2 0 2 1 A N N U A L R E P O R T

1	DIRECTORS’ REPORT	03
2	FINANCIAL REPORTS	08
3	NOTES	15
4	STATUTORY INFORMATION	39

EMBELTON LIMITED

ACN 004 401 496

REGISTERED OFFICE

147-149 Bakers Road, Coburg 3058 Telephone: 03 9353 4811 Facsimile: 03 9353 4855

DIRECTORS

G R Embelton, Chairman J J Embelton, Managing Director J R Baldwin M S Crabb

AUDITORS

Deloitte Touche Tohmatsu

SECRETARY

E P Galgano

STOCK EXCHANGE

Embelton Limited shares are quoted on the Australian Stock Exchange

DIRECTORS’ 1 REPORT

PREMIER TOWER, MELBOURNE

Engineered European Oak Floors

DIRECTOR'S REPORT

DIRECTORS’ REPORT TO SHAREHOLDERS

Led by pressures arising from Covid 19, Company progress during the reporting period was challenged on several fronts. Not only did earnings suffer from widespread dislocation to normal operations, but measures to counter the impact of the virus forced changes to much of our forward planning. Development initiatives were cut back, delayed or shelved altogether as business interruption continued throughout the year.

What was to have been a period of carefully managed transition following acquisition of the Omnifloor contracting business and the establishment of a new Online Retail platform, instead became a year of constant disruption which restrained meaningful progress.

While the Group’s IT infrastructure proved adequate in facilitating remote working and intra-branch communication, restrictions on interstate travel meant that the personal contact between members of the senior executive team, essential for effective group management, became very difficult. Furthermore, the inability to interact personally with current and prospective customers had a detrimental impact on securing future contracts, particularly in locations where our senior leaders were not physically located.

It has certainly been a difficult period for the Group.

Summary	2021	2020
	($’000s)	($’000s)
Sales Revenue	68,117	72,324
Operating Proft	2,111	3,180
Company Tax	672	1,023
Net Proft after Tax	1,439	2,157
Earnings per Share	67c	100c

Net Tangible Assets per Share

per Share
before declared fnal dividend
$8.72	$8.42
after declared fnal dividend
$8.52	$8.22

DIVIDEND

The final ordinary dividend has been held at 20 cents, making a payout of 40 cents for the year. Representing 60% of net earnings after tax, the total dividend remains unchanged from the prior two years.

OPERATIONS

Flooring

Planned expansion of the Company’s floor installation business was set back in several ways, particularly by the mandated work restrictions in response to the Covid crisis. This was most severely felt in Victoria, but forward progress in other markets was similarly affected.

In Queensland, a slower construction market affected operations in that State, particularly in large multi-storey residential and office builds which have been our predominant focus in recent times. Completion of several major projects early in the financial year were not replaced by comparable new work as the year progressed, leading to a restructure of local branch operations. Midway through the year, the Embelton branch combined with that of our separately located Brisbane subsidiary, Modern Commercial Flooring, into shared premises at Banyo better suited to the integrated operation.

Major supply and installation flooring contracts completed during the period included West Side Place, Australia 108 and Premier Tower in Melbourne, Greenland Centre in Sydney and Jewel Apartments on the Gold Coast. With most of these contracts having started in the more buoyant prior term, end of project revenues received in the past year are unlikely to be matched by corresponding income in the current period where the start of new work has been delayed by continuing limits on construction activity.

Our new business, Flooring Online Australia (www.flooringonline.com), established at the start of the financial year, has progressed satisfactorily and although recording an expected operating loss, our broadening experience and development of improved support infrastructure underpins cautious optimism for growth in the period ahead.

Engineering

The Engineering Division recorded a modest fall in revenue during the reporting period, but better control of costs yielded a satisfactory outcome. Positive contributions from our project design and contracting work as well as the traditional provision of noise isolation equipment for OEM and mechanical contracting markets contributed to a reasonable result.

Continuing innovation saw new products designed and tested by our engineering team, including solutions for swimming pool structures, gymnasiums and other building services where vibration and noise attenuation continue to be priority issues.

Interesting projects completed during the year included the isolation of Studio and Rehearsal areas at the Greenland Centre in Sydney, the installation of car stacker mountings together with swimming pool and gymnasium isolation at Home Southbank in Victoria, and building isolation at the Caboolture hospital in Queensland.

Our People

In what has been a particularly difficult year for our staff group, most have responded positively in adapting to the changed Covid environment. Many team members moved to home working arrangements as required by Government regulations, whilst others continued in our various offices. Hopes that remote Covid-induced working routines could be wound back during the second half of the year, particularly in Victoria, were not realised. And regrettably, emergence of the Delta variant, strongly in NSW and Victoria, has seen a reversion to the earlier mixed work structures. As a result, efficiency remains impaired across many parts of the Company.

The unusual situation necessitated some change in operating responsibilities during the year but the understanding and commitment of staff in adapting to the revised circumstances ensured a level of organisational resilience which greatly assisted in meeting the many challenges.

The Directors and Management wish to record their appreciation of the widespread support received from staff in all branches.

With projects interrupted at short notice to match the constantly changing work schedules of major contractors, planned operating efficiencies necessary for profitable project delivery were not easily achieved. Additionally, these almost daily work adjustment issues became an impediment to effective integration of the recently acquired Omnifloor business with our own NSW and Victorian floor contracting operations.

EMBELTON ANNUAL REPORT 2021

Outlook

The current year has begun with a continued emphasis on the development in engineering product design, alignment of our Contracting Operations to meet current demand and an extension of our new Online Retail Flooring platform. These initiatives, combined with enhancement in project management, enterprise IT and cost control systems should see the Group manage successfully through this particularly difficult pandemic period.

Although the pipeline of confirmed and prospective contracts within the building sector remains solid, project delivery will continue to be hampered by restricted working conditions around the country, most particularly in Victoria and NSW during the first half. Under these circumstances we remain unclear about the probable timing for resumption of normal activity which in turn makes difficult any realistic prediction of results for the current period.

input into and final approval of management’s development of corporate strategy and performance objectives.
the overall corporate governance of the Group including the strategic direction, establishing goals for management, and monitoring the achievement of these goals; and oversight of Committees.

To assist in the execution of its responsibilities, the Board has the authority to establish Committees (and delegate powers accordingly) to consider such matters as it may consider appropriate including, by way of example only, audit matters, finance and business risks, remuneration, and nominations, and to establish a framework for the effective and efficient management of the Company and the Group.

The Company complies with Recommendation 1.1 of the ASX Principles and Recommendations.

Recommendation 1.2 – Director Checks

The Company has processes in place to ensure the appropriateness of candidates for appointment and election as Directors.

CORPORATE GOVERNANCE

Compliance with Corporate Governance Principles and Recommendations

This corporate governance statement is provided by Embelton Limited (“the Company”) pursuant to ASX Listing Rule 4.10.3 and measures the Company’s governance practices against the recommendations in the 3[rd] edition of the Corporate Governance Principles and Recommendations (“ASX Principles and Recommendations”).

The corporate governance statement discloses the extent to which the Company has followed the ASX Principles and Recommendations during the year ended 30 June 2021 and has been approved by the Board of the Directors of the Company (“the Board”). Embelton has prepared an ASX Appendix 4G – Key to Disclosures which together with this corporate governance statement is lodged with the ASX.

This corporate governance statement is effective as of 1 July 2020.

– Principle 1 Laying Solid Foundations for Management and Oversight

Recommendation 1.1 – Role of the Board and Management

The Board of Embelton Limited takes corporate governance seriously, that is, the system by which the Company and its subsidiaries (“the Group”) are managed.

The role of the Board is to create sustainable shareholder wealth in a manner consistent with the Company’s Constitution, the Board’s Charter and all legal and regulatory requirements.

The Board achieves this by:

charting strategy and setting financial targets for the Group.
• monitoring the implementation and execution of strategy and performance against financial targets.
setting and overseeing the Company’s values and corporate governance framework and ensuring that the Company acts with integrity and in accordance with the highest ethical standards.
ensuring there is an effective balance between the delegation and responsibility for the day-to-day operation and management to the Managing Director and the role of the Board in monitoring, guiding and providing oversight; in setting, overseeing the Company’s direction; and
ensuring effective communication with shareholders.

The Board has responsibility for the matters specified above and, in addition to those matters reserved to it by law, reserves to itself the following matters and all power and authority in relation to those matters:

appointing and removing the Managing Director.
ratifying the appointment and, where appropriate, the removal of the Company Secretary.
reviewing and overseeing the operation of systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and regulatory compliance.
approving major capital expenditure, capital management, and acquisitions and divestitures.
approving and monitoring financial and other reporting.

Details of each Director are included in the Annual Report. Where a Director is seeking election, shareholders are given full details.

The Company complies with Recommendation 1.2 of the ASX Principles and Recommendations.

Recommendation 1.3 – Written Agreement with Each Director and Senior Executive

The Company has written agreements with each Non-Executive Director.

The Company also had written agreements with the Managing Director.

The Company complies with Recommendation 1.3 of the ASX Principles and Recommendations.

Recommendation 1.4 – Company Secretary

The Company Secretary reports directly to the Board, through the Chairman, on all matters regarding the functioning of the Board.

The Company complies with Recommendation 1.4 of the ASX Principles and Recommendations.

Recommendation 1.5 – Diversity

Having regard to the size of the Company and the nature of its activities, a separate formal diversity policy has not been adopted.

The Company does not discriminate based on age, ethnicity, or gender in any employment matters and when a position becomes vacant the Company seeks to employ the best candidates available for the position.

The Company currently has no women in senior executive positions or women on the Board. The Board fully supports the gender diversity concept and is committed to establishing measurable objectives for achieving gender diversity as the business expands.

The Company and its subsidiaries employ less than 100 people and is not a “relevant employer” under the Workplace Gender Equality Act.

The Company does not comply with Recommendation 1.5 of the ASX Principles and Recommendations.

Recommendation 1.6 – Board Performance Assessment

The Company has a process for periodically evaluating the performance of its Board and each Director. The performance of all the Directors is reviewed by the Chairman each year. The performance of the Chairman is reviewed and assessed each year by the other Directors.

The Chairman determines the evaluation criteria and process.

The Company complies with Recommendation 1.6 of the ASX Principles and Recommendations.

DIRECTOR'S REPORT

Recommendation 1.7 – Performance Evaluation of Senior Executives

The Company has a process for periodically evaluating the performance of its Managing Director and other senior executives. The performance of Managing Director and other senior executives is reviewed by the Board each year. In addition, the performance of the Managing Director and other senior executives is constantly reviewed by the Board as part of the ordinary course of meetings of Directors.

The Company complies with Recommendation 1.7 of the ASX Principles and Recommendations.

To date the Board does not consider that a specific skills matrix is required. However, the Board will continue to consider whether it would be appropriate for the Company to adopt a board skills matrix as the Company continues to develop and grow.

The profile of each Director containing their skills, experience, expertise, and term of office is set out in the Directors’ Report.

The Company does not comply with Recommendation 2.2 of the ASX Principles and Recommendations.

Recommendation 2.3 – Directors’ Independence

Principle 2 – Structure the Board to Add Value

The Company’s Corporate Governance Charter requires:

Recommendation 2.1 – Nomination Committee

the Board to comprise a minimum of 3 Directors.
at least half of the Board must be Non-Executive Directors; and

The Board has not formed a Nomination Committee as recommended by Recommendation 2.1 of the ASX Principles and Recommendations.

The Board reviews the composition of the Board and appointment of new Directors, to ensure the appropriate mix of skills and expertise is present to facilitate successful strategic direction.

The composition of the Board is currently determined according to the following principles:

the Board must comprise members with a broad range of experience, expertise, skills, and contacts relevant to the Group and its business.
the Board must consist of a minimum of 3 Directors and a maximum of 4 Directors.
the number of Directors may be increased where the Board considers that additional expertise is required in specific areas or when an outstanding candidate is identified.
at least half of the Board must be Non-Executive Directors.

Having regard to the size, current ownership structure of the Company and the nature of its activities, the Board believes that the current composition of the Board is appropriate as it adds value by ensuring there is a broad range of experience, expertise, skills, qualifications, and contacts which are deemed relevant to the business of the Company.

The Board also considers it appropriate for the selection and appointment of Directors to be managed by the Board itself. When deemed necessary the Board may also engage an external consultant to identify and assess suitable candidates who meet the Board’s selection criteria.

Directors are initially appointed by the full Board subject to election by shareholders at the next annual general meeting. Under the Company’s Constitution the tenure of Directors (other than Managing Director) is subject to reappointment by shareholders not later than the third anniversary following his or her last appointment. Subject to the requirements of the Corporations Act 2001, the Board does not subscribe to the principle of a compulsory retirement age and there is no maximum period of service as a director. A Managing Director may be appointed for any period and on any terms the Directors think fit and, subject to the terms of the written agreement entered into, the Board may revoke this appointment according to the terms of this agreement.

As the Group’s activities increase in size and scope, the size of the Board will be reviewed periodically to determine if a Nominations Committee is required for the Board to properly perform its responsibilities and functions.

The Company does not comply with Recommendation 2.1 of the ASX Principles and Recommendations.

Recommendation 2.2 – Board Skills Matrix

The Board endeavours to ensure that the Board comprises members with a broad range of experience, expertise, skills and contacts relevant to the Group and its business. Having regard to the size, current ownership structure of the Company and the nature of its activities, the Board considers that it has the necessary balanced mix of skills.

the Chairman must be a Non-Executive Director.

The current Board comprises four Directors with 3 Non-Executive Directors and one Executive Director.

The Company does not comply with Recommendation 2.3 of the ASX Principles and Recommendations.

Recommendation 2.4 – Majority of Directors Independent

The Company does not currently have a majority of the Board who are independent Directors as recommended by Recommendation 2.4 of the ASX Principles and Recommendations.

Having regard to the size, current ownership structure of the Company and the nature of its activities, the Directors believe that the current composition of the Board is appropriate as it adds value by ensuring there is a broad range of experience, expertise, skills, qualifications, and contacts which are deemed relevant to the business of the Company.

The situation will be monitored and changed in line with best practice as and when the Directors feel the Company is of sufficient size.

To ensure that independent judgement is achieved and maintained in respect of its decision-making processes, the Board has adopted several measures which include the following:

each Director has the right to seek independent legal or other professional advice at the Company’s expense; and
any Director believing that he or she may have a conflict of interest in relation to a particular item of business must declare their interest and excuse themselves from the Board meeting if required by the Board before commencement of discussion on the topic.

The Company does not comply with Recommendation 2.4 of the ASX Principles and Recommendations.

Recommendation 2.5 – Independent Chairman & Chief Executive

Ofcer

The roles of Chairman and Managing Director of the Company are separately held by Mr George Embelton and Mr James Embelton respectively. Although the Company’s Chairman is a Non-Executive Director, he is a substantial shareholder and as such is not an independent Director under the definition of the ASX Principles and Recommendations.

The Board considers Mr George Embelton’s role as Non-Executive Chairman essential to the success of the Company at this stage of its development.

The Company does not comply with Recommendation 2.5 of the ASX Principles and Recommendations.

Recommendation 2.6 – Company Induction and Professional Development of Directors

The Board considers that its directors are suitably qualified and experienced to fulfil their roles, and that the Board possesses the correct mix of skills for the Board to be able to carry out its function effectively.

EMBELTON ANNUAL REPORT 2021

Each new Director of the Company is, upon appointment, provided with an induction into the Company’s assets and business including policies and procedures. This includes discussions with members of the existing Board, the Company Secretary, and other key executives to familiarise themselves with the Company.

The Company complies with Recommendation 2.6 of the ASX Principles and Recommendations.

– Principle 3 Act Ethically and Responsibly

Recommendation 3.1 – Values

The Company is currently establishing a formal policy on values.

The Company does not comply with recommendation 3.1 of the ASX

Principles and Recommendations.

Recommendation 3.2 – Code of Conduct

As a guide to all employees and directors, the Board has formalised a Code of Conduct to reflect practices which, for many years, have formed the ethical framework upon which our business operations have been based.

The Code provides guidance as to how the Company should conduct its business affairs and all employees, directors and officers will be expected to comply with this Code.

Above all, the Code requires that all directors and employees conduct

themselves with honesty and integrity.

Subjects covered by this Code include, inter alia, promotion of a safe working environment, dealing with conflicts or potential conflicts of interest, responsible use of company property, guidelines for trading in Company shares and the regular monitoring and active reporting of any unseemly or unethical practices which might arise or be seen to arise. Integrity in financial reporting.

The Company complies with Recommendation 4.2 of the ASX Principles and Recommendations. Recommendation 4.3 – External Auditors

The Company invites the auditors to attend the AGM. The auditors are available to answer any questions from shareholders relevant to the audit.

The Company complies with Recommendation 4.3 of the ASX Principles and Recommendations.

– Principle 5 Make Timely and Balanced Disclosure

Recommendation 5.1 – Disclosure Policy

The Company maintains an appropriate and responsive continuous disclosure regime, which is intended to support the timely and balanced disclosure of all matters concerning the Company. The Company Secretary is responsible, on the Board’s behalf, for communicating issues to the ASX.

The disclosure management framework provides for:

compliance with the Corporations Law, and the ASX Listing Rules.
timely disclosure to the market of all price sensitive Company information.
a conservative approach to the release and dissemination of price or event sensitive information; and
avoidance of selective or differential disclosure to selected individuals or groups or in selected situations.

The Company complies with Recommendation 5.1 of the ASX Principles and Recommendations.

Recommendation 5.2 – Market Announcements

The Board reviews and approves all market announcements. The Company also circulates all price sensitive information to the Board ahead of the release being made.

The Company complies with recommendation 5.2 of the ASX

The Company complies with Recommendation 3.2 of the ASX

Principles and Recommendation.

Principles and Recommendations.

Recommendation 5.3 – Presentation Materials

Recommendation 3.3 – Whistleblower Policy

The Company is currently considering the establishment of a

The Company will disclose any presentations to a substantive investor by releasing a copy of the presentation materials on the ASX.

whistleblower policy.

The Company does not comply with recommendation 3.3 of the ASX Principles and Recommendations.

The Company complies with recommendation 5.3 of the ASX Principles and Recommendation.

– Principle 6 Respecting the Rights of Shareholders

Recommendation 3.4 – Anti-bribery and Corruption Policy

Recommendation 6.1 – Information on Website

The Company is currently reviewing the possible establishment of an anti-bribery and Corruption policy.

The Company does not comply with recommendation 3.4 of the ASX

Principles and Recommendation.

– Principle 4 Safeguarding Integrity in Corporate Reporting

Information about the Company is accessible to investors on the Company’s website: www.embelton.com, which contains all relevant information about the Company. The Company will regularly update the website and its contents therein as deemed necessary.

The Company complies with Recommendation 6.1 of the ASX Principles and Recommendations.

Recommendation 4.1 – Audit & Risk Management Committees

Recommendation 6.2 – Investor Relations Program

Because of its relatively small size, the Company has not established an Audit and Risk Management Committee but the responsibilities which would ordinarily be exercised by such a committee have been accepted by the Board.

The Company does not comply with Recommendation 4.1 of the

ASX Principles and Recommendations.

Recommendation 4.2 – Declarations from the CEO and CFO

The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial risk.

The Board aims to ensure that shareholders are informed of all major

developments affecting the Group’s state of affairs.

In line with ASX’s continuous disclosure requirements, the Company keeps its shareholders informed through reports which include the annual reports, half yearly reports, and specific ASX releases covering material developments and other price-sensitive information. Shareholders are encouraged to attend and participate at general meetings. The Company’s auditors attend the annual general meetings and are available to answer shareholders’ questions. The Directors believe that the Company’s policies comply with the Guidelines in relation to the rights of shareholders.

DIRECTOR'S REPORT

The Company complies with Recommendation 6.2 of the ASX Principles and Recommendations.

Recommendation 6.3 – Participation at Meetings of Shareholders

All shareholders are notified in writing of general meetings and encouraged to participate in person or by proxy to ensure a high level of accountability and understanding of the Group’s strategy, activities and financial position and performance.

The Company complies with Recommendation 6.3 of the ASX Principles and Recommendations.

Recommendation 6.4 – Electronic Communication

The Company’s share registry, Boardroom Pty Ltd, has facilities for shareholders to receive and send communications electronically.

The Company complies with Recommendation 6.4 of the ASX Principles and Recommendation.

Recommendation 6.5 – Electronic Communications

Shareholders have the option of electing to receive communications from and sending communications to the Company electronically.

The Company complies with recommendation 6.5 of the ASX Principles and Recommendation.

– Principle 7 Recognising and Managing Risk

Recommendation 7.1 – Risk Committee

Because of its relatively small size, the Company has not established a Risk Management Committee but the responsibilities which would ordinarily be exercised by such a committee have been accepted by the Board.

whole and its external auditor, discharges the function of evaluating and continually improving the effectiveness of its risk management and control processes.

The Company does not comply with Recommendation 7.3 of the ASX Principles and Recommendation.

Recommendation 7.4 – Economic, Environmental and Social

Sustainability Risks

The Company’s performance is subject to business, financial and operational risks including but not limited to:

economic risks, such as changes in economic conditions that may adversely impact the Company’s business or operations.
• environmental risks due sustainability of resources
financial risks including access to needed capital on satisfactory terms; and
social sustainability risks.

The Board is informed about risks of this nature facing the Company. This risk profile is reviewed and updated at least annually.

The Company complies with Recommendation 7.4 of the ASX Principles and Recommendation.

– Principle 8 Remunerate Fairly and Responsibly

Recommendation 8.1 – Remuneration Committee

Having regard to its size, with a small complement of staff and executives, the Company does not currently have a dedicated Remuneration Committee. The task of ensuring that the level of Director and executive remuneration is appropriate and competitive, and that its relationship to performance is clear, and dealt with by the Board.

The Company does not comply with Recommendation 8.1 of the ASX Principles and Recommendation.

Recommendation 8.2 – Disclosure of Remuneration Policies and

The Board accepts responsibility for identification of significant areas of business risk, implementation of procedures to manage such risks and development of policies regarding the establishment and maintenance of appropriate ethical standards.

Its specific role in this area is to:

ensure compliance with both formal and informal standards in legal, statutory and ethical matters
monitor the business environment

Practices

The Company’s policies and practices regarding the remuneration of Non-Executive Directors and the remuneration of Executive Directors and other senior executives is disclosed in the in the Remuneration Report which forms part of the Directors’ Report.

The Company complies with Recommendation 8.2 of the ASX Principles and Recommendation.

identify business opportunities; and
monitor procedures to ensure that responses to shareholder enquiries and/or complaints are appropriate and prompt

Other responsibilities which might ordinarily be exercised by a Risk Management Committee in larger corporations have been accepted by the Board. The Managing Director and Chief Financial Officer report regularly to the Board on all matters of financial integrity and risk management.

The Company does not comply with Recommendation 7.1 of the ASX Principles and Recommendation.

Recommendation 7.2 – Annual Risk Review

The Board annually reviews and approves the risk framework of the Company.

The Company undertook a review of the Company’s risk management framework during the year ended 30 June 2021.

The Company complies with Recommendation 7.2 of the ASX Principles and Recommendation.

Recommendation 8.3 – Policy on Equity Based Remuneration

Scheme

All Board members are responsible for determining and reviewing compensation arrangements for Directors, Managing Director and Senior Executives.

The Board annually assesses the appropriateness of the nature and the amount of remuneration received by Directors and Senior Executives by reference to relevant employment market conditions and, with an overall objective of ensuring maximum stakeholder return, seeks to ensure the retention of a high-quality board and executive team. Professional advice is taken when appropriate.

Each director receives a fee for being a Director of the Company but no additional fees for additional work undertaken in Board committees. The Non-executive directors are remunerated by way of cash payments or superannuation contributions. Remuneration does not include any retirement benefits other than contributions to his nominated superannuation fund.

The Company complies with Recommendation 8.3 of the ASX

Principles and Recommendation.

Recommendation 7.3 – Internal Audit

Having regard to the size (including a small complement of staff), current ownership structure of the Company and the nature of its activities, the Company does not have an internal audit function. The Board as a

FINANCIAL 2 REPORTS

MELBOURNE CRICKET GROUND - Jim Stynes Room

Supply and Installation of Tufted Carpet Plank

EMBELTON ANNUAL REPORT 2021

EMBELTON LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021

Notes Sales Revenue 3 Cost of Sales Gross Proft Other Income 3 Less Expenses: Manufacturing Expenses Marketing Expenses Storage and Distribution Expenses Finance costs 4 Impairment expenses 22 Administration and Other Expenses Proft before income tax expense 4 Income tax expense 6 Proft for the year Other comprehensive income for the year Items that may be reclassifed subsequently to proft or loss: Exchange diferences on translating foreign operations Total comprehensive income for the year Proft attributable to: Owners of the company Non-controlling interests Total comprehensive income attributable to: Owners of the company Non-controlling interests Basic earnings per share 9 Diluted earnings per share 9	2021 $ 68,116,846 (52,646,028) 15,470,818 104,779 (207,155) (6,203,122) (2,176,142) (209,199) - (4,669,114) 2,110,865 (671,548) 1,439,317 1,617 1,440,934 1,440,934 - 1,440,934 1,440,934 - 1,440,934 66.8 cents 66.8 cents	2020 $ 72,324,139 (53,449,125)
		18,875,014 120,886 (170,681) (7,265,884) (1,632,774) (342,523) (500,000) (5,904,533)
		3,179,505 (1,022,907)
		2,156,598 (4,342)
		2,152,256
		2,152,256 -
		2,152,256
		2,152,256 -
		2,152,256
		99.7 cents 99.7 cents

The accompanying notes form part of the financial statements.

FINANCIAL REPORTS

EMBELTON LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2021

Notes CURRENT ASSETS Cash and cash equivalents 24(i) Trade receivables 10 Inventories 11 Current tax assets 6 Other 12 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment 14 Right of use assets 14(i) Intangibles 22 Deferred tax assets 6 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 15 Borrowings 15(i) Lease liabilities 19 Current tax liabilities 6 Provisions 16 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities 6 Borrowings 15(i) Lease liabilities 19 Provisions 16 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 8 Reserves 13(ii) Retained earnings 13(i)	2021 $ 86,237 8,855,056 12,447,571 106,742 526,266 22,021,852 9,211,151 433,969 330,154 685,280 10,660,554 32,682,406 10,405,903 - 388,792 - 1,423,460 12,218,155 75,384 1,000,000 59,095 180,536 1,315,015 13,533,170 19,149,236 1,155,970 3,083 17,990,183	2020 $ 24,574 12,603,584 12,072,188 - 156,254
		24,856,600
		9,261,718 449,903 397,334 982,062
		11,091,017
		35,947,617
		8,713,290 5,622,958 332,894 583,603 1,488,735
		16,741,480
		153,690 - 167,616 313,389
		634,695
		17,376,175
		18,571,442
		1,155,970 1,466 17,414,006

TOTAL EQUITY	19,149,236	18,571,442

The accompanying notes form part of the financial statements.

EMBELTON ANNUAL REPORT 2021

EMBELTON LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2021

Notes CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Finance costs Income taxes paid Net cash provided by operating activities 24(ii) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Acquisition of Business 22 Payment of deferred consideration Payment for property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of lease liability principal Repayment of borrowings Dividends paid Net cash used in fnancing activities Net Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the fnancial year Cash and cash equivalents at the end of the fnancial year 24(i)	2021 $ 79,118,053 (71,285,970) 418 (209,199) (1,150,975) 6,472,327 44,650 - - (505,138) (460,488) (464,108) (4,622,958) (863,140) (5,950,206) 61,663 24,574 86,237	2020 $ 74,473,175 (71,135,674) 1,004 (342,523) (561,234)
		2,434,748
		8,700 (329,592) (37,500) (258,378)
		(616,770)
		(480,000) (484,906) (863,140)
		(1,828,046)
		(10,068) 34,642
		24,574

The accompanying notes form part of the financial statements.

FINANCIAL REPORTS

EMBELTON LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2021

At 30 June 2019 Proft for the period Total comprehensive income for the period Dividends paid At 30 June 2020 Proft for the period Total comprehensive income for the period Dividends paid At 30 June 2021	Issued Capital $ 1,155,970 - - - 1,155,970 - - - 1,155,970	Foreign Currency Translation Reserve $ 5,808 (4,342) (4,342) - 1,466 1,617 1,617 - 3,083	Retained Earnings $ 16,120,548 2,156,598 2,156,598 (863,140) 17,414,006 1,439,317 1,439,317 (863,140) 17,990,183	Total $ 17,282,326 2,152,256
				2,152,256 (863,140)
				18,571,442 1,440,934
				1,440,934 (863,140)
				19,149,236

The accompanying notes form part of the financial statements.

ABOUT EMBELTON GROUP

Since the Company’s establishment in 1925, Embelton has maintained a bias towards the building and construction sector - leading to its current product range which comprises a comprehensive collection of flooring materials and accessories, noise and vibration isolation technology and manufacturing facilities for the precision bending and fabrication of specialised metal alloys.

The Group has long been recognised as an engineering and product innovator with a reputation for quality and service.

EMBELTON CORE VALUES

1 Act with integrity and professionalism
2 Promote Initiative
3 Focus on Growth
4 Deliver Quality, Expertise and Value
5 Develop People to Succeed

NOTES 3

SURFIT GYM, SYDNEY

Isolation Floor suspended by NXS Spring System

NOTES

NOTES TO AND FORMING PART OF THE FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2021

1. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Group has adopted all of the new and revised standards and interpretations issued by the revised standards and interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for an accounting period that begins on or after 1 July 2020.

New and revised AASBs affecting amounts reported and/or disclosures in the financial statements.

(i) Amendments to AASBs and the new interpretations that are mandatorily efective for the current year

New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the group include:

AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet Issued in
Australia
AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions and AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021

The impact of the application of the above amendments and standard has not had a material impact on the financial statements of the Group.

(ii) Standards and Interpretations in issue not yet adopted

New and revised Standards and amendments thereof and Interpretations that are not yet effective for the current year that are relevant to the group include:

Standards/Amendment	Efective for annual reporting periods beginning on or after	Expected to be initially applied in the fnancial year ending
AASB 2020-8 Amendments to Australian Accounting	1 January 2021	30 June 2022
Standards – Interest Rate Benchmark Reform – Phase 2
AASB 2020-1 Amendments to Australian Accounting Standards- Classifcation of Liabilities as Current or Non- Current	1 January 2022	30 June 2023
AASB 2020-3 Amendments to Australian Accounting	1 January 2022	30 June 2023
Standards- Annual Improvements 2018-2020 and Other
Amendments
AASB 2014-10 Amendments to Australian Accounting	1 January 2022	30 June 2023
Standards – Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture, AASB 2015-10 Amendments to Australian Accounting Standards – Efective Date of Amendments to AASB 10 and AASB 128, AASB 2017- 5 Amendments to Australian Accounting Standards – Efective Date of Amendments to AASB 10 and AASB 128 and Editorial
Corrections
AASB2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Defnition	1 January 2023	30 June 2023
of Accounting Estimates
AASB 17 Insurance Contracts and AASB 2020-5	1 January 2023	30 June 2024
Amendments to Australian Accounting Standards –
Insurance Contracts

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.

EMBELTON ANNUAL REPORT 2021

2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies which have been adopted in the preparation of these financial statements are:-

Statement of compliance

These financial statements are general purpose financial statements that have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements issued by the Australian Accounting Standards Board (AASB) and comply with other requirements of the law.

The financial statements comprise the consolidated financial statements of the Group. For the purpose of preparing the consolidated financial statements, the Group is a for profit entity.

Compliance with Australian Accounting Standards ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

The financial statements were authorised for issue by the Directors on 27 September 2021.

a. Basis of preparation

The financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

b. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Company:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

NOTES

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

c. Going Concern

The financial statements have been prepared in accordance with generally accepted accounting standards, which are based on the Company continuing as a going concern.

d. Foreign Currencies

The functional and presentation currency of Embelton Limited and its Australian subsidiaries is Australian dollars (A$).

Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange prevailing on the reporting date. Foreign exchange gains and losses resulting from settling foreign currency transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in the profit or loss.

Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from the functional currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.

e. Revenue Recognition

The Group recognises revenue from the sale of flooring and related products and services to Merchandising and Commercial customers. The majority of sales to Commercial customers are subject to contracts of supply with commercial construction companies. Revenue derived from sales to Merchandising customers is subject to purchase orders or trade showroom sales.

Sales of products

The Group sells flooring and other products. Revenue is recognised at a point-in time when the control of the goods has transferred, being when the goods have been either collected by the customer or delivered to the customer’s specific location. Following delivery, the customer has full discretion over the manner of use of the flooring and products and bears the risks of loss in relation to the products. The Group recognises a receivable when the goods are collected by or delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due.

Sales of services

The Group provides a service of installation of flooring and other products. Such services are recognised as a performance obligation satisfied over time. Revenue is recognised for these installation services based on the stage of completion of the contract. Stage of completion is determined using the output method.

f. Income Tax

The income tax expense represents the sum of the tax currently payable and the deferred tax.

Current Tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred Tax

Deferred tax is accounted for using the liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. Deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them stem from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the statement of profit or loss and other comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

EMBELTON ANNUAL REPORT 2021

Tax consolidation

Embelton Limited and its wholly-owned subsidiaries have implemented the tax consolidation legislation for the whole of the financial year. Embelton Limited is the head entity in the tax consolidated group. The separate taxpayer within a group approach has been used to allocate current income tax expense and deferred tax balances to wholly-owned subsidiaries that form part of the tax consolidated group. Embelton Limited has assumed all the current tax liabilities and the deferred tax assets arising from unused tax losses for the tax consolidated group via intercompany receivables and payables because a tax funding arrangement has been in place for the whole financial year. Refer to note 6 for further disclosure on Tax Consolidated Group.

g. Impairment of Assets excluding Goodwill

At each reporting date the Group assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in the profit or loss where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where an individual asset does not generate cash flows that are independent from other assets, recoverable amount is determined for the cash-generating unit to which the asset belongs. Refer to Note v. Goodwill below for policy relating to impairment of Goodwill.

h. Cash and Cash Equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Bank overdrafts are included within borrowings in the statement of financial position.

i. Financial Instruments

The Group classifies its financial assets in the following categories, depending on their nature (i.e. their contractual cash flow characteristics) and how they are managed.

Financial assets

These financial assets are initially recognised at fair value plus directly attributable costs.

They are classified as subsequently measured at amortised cost if they meet both of the following criteria:

The asset is held within a business model whose objective is to hold the financial asset in order to collect contractual cash flows; and
• The contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on a specified date.

Impairment of financial assets

At each reporting date, the Group performs impairments tests using a forward-looking expected credit loss (ECL) model.

The amount of impairment to be recognised as expected credit losses (ECL) at each reporting date as well as the amount of interest revenue to be recorded in future periods are determined through a three-stage impairment model based on whether there has been a significant increase in the credit risk of a financial asset since its initial recognition:

Stage 1: When the credit risk has not increased significantly since initial recognition, the Group accounts expected losses over next 12 months and recognises interest on a gross basis;
• Stage 2: When the credit risk has increased significantly since initial recognition and is not considered as low, the Group accounts
expected losses over the lifetime of the asset and recognises interest on a gross basis;
Stage 3: In case of a credit deterioration that threatens its recoverability, the Group accounts expected losses over the lifetime of the asset and present interest on a net basis (i.e. on the gross carrying amount less credit allowance).

Financial Liabilities and Equity Instruments

Classifcation as debt or equity

Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of financial liability and equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Group’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

Financial liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest method or at FVTPL.

However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, and financial guarantee contracts issued by the Group, are measured in accordance with the specific accounting policies set out below.

NOTES

Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination, (ii) held for trading, or (iii) it is designated as at FVTPL. A financial liability is classified as held for trading if:

it has been acquired principally for the purpose of repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in profit or loss.

Gains or losses on financial guarantee contracts issued by the Group that are designated by the Group as at FVTPL are recognised in profit or loss.

j. Inventories

Raw Materials, Work in Progress and Finished Goods

Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials, direct labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on the basis of normal operating capacity. Costs are assigned to inventory using either the weighted average cost or first-in-first-out basis, whichever is more appropriate. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling cost of completion and selling expenses. Work in progress comprises material and labour that have been expended on a project but due to the timing of the progress claim have not yet been claimed.

k. Property, Plant and Equipment

Buildings are measured at cost less accumulated depreciation.

All other plant and equipment is stated at cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairments.

Land is not depreciated. Depreciation on other assets is calculated on a straight-line basis over the estimated useful life of the asset as follows:

- Buildings	2%
- Plant and Machinery	10% - 17%
- Motor Vehicles	15% - 25%
- Fixtures and Fittings	10% - 33%

l. Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The entity recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments on a straight-line basis over the term of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed payments), less any lease incentives receivable.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter of the period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The Group applies AASB 136 Impairment of Assets to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the ‘Property, plant and equipment’ policy.

m. Trade and Other Payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.

EMBELTON ANNUAL REPORT 2021

n. Provisions

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

Where the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

o. Employee Benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is

probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

Defined contribution plans - Contributions to defined contribution superannuation plans are expensed when employees have rendered services entitling them to the contribution.

p. Contributed Equity

Ordinary shares are classified as equity.

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit.

q. Dividends Payable

Provision is made for dividends declared and no longer at the discretion of the Group, on or before the end of the financial year but not distributed at reporting date.

r. Earnings Per Share

Basic earnings per share - Basic earnings per share is calculated by dividing the profit attributable to members of Embelton Limited, by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share - Earnings used to calculate diluted earnings per share are the same as basic earnings per share as there are no diluting potential ordinary shares.

s. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii. or receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is not included.

t. Critical accounting judgements and key sources of estimation uncertainty

In the application of the company’s accounting policies, which are described above, the directors are required to make judgments, estimates and assumptions about carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Impact of COVID-19

COVID-19 continues to cause disruption to business and economic activity. The Board and Management have considered the impact of COVID-19 on the consolidated entity’s operations and financial performance and have ascertained that no impairment on goodwill is required (2020 - $500,000), refer note 22.

NOTES

Long service leave (see Note 16)

Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at reporting date:

future increases in salaries and wages;
future on-cost rates; and
experience of employee departures and period of service.

Property, plant and equipment (see Note 14)

Judgement is applied in determining the useful lives of property, plant and equipment. Any reassessment of useful lives and residual value in a particular year will affect depreciation and amortisation expense (either increasing or decreasing) from the date of reassessment through to the end of the reassessed useful life for both the current and future years.

Net realisable values of inventories (see Note 11)

Management judgement is applied in estimating the net realisable value of inventories. Factors considered include levels of stock turnover, age and cost.

Carrying value of goodwill and estimation of future performance (see Note 22)

The group is required to annually assess the recoverability of the carrying value of goodwill. This is performed through a value-in-use discounted cash flow model. The value in use calculation includes key assumptions and judgments in the calculation of the recoverable amounts, namely forecast future cash flows, the long term growth rate and discount rate assumptions.

u. Business Combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with AASB12 Income Taxes and AASB119 Employee Benefits respectively.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Other contingent consideration is remeasured to fair value at subsequent reporting dates with changes in fair value recognised in profit or loss.

v. Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note t. above) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

w. Government Grants

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. The benefit of Job Keeper subsidies received during the year, amounting to $913,500, have been presented as a reduction in employee benefit expenses.

EMBELTON ANNUAL REPORT 2021

3. INCOME Revenue from the sale of goods and provision of services Other Income Interest income Sundry income Gain on disposal of property, plant and equipment Total other income Total Income 4. PROFIT BEFORE TAX Proft before tax has been determined after: Expenses: Finance costs - bank debt Finance costs - lease liability Total fnance cost Depreciation of non-current assets: Buildings Plant and equipment Right of use assets Total depreciation Bad debts written of – trade debtors Short term operating lease rentals Employee benefts Payments made to Defned Contribution Plans on behalf of employees Total Employee Benefts 5. AUDITORS’ REMUNERATION Remuneration of the auditor for: Auditing or reviewing the fnancial report Review of the tax return and other services Remuneration of other auditors of subsidiaries for: Auditing or reviewing the fnancial report	2021 $ 68,116,846 418 59,711 44,650 104,779 68,221,625 180,198 29,001 209,199 119,160 436,545 427,418 983,123 - 338,207 9,696,046 852,096 10,548,142 72,405 24,724 97,129 1,950	2020 $ 72,324,139 1,004 111,182 8,700 120,886 72,445,025 312,135 30,388
		342,523
		119,395 344,042 530,343
		993,780
		15,013 228,930 8,263,060 819,688
		9,082,748
		73,815 26,051
		99,866
		1,815

The auditor of Embelton Limited is Deloitte Touche Tohmatsu. The auditors did not receive any other benefits.

NOTES

2021 2020 $ $

6. TAXATION

a) Income tax expense recognised in profit

Tax expense comprises

- current tax expense - deferred tax expense relating to the origination and reversal of temporary diferences	453,072 218,476 671,548	1,174,574 (151,667)
		1,022,907

The prima facie income tax expense on pre tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

Proft from operations Income tax expense calculated at 30% Depreciation on property, plant and equipment not deductible for tax Sundry items Under provision prior year tax Income tax expense recognised in proft	2,110,865 633,259 5,637 5,557 27,095 671,548	3,179,505
		953,852 1,052 55,204 12,799
		1,022,907

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

b) Current tax assets/(liabilities)

Current tax receivable//(payable)

Income tax attributable to: Parent entity Entities in tax consolidated group	(15,387) 122,129 106,742	(45,889) (537,714)
		(583,603)

c) Deferred tax balances

Deferred tax assets comprise: Temporary diferences Deferred tax liabilities comprise: Temporary diferences	685,280 75,384 609,896	982,062
		153,690
		828,372

EMBELTON ANNUAL REPORT 2021

6. TAXATION (CONTINUED)

d) Taxable and deductible temporary differences arise from the following:

As at 30 June 2021 Gross deferred tax assets Receivables Provisions and accrued expenses Leases Gross deferred tax liability Property, plant and equipment Customer contracts As at 30 June 2020 Gross deferred tax assets Receivables Provisions and accrued expenses Leases Gross deferred tax liability Inventories Property, plant and equipment Customer contracts	Opening balance $ 13,500 937,609 30,953 982,062 (123,661) (30,029) (153,690) 828,372 13,500 644,282 - 657,782 - 18,923 - 18,923 676,705	Acquired in Business. Combin. $ - - - - - - - - - 131,126 - 131,126 (24,283) (66,536) (40,307) (131,126) -	Charged to Proft & Loss $ - (167,761) (129,001) (296,782) 48,277 30,029 78,306 (218,476) - 162,201 30,953 193,154 24,283 (71,048) 10,278 (41,487) 151,667	Closing balance $ 13,500 769,828 (98,048)
				685,280
				(75,384) -
				(75,384)
				609,896
				13,500 937,609 30,953
				982,062
				- (123,661) (30,029)
				(153,690)
				828,372

Tax Consolidation

Relevance of tax consolidation to the consolidated entity

The Company and its wholly owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date or dates subsequent when new entities have joined the Group. The head entity within the tax-consolidated group is Embelton Limited. The members of the tax-consolidated group are identified at Note 17.

Under the tax law, the taxable profit made by a tax-consolidated group in relation to an entity leaving the group depends on a range of factors, including the tax values and/or carrying values of the assets and liabilities of the leaving entities, which vary in line with the transactions and events recognised in each entity. The taxable profit or loss ultimately made on any disposal of the investments within the tax-consolidated group will therefore depend upon when each entity leaves the tax-consolidated group and the assets and liabilities that the leaving entity holds at that time.

The consolidated entity considers the effects of entities entering or leaving the tax-consolidated group to be a change of tax status that is only recognised when those events occur. As a result, temporary differences and deferred tax liability have not been measured or recognised in relation to investments within the tax-consolidated group.

Nature of tax funding arrangements

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, Embelton Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group.

The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

NOTES

2021	2020
$	$

7. DIVIDENDS PROVIDED FOR OR PAID

Dividends paid by the Company are:

Dividends paid by the Company are:
(i) A fnal fully franked ordinary dividend of 20.0 cents (2019 – 20.0 cents) was declared for the 2020 fnancial year and was paid on 9 October 2020 (11 October 2019) (ii) An interim fully franked ordinary dividend of 20.0 cents (2020 – 20.0 cents) for the 2020/21 fnancial year was declared on 27 January 2021 (2020 – 13 February) and paid on 9 April 2021 (2020 – 10 April)	431,570 431,570 863,140	431,570 431,570
		863,140

UNRECOGNISED AMOUNTS

A fully franked ordinary dividend of 20.0 cents per share was declared by the Directors on 4 August 2021, but this has not been provided for in the financial statements as at 30 June 2021.

The total estimated dividend to be paid is $431,570.

FRANKING ACCOUNT BALANCE

Franking account balance

Franking account balance after payment of unrecognised dividends

8. ISSUED CAPITAL

2,157,857 (2020 - 2,157,857 shares) fully paid ordinary shares

7,695,025 7,510,066 1,155,970	6,913,969
	6,729,010
	1,155,970

Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion of the number of shares held.

9. EARNINGS PER SHARE

Basic and diluted earnings per share

Net Profit used in calculation

Weighted average number of ordinary shares

66.8 cents 1,439,317 2,157,857	99.7 cents
	2,156,598
	2,157,857

EMBELTON ANNUAL REPORT 2021

RADE RECEIVABLES CURRENT Trade receivables Allowance for expected credit losses Ageing of past due but not impaired: 30 – 60 days Over 60 days	2021 $ 8,900,056 (45,000) 8,855,056 141,326 310,103 451,429	2020 $ 12,648,584 (45,000)
		12,603,584
		949,137 492,105
		1,441,242

10. TRADE RECEIVABLES CURRENT

The average credit period on sales of goods and services provided is 41 days (2020 – 40.3 days). No interest is charged on the trade receivables. An allowance has been made for estimated irrecoverable amounts from the sale of goods at an amount equal to lifetime expected credit losses, determined by reference to past default experience and economic conditions. Based on past and future expected rates of default there is no reason to suggest the amount listed above will not be recovered in full.

Movement in allowance for doubtful debts

Balance at the beginning of the year Amounts provided for during the year Amounts written of during the year as uncollectable Balance at the end of the year INVENTORIES CURRENT - At lower of costs or net realisable value Raw materials Work in progress Finished goods OTHER CURRENT ASSETS Prepayments and sundry debtors (i) RETAINED PROFITS Retained profts at beginning of year Net proft attributable to members of the parent entity Dividends paid (Note 7) Retained profts at the end of the year (ii) FOREIGN CURRENCY TRANSLATION RESERVE Balance at beginning of year Exchange diferences arising on translating foreign operations Balance at the end of the year	45,000 - - 45,000 50,270 5,761,915 6,635,386 12,447,571 526,248 17,414,006 1,439,319 (863,140) 17,990,185 1,466 1,617 3,083	45,000 15,013 (15,013)
		45,000
		12,858 4,222,246 7,837,084
		12,072,188
		156,254
		16,120,548 2,156,598 (863,140)
		17,414,006
		5,808 (4,342) 1,466

11. INVENTORIES

12. OTHER CURRENT ASSETS

13. (i) RETAINED PROFITS

The reserve arises out of the translation of foreign operations functional currencies into the consolidated entity presentation currency of AUD$

NOTES

14.PROPERTY, PLANT AND EQUIPMENT LAND- At cost BUILDINGS– At cost - Accumulated depreciation TOTAL LAND AND BUILDINGS PLANT & MACHINERY– At cost - Accumulated depreciation FIXTURES AND FITTINGS– At cost - Accumulated depreciation MOTOR VEHICLES– At cost - Accumulated depreciation TOTAL – Cost - Accumulated depreciation NET BOOK VALUE MOVEMENT IN CARRYING AMOUNTS 2021 Balance at beginning of year Additions Disposals Depreciation expense Carrying amount at end of year 2020 Balance at beginning of year Additions Disposals Depreciation expense Carrying amount at end of year	2021 $ 2,834,082 5,786,423 (907,976) 4,878,447 7,712,529 1,078,891 (884,879) 194,012 3,351,899 (2,330,066) 1,021,833 559,624 (276,847) 282,777 13,610,919 (4,399,768) 9,211,151 Freehold Land Buildings Plant & Machinery Fixtures & Fittings Motor Vehicles $ $ $ $ $ 2,834,082 4,997,607 248,706 911,352 269,971 - - 2,330 401,240 101,568 - - - - - - (119,160) (57,024) (290,759) (88,762)	2020 $ 2,834,082 5,786,423 (788,816)
		4,997,607
		7,831,689
		1,076,562 (820,656)
		255,906
		2,975,608 (2,064,255)
		911,353
		582,027 (319,257)
		262,770
		13,254,702 (3,992,984)
		9,261,718
		TOTAL $ 9,261,718 505,138 - (555,705) 9,211,151 9,064,712 664,049 (3,606) (463,437) 9,261,718
	2,834,082 4,878,447 194,012 1,021,833 282,777
	2,834,082 5,117,002 150,843 886,853 75,932 - - 165,016 274,783 224,250 - - (3,313) (293) - - (119,395) (56,640) (249,990) (37,412)
	2,834,082 4,997,607 255,906 911,353 262,770

EMBELTON ANNUAL REPORT 2021

14(i) RIGHT OF USE ASSETS

2021 $ 985,483 (646,458) 339,025 406,247 (311,303) 94,944 433,969 Buildings Motor Vehicles $ $ 632,153 348,093 353,330 58,154	2021 $ 985,483 (646,458) 339,025 406,247 (311,303) 94,944 433,969 Buildings Motor Vehicles $ $ 632,153 348,093 353,330 58,154	2020 $ 632,153 (359,635) 272,518 348,093 (170,708) 177,385 449,903 TOTAL $ 980.246 411,484
985,483 406,247		1,391,730
359,635 170,708 286,823 140,595		530,343 427,418
646,458 311,303		957,761

339,025 94,944		433,969
	4,262,179 6,143,724 10,405,903	5,810,501 2,902,789
		8,713,290

15. TRADE AND OTHER PAYABLES

The average credit period on purchases of goods is 45 days. No interest is charged on trade payables. The consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

15(i) BORROWINGS

CURRENT Bank overdraft (secured) Bank Loans (secured) NON CURRENT Bank Loans (secured) Total Borrowings	- - - 1,000,000 1,000,000	22,958 5,600,000 5,622,958 - 5,622,958

Refer Note 24(iii) for details of financing arrangements.

NOTES

16. PROVISIONS

CURRENT Employee benefts NON-CURRENT Employee benefts Aggregate liability for employee entitlements	2021 $ 1,423,460 180,536 1,603,996	2020 $ 1,488,735
		313,389
		1,802,124

Aggregate liability for employee entitlements

17. SUBSIDIARIES

Details of the Group’s subsidiaries at the end of the reporting period are as follows

	Notes	Ownership	Interest
		2021	2020
		%	%
EMBELTON LIMITED
CONTROLLED ENTITIES
G. P. Embelton & Co. Pty. Ltd.	a	100	100
Windolite (Australia) Pty. Ltd.	a	100	100
Wood Flooring Wholesale Pty. Ltd. as trustee for Wood Flooring Unit Trust	a	100	100
Embelton Contracting Pty. Ltd.	a	100	100
Embelton Engineering Pty. Ltd.	a	100	100
Modern Commercial Projects Pty. Ltd.	a	100	100
Embelton Singapore Pte. Ltd.	a,b	100	100
Embelton Timber Services Pty. Ltd.	a	100	100
Embelton (Shanghai) Trading Co. Ltd.	a,b	100	100
Embelton UK Ltd.	a,b	100	100
Flooring Pty. Ltd	a	100	Nil

a. With respect to controlled entities, the only class of share issued is ordinary. All controlled entities are incorporated in Australia and operate in Australia, with the exception of Embelton Singapore Pte Ltd, Embelton (Shanghai) Trading Co. Ltd and Embelton UK Ltd. and Embelton-Grail Inc, which are incorporated in Singapore, China and United Kingdom respectively. All controlled entities are included in the tax consolidated group referred to in Notes 2d and 6, with the exception of Embelton Singapore Pte Ltd, Embelton (Shanghai) Trading Co. Ltd and Embelton UK Ltd.

b. Shares in Flooring Pty Ltd were purchased on 9 July 2020
c. During the year Embelton (Malaysia) Sdn. Bhd. was dissolved

18. KEY MANAGEMENT PERSONNEL COMPENSATION

The key management personnel of Embelton Limited during the year were:

G R Embelton Chairman J J Embelton Managing Director J R Baldwin Non-executive Director M S Crabb Non-executive Director E P Galgano Company Secretary

EMBELTON ANNUAL REPORT 2021

18. KEY MANAGEMENT PERSONNEL COMPENSATION (CONTINUED)

The aggregate compensation of key management personnel of the consolidated entity and company is as follows:

Short term employment benefts Post-employment benefts	2021 $ 766,842 53,505 820,347	2020 $ 837,161 44,238
		881,399

Details of key management personnel compensation are disclosed in the Remuneration Report that forms part of the Directors’ Report.

19. LEASE LIABILITY

CURRENT - Lease liability NON CURRENT - Lease liability Total Lease Liability	388,792 59,095 447,887	332,894

		167,616

		500,510

20. RELATED PARTIES

KEY MANAGEMENT PERSONNEL

The names of each person holding the position of Director of Embelton Limited during the financial year are - Messrs G R Embelton, J R Baldwin, J J Embelton and M S Crabb

Details of key management personnel compensation, superannuation and retirement payments are set out in the Remuneration Report that forms part of the Directors’ Report.

No Director has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving Directors’ interest existing at year end.

The interests of each key management person and their related parties in the share capital of the Company during the year are set out in the remuneration report.

Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

Loans to and from related parties

No loans have been received or provided to key management personnel.

21. SEGMENTAL INFORMATION

Identification of reportable segments

The group has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director (the chief operating decision maker) in assessing performance and in determining allocation of resources.

The operating segments are identified by management based on the geographical segmentation. Discrete financial information about each of these operating businesses is reported to the Managing Director on at least a monthly basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the services provided, as these are the sources of the Group’s major risks and have the most effect on the rates of return.

The reportable segments identified have not changed from those identified previously.

Reportable segments

Merchandising

Comprises the sale of flooring and accessory products, various vibration control devices, building materials, industrial cork, rubber products and metal fabrications.

Commercial/Contracting

Comprises the sale and installation of flooring and flooring accessory products on commercial projects.

Manufacturing

Manufacturing operations supply to both market segments.

NOTES

21. SEGMENTAL INFORMATION (CONTINUED)

Business Segments (i) 2021 Revenue Sale of Goods and Services Elimination on Consolidation Total Segment Revenue Results Segment results Unallocated expenses Total Operating Proft before income tax Income tax expense Total Operating Proft after income tax Assets Segment assets Unallocated assets Total Assets Liabilities Segment Liabilities Unallocated Liabilities Total Liabilities Other Acquisition of non-current assets Depreciation of non-current assets (ii) 2020 Revenue Sale of Goods and Services Elimination on Consolidation Total Segment Revenue Results Segment results Unallocated expenses Total Operating Proft before income tax Income tax expense Total Operating Proft after income tax Assets Segment assets Unallocated assets Total Assets Liabilities Segment Liabilities Unallocated Liabilities Total Liabilities Other Acquisition of Segment Assets Depreciation of Segment Assets	Merchandising ($’000) 24,647 - 24,647 162 11,065 1,977 170 149 28,059 - 28,059 1,384 12,290 4,021 95 156	Contracting and Commercial ($’000) 44,311 (1,094) 43,217 2,316 18,804 10,488 326 395 45,662 (1,700) 43,962 1,764 18,958 11,082 539 290	Manufacturing ($’000) 5,978 (5,725) 253 (168) 2.221 598 9 13 6,984 (6,681) 303 237 2,755 1,238 30 17	Consolidated ($’000) 74,936 (6,819)
				68,117
				2,310 (199)
				2,111 672
				1,439
				32,090 592
				32,682
				13,063 470
				13,533
				505
				557
				80,705 (8,381)
				72,324
				3,385 (205)
				3,180 1,023
				2,157
				34,003 1,945
				35,948
				16,341 1,035
				17,376
				664
				463

EMBELTON ANNUAL REPORT 2021

22. INTANGIBLES

(i) GOODWILL Cost Cost Balance at beginning of year Impairment expense for the year Balance at end of year	2021 $ 330,154 330,154 - 330,154	2020 $ 330,154
		830,154 (500,000)
		330,154

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to the Modern Commercial Flooring cash-generating unit defined as a business operation representing the lowest level within the entity at which the goodwill is monitored for internal management purposes and not a reportable segment.

Before recognition of impairment losses, the carrying amount of goodwill was;

330,154 830,154

Modern Commercial Flooring

The recoverable amount of this cash-generating unit is determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by the directors covering a five-year period, and a post tax discount rate of 13.5% per annum (2020- 13.5%).

Cash flow projections during the budget period reflect compounding annual revenue growth of 2.9% per annum and the same expected gross margins and raw materials price inflation throughout the budget period. The cash flows beyond that five-year period have been extrapolated using a steady 2.0% per annum (2020 - 1.5%) growth rate which is the projected long-term average growth rate for the construction market. The directors have considered sensitivities associated with the key assumptions disclosed above, and recognised that changes in these key assumptions could potentially result in the remaining carrying amount of goodwill being impaired.

Acquisition of Omnifloor Australia

On the 1 March 2020 the Group acquired Omnifloor Australia’s commercial flooring business out of administration.

Business combination note

Fair value of consideration Up-front cash consideration Total consideration Fair value of identifable net assets acquired Inventories Property, plant and equipment Customer contracts Deferred tax assets Total assets Employee provisions Deferred tax liabilities Total liabilities Fair value of identifcable net asset acquired Goodwill (ii) CUSTOMER CONTRACTS Balance due to Omni acquisition Less accumulated amortisation Balance at end of year Total Intangibles	- - - - - - - - - - - - 134,359 (134,359) - 330,154	329,592
		329,592
		226,828 405,495 134,359 131,126
		897,808
		437,090 131,126
		568,216
		329,592

		-
		134,359 (67,179)
		67,180

		397,334

NOTES

23. FINANCIAL INSTRUMENTS

Capital Risk Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group adopts a conservative capital management approach by financing its operating activities through cash generating operations and by controlling debt.

The Group’s overall strategy remains unchanged from 2020.

Operating cash flows are used to maintain and expand the Group’s operations as well as to manage the routine outflows of tax and dividends. The Group’s principal financial instruments comprise cash, deposits at call, receivables, other financial assets, external debt and payables.

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and market price risk (currency risk and interest rate risk).

a. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the Group comprises two types of risk: market interest rates (interest rate risk) and foreign exchange rates (currency risk). There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period.

b. Credit risk

The Group and Company’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying value of those assets as indicated in the balance sheet.

Credit risk in trade receivables is minimised by:

having 30 day payment terms,
close monitoring of all overdue balances by senior management, and
providing credit insurance for all active accounts over $5,000.

Cash balances and short term deposits are maintained with the Commonwealth Bank.

The carrying amount of financial assets in this financial report represents the Group and Company’s maximum exposure to credit risk at reporting date.

c. Categories of financial instruments

	2021	2020
	$’000	$’000
Financial Assets at amortised cost
Cash and cash equivalents	86	25
Trade receivables	8,855	12,604
Other receivables	526	156
Financial Liabilities at amortised cost
Trade and sundry payables	10,405	8,713
Borrowings	1,000	5,623
Lease liability	448	501

d. Interest rate risk

Interest rate risk is the risk that the market value of the Group’s investments will be adversely affected by fluctuations in interest rates. The Group’s and the Company’s exposure to interest rate risk and the effective return on its financial assets and liability is summarised below:

Interest Rate Sensitivity Analysis

The sensitivity analysis below has been determined based on exposure to interest rates for non-derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year end held constant throughout the reporting period.

At reporting date if interest rates had been 25 basis points higher or lower and all other variables were held constant Group net profit would vary by $6,250 (2020 - $12,567).

e. Currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group operates within Australia and imports certain inventory items from overseas in transactions dominated in foreign currency. Exchange rate exposure is managed utilising forward foreign exchange contracts. The value of the groups foreign currency denominated monetary liabilities at the reporting date are US$ 1,417,087 (2020 - US$ 1,306, 590) at the reporting date the group has foreign currency of forward contracts outstanding for this amount at an average exchange rate of $0.7474 (2020 - $0.6832).

EMBELTON ANNUAL REPORT 2021

23. FINANCIAL INSTRUMENTS (CONTINUED)

Foreign Currency Sensitivity

The Group is mainly exposed to USD and Euro currencies. The following table sets out the Group’s sensitivity to a 5% variation in the Australian dollar against the relevant foreign currencies. The analysis includes all trade payables outstanding at year end.


	2021	2020	2021	2020
	$	$	$	$
Proft would vary by	14,759	8,316	-	271

f. Fair values There is no material difference between the carrying amounts of financial instruments at amortised cost and the fair values of financial assets and liabilities.

The fair value of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

g. Liquidity risk

Liquidity risk is the risk that the Group will have insufficient liquidity to meet its obligations as they fall due. All non-related payables are non-interest bearing and standard settlement terms apply. This risk is managed by regularly monitoring liquid reserves and obligations falling due and by holding cash and deposits at call.

The Group and Company manages liquidity risk by maintaining adequate cash reserves sufficient to pay intercompany loans. This is done by continually monitoring forecast and actual cashflows and matching the maturity profiles of financial assets and liabilities classed as financial instruments.

CONSOLIDATED

CONSOLIDATED
	Weighted
	Average Interest
	Rate	Less than 1 year	1-5 Years	5+ years
	%	$’000	$’000	$’000
2021
Assets
Trade and other receivables	-	9,574	-	-
Liabilities
Trade and other payables	-	11,394	-	-
Borrowings	1.2%	-	1,000	-
Lease liability	3.1%	389	59	-
2020
Assets
Trade and other receivables	-	12,784	-	-
Liabilities
Trade and other payables	-	11,119	-	-
Borrowings	1.5%	5,623	-	-
Lease liability	3.1%	333	167	-

NOTES

24. NOTES TO THE STATEMENT OF CASH FLOWS

(i) Reconciliation of Cash

For the purposes of the Statement of Cash Flow, cash includes cash and cash equivalents on hand and at bank and short term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the balance sheet as follows:

Cash and cash equivalent Cash at Bank conciliation of Proft for the period to Net Cash provided by Operating Activities Proft for the period Depreciation and Amortisation Proft on sale of property, plant and equipment Impairment expense Other non cash items Net bad debts written of Net Cash Provided by Operating Activities before changes in Assets and Liabilities Change in Assets and Liabilities during the fnancial year: (Increase)/Decrease in assets: Trade receivables Inventory Income tax receivable Other current assets Deferred tax asset Increase/(Decrease) in liabilities: Income taxes payable Trade payables Sundry payables Provisions Deferred tax liability Net Cash provided by Operating Activities	2021 $ 8,104 78,133 86,237 1,439,317 983,123 (44,650) - - - 2,377,790 3,748,528 (375,383) (106,742) (369,994) 296,782 (583,603) (1,548,322) 3,240,935 (137,358) (70,306) 6,472,327	2020 $ 7,200 17,374
		24,574
		2,156,598 993,780 (8,700) 500,000 (100,000) 15,013
		3,556,691 (4,633,439) 561,507 29,865 241,643 (169,202) 583,603 1,126,782 555,001 564,762 17,535
		2,434,748

(ii) Reconciliation of Profit for the period to Net Cash provided by Operating Activities

(iii) FINANCING ARRANGEMENTS

The group has access to a multi option facility to cater for its Overdraft, Loans and Bank Guarantees to a maximum of $11,000,000 (2020 - $13,300,000) and an additional bank guarantee line of Nil (2020 - $2,000,000) which, after allowing for outstanding Overdraft, Bank Guarantees and Loans, left an unused facility of $4,006,916 (2020 - $5,098,549) at year end. The bank overdraft is part of our facility and is subject to annual review. The bank facilities are secured by a registered mortgage over properties situated at 147-149 Bakers Road, Coburg, Victoria together with a floating charge on receivables and inventory. Freehold land and buildings with a carrying amount of $3,339,131 (30 June 2020: $4,643,006 ) have been pledged to secure borrowings of the Group. The freehold land and buildings have been pledged as security for bank loans under a mortgage. This facility expires in May 2024 and there is no reason to believe that this facility will not be rolled over. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity. The Group was in compliance with all bank covenants at 30 June 2021.

EMBELTON ANNUAL REPORT 2021

25. PARENT ENTITY INFORMATION

The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer note 2 for a summary of the significant accounting policies relating to the group.

Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital Retained earnings Total equity Financial performance Proft for the year Other comprehensive income Total comprehensive income Contingent liabilities of the parent entity Commitments for the acquisition of property, plant and equipment by the parent entity Not longer than one year Longer than one but no later than 5 years Longer than 5 years	2021 $ 107,121 9,659,111 9,766,232 25,000 - 25,000 1,155,970 8,585,263 9,741,233 122,483 - 122,483 - - - - -	2020 $ - 11,081,039
		11,081,039
		599,147 -
		599,147
		1,155,970 9,325,922
		10,481,892
		3,168,190 -
		3,168,190
		-
		- - -
		-

26. SUBSEQUENT EVENTS

No significant events, apart from the following, have occurred since the balance date which would impact on the financial position of the Group at 30 June 2021 or the results for the period ended on that date.

In response to COVID-19, both the Federal Government and certain State Governments in which the group operated have implemented policies and measures with the aim of containing the virus. As part of this effort various restrictions have been and continue to be introduced throughout Australia.

As the situation remains fluid (due to evolving changes in government policy and evolving business and customer reactions thereto) as at the date these financial statements are authorised for issue, the directors of the Company considered that the financial effects of COVID-19 on the Group’s consolidated financial statements cannot be reasonably estimated for future financial periods.

A final fully franked ordinary dividend of 20.0 cents per share was declared by Directors on the 25 August 2021.

STATUTORY 4 INFORMATION

80 ANN STREET, BRISBANE - MECHANICAL ISOLATION

Embelton Seismic Spring Mounts and Ceiling Hangers

STATUTORY INFORMATION

DIRECTORS’ DECLARATION

The Directors declare that:

a. in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
b. In the Directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in note 2 to the financial statements;
c. in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and
d. the Directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

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G R Embelton

Chairman

27 September 2021

EMBELTON ANNUAL REPORT 2021

STATUTORY DIRECTORS’ REPORT

Your Directors present their report on the Company and its subsidiaries for the financial year ended 30 June 2021.

DIRECTORS

The names of Directors in office at any time during or since the end of the year are:

Mr G R Embelton Mr J J Embelton Mr J R Baldwin Mr M S Crabb

COMPANY SECRETARY

The following person held the position of Company Secretary at the end of the financial year:

Mr E P Galgano

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the year comprised the manufacture, distribution and installation of flooring products and services, structural noise and vibration control systems, metal fabrication, rubber and cork sheeting, and other industrial products. There has been no significant change in these activities during the year.

OPERATING RESULTS

The consolidated profit of the consolidated entity after providing for income tax and eliminating outside equity interests amounted to $1,439,317 (2020: $2,152,256).

DIVIDENDS

Dividends paid or declared for payment in respect of the fnancial year are as follows: An interim fully franked ordinary dividend of 20.0 cents per share (2020 – 20.0 cents) was paid on 9 April 2021 A fnal fully franked ordinary dividend of 20.0 cents per share (2021 – 20.0 cents) was declared by Directors on the 25 August 2021	2021 $ 431,570 431,570 863,140	2020 $ 431,570 431,570
		863,140

CHANGE IN STATE OF AFFAIRS

During the financial year, there was no significant change in the state of affairs of the consolidated entity other than those referred to in the financial statements or notes thereto.

EVENTS AFTER BALANCE DATE

ENVIRONMENTAL ISSUES

Operations of the consolidated entity are subject to regulation under environmental legislation in many aspects of its businesses. Operating entities monitor compliance with environmental regulations to maintain a safe and healthy working environment at all times.

The directors are not aware of any significant breaches or non-compliance with such regulations during the period covered by this report.

STATUTORY INFORMATION

DIRECTORS

The Directors in office at the date of this report, their shareholdings, qualifications and experience are set out below.

George Embelton, BE, FIEAust

Mr Embelton was appointed Chairman in 1984

James Embelton, BA

Appointed Non-Executive Director in April 2008

Appointed Managing Director in November 2010

Prior to joining the company as Managing Director, Mr Embelton had 15 years’ experience in financial services most recently with Macquarie Group Limited, where he was a Division Director. Earlier he spent ten years in the North American Financial Services Sector, including time as a Director for Legg Mason in Toronto, responsible for business development with Financial Institutions and Pension Funds. Prior to this Mr Embelton was Associate Vice-President for AIC Mutual Funds. He completed a Bachelor of Arts from Monash University in 1992, has completed the Canadian Securities Institute designation and completed the first level of the Chartered Financial Analyst Program in 2004.

Ross Baldwin, DipCE, FIEAust

Appointed Non-Executive Director in 2002.

Mr Baldwin consults to clients involved in all aspects of development, construction, operation and maintenance of major infrastructure projects. He also specialises in advising on projects in the Asian region, having been resident there for eleven years, during which time he occupied key positions including Director and/or Managing Director with companies which undertook significant infrastructure and mining projects.

He is a director, past Chairman and principal of Flagstaff Consulting Group and a director of Flagstaff PCM. He is also a former Managing Director of John Holland Asia, former Director of the Overseas Projects Corporation of Victoria and the Mayfair Hanoi Joint Venture.

Mr Baldwin is considered an independent director.

Martin Crabb, BA

Appointed Non-Executive Director in October 2014

Mr Crabb is currently a director of and Chief Investment Director at Shaw and Partners. Mr Crabb provides advisers and clients with research insights into global macroeconomics, asset allocation and equity strategy. Prior to Shaw and Partners, Mr Crabb was with Macquarie Group Limited where he was an Executive Director in charge of Dealer Services within the Banking and Financial Services Group. Mr Crabb spent over 20 years at Macquarie in various roles across Wealth Management and Institutional Stockbroking.

Mr Crabb is considered an independent director.

MEETINGS OF DIRECTORS

The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the financial year are:

Directors’ Meetings

	Meetings	Meetings eligible
	attended	to attend
G R Embelton	6	6
J J Embelton	6	6
J R Baldwin	6	6
M S Crabb	6	6

EMBELTON ANNUAL REPORT 2021

REMUNERATION REPORT (AUDITED)

This outlines the remuneration arrangements for directors and executives of Embelton Ltd. Remuneration of directors and key management personnel is referred to as compensation as defined in AASB 124 “Related Party Disclosures”.

Directors’ and executives’ relevant shareholdings

	Balance at	Received as	Other	Balance at	Received as	Other	Balance at
	30.06.19	Compensation	Changes	30.06.20	Compensation	Changes	30.06.21
Directors
G R Embelton	1,002,826	-	1,607	1,004,433	-	-	1,004,433
J J Embelton	31,877	-	-	31,877	-	-	31,877
J R Baldwin	6,535	-	-	6,535	-	-	6,535
M S Crabb	7,694	-	-	7,694	-	-	7,694
Executives
E P Galgano	-	-	-	-	-	-	-

Remuneration Policy

The Company has an established policy for determining the nature and amount of emoluments of Board Members and Senior Executives of the Company to align remuneration with the creation of shareholder value. The remuneration structure for the Senior Executives, including the Managing Director, seeks to emphasise payment for results. The objective of the reward scheme is both to reinforce the short and long terms goals of the Company and to provide a common interest between management and shareholders.

A review of the Group’s operations during the year is included in the Directors’ Report. The Board considers the remuneration of key management personnel to be appropriate given the results for the year.

Remuneration Committee

The Remuneration Committee comprises the Chairman and the non-executive Directors of the Company and is responsible for determining and reviewing compensation arrangements for the Directors, Managing Director and Senior Executives.

The Remuneration Committee assesses the appropriateness of the nature and amount of the remuneration of Directors and Senior Executives on an annual basis by reference to the relevant employment market conditions with the overall objective of ensuring maximum stakeholder return from the retention of a high quality board and executive team. Professional advice is taken when appropriate.

Remuneration Structure

In accordance with the ASX Corporate Governance Council Recommendations, the remuneration structure for the non-executive Directors are separate and distinct from that for Senior Executives.

STATUTORY INFORMATION

Executive Directors and Senior Executives

The Company aims to reward executives with a remuneration package commensurate with their position and responsibilities with the Company and so as to:

Reward executives for achievement of pre-determined key performance indicators;
Link reward with the strategic goals and performance of the Company; and
Ensure total remuneration is competitive by market standards.

Remuneration for Senior Executives and staff is reviewed annually by the Managing Director, using a formal performance appraisal process.

The remuneration structure is in two parts:

Fixed remuneration; and
Variable remuneration.

Fixed Remuneration comprises payroll salary, superannuation and other benefits. Some individuals have also chosen to sacrifice part of their salary to increase payments towards superannuation.

Variable Remuneration is based on a short-term incentive plan which is used to differentiate rewards based on performance and is assessed each year. The principal performance indicator of the short-term incentive plan relates to the Company’s financial performance and individual achievement of specified goals, which may, for example, include accomplishment of growth initiatives.

The Remuneration Committee recommends to the Board adjustments to fixed remuneration each year based on the performance of individuals. In addition, the Committee reviews the performance and the remuneration of the Managing Director and recommends to the Board any shortterm incentive payments and adjustments to his remuneration.

Non-Executive Directors

The Board seeks to set an aggregate remuneration level which provides the Company with the ability to attract and retain Non-Executive Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined from time to time by a general meeting, to be divided between the Directors as the Directors shall determine and, in default of agreement between them, then in equal share.

The Non-Executive Directors receive a fee for being a Director of the Company but no additional fees for sitting on or chairing committees.

Non-Executive Directors are encouraged by the Board to own shares in the Company (purchased by Non-Executive Director on market). It is considered good governance for directors to have an ownership interest in the Company on whose board he or she sits.

EMBELTON ANNUAL REPORT 2021

Employment Contracts of Directors and Senior Executives

Year ended:	30 June	2017	30 June	2018	30 June	2019	30 June	2020	30 June	2021
	$		$		$		$		$
Total Revenue	44,183,337		59,353,660		58,055,771		72,445,025		68,221,625
Net proft before tax	3,306,365		4,026,390		1,832,207		3,179,505		2,110,865
Net proft after tax	2,200,690		2,802,109		1,271,504		2,156,598		1,439,317
Year ended:	30 June	2017	30 June	2018	30 June	2019	30 June	2020	30 June	2021
Share price at start of year		$8.04	$12.00		$13.98		$10.50		$10.00
Share price at end of year	$12.00		$13.98		$10.50		$10.00		$12.10
Interim Dividend¹	19.0	cents	20.0	cents	20.0	cents	20.0	cents	20.0	cents
Special Dividend¹	4.0	cents		-		-		-		-
Final Dividend¹	23.0	cents	30.0	cents	20.0	cents	20.0	cents	20.0	cents
Basic earnings per share	102	cents	130	cents	59	cents	100	cents	67	cents
Diluted earnings per share	102	cents	130	cents	59	cents	100	cents	67	cents
Total Dividends declared	46.0	cents	50.0	cents	40.0	cents	40.0	cents	40.0	cents

¹Franked to 100% at 30% corporate tax rate

Compensation of Key Management Personnel

Names and positions held of Company Directors and other key management personnel in office at any time during the financial year are:

Company Directors:

Mr G R Embelton Chairman – appointed Chairman 1984 Mr J J Embelton Director – appointed Managing Director 2010 Mr J R Baldwin Director – Non-executive – appointed Director 2002 Mr M S Crabb Director – Non-executive – appointed Director 2014

Executives:

Mr E P Galgano

Company Secretary - appointed September 2011

STATUTORY INFORMATION

Consolidated Entity and Company

Short Term Employee Benefts Salary & Directors Fees LSL Incentive Accrued for Current Period Non- monetary Beneft $ $ $ $ 25,000 - - - 25,000 - - - 50,000 - - - 22,000 - - - 22,000 - - - 44,000 - - - 90,000 1,500 - 4,990 373,354 6,223 65,000 7,892 187,400 3,123 27,360 - 650,754 10,846 92,360 12,882 67,500 1,377 - 6,407 374,045 5,638 115,000 8,165 187,400 2,960 68,669 - 628,945 9,975 183,669 14,572	Short Term Employee Benefts Salary & Directors Fees LSL Incentive Accrued for Current Period Non- monetary Beneft $ $ $ $ 25,000 - - - 25,000 - - - 50,000 - - - 22,000 - - - 22,000 - - - 44,000 - - - 90,000 1,500 - 4,990 373,354 6,223 65,000 7,892 187,400 3,123 27,360 - 650,754 10,846 92,360 12,882 67,500 1,377 - 6,407 374,045 5,638 115,000 8,165 187,400 2,960 68,669 - 628,945 9,975 183,669 14,572	Short Term Employee Benefts Salary & Directors Fees LSL Incentive Accrued for Current Period Non- monetary Beneft $ $ $ $ 25,000 - - - 25,000 - - - 50,000 - - - 22,000 - - - 22,000 - - - 44,000 - - - 90,000 1,500 - 4,990 373,354 6,223 65,000 7,892 187,400 3,123 27,360 - 650,754 10,846 92,360 12,882 67,500 1,377 - 6,407 374,045 5,638 115,000 8,165 187,400 2,960 68,669 - 628,945 9,975 183,669 14,572	Proportion of Remuneration Performance Related - -
Salary & Directors Fees $ 25,000 25,000 50,000 22,000 22,000 44,000 90,000 373,354 187,400 650,754 67,500 374,045 187,400 628,945	LSL $ - - - - - - 1,500 6,223 3,123 10,846 1,377 5,638 2,960 9,975	Incentive Accrued for Current Period $ - - - - - - - 65,000 27,360 92,360 - 115,000 68,669 183,669
			-
			- -
			-
			- 14% 11%
			11%
			- 22% 25%
			21%

For the year under review, bonuses of $65,000 and $27,360 have been provided for Mr. J J Embelton and Mr. E P Galgano respectively (2020 – $115,000 and $68,669 respectively) following the Group’s achievement of specified profit targets and the amount paid may be any amount up to a maximum amount or nil if targets are not achieved. The specified profit target was chosen as a means of aligning executive remuneration with the creation of shareholder value.

End of audited renumeration report.

INDEMNIFYING OFFICERS OR AUDITORS

During or since the end of the financial year the Company has paid premiums to insure all Directors and officers of the Company against liabilities for costs and expenses incurred by them in defending legal proceedings arising out of their conduct while acting in the capacity of officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium was $28,225 (2020 - $10,397).

The Company has not, during or since the end of the financial year, in respect of any person who is or has been the auditor of the Company or a related body corporate:

indemnified or made any relevant agreement for indemnifying against a liability incurred as an auditor, including costs and expenses in successfully defending legal proceedings; or
paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an auditor for the costs or expenses to defend legal proceedings; with the exception of the matters mentioned above.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

EMBELTON ANNUAL REPORT 2021

NON-AUDIT SERVICES

The Board of Directors is satisfied that the provision of non audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditors independence for the following reasons:

all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the relevant professional and ethical standards.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2021:

Taxation services - preparation of income tax returns Compliance and consulting services Total	$13,900 $10,824
	$24,724

STATUTORY INFORMATION

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration for the year ended 30 June 2021 has been received and can be found on page 53. Signed in accordance with a resolution of the Board of Directors.

On behalf of the Directors

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G R Embelton

Chairman

27 September 2021

EMBELTON ANNUAL REPORT 2021

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STATUTORY INFORMATION

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EMBELTON ANNUAL REPORT 2021

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STATUTORY INFORMATION

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EMBELTON ANNUAL REPORT 2021

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STATUTORY INFORMATION

ADDITIONAL STOCK EXCHANGE INFORMATION AS AT 28 AUGUST 2021

In accordance with the listing requirements of the Australian Associated Stock Exchange, the Directors state:

a. The number of holders of fully paid ordinary shares as at 31 August 2021 was 57 of which 51 held less than a marketable parcel.
b. Distribution of Shareholding

Range 1 – 1,000 shares 1,001 – 5,000 shares 5,001 – 10,000 shares 10,001 – 100,000 shares 100,001 and over		No of Holders of Ordinary Shares 82 51 6 21 4 164	No of Shares 28,261 119,553 41,452 380,737 1,587,854
			2,157,857

c. Percentage total holdings by or on behalf of the twenty largest shareholders is 88.731%.

Holder Name G R E Nominees Pty Ltd George Robert Embelton Mrs Elizabeth Margaretha Montgomery & Mrs Bridget Elizabeth Tomkins Mr Ian Peter Alexander Ms Carolyn Louise Hill Mr James John Embelton Treasure Island Hire Boat Mr Norman John Levi & Ms Jillian Michele Levi Jennifer Mary Shepherd HSBC Custody Nominees Geofrey Weston Cruse Mr Daniel Lawrence Hall Aviation Fuel Associates (Aust) Pty Ltd (The Fraser Super Fund A/C) Torquinet Pty Ltd (Sallie Super Fund A/C) Miss Bridget Elizabeth Montgomery Mrs Maxine Charlotte Stewart Ms Sallie Christina Hill Mr David Anthony Embelton Mr Robert Nicol Fraser Gotterdamerung Pty Ltd Total of Securities		Balance as at 31-08-2021 574,440 413,993 403,481 195,940 32,307 31,877 31,700 23,534 22,395 21,841 21,105 20,005 16,838 16.395 16,107 16,000 15,913 15,875 12,838 12,104 1,914,688 2,157,857		% of total 26.621% 19.185% 18.698% 9.080% 1.497% 1.477% 1.469% 1.091% 1.038% 1.012% 0.978% 0.927% 0.780% 0.760% 0.746% 0.741% 0.737% 0.736% 0.595% 0.561%

				88.731%

The following holdings are those stated in the register of substantial shareholdings GRE Nominees Pty Ltd 574,440, George R Embelton 413,993, Elizabeth Margaretha Montgomery & Bridget Elizabeth Tomkins (Elizabeth Montgomery S/F A/C) 403,481, Ian Peter Alexander 195,940.

EMBELTON ANNUAL REPORT 2021

EMBELTON GROUP PRODUCTS

Supply and installation of flooring, noise control systems, and industrial materials

Flooring and Consumer Products:

Wooden parquetry flooring
Prefinished and natural strip flooring
Timber, Bamboo, Laminate and Hybrid Flooring
Carpet
Rubber and sports flooring
Adhesives and finishes
Other flooring accessories

Industrial and Construction Products:

Structural noise and vibration isolation systems
Anti-vibration mountings - springs and rubber
Seismic restraints for resiliently mounted equipment
Recycled and natural rubber sheets
Spandex cork jointing
Other jointing media
Tube and Pipe bending
Compressed cork sheets, blocks and rolls

Melbourne

147-149 Bakers Road Coburg 3058 T: +61 (0)3 9353 4811 F: +61 (0)3 9353 4855

Trade Store

1/72 Fenton Street Huntingdale 3166 T: +61 (0)3 9545 6499 F: +61 (0)3 9545 6599

Sydney

Brisbane

50 Newton Road 5 Hurricane St Wetherill Park 2164 Banyo 4014 T: +61 (0)2 9748 3188 T: + 61 (0)7 3359 7100 F: +61 (0)2 9748 3122 F: + 61 (0)7 3350 3382

Overseas

Room 821, Level 8, Longemont Yes Tower No.399 Kaixuan Road, Changning District, Shanghai 200051

Perth

21 Pearson Way Osborne Park 6017 T: +61 (0)8 9204 1300 F: +61 (0)8 9204 1311

AI assistant

EMBELTON LIMITED — Annual Report 2021

64842_rns_2021-09-26_e382bbbf-3f3e-4503-9a22-e5a4c56cfa80.pdf

2 0 2 1 A N N U A L R E P O R T

CONTENTS

EMBELTON LIMITED

REGISTERED OFFICE

DIRECTORS

AUDITORS

SECRETARY

STOCK EXCHANGE

DIRECTORS’ REPORT TO SHAREHOLDERS

DIVIDEND

OPERATIONS

Flooring

Engineering

Our People

Outlook

The Company complies with Recommendation 1.1 of the ASX Principles and Recommendations.

Recommendation 1.2 – Director Checks

CORPORATE GOVERNANCE

Compliance with Corporate Governance Principles and Recommendations

– Principle 1 Laying Solid Foundations for Management and Oversight

Recommendation 1.1 – Role of the Board and Management

The Company complies with Recommendation 1.2 of the ASX Principles and Recommendations.

Recommendation 1.3 – Written Agreement with Each Director and Senior Executive

The Company complies with Recommendation 1.3 of the ASX Principles and Recommendations.

Recommendation 1.4 – Company Secretary

The Company complies with Recommendation 1.4 of the ASX Principles and Recommendations.

Recommendation 1.5 – Diversity

The Company does not comply with Recommendation 1.5 of the ASX Principles and Recommendations.

Recommendation 1.6 – Board Performance Assessment

Recommendation 1.7 – Performance Evaluation of Senior Executives

The Company complies with Recommendation 1.7 of the ASX Principles and Recommendations.

The Company does not comply with Recommendation 2.2 of the ASX Principles and Recommendations.

Recommendation 2.3 – Directors’ Independence

Principle 2 – Structure the Board to Add Value

Recommendation 2.1 – Nomination Committee

The Company does not comply with Recommendation 2.1 of the ASX Principles and Recommendations.

Recommendation 2.2 – Board Skills Matrix

The Company does not comply with Recommendation 2.3 of the ASX Principles and Recommendations.

Recommendation 2.4 – Majority of Directors Independent

The Company does not comply with Recommendation 2.4 of the ASX Principles and Recommendations.

Recommendation 2.5 – Independent Chairman & Chief Executive

Ofcer

The Company does not comply with Recommendation 2.5 of the ASX Principles and Recommendations.

Recommendation 2.6 – Company Induction and Professional Development of Directors

The Company complies with Recommendation 2.6 of the ASX Principles and Recommendations.

– Principle 3 Act Ethically and Responsibly

Recommendation 3.1 – Values

The Company does not comply with recommendation 3.1 of the ASX

Principles and Recommendations.

Recommendation 3.2 – Code of Conduct

The Company complies with Recommendation 4.2 of the ASX Principles and Recommendations. Recommendation 4.3 – External Auditors

The Company complies with Recommendation 4.3 of the ASX Principles and Recommendations.

– Principle 5 Make Timely and Balanced Disclosure

Recommendation 5.1 – Disclosure Policy

The Company complies with Recommendation 5.1 of the ASX Principles and Recommendations.

Recommendation 5.2 – Market Announcements

The Company complies with recommendation 5.2 of the ASX

The Company complies with Recommendation 3.2 of the ASX

Principles and Recommendation.

Recommendation 5.3 – Presentation Materials

Recommendation 3.3 – Whistleblower Policy

The Company does not comply with recommendation 3.3 of the ASX Principles and Recommendations.

The Company complies with recommendation 5.3 of the ASX Principles and Recommendation.

– Principle 6 Respecting the Rights of Shareholders

Recommendation 3.4 – Anti-bribery and Corruption Policy

Recommendation 6.1 – Information on Website

Principles and Recommendation.

– Principle 4 Safeguarding Integrity in Corporate Reporting

The Company complies with Recommendation 6.1 of the ASX Principles and Recommendations.

Recommendation 4.1 – Audit & Risk Management Committees

Recommendation 6.2 – Investor Relations Program

Recommendation 4.2 – Declarations from the CEO and CFO

The Company complies with Recommendation 6.2 of the ASX Principles and Recommendations.

Recommendation 6.3 – Participation at Meetings of Shareholders

The Company complies with Recommendation 6.3 of the ASX Principles and Recommendations.

Recommendation 6.4 – Electronic Communication

The Company complies with Recommendation 6.4 of the ASX Principles and Recommendation.

EMBELTON LIMITED Annual Report 2021