Announcement PDF AVA Risk Group Limited and its controlled entities Appendix 4E Preliminary Final Report For the year ended 30 June 2024 Lodged with the ASX under Listing Rule 4.3A ABN 67 064 089 318 ASX Code: AVA Registered Office: 10, Hartnett Close, Mulgrave, VIC 3170, Australia www.theavagroup.com AVA Risk Group Limited Appendix 4E Preliminary Final Report ABN 67 064 089 318 Details of the reporting period and the previous corresponding period Reporting period Year Ended 30 June 2024 Previous Corresponding Period Year Ended 30 June 2023 Results for announcement to the market Consolidated Amount of change $'000 2024 30 June $'000 2023 30 June $'000 Change % movement Consolidated revenue from operations up 5% 1,544 30,145 28,601 Loss after tax attributable to shareholders up 394% (4,149) (5,203) (1,054) EBITDA* down 280% (3,955) (2,544) 1,411 * Earnings from continuing operations before interest, tax, depreciation and amortisation (unaudited). Dividends and Distributions Current reporting period Special dividend declared on 26 October 2023, paid on 15 December 2023 Record date Amount per share cents 0.0017c 6 November 2023 Previous corresponding period Amount per share cents Nil No dividends proposed Details of dividends/distribution reinvestment plan The Company does not have a dividend reinvestment plan. Net tangible assets per security Net tangible asset backing per ordinary security 2024 2023 30 June 30 June cents cents 4.94c 1 6.03c AVA Risk Group Appendix 4E Preliminary Final Report ABN 67 064 089 318 Control gained or lost over entities during the period The company did not gain or lose control over entities during the period. Details of associates and joint venture entities The Company did not have any associated entities or joint ventures during the period. Other significant information Refer to the Directors' Report for details on other significant matters and information regarding the Consolidated Entity. Commentary on significant features of operating performance Commentary on results is included in the attached Directors' Report and the accompanying Group Financial Statements. Compliance Statement Audit of accounts upon which this report is based This report is based on accounts to which have been audited (refer attached financial statements). The financial report contains an independent audit report which is unmodified. Date: Name: Position: 27 August 2024 Neville Joyce Company Secretary 2 AVA Risk Group Limited Financial Report for the year ended 30 June 2024 Corporate Information ABN 67 064 089 318 DIRECTORS David Cronin, Chairman and Non-Executive Director Mark Stevens, Non-Executive Director Mike McGeever, Non-Executive Director Malcolm Maginnis, Group Chief Executive Officer and Executive Director. COMPANY SECRETARIES Neville Joyce, Kim Larkin REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS 10 Hartnett Close, Mulgrave, Victoria 3170, Australia Telephone: +61 3 9590 3100 Facsimile: +61 3 9590 8000 INVESTOR RELATIONS Email: investor@theavagroup.com SHARE REGISTRY Boardroom Pty Limited Grosvenor Place, Level 12, 225 George Street, Sydney, NSW 2000, Australia Telephone (within Australia): 1300 737 760 Telephone (outside Australia): +61 2 9290 9600 Facsimile: +61 2 9279 0664 STOCK EXCHANGE AVA Risk Group Limited shares are quoted on the Australian Securities Exchange (ASX). ASX Code: AVA BANKERS Westpac Banking Corporation 275 Kent Street, Sydney, NSW 2000, Australia AUDITORS BDO Audit Pty Ltd, Level 18, Tower 4/ 727 Collins St. Docklands VIC 3008 WEBSITE www.theavagroup.com Information correct as at 27 August 2024. 5 Annual Report 2024 | AVA Group Chairman's Report DEAR FELLOW SHAREHOLDERS AND ASSOCIATES, I am pleased to report to shareholders on the significant progress that Ava Risk Group Limited (Ava Risk Group / the Company) has made during FY2024 on building its position as a global leader in sensing and risk management technology. Since Mal Maginnis joined the Company as Group CEO in January 2023 the Company has focussed on enhancing its commercial capability and technology to grow revenue by increasing market share and developing adjacent applications. In the Detect segment, we have continued to invest in the technology that supports the Company’s product offering. Aura Ai-X is a market leading fibre optic sensing solution that has enormous versatility in its application. It is rapidly becoming a solution of choice for diverse industries ranging from telecommunications, sovereign border detection and energy infrastructure protection. In the Access segment we completed product certifications for the Cobalt series locks which enabled initial stocking orders from dormakaba under its global framework agreement. Total sales order intake for Access grew by 48% on the previous year underlining the importance of the framework agreement with dormakaba. Access is well placed to continue its growth trajectory in FY2025. In the Illuminate segment we have developed a new wireless solution based on LoRa which enables the integration of up to 500 devices without the need for data cables to provide a unified control and security network. The LoRa product will be launched in the market in FY2025. The improved sophistication in our commercial capability is best demonstrated by the significant agreements that the Company progressed during FY2024. Following extensive collaboration and product trials, Ava Risk Group signed a supply agreement with Telstra Group for the supply of its technology and services to Australia’s largest telecommunication provider and owner of Australia’s largest fibre optic network. This is an exciting opportunity for the Company to deploy its technology to an existing fibre network, transforming the sensing capability of the network. Ava Risk Group also entered an agreement with UGL Limited to deploy its fibre optic sensing technology on a major Sydney transportation project. Using the Company’s market leading Aura Ai-X technology, Ava Risk Group’s obligations on this project have been substantially delivered during FY2024. Our obligations included ensuring that Aura Ai-X received Safety Integrity Level 2 certification, a safety standard specific to railway control and protection applications. This is a globally recognised certification that ensures Aura Ai-X can be deployed to further railway protection opportunities. Reflecting the strength of the opportunities before us, the Company undertook a successful equity raise during H2 FY2024. Ava Risk Group raised $4.3 million from an institutional placement of $3.0 million in March 2024 and $1.3 million from an oversubscribed Share Purchase Plan in May 2024. Funds raised have been used to support major contract delivery and ongoing technology development. 6 Annual Report 2024 | AVA Group Chairman's Report (cont'd) Total sales order intake for the Company was $35.3 million, an increase of 14% on the previous year. This has resulted in revenue and other income of $30.2 million for FY2024, an increase of 6% on the previous year. The difference between sales order intake and revenue is reflected in growth in the sales order backlog to $8.5 million, including $2.0 million in contracted ARR. Growing ARR remains a key element of Aura Ai-X market offering. Pleasingly the Company recorded positive underlying EBITDA during H2 FY2024 as revenue increased and the cost base stabilised. The investments made in our commercial capability and technology impacted underlying EBITDA in FY2024. However, these investments have positioned the Company well for future growth. We remain committed and focused on the strategy to grow revenue and profits and have a clear path to continued growth over the next 24 months underpinned by: • Growth in sales order intake. • Strong sales order backlog. • Increasing recurring revenue. • High gross margins of 60 – 65%. • Scalable cost base generating positive EBITDA. Finally, I would like to thank you, our shareholders and associates, for your continued support and engagement with the Ava Group as we build a world class technology business. On behalf of my fellow Directors, I also thank the management team for their hard work, dedication, and achievements throughout FY2024. David Cronin Chairman 7 Annual Report 2024 | AVA Group Chief Executive Officer's Report Review of Operations I am pleased to report on the continued progress that Ava Risk Group has made towards becoming a world leader in the provision of sensing and risk management technologies. Since joining Ava Risk Group in January 2023 my focus has been in three key areas: • Grow our commercial capability to improve the sophistication of our sales and business development offering and target premium partners for delivery of our products and services. • Grow revenue and market share to better leverage our cost base and improve earnings while creating a sales order backlog to improve predictability of forecast revenue. • Ensuring our technology is market leading and provides a competitive advantage. This has resulted in an increase in our backlog and the volume and quality of our pipeline. These two factors are the key to sustaining the achievements of this year and building on this foundation for a strong FY25. During H1 FY2024 I completed the restructuring of our customer facing sales and technical support capability. We have invested heavily to ‘upskill’ these teams, reflecting the complex challenges of larger program sales which is fundamental to growing the revenue base of the business. We have seen the benefit of this investment through growth in sales order intake and backlog while establishing contracts with significant partners such as Telstra, UGL Limited, Siemens, Santos, Exxon and dormakaba. Highlights during FY2024 include: • Sales order intake grew by 14% to $35.3 million with growth recorded in each operating segment. • At 30 June 2024 we carried a sales order backlog of $8.5 million which represents orders received that are yet to be fulfilled. Of the backlog, $4.9 million relates to equipment for project delivery which is anticipated to be fulfilled primarily in H1 FY2025. The balance of the backlog relates to commissioning services and multi-year support contracts including contracted ARR of $2.0 million. • In February 2024 we signed a supply agreement with Telstra for the provision of all our goods and services. This agreement represents a significant milestone in adapting our fibre optic technology to other applications such as telecommunications. By partnering with Telstra we are able to use our fibre optic technology to transform their existing fibre network into sensors. This will also open major new markets globally and demonstrates that our technology can be applied to solutions beyond security detection. • Partnering with UGL Limited to provide intrusion detection systems to a major transport infrastructure project in New South Wales. This contract is significant as it is the first major transport project that the Company has been awarded in Australia for transport infrastructure. It follows our successful completion of a metro program in Chile in 2023. As part of this project, Aura Ai-X achieved Safety Integration Level 2, a globally recognised safety certification within the rail sector. We are now well placed to pursue further rail related opportunities both in Australia and internationally. • Deepened our relationship with dormakaba for our Access products including the first sales orders for the distribution of our Cobalt series locks in North America. This important distribution channel is the culmination of product development and certification since signing a global framework agreement with dormakaba in December 2021. It remains a key driver of future growth within the Access segment. • Focus on sales growth in key geographies and industry verticals. During FY2024 we received our first sales orders for Aura Ai-X perimeter detection systems with U.S. correctional facilities and received further orders in the North American energy sector. Both of these sectors remain important catalysts for growth in the North American segment. 8 Annual Report 2024 | AVA Group Chief Executive Officer's Report (cont'd) We also continued to invest heavily in our technology across all three operating segments during FY2024. Aura Ai-X is a market leading fibre optic sensing product that has achieved significant customer uptake since its launch in March 2023. It is at the forefront of transforming the deployment of our technology from its security-based heritage to fibre sensing applications which generate sensing data for end users. Its versatility is demonstrated by the wide range of applications to which it has been deployed during FY2024 – sovereign border protection in Europe, energy infrastructure in the U.S., telecommunications in Australia. We have grown our contracted recurring revenue base to $2.0 million as a subscription model has become an integral element of the Aura Ai-X product. In addition we launched a second product within the Aura Ai-X family to cater for shorter range applications and integrate with our successful Illuminate range of sensors. In Access, the product development and certification of the Cobalt series locks was finalised in FY2024. This enabled us to fulfill initial stocking orders with dormakaba under a global framework agreement and was a key driver of the impressive sales order growth of 48% that was recorded in FY2024. We will continue to invest in both locks and reader development in the Access business and believe that this segment can sustain its growth rate. Development of the LoRa wireless connection solution was completed during FY2024 in the Illuminate segment. LoRa is a system that can connect up to 500 devices without the need for data cables. It incorporates devices into a unified network alongside other control, automation and security systems and offers configuration capabilities that enable intelligent responses to events. It will be launched in the market during H1 FY2025. Financial Review A$m Revenue and other income Underlying EBITDA* Loss after tax FY2023 H1 FY2024 14.2 28.6 1.3 (0.9) (1.1) (2.3) H2 FY 16.0 0.1 (2.9) FY2024 30.2 (0.9) (5.2) Change 1.6 (2.1) (4.1) * Underlying EBITDA is loss after tax adjusted for depreciation and amortisation, impairment of goodwill, finance expense and foreign exchange movements per Consolidated Statement of Comprehensive Income. Revenue and Other Income of $30.2 million was $1.6 million higher than the previous year (FY2023: $28.6 million). Revenue grew in the second half compared to the first half (up by 13%) driven by improved performance in the Detect segment. Over the full year revenue growth was achieved in both Access (38%) and Illuminate (5%). Despite growth in sales order intake for Detect, revenue was slightly lower in FY2024 reflecting a subdued first half and a number of open sales orders remaining in the sales order backlog pending fulfillment in FY2025. EBITDA loss prior to the impairment of goodwill of $0.9 million is lower than for the prior year impacted by the significant investment in both commercial and technology capability. Underlying EBITDA was positive during the second half year driven by increased revenue and a stabilised cost base following completion of business restructure activity during H1 FY2024. 9 Annual Report 2024 | AVA Group Chief Executive Officer's Report (cont'd) An impairment charge of $1.5 million against goodwill in the Illuminate segment was recognised in FY2024. The charge is a result of lower than previously forecast (within our internal impairment testing model) performance during FY2024 for the segment which has resulted in a re-assessment of subsequent periods. In accordance with relevant accounting standards an adjustment to the carrying value of goodwill was recorded. Nonetheless I remain very confident in the future performance of the Illuminate segment, particularly its complimentary offering with Detect. Net loss for the period was $5.2 million (FY2023 was a net loss of $1.1 million) reflecting lower EBITDA and the impairment of goodwill. The Company had a cash balance at 30 June 2024 of $5.1 million. Outlook The Company remains well placed to accelerate revenue and earnings growth in FY2025. Given our business capability and technology investment, earnings growth will be driven by increased revenue leveraging a stable cost base. To this end, growth catalysts exist in each of the segments to drive future revenue. The focus in Detect is on increasing the market penetration of Aura Ai-X. We have successfully deployed this technology to multiple applications and will build on that to drive further sales in FY2025. We will consolidate our position in both the North American corrections and energy sectors. We will complete the UGL transportation project in early FY2025 and use that to position ourselves for future rail infrastructure projects, both in Australia and internationally. The successful deployment of our technology to sovereign border protection has led to a number of other opportunities in Europe and Asia which we expect to close in FY2025. We carry a strong global sales pipeline of ‘traditional’ infrastructure protection opportunities. Our supply agreement with Telstra provides tangible evidence of the ability to use our technology in adjacent sensor-based applications. We are actively working with Telstra to generate use-cases of how our technology can be installed on Telstra’s fibre network to transform it to sensors. This is an incredibly exciting opportunity which will propel growth in Australia and provide additional opportunities in the international telecommunications sector. Building on the strong growth in Access in FY2024, we will exploit our key distribution channels for our market leading locks. dormakaba is an important relationship to drive increased volume as it enables our products to access a global distribution network. We also continue to grow our other distribution channels particularly in Europe, U.K. and Asia Pacific. We are refreshing our reader technology and are confident that this will generate opportunities for equipment upgrades to existing customers while also attracting new customers. The Illuminate segment provides a complimentary product offering to the Detect segment. Increasingly through FY2025 I expect to see close collaboration across the Illuminate and Detect segments to provide a more holistic solution to our customer’s requirements. It remains a priority to leverage our position in North America and Asia Pacific to grow the Illuminate segment. The anticipated launch of LoRa System in early FY2025 will provide another strong growth catalyst. I look forward to updating you on our successes in FY2025. Mal Maginnis Chief Executive Officer 10 Annual Report 2024 | AVA Group Table of Contents Directors’ Report 12 Auditor’s Independence Declaration 32 Consolidated Statement of Profit or Loss and Other comprehensive Income 33 Consolidated Statement of Financial Position 34 Consolidated Statement of Cash Flows 35 Consolidated Statement of Changes in Equity 36 Notes to the Consolidated Financial Statements 37 Directors’ Declaration 76 Independent audit report 77 Shareholder Information 82 Annual Report 2024 | AVA Group Directors' Report The directors present their report together with the financial report of the Consolidated Entity (referred to hereafter as the “Group” or “Consolidated Entity”) consisting of AVA Risk Group Limited (referred to hereafter as the “Company” or “AVA Risk Group” or "AVA Group") and the entities it controlled for the financial year ended 30 June 2024 and auditor’s report thereon. Directors The names of directors in office at any time during or since the end of the year are detailed in the table below. The directors have been in office since the start of the year to the date of this report unless otherwise stated. Information on Company Directors and Company Secretary The qualifications, experience and special responsibilities of each person who has been a director of AVA Group at any time since 1 July 2023 to the date of this report is provided below with details of the company secretaries as at the year end. Name, qualifications, and independence status Experience, special responsibilities and other directorships David Cronin David has over 25 years professional experience and more than 15 years of international experience at the director/chairman board level. David is presently the Managing Director of the investment & consulting group Pierce Group Asia where he is responsible for its technology focussed corporate development and investment activities. Chairman of the Board (Appointed 31 August 2018) Non-Executive Director (Appointed 10 April 2018) Previous to his role at Pierce Group Asia, David was an investment manager for the London listed Guinness Peat Group PLC and Director of M&A for its technology focussed division. Working for several large financial and non-financial institutions, David has been involved in various advisory, executive level and board positions with several early to mid-stage technology companies. David has extensive knowledge of AVA Group and the security markets that it services. He has more than 10 years of board level experience within AVA Risk Group, having previously served as a Director and Chairman of AVA Group prior to its IPO. Mike McGeever Non-Executive Director (Appointed 8 August 2018) Mr McGeever has over 35 years’ experience in the military, facilities and securities sectors. Prior to his retirement in 2015, Mr McGeever was the Managing Director and founder of Transguard Group LLC, a UAE based security and facilities management company and one of the largest security companies in the world, employing 55,000 staff. Prior to that he held senior positions in a range of security and facilities focussed companies. Mr McGeever has a Master of Business Administration from the University of Portsmouth (England). 12 Annual Report 2024 | AVA Group Directors' Report Mark Stevens Non-Executive Director (Appointed 8 August 2018) With more than 30 years of experience in senior management roles with multi-national corporations, Mark is a seasoned executive with broad experience in sales and general management in the telecommunications and Information technology sector. Mark has held senior positions with Nortel Networks Inc., Aircom International Limited, ECI Telecom Limited, Transmode Systems AB, and more recently Infinera Corporation. He has lived and worked in Europe, the United States, Singapore and Australia. Mark holds a Master of Business Administration from the University of Melbourne, a Bachelor of Engineering degree from Monash University and is a Graduate Member of the Australian Institute of Company Directors. Mal has more than 35 years of experience in the defence, Malcolm Maginnis Group Chief Executive Officer security, safety and technology industries. Most recently, Mal served as President of Rapiscan Systems from July 2017 until September 2022 – a US-headquartered global manufacturer of (Appointed 9 January 2023) security equipment and systems. Prior to joining Rapiscan, Mal was head of Iveagh Technology a technology development company based in Singapore and part owner of SX Technologies, a Sydney-based detection company. He was also President of Smiths Detection from 2011 to 2014. Mal is based in Singapore. Joint Company Secretaries Neville Joyce Appointed 3 November 2021 Neville is a highly experienced financial and commercial executive with proven expertise across multiple sectors including energy, mining, technology and manufacturing. With extensive experience in leadership, management and strategic financial analysis, Neville has held senior finance positions at Origin and Energy Australia including roles as Chief Financial Officer and Divisional Head of Finance. Prior to joining AVA Group, Neville was Group Chief Financial Officer at Redflex Holdings Limited from 2017 to 2021. Neville is a CPA and holds a Bachelor of Business. Kim Larkin Appointed 20 January 2017 Kim is an experienced business professional with 24 years’ experience in the banking and finance industries and 7 years as a Company Secretary (in-house) of an ASX300 company. Her experience includes debt and capital raising, risk management, mergers and acquisitions, compliance and governance. Kim currently acts as Company Secretary to various ASX listed and unlisted companies in Australia and is the Head of Corporate Services for Boardroom Pty Limited’s Queensland office. 13 Annual Report 2024 | AVA Group Directors' Report Directors' Meetings The number of meetings of the board of directors and of each board committee held during the financial year and the number of meetings attended by each director are: D Cronin M Stevens M McGeever M Maginnis Board of Directors' Eligible to attend Attended 12 12 12 12 12 12 12 12 Meetings of Audit & Risk Eligible to attend Attended 4 4 4 4 4 4 - Meetings of Eligible to attend Attended 4 4 4 4 4 4 - Committee Membership As at the date of this report, the company had an Audit & Risk Committee, and a Remuneration & Nomination Committee of the Board of Directors. Members acting on the committees of the Board during the year were: Audit Committee M Stevens (Chairman) D Cronin M McGeever Remuneration and Nomination Committee M McGeever (Chairman) D Cronin M Stevens Gender Diversity Policy The Remuneration & Nomination Committee is responsible for setting the diversity policy of the The Committee has established a diversity policy for the Company, which is disclosed on the Company website. Measurable objectives for achieving gender diversity have been set with the Company assessing annually both the objectives and the entity’s progress in achieving them. The Company has set an objective to ensure that the representation of women across the business is 25%. During the year ended 30 June 2024, women represented 26% of the business. Whilst AVA Group particularly focuses on narrowing the gap in gender representation across all levels, it strives for equal development opportunities for all employees, irrespective of gender, cultural, physical capabilities, or other differences. 14 Annual Report 2024 | AVA Group Directors' Report Directors’ Interests in shares or options As at the date of this report, the interests of the directors in the shares and performance rights of AVA Group are as detailed below: D Cronin M Stevens M Mc Geever M Maginnis Number of ordinary shares Number of performance rights 33,750,706 1,721,181 6,005,000 333,333 2,102,482 Principal activities The principal activities of the Consolidated Entity during the financial year were: › the provision of security technology products for perimeter intrusion detection solutions; › the development, manufacture and supply of high quality, high security card and biometric readers, electromechanical locks and related electronic security products; and › manufacture and supply of professional external security and intruder detection equipment including ANPR cameras, lighting controllers and infrared and white-light LED Illuminators. Review of operations During FY2024 Ava Risk Group has pursued its strategy to grow revenue from its market leading technologies by increasing market share and developing new and adjacent applications. The Company has achieved a number of significant milestones on the implementation of its strategy. In the Detect segment, the Company has continued to invest in its technology and commercial capability. Aura Ai-X is a market leading fibre optic sensing solution that has enormous versatility in its application. It is rapidly becoming a solution of choice for diverse industries ranging from telecommunications, sovereign border detection and energy infrastructure protection. Product certifications for the Cobalt series locks were completed in the Access segment which enabled initial stocking orders from dormakaba under its global framework agreement. Total sales order intake for Access grew by 48% on the previous year underlining the importance of the framework agreement with dormakaba. Access is well placed to continue its growth trajectory in FY2025. A new wireless solution (“LoRa”) has been developed in the Illuminate segment which enables the integration of up to 500 devices without the need for data cables to provide a unified control and security network. The LoRa product will be launched in the market in FY2025. The improved sophistication in our commercial capability is best demonstrated by the significant agreements that the Company progressed during FY2024. Following extensive collaboration and product trials, Ava Risk Group signed a supply agreement with Telstra Group for the supply of its technology and services to Australia’s largest telecommunication provider and owner of Australia’s largest fibre optic network. This is an exciting opportunity for the Company to deploy its technology to an existing fibre network, transforming the sensing capability of the network. 15 Annual Report 2024 | AVA Group Directors' Report Ava Risk Group also entered an agreement with UGL Limited to deploy its fibre optic sensing technology on a major Sydney transportation project. Using the Company’s market leading Aura AiX technology, Ava Risk Group’s obligations on this project have been substantially delivered during FY2024. Our obligations included ensuring that Aura Ai-X received Safety Integrity Level 2 certification, a safety standard specific to railway control and protection applications. This is a globally recognised certification that ensures Aura Ai-X can be deployed to further railway protection opportunities. Reflecting the strength of the opportunities before the Company, the Company undertook a succ