SCHOOLBLAZER LIMITED — Capital/Financing Update 2020

Oct 20, 2020

21 October 2020

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Company Announcements Office Australian Securities Exchange Authorised for immediate release

Financial Update – year ended 30 September 2020

HGL Limited (ASX: HNG) ( HGL or Company ) provides the following update for the financial year ended 30 September 2020 (FY20).

All information provided in this financial update remains subject to audit.

Consolidated Revenue from Ordinary Activities for FY20 is expected to be around $38M (FY19: $39M), with Underlying Earnings Before Interest and Tax (EBIT) anticipated to be in the range of $1.3M – $1.9M (FY19 $0.6M). Statutory Net Loss before Tax is anticipated to be between $15M - $16M (FY19: $1.5M Net Profit).

The Underlying EBIT includes the impact of COVID-19 on trading across the HGL Group, increased earnings from Mountcastle following its acquisition of LW Reid in December 2019 and the receipt of government support received through JobKeeper (totalling $1.1M). Of the four HGL Group businesses that had been receiving JobKeeper prior to 28 September 2020, only one qualified for ongoing support under JobKeeper 2.0.

The Statutory Net Loss will be impacted by a number of extraordinary items, including:

1. Further impairment of the value of the JSB Lighting business (including a write-off of the balance of goodwill), in view of updated trading results, anticipated to be $13.0M for the full year; and

2. Costs of $0.5M reflecting an agreement reached prior to year-end to surrender surplus office space in Macquarie Park. The surrender of the lease will eliminate the remaining obligation on the balance of the term of the lease, in excess of $1.2M.

As at 30 September 2020, the HGL Group had drawn facilities with the ANZ of $2.3M, with undrawn credit lines in excess of $1.0M, and following a breach of the bank covenant leverage ratio in March 2020 has subsequently returned to compliance. The Group’s facilities remain subject to an annual review process, and the current capital raise is expected to raise sufficient cash for the ongoing needs of the Group should facility limits change.

During the period the Group (excluding Mountcastle) received PAYGW Boost government support payments totalling $0.4M. The Group’s eligibility to retain these benefits are currently being discussed with the Australian Tax Office ( ATO ). In the event this issue is not resolved in HGL’s favour, these amounts will need to be repaid. Given the uncertainty, these receipts have not been recognised in the income statement.

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Overall, each of the Group’s businesses have seen a positive return in trading conditions (albeit slow in elements of the retail and construction sectors) since the end of strict lockdown conditions, with the exception of the lockdown reimposed in Victoria, as well as in New Zealand, where recovery has been slow.

Given the ongoing level of general economic uncertainty, no further guidance on the future results of the business is able to be provided at this point.

Further Information

For more information, please contact Greg Timar, HGL CEO, on 02 8667 4661.

About HGL Ltd

HGL is an investment company which invests in small to medium size businesses with a sustainable competitive advantage and strong growth prospects, providing them with specialist business management skills and equity capital to leverage these growth opportunities. Our core purpose is to create shareholder value through active long-term ownership in our portfolio businesses, driving sustainable growth through a strong focus on customers and employees.

www.hgl.com.au

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