%) reduction in EBITDA margins. Management have not identified any reasonably possible change in the key assumptions of the cashflow model that would cause the carrying amount to exceed the recoverable amount of the CGU. Should a combination of these sensitivities occur in the same manner there may be a potential impairment.

Management have determined that there are no other reasonably possible changes that could result in material impairments to the CGUs, however management recognise the uncertainty associated with the national economy due to the COVID 19 pandemic which could result in a significant worsening of the Group’s performance should there be a material change in the national economy. These outcomes have not been reflected in management’s assessment.

Property segment – fair value less cost to dispose

In the prior year, an independent valuation of the three vacant blocks of land at Hazelmere within the property segment was performed at 30 June 2020. The valuation was based on a price per square metre through comparison to similar sales of land in a comparable area and is considered to be a level 3 valuation in accordance with Accounting Standards. This valuation indicated a combined value of $23,300,000, after adjusting for expected selling costs, the Group had recognised an impairment of $5,771,500 at 30 June 2020.

The independent valuation of property as at 30 June 2020 has noted the heightened risk of material market movements as a result of the COVID-19 environment, which is expected to continue into the foreseeable future. As such there remains inherent uncertainty surrounding the impact that the COVID-19 pandemic will have on the fair value of property in future periods. Management will continue to monitor movements in valuations. At 30 June 2021 management have assessed there have been no material movements in the market, no further impairments or reversal of impairment have been recognised.

Other property that is held within the Property segment is expected to be recovered through value-in-use as the property is utilised within the underlying operations of the business. No impairment has been recognised in relation to other property.

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Trade payables 8,185,823 8,551,039
Other payables 10,465,172 8,981,207
18,650,995 17,532,246
Lease liabilities - current 17,404,357 14,915,331
Bank loans – non-current 31,905,000 42,770,000
Lease liabilities – non-current 42,505,951 44,157,058
Total interest-bearing borrowings 91,815,308 101,842,389
The total secured liabilities (current and non-current) are as follows:
Secured
Bank loans 31,905,000 42,770,000
Lease liabilities 4,340,658 5,652,010
Total secured liabilities 36,245,658 48,422,010
----- End of picture text -----*

*Represents hire purchase liabilities included within the lease liabilities balance.

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Page 37

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Bank overdrafts and bank loans are secured by mortgages over the Group’s freehold land and buildings, investment properties and fixed and floating charges over the remaining Group assets.

Hire purchase liabilities are effectively secured as the rights to the assets recognised in the financial statements revert to the financier in the event of default.

The carrying amounts of assets pledged as security for current and non-current interest-bearing liabilities are:

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----- Start of picture text -----

Floating charge
Cash and cash equivalents 6,493,618 7,611,064
Receivables 31,386,515 28,277,807
Inventories 297,958 165,359
Total current assets pledged as security 38,178,091 36,054,230
First mortgage
Freehold land and buildings 37,097,228 37,870,973
Floating charge
Other investments 52,836 44,144
Plant, equipment and motor vehicles 23,674,895 24,650,186
Freehold land and buildings 27,329,657 27,485,500
Investment properties 2,207,021 2,207,021
Intangible assets 860,505 1,276,088
54,124,914 55,662,939
Total non-current assets pledged as security 91,222,142 93,533,912
Total assets pledged as security 129,400,233 129,588,142
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Secured financial guarantee and documentary credit 2,690,930 1,883,000
Secured bill acceptance facility 48,597,070 48,770,000
51,288,000 50,653,000
Secured bill acceptance facility 31,905,000 42,770,000
Secured financial guarantee and documentary credit facility 2,690,930 1,883,000
34,595,930 44,653,000
Bank loan facility
Total facility 51,288,000 50,653,000
Used at balance date (34,595,930) (44,653,000)
Unused at balance date 16,692,070 6,000,000
----- End of picture text -----

The bank overdraft facilities may be drawn at any time and are subject to annual review. The bill acceptance facilities have defined maturity dates. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time.

The current interest rates are 0.88% - 2.34% per annum on bill facilities, 4.59% on overdraft (2020 - bill facilities 1.10% - 2.86%, overdraft – 4.59%).

Information concerning interest rate risk is set out in note 3.

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Page 38

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The carrying amounts of interest-bearing liabilities approximate their fair value at balance date.

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rdinary shares (fully paid) t 30 June 2020 pening balance losing balance t 30 June 2021 pening balance ividend reinvestment plan onus share plan losing balance	75,027,420 27,248,025
	75,027,420 27,248,025
	75,027,420 27,248,025 152,360 132,553 11,889 10,344 75,191,669 27,390,922

At 30 June 2021 there were 2,685,000 contingently issuable shares (2020 – 2,685,000) relating to shares issued under the Company’s Employee Share Plan. During the year no contingently issuable shares were issued to any employees under the Company’s Employee Share Plan (2020 - nil). There is no expiry on these shares subject to exercise by the employee.

All ordinary shares are fully paid and entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

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----- Start of picture text -----

Final dividend for the year ended 30 June 2020 of nil cents (2019 – nil cents) per fully paid share - -
Interim dividend for the year ended 30 June 2021 of 2.0 cents (2020 – nil cents) per fully paid share
Fully franked dividend based on tax paid @ 30% (2020 - 30%) 1,500,548 -
Less – bonus issue of ordinary shares under the Company’s Bonus Share Plan. (10,344) -
1,490,204 -
In addition to the above dividends, since year end the directors have declared the payment of a final
dividend of 2.0 cents per fully paid ordinary share, (2020 – nil cents) fully franked based on tax paid at
30%. The aggregate amount of the proposed dividend expected to be paid on 12 November 2021 out of
retained profits at 30 June 2021, but not recognised as a liability at year end, is 1,503,833 -
----- End of picture text -----

Franking credits available at 30 June 2021 for subsequent financial years based on a tax rate of 30% - $22,196,361 (2020 - $21,855,582 - 30%).

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Page 39

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CTI Logistics Limited is the ultimate Australian parent entity of the Group and head entity of the tax consolidated Group.

Key management personnel compensation

ey management personnel compensation comprised the following: hort-term ost-employment uring the year the following fees were paid or payable for services provided by the auditor f the parent entity, its related practices and non-related audit firms: udit services PMG Australia udit and review of financial reports	1,600,907 1,624,815 74,880 74,880 1,675,787 1,699,695
	195,200 177,280

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Capital expenditure contracted for at the reporting date but not recognised as liabilities comprises of plant and equipment and is payable within one year is $1,820,022 (2020 - $nil).

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Page 40

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All subsidiaries are incorporated in Australia.

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):

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CTI Logistics Limited	CTI Logistics Limited	CTI Logistics Limited						Australia
Bring Transport		Industries Pty Ltd						Australia	100	100
Mercury Messengers Pty				Ltd				Australia	100	100
CTI Security Services Pty				Ltd				Australia	100	100
CTI Transport Systems			Pty Ltd					Australia	100	100
CTI Taxi Trucks		Pty Ltd						Australia	100	100
CTI Security Systems Pty				Ltd				Australia	100	100
CTI Transport Services			Pty Ltd					Australia	100	100
CTI Freight Management				Pty	Ltd			Australia	100	100
Action Logistics		(WA) Pty Ltd						Australia	100	100
CTI Freight Systems Pty				Ltd				Australia	100	100
CTI Couriers Pty Ltd								Australia	100	100
CTI Swinglift Services Pty Ltd								Australia	100	100
CTI Xpress Systems Pty Ltd								Australia	100	100
CTI Nationwide		Logistics		Pty	Ltd			Australia	100	100
Consolidated Transport			Industries			Pty Ltd		Australia	100	100
CTI Logistics (NSW) Pty				Ltd				Australia	100	100
Australian Fulfilment Services					Pty Ltd			Australia	100	100
Lafe (WA) Pty Ltd								Australia	100	100
CTI Freightlines		Pty Ltd						Australia	100	100
Blackwood Industries Pty Ltd								Australia	100	100
CTI Logistics (Vic) Pty			Ltd					Australia	100	100
CTI Online Pty		Ltd						Australia	100	100
CTI Records Management				Pty Ltd				Australia	100	100
CTI Quarantine		& Fumigation Services Pty					Ltd	Australia	100	100
Foxline	Logistics Pty Ltd							Australia	100	100
G.M. Kane & Sons Pty			Ltd					Australia	100	100

These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 2016/785 issued by the Australian Securities and Investments Commission. For further information refer to note 23.

CTI Logistics Limited and its wholly-owned entities are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors’ report under Class Order 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee, they also represent the Extended Closed Group.

The consolidated results of the Company and all the parties to the Deed are the same as the consolidated results of the Group.

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Page 41

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rofit/(loss) for the year
epreciation and amortisation
pairment
rovision for doubtful debts
et gain on sale of non-current assets
hare-based payment expense
hange in operating assets and liabilities
ncrease)/decrease in trade and other debtors
ecrease in inventories
crease in provision for income taxes
crease in deferred tax
crease/(decrease) in trade creditors, employee benefits and other provisions
et cash inflow from operating activities
asic earnings/(loss) per share attributable to the ordinary equity holders of the Company.
rofit/(loss) attributable to ordinary shareholders used in calculating basic earnings per share.
eighted average number of ordinary shares used as the denominator in calculating basic earnings
er share.
iluted earnings/(loss) per share attributable to the ordinary equity holders of the Company.
rofit/(loss) attributable to ordinary shareholders used in calculating diluted earnings per share.
eighted average number of ordinary shares used as the denominator in calculating diluted
arnings per share.
eighted average number of shares (basic)
he effect of the vesting of contingently issuable shares
eighted average number of shares (diluted)

8,168,699
(4,348,839)
22,506,025
21,817,627
-
5,771,500
(99,923)
194,918
(243,880)
(194,406)
-
30,997
(3,136,780)
1,001,739
(132,599)
(31,014)
1,269,830
642,031
791,911
3,435,877
1,964,131
(4,988,281)
31,087,414
23,332,149
10.88
(5.79)
8,168,699
(4,348,839)
75,056,220
75,027,420
10.88
(5.79)
8,168,699
(4,348,839)
75,056,220
75,027,420
-
-
75,056,220
75,027,420

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Page 42

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The average market value of the Company’s shares for the purposes of calculating the dilutive effect of the vesting of contingently issuable shares was based on quoted market prices for the period during which the contingently issuable shares were outstanding, as at 30 June 2021 these shares are considered anti-dilutive and excluded from the calculation.

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The individual financial statements for the parent entity show the following aggregate amounts:

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----- Start of picture text -----

Current assets 9,715,427 10,563,353
Total assets 45,563,221 47,188,385
Current liabilities 11,401,169 12,753,530
Total liabilities 11,710,627 17,013,397
33,852,594 30,174,988
Issued capital 27,390,922 27,248,025
Reserves 1,932,558 1,926,472
Retained earnings 4,529,114 1,000,491
33,852,594 30,174,988
5,029,173 (2,238,797)
5,035,259 (2,231,842)
Carrying amount included in Group
- current liabilities 2,451,658 2,642,632
- non-current liabilities 33,794,000 38,779,377
36,245,658 41,422,009
----- End of picture text -----

The parent entity has provided financial guarantees in respect of loans and hire purchase commitments of subsidiaries amounting to $36,245,658 (2020 - $41,422,009). The loans are secured by registered mortgages over the freehold properties of the subsidiaries.

In addition, there are cross guarantees given by CTI Logistics Limited, as described in note 23. No deficiencies of assets exist in any of these entities.

There are no other events since the end of the financial year that provide additional evidence of conditions that existed at the end of the financial year or that reveal for the first time a condition that existed at the end of the financial year.

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Page 43

In the opinion of the directors of CTI Logistics Limited (‘the Company’):

(a) the consolidated financial statements and notes that are set out on pages 13 to 43 and the remuneration report on pages 6 to 7 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

There are reasonable grounds to believe that the Company and the Group entities identified in note 22 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those Group entities pursuant to ASIC Class Order 2016/785.

Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

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DAVID WATSON Director

Perth, WA 30 August 2021

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Page 44

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Independent Auditor’s Report

To the shareholders of CTI Logistics Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of CTI Logistics Limited (the Company).

In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001 , including:

Giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and
Complying with Australian Accounting Standards and the Corporations Regulations 2001.

The Financial Report comprises the:

Consolidated statement of financial position as at 30 June 2021.
Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended.
Notes including a summary of significant accounting policies.
Directors' Declaration.

The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period.

This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

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Value of property, plant and equipment, right-of-use assets and intangible assets ($164,570,409)

Refer to Note 14 of the Financial Report

The key audit matter

How the matter was addressed in our audit Our procedures included:

Value of property, plant and equipment, right-of-use assets and intangible assets ($164,570,409)	Value of property, plant and equipment, right-of-use assets and intangible assets ($164,570,409)	Value of property, plant and equipment, right-of-use assets and intangible assets ($164,570,409)
Refer to Note 14 of the Financial Report
The key audit matter		How the matter was addressed in our audit
The carrying value of property, plant and equipment, right-of-use assets and intangible assets is a key audit matter due to the: • Size of property, plant and equipment, right- of-use assets and intangible assets balances which, in aggregate, represent 78% of total assets. The intangible assets also include goodwill acquired in business combinations which is allocated to Cash Generating Units (CGUs) which are required to be tested for impairment annually irrespective of whether there is any indication of impairment. • Group’s market capitalisation was less than the carrying amount of the Group’s net assets at year-end. This increases the possibility of property, plant and equipment, right-of-use assets and intangible assets being impaired and, as a result, increased our audit effort in this area. • There is uncertainty regarding the ongoing impact of COVID-19. This further increases the risk of impairment as well as the risk of inaccurate forecasts or a wider range of possible outcomes for us to consider. • Group’s valuation of vacant land adjacent to one of its operating businesses, based on its fair value less cost of disposal determined through external valuation. We focused on the significant forward-looking assumptions the Group applied in its value in use models, including: • Forecast operating cash flows, EBITDA margins, growth rates and terminal growth rates. In addition to the uncertainties described above, the Group’s value in use models for certain CGUs are highly sensitive to small changes in EBITDA margins and cash flow improvements associated with new customers and changes to existing customer arrangements, reducing available headroom. This drives additional audit effort specific to their feasibility. • Discount rate – this is complicated in nature and varies according to the conditions and environment the specific CGUs are subject
	The carrying value of property, plant and equipment, right-of-use assets and intangible assets is a key audit matter due to the: • Size of property, plant and equipment, right- of-use assets and intangible assets balances which, in aggregate, represent 78% of total assets. The intangible assets also include goodwill acquired in business combinations which is allocated to Cash Generating Units (CGUs) which are required to be tested for impairment annually irrespective of whether there is any indication of impairment. • Group’s market capitalisation was less than the carrying amount of the Group’s net assets at year-end. This increases the possibility of property, plant and equipment, right-of-use assets and intangible assets being impaired and, as a result, increased our audit effort in this area. • There is uncertainty regarding the ongoing impact of COVID-19. This further increases the risk of impairment as well as the risk of inaccurate forecasts or a wider range of possible outcomes for us to consider. • Group’s valuation of vacant land adjacent to one of its operating businesses, based on its fair value less cost of disposal determined through external valuation. We focused on the significant forward-looking assumptions the Group applied in its value in use models, including: • Forecast operating cash flows, EBITDA margins, growth rates and terminal growth rates. In addition to the uncertainties described above, the Group’s value in use models for certain CGUs are highly sensitive to small changes in EBITDA margins and cash flow improvements associated with new customers and changes to existing customer arrangements, reducing available headroom. This drives additional audit effort specific to their feasibility. • Discount rate – this is complicated in nature and varies according to the conditions and environment the specific CGUs are subject	Our procedures included: • Considering the appropriateness of the value in use method applied by the Group to assess the carrying value of property, plant and equipment, right-of-use assets and intangible assets against the criteria in the accounting standards. • We considered the Group’s determination of their CGUs based on our understanding of the operations of the Group’s business, how the identifiable CGUs generate independent cash inflows, and against the requirements of the accounting standards. • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. • We considered the sensitivity of the models by varying key assumptions, such as forecast EBITDA margins, discount rate and cash flow improvements associated with new customers and changes to existing customer arrangements, within a reasonably possible range. We did this to identify those CGUs at higher risk of impairment and to focus our further procedures. • We challenged the Group’s forecast cash flows, EBITDA margin and growth assumptions considering the uncertainty in business activity. We compared forecasts to Board approved budgets and we assessed forecast EBITDA margins through comparison to historical performance. We applied increased scepticism where previous forecasts were not achieved, using our knowledge of the challenging economic environment. • We compared forecast growth rates and terminal growth rates to published studies of industry trends and expectations, and considered differences for the Group’s operations. We used our knowledge of the Group, its past performance, business and customers, and our industry experience. • Working with our valuation specialists, we: − Independently developed a discount rate range considered comparable using publicly available market data for comparable entities.

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to from time to time. The Group’s value in − Assessed the integrity of the value in use use models for certain CGUs are sensitive model used, including the accuracy of the to changes in discount rate. underlying calculation formulas.
The Group also has many operating businesses − Assessed the Group’s analysis of the
and service lines necessitating our difference between the market
consideration of the Group’s determination of capitalisation and net assets of the Group.
CGUs, based on their ability to generate We did this by comparing the implicit
independent cash flows. earnings multiple in the Group’s models to
We involved valuation specialists to supplement market multiples of comparable entities.
our senior audit team members in assessing this key audit matter. • For the vacant land we considered the basis of the valuation and compared the expert’s valuation to carrying amount of the vacant land.
We assessed the disclosures, including those related to most sensitive key assumptions used in the estimation of the recoverable amount, in the financial report using the results of our testing and against the requirements of the accounting standards.

Other Information

Other Information is financial and non-financial information in CTI Logistics Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

Preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001.
Implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
Assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.

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Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

To obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and
To issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.

Report on the Remuneration Report

Opinion

Directors’ responsibilities

In our opinion, the Remuneration Report of The Directors of the Company are responsible for CTI Logistics Limited for the year ended 30 June the preparation and presentation of the 2021, complies with Section 300A of the Remuneration Report in accordance with Section Corporations Act 2001 . 300A of the Corporations Act 2001 .

Our responsibilities

We have audited the Remuneration Report included in the Directors’ Report on page 6 & 7 for the year ended 30 June 2021.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

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KPMG

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Jane Bailey Partner Perth 30 August 2021

AI assistant

CTI LOGISTICS LIMITED — Annual Report 2021

64663_rns_2021-08-29_2eae7db0-1b0d-40e2-98aa-33c55b6e1314.pdf