TEMPLE & WEBSTER GROUP LTD — Interim / Quarterly Report 2020

Feb 17, 2020

Temple & Webster Group Ltd Appendix 4D Half-year report

1. Company details

Name of entity: Temple & Webster Group Ltd ABN: 69 608 595 660 Reporting period: For the half-year ended 31 December 2019 Previous period: For the half-year ended 31 December 2018

2. Results for announcement to the market

				$'000
Revenues from ordinary activities	up	50.2%	to	74,131
Profit from ordinary activities after tax attributable to the owners of Temple & Webster Group Ltd	down	3.2%	to	2,926
Profit for the half-year attributable to the owners of Temple & Webster Group Ltd	down	3.2%	to	2,926

Dividends

There were no dividends paid, recommended or declared during the current financial period.

Comments

Net profit after tax results in both 2018 and 2019 were impacted by the recognition of deferred tax assets, the Group recommends using net profit before tax for like for like comparisons (2019 was $2,046,000 vs $792,000 in 2018).

3. Net tangible assets

	Reporting period	Previous period
	Cents	Cents
Net tangible assets per ordinary security(1)	8.40	5.68

The net tangible assets per ordinary share amount is calculated based on 113,422,884 ordinary shares on issue as at 31 December 2019 (112,511,540 as at 31 December 2018).

4. Control gained or lost over entities

No changes to the group structure have occurred in the current and the previous financial year.

5. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements were subject to a review by the auditors and the review report is attached as part of the Interim Report.

[(1)] Consistent with the Australian Security & Investment Commission interpretation, the Right-of-use asset (AASB 16) and Right of return assets (AASB 15) are intangible assets, and therefore have been excluded from Net tangible assets. Comparative period has also been amended accordingly to exclude the Right of return assets (AASB 15).

Temple & Webster Group Ltd Appendix 4D Half-year report

6. Attachments

Details of attachments (if any):

The Interim Report of Temple & Webster Group Ltd for the half-year ended 31 December 2019 is attached.

7. Signed

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Stephen Heath

Chairperson 18 February 2020 Sydney

Temple & Webster Group Ltd

ABN 69 608 595 660

Interim Report – Half-Year Ended 31 December 2019

Temple & Webster Group Ltd Contents 31 December 2019

Contents

Directors' report	2
Auditor's independence declaration	3
Statement of profit or loss and other comprehensive income	4
Statement of financial position	5
Statement of changes in equity	6
Statement of cash flows	7
Notes to the financial statements	8
Directors' declaration	16
Independent auditor's review report to the members of Temple & Webster Group Ltd	17

1

Temple & Webster Group Ltd Directors' report 31 December 2019

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Temple & Webster Group Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the half-year ended 31 December 2019.

Directors

The following persons were directors of Temple & Webster Group Ltd during the half-year and until the date of this report, unless otherwise stated:

Stephen Heath Susan Thomas Conrad Yiu Mark Coulter (appointed 23[rd] October 2019)

Financial and operational review

Revenue for the half-year was $74,131,000 (2018: $49,360,000) representing an increase of 50.2% on the previous corresponding half-year. Growth was driven by a combination of active customer growth and revenue per active customer.

Gross margin increased in the half-year to $32,848,000 (2018: $22,003,000) predominately driven by the growth in revenue.

Consolidated net profit before tax for the half-year was $2,046,000 (2018: $792,000), up 158% on the previous corresponding half-year. This was largely driven by operating leverage as a result of high revenue growth and fixed costs growing at a slower rate than revenue.

Consolidated net profit after tax for the half-year was $2,926,000 (2018: $3,023,000), NPAT results in both 2018 and 2019 were impacted by the recognition of deferred tax assets, the company recommends using NPBT for like for like comparisons.

Further commentary on the Group’s financial results can be found in the Group’s half-year results presentation lodged with the ASX on the 18[th] February.

Rounding of amounts

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

On behalf of the directors.

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Stephen Heath

Chairperson

18 February 2020 Sydney

2

200 George Street Tel: +61 2 9248 5555 Sydney NSW 2000 Australia Fax: +61 2 9248 5959 GPO Box 2646 Sydney NSW 2001 ey.com/au

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Auditor’s Independence Declaration to the Directors of Temple & Webster Group Ltd

As lead auditor for the review of the half-year financial report of Temple & Webster Group Ltd for the half-year ended 31 December 2019, I declare to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review ; and

• b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Temple & Webster Group Ltd and the entities it controlled during the financial period.

Ernst & Young

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Graham Leonard Partner 18 February 2020

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

3

Temple & Webster Group Ltd Statement of profit or loss and other comprehensive income For the half-year ended 31 December 2019

Note Revenue Revenue from contracts with customers 4 Cost of goods sold Gross margin Net foreign exchange (loss) / gain Interest income Expenses Distribution Marketing Employee benefits Merchant fees Depreciation and amortisation Finance costs Other Profit before income tax expense Income tax benefit 5 Profit after income tax expense for the half-year attributable to the owners of Temple & Webster Group Ltd Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of Temple & Webster Group Ltd Basic earnings per share Diluted earnings per share	31/12/2019 $'000 74,131 (41,283) 32,848 (32) 111 (10,795) (8,261) (8,142) (1,149) (308) (19) (2,207) 2,046 880 2,926 - - 2,926 Cents 2.59 2.41	Consolidated 31/12/2018 $'000 49,360 (27,357)
		22,003 43 57 (6,940) (5,376) (6,586) (760) (127) -) (1,522)
		792 2,231
		3,023
		-
		-
		3,023
		Cents 2.72 2.59

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

4

Temple & Webster Group Ltd Statement of financial position For the half-year ended 31 December 2019

Note Assets Current assets Cash and cash equivalents 6 Trade and other receivables Inventories 7 Other 8 Total current assets Non-current assets Right-of-use assets Property, plant and equipment Intangibles 9 Other Deferred tax asset Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 10 Employee benefits Provisions 11 Lease liabilities Other Deferred revenue Total current liabilities Non-current liabilities Employee benefits Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed capital Share-based payments reserve 12 Accumulated losses Total equity	31/12/2019 $'000 15,700 83 5,474 1,707 22,964 1,142 394 7,703 22 4,344 13,605 36,569 10,090 561 1,284 372 106 4,444 16,857 329 85 786 1,200 18,057 18,512 76,566 3,024 (61,078) 18,512	Consolidated 30/06/2019 $'000 13,539 103 3,521 1,609
		18,772
		- 471 7,596 22 3,464
		11,553
		30,325
		8,891 528 947 - 30 4,331
		14,727
		300 85 -
		385
		15,112
		15,213
		76,566 2,615 (63,968)
		15,213

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

5

Temple & Webster Group Ltd Statement of changes in equity For the half-year ended 31 December 2019

Consolidated Balance at 1 July 2018 Effect of adoption of new accounting standard Balance at 1 July 2018 (restated) Profit after income tax benefit for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Share-based payments (Note 12) Transaction cost Balance at 31 December 2018 Consolidated Balance at 1 July 2019 Effect of adoption of new accounting standard (Note 2) Balance at 1 July 2019 (restated) Profit after income tax benefit for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Share-based payments (Note 12) Transaction cost Balance at 31 December 2019	Contributed capital $'000 76,566 - 76,566 - - - - - 76,566 Contributed capital $'000 76,566 - 76,566 - - - - - 76,566	Reserves $'000 1,586 - 1,586 - - - 561 (16) 2,131 Reserves $'000 2,615 - 2,615 - - - 420 (11) 3,024	Accumulated losses $'000 (67,330) (402) (67,732) 3,023 - 3,023 - - (64,709) Accumulated losses $'000 (63,968) (36) (64,004) 2,926 - 2,926 - - (61,078)	Total equity $'000 10,822 (402) 10,420 3,023 -
				3,023 561 (16)
				13,988
				Total equity $'000 15,213 (36) 15,177 2,926 -
				2,926 420 (11)
				18,512

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

6

Temple & Webster Group Ltd Statement of cash flows For the half-year ended 31 December 2019

Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest and other finance costs paid Net cash from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Net cash (used in) investing activities Cash flows from financing activities Transaction costs of issue of shares Payment of lease liabilities Net cash (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Cash and cash equivalents at the end of the financial half-year	31/12/2019 $'000 81,757 (79,259) 111 (19) 2,590 (85) (175) (260) (11) (158) (169) 2,161 13,539 15,700	Consolidated 31/12/2018 $'000 53,864 (52,172) 57 (2)
		1,747
		(77) (25)
		(102)
		(16) (20)
		(36)
		1,609 9,933
		11,542

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

7

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 1. General information

The interim consolidated financial statements cover Temple & Webster Group Ltd (referred to as ‘Company’ or ‘parent entity’) as a Group consisting of Temple & Webster Group Ltd and the entities it controlled at the end of, or during, the half-year (collectively referred to in these financial statements as the ‘Group’). The financial statements are presented in Australian dollars, which is Temple & Webster Group Ltd's functional and presentation currency.

Temple & Webster Group Ltd is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

1A / 1-7 Unwins Bridge Road St Peters, NSW 2044

A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 18 February 2020.

Note 2. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2019 have been prepared in accordance with Australian Accounting Standard 134 ‘Interim Financial Reporting’ and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

From 1 July 2019, the group has adopted AASB 16 Leases to replace AASB 117 Leases . The Group has adopted this standard by using the modified retrospective method, and therefore the comparatives have not been adjusted.

Other accounting policies and methods of computation are consistent with those of the most recent annual financial statements.

Rounding of amounts

The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

New, revised or amending Accounting Standards and Interpretations adopted

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those following in the preparation of the Group’s annual consolidated financial statements for the year ended 30 June 2019, expect for the adoption of new standards effective for the Group as of 1 July 2019. The group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applies, for the first time, AASB 16 Leases. As required by AASB 134, the nature and effect of these changes are disclosed below.

Other amendments and interpretations apply for the first time in in the current financial year, but do not have an impact on the interim condensed consolidated financial statements of the Group.

AASB 16 Leases

AASB 16 supersedes AASB 117 ‘Leases’. The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

The Group adopted AASB 16 using the modified retrospective method of adoption, with the date of initial application of 1 July 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.

8

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 2. Significant accounting policies (continued)

The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 at the date of initial application. The group also applied the available practical expedients wherein it:

• Used the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’)

• Used a single discount rate to a portfolio of leases with reasonably similar characteristics

• Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application

Nature of the effect of adoption of AASB 16

The Group has lease contracts for buildings, machinery and a vehicle. Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest (recognised as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The standard provides specific transition requirements and practical expedients, which has been applied by the Group.

For leases previously classified as finance leases, the Group did not change the initial carrying amounts of recognised assets and liabilities at the date of initial application (i.e., the right-of-use assets and lease liabilities equal the lease assets and liabilities recognised under AASB 117). The requirements of AASB 16 was applied to these leases from 1 July 2019.

For leases previously accounted for as operating leases, the Group recognised right-of-use assets and lease liabilities, except for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate of 6.5% at the date of initial application.

The effect of adoption AASB 16 as at 1 July 2019 (increase/(decrease)) is as follows:

Right-of-use assets Property, plant and equipment Total assets Lease liabilities Trade and other payables Total current liabilities Net assets Accumulated losses Total Equity	$'000 449 (92)
	357
	473 (80)
	393
	(36)
	(36) (36)

Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been applied from the date of initial application:

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of lowvalue assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

9

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 2. Significant accounting policies (continued)

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment, consistent with the Group’s property, plant and equipment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of equipment that are considered of low value. Lease payments on short term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its leases to lease the assets for additional terms of three to four years. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). The Group has not included the renewal period as part of the lease term for leases of buildings due to uncertainty around the current capacity meeting future Group’s requirements.

Presentation and disclosure requirements

As required for the interim financial statements, the Group has recognised the relevant Right-of-use asset and Lease liabilities in relation to the leases the Group currently holds.

The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows:

Minimum lease payments under operating leases as of 30 June 2019 Effect from discounting at the incremental borrowing rate Liabilities additionally recognised based on initial application of AASB 16 Other Liabilities from finance leases as of 30 June 2019 Liabilities from leases as of 1 July 2019	$'000 413 (32)
	381 39 53
	473

10

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 3. Operating segments

Identification of reportable operating segments

The Group operates in one segment being the sale of furniture, homeware, and other lifestyle products through its online platform. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors, who are identified as the Chief Operating Decision Makers ('CODM') in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

The operating segment information is the same information as provided throughout the financial statements and therefore not duplicated.

The information reported to the CODM is on at least a monthly basis.

Note 4. Revenue from contracts with customers

Set out below is the disaggregation of the Group’s revenue from contracts with customers:

Sale of goods Purchase protection	31/12/2019 $'000 73,769 362 74,131	Consolidated 31/12/2018 $'000 49,010 350
		49,360

Note 5. Income Tax Benefit

The Group calculates the period income tax benefit using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax benefit in the interim consolidated statement of profit or loss are:

Current income tax expense Unders and overs from previous financial year Deferred income tax benefit relating to origination and reversal of temporary differences Deferred income tax benefit relating to losses utilised Deferred income tax benefit relating to the recognition of losses available for offsetting against future taxable income	31/12/2019 $'000 (919) (24) 144 919 760 880	Consolidated 31/12/2018 $'000 (283) - - 283 2,231
		2,231

11

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 6. Current assets - cash and cash equivalents

Cash at bank Cash on deposits ote 7. Current assets – inventories Stock in transit Stock on hand Less: Provision for obsolescence	31/12/2019 $'000 2,882 12,818 15,700 31/12/2019 $'000 1,573 4,239 (338) 5,474	Consolidated 30/06/2019 $'000 5,169 8,370
		13,539
		Consolidated 30/06/2019 $'000 780 2,930 (189)
		3,521

Note 7. Current assets – inventories

Inventory that was recognised as an expense in profit or loss amounted to $41,283,000 for the half-year ended 31 December 2019 ($27,357,000 for the half-year ended 31 December 2018).

Note 8. Current assets – other

Prepayments Security deposits Right of return assets	31/12/2019 $'000 1,442 120 145 1,707	Consolidated 30/06/2019 $'000 1,368 113 128
		1,609

12

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 9. Non-current assets - intangibles

Goodwill - at cost Less: Accumulated Impairment Brands - at cost Software and websites - at cost Less: Accumulated amortisation Less: Impairment Development Customer relationships - at cost Less: Accumulated amortisation	31/12/2019 $'000 22,434 (17,902) 4,532 2,781 1,984 (460) (1,474) 50 340 338 (338) - 7,703	Consolidated 30/06/2019 $'000 22,434 (17,902)
		4,532
		2,781
		1,967 (429) (1,474)
		64
		182
		338 (301)
		37
		7,596

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial half-year are set out below:

Consolidated Balance at 1 July 2018 Additions Amortisation expense Balance at 31 December 2018 Balance at 1 July 2019 Additions Amortisation expense Balance at 31 December 2019	Goodwill $'000 4,532 - - 4,532 4,532 - - 4,532	Brands $'000 2,781 - - 2,781 2,781 - - 2,781	Software and websites $'000 82 - (29) 53 64 17 (31) 50	Development $'000 - 24 - 24 182 158 - 340	Customer relationships $'000 121 - (43) 78 37 - (37) -	Total $'000 7,516 24 (72)
						7,468
						7,596 175 (68)
						7,703

13

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 10. Current liabilities - trade and other payables

		Consolidated
	31/12/2019	30/06/2019
	$'000	$'000
Trade payables	4,542	6,553
Accrued payables	4,289	728
Employee related payables	311	922
Cash-settled share-based payments	157	242
On-costs on share-based payments	31	133
Other payables	760	313
	10,090	8,891
ote 11. Current liabilities – provisions
		Consolidated
	31/12/2019	30/06/2019
	$'000	$'000
Refunds and replacements	1,260	923
Lease make good	24	24
	1,284	947

Note 11. Current liabilities – provisions

Note 12. Share-based payments

For the long-term incentive (‘LTI’) performance rights granted during the current financial year to the executive team, the valuation model inputs used to determine the fair value at the grant date, is as follows:

		Vesting	Number of	Share price	Exercise	Expected	Risk-free	Fair value
Grantee	Grant date	date	Shares	at grant date	price	volatility	interest rate	at grant date
Executive	1/07/2019	31/08/2022	114,898	$1.38	$0.00	60.00%	0.95%	$0.600
team

Nil dividend yield was used in the valuation of the share-based payments granted in the current financial half-year.

For the six months ended 31 December 2019, the Group has recognised $420,000 of share-based payment expense in the statement of profit or loss (31 December 2018: $561,000).

Issue of shares

During the current financial year, the executives have exercised performance rights to acquire 824,142 fully paid ordinary shares in the Company.

Additionally, the short-term incentive ('STI') plan for non-executive employees, established in the previous financial year, was completed and respective targets met, resulting in 42,048 shares being issued in September 2019.

Note 13. Equity - dividends

There were no dividends paid, recommended or declared during the current or previous financial half-year.

Note 14. Fair value measurement

The carrying amounts of trade and other receivables, trade and other payables and other financial assets and liabilities are assumed to approximate their fair values due to their short-term nature.

14

Temple & Webster Group Ltd Notes to the financial statements 31 December 2019

Note 15. Contingent liabilities

The Group had no contingent liabilities at 31 December 2019 and 30 June 2019.

Note 16. Related party transactions

The Group had not entered into any related party transactions and paid for any services to the related parties other than compensation to key management personnel under their employment contracts, during the current or previous financial half-year.

Note 17. Events after the reporting period

No matter or circumstance has arisen since 31 December 2019 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

15

Temple & Webster Group Ltd Directors' declaration 31 December 2019

In the directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 December 2019 and of its performance for the financial half-year ended on that date; and

• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the directors

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Stephen Heath

Chairperson 18 February 2020 Sydney

16

200 George Street Tel: +61 2 9248 5555 Sydney NSW 2000 Australia Fax: +61 2 9248 5959 GPO Box 2646 Sydney NSW 2001 ey.com/au

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Independent Auditor's Review Report to the Members of Temple & Webster Group Ltd

Report on the Half-Year Financial Report

Conclusion

We have reviewed the accompanying half-year financial report of Temple & Webster Group Ltd (the Company) and its subsidiaries (collectively the Group), which comprises the statement of financial position as at 31 December 2019, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the consolidated financial position of the Group as at 31 December 2019 and of its consolidated financial performance for the half-year ended on that date; and

• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Directors’ Responsibility for the Half-Year Financial Report

The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s consolidated financial position as at 31 December 2019 and its consolidated financial performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Ernst & Young

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Graham Leonard Partner Sydney 18 February 2020

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

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