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UNIVERSITY CO-OPERATIVE BOOKSHOP LIMITED

ARBN 009 937 160 FINANCIAL REPORT

FOR FINANCIAL YEAR ENDED 30 JUNE 2018

INDEX

Directors’ Report 1-5 Independent Auditor’s Report 6-7 Directors’ Declaration 8 Consolidated Statement of Profit or Loss and Other Comprehensive Income

9

Consolidated Statement of Financial Position

10 Consolidated Statement of Changes in Equity

11 Consolidated Statement of Cash Flows 12 Notes to the Consolidated Financial Statements

13-31

DIRECTORS’ REPORT

1

Directors’ Report The directors of the University Co-operative Bookshop Limited submit herewith the annual report of the consolidated entity, being University Co-operative Bookshop Limited (‘Co-operative’) and its controlled entity (‘the Group’) for the financial year ended 30 June 2018. In order to comply with the provisions of the Co-operatives (Adoption of National Law) Act 2012 (NSW), the directors report the following. The names and particulars of the directors of the Co-operative during or since the end of the financial year are: Name

Particulars Mr Joseph Merhi – Chair

MBA (AGSM), BE (Civil) (UNSW), ADip.(Risk Management). Business executive and entrepreneur; Over 25 years’ experience in - Business; Engineering; Major infrastructure projects; Finance & Banking; Security & Risk Consulting. Founder and Chief Executive Officer of Synergy Protection Agency; Previous Director, Bendigo Bank (Branch). Licensed Risk Consultant; Deputy Chair of Coop’s Audit, Risk & Corporate Governance Committee; Appointed to the Coop Board in April 2012 and Chair in February 2016.

Mr Brad Newton – Deputy Chair

MBA, Post Grad Cert (Bus Man), BA (Police Studies). Founder and Managing Director of Point Parking. Highly qualified, very experienced and with a strong history of success in a number of challenging roles and industries including Commercial Property, Logistics, Technology and Retailing. Non-Executive Director. Appointed to the Board in February 2012 and Deputy Chair February 2016.

Emeritus Professor Dianne Yerbury, AO – Independent Director

AO; LLB Hons; Grd Dip in Industrial Admin; PhD; NSW Telstra Business Woman of the Year 2002; Claes Nobel World Betterment Award 2016, HonD (UWS); HonD (Ritsumeikan); HonD (Macq); Vice-Chancellor, Macquarie University 1987-2006; President, AVCC (now Universities Australia) 2004-2005; previous Regional Chair (South Pacific), International Association of University Presidents; previous President, Chair or Board Director of several other international and national peak education bodies; past and present. Chair or Director of education-related companies, including Chair, AIM Overseas and HSCLive; Chair or Member of over 13 major government reviews in Australia and overseas; Board Director, International College of Management Sydney; Chair, Board of Directors, Cambridge International College; Honorary Lifetime Trustee (previous Board Director), CEDA; Lifetime Achievement Award, International Industrial Relations Society; Independent/ Non-Executive Director appointed to the Board in December 1999.

DIRECTORS’ REPORT

2

Ms Ekaterina Shkurko – Director

CPA, GAICD, M.Com (Acct); BA (Int. Relations). Executive Finance Manager with strategic and commercially orientated business skills. Over 10 years’ experience in Commerce and Non for profit sector, including exposure to international business roles. 2014-Current- Finance Director at Emanuel Synagogue. 2008 – 2012, Company Chief Accountant at Platinum Hearing Group. 2001-2007, Project Manager at Department of Investments and Project Support of the Krasnodar Region. Chair of the Audit, Risk & Corporate Governance Committee for the Co-operative. Appointed to the Board February, 2011.

Mr Mounir Kiwan – Director resigned July 2018

Head of Corporate Affairs at subsidiary of German multinational Robert Bosch (Australia), former General Manager at the Federation of Automotive Products Manufacturers (FAPM), Business Development Manager at global start-up Better Place, Adviser to the Office of the Attorney General (Victoria) and Parliamentary Secretary to the Premier (Victoria). Current Non-Executive Director of the Society for Automotive Engineers Australasia (SAE-A) and not-for-profit Steer North Limited. Appointed to the Board in March 2013. Resigned from the Board in July 2018

Mr Richard Reilly – Director

BA, BComm, (University of Melbourne), MBA (Melbourne Business School) Senior executive with a recognised profile in advocacy, management, corporate governance, government relations, government policy development and media relations. Formerly Chief Executive Officer, Federation of Automotive Products Manufacturers, Principal at Deloitte Touche Tohmatsu Ltd. Currently director of his own business advisory consultancy. Co-op Director, appointed to the Board in February 2016

Ms Janice Harkins – Employee Director resigned Sept 2018

Employed by the University Co-operative Bookshop at the UWA Branch since Nov 2006, Appointed to Board as Employee Director in January 2010. OH&S Representative of the Board. Resigned from the Board in September 2018.

Ms Fatma Saaoud – Independent Director appointed July 2018

BA, BComm (Fin), (Deakin University of Melbourne). Over 8 years’ experience in the financial services industry, predominantly in lending, superannuation and managed funds. Senior Manager with Landcorp Australia and the National Coordinator of The Crescent Foundation. Formerly Business Development Manager and Relationship Manager for Crescent Wealth. Appointed to the Board in July 2018.

DIRECTORS’ REPORT

3

Principal Activities The Co-operative’s principal activities in the course of the financial year were the provision of text books and other study aids to tertiary students, sale of games, toys and gadgets to feed curious minds. Review of Operations The profit before income tax for the financial year ended 30 June 2018 was $1,226,461 compared to a prior year profit of $598,712. The table below sets out the sales and members’ discount for the financial year ended 30 June 2018 as well as for the prior year ended 31 August 2017.

Financial Year 30 June 2018 31 August 2017 Sales before members’ discount 159,036,145 200,273,475 Members’ discount 2,299,782 8,087,091

Change in accounting period The Co-operative’s current account period is the year ended 30 June 2018 (10-month financial year), and its comparative accounting period is from 1 September 2016 to 31 August 2017. Therefore, the results are not directly comparable. Subsequent Events There are no subsequent events. Future Developments Disclosure of information regarding likely developments in the operations of the Co-operative in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Co-operative. Accordingly, this information has not been disclosed in this report. Dividends No dividend was declared in respect of the financial year ended 30 June 2018, and the directors do not recommend a dividend in respect of the financial year ended 30 June 2018 (31 August 2017: nil).

DIRECTORS’ REPORT

4

Indemnification of Officers’ & Auditors During the financial year, the Co-operative paid a premium in respect of a contract insuring the directors of the Co-operative (as named above), the company secretary and all executive officers of the Co-operative against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Co-operatives (Adoption of National Law) Act 2012 (NSW). The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Co-operative has not otherwise during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Co-operative or of any related body corporate against a liability incurred as such an office or auditor. Directors’ Meetings The following tables set out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or committee member). During the financial year 4 Board Meetings and 3 Audit, Risk and Corporate Governance Committee Meetings were held. Board Meetings

Director Name No of Meetings Held

No of Meetings Attended

Mr Joseph Merhi 4 4 Mr Brad Newton 4 3 Professor Dianne Yerbury 4 3 Ms Ekaterina Shkurko 4 4 Mr Mounir Kiwan (resigned July 2018) 4 3 Mr Richard Reilly 4 3 Ms Janice Harkins (resigned Sept 2018) 4 4

Audit, Risk and Corporate Governance Committee Meetings Director Name No of Meetings

Held No of Meetings

Attended Ms Ekaterina Shkurko 3 3

Mr Joseph Merhi 3 3 Mr Mounir Kiwan (resigned July 2018) 3 2

DIRECTORS’ REPORT

5

Directors’ Shareholdings The following table sets out each director’s relevant interest in the shares of the Co-operative as at the date of this report.

Director Name Fully Paid

Ordinary Shares Mr Joseph Merhi 1 Mr Brad Newton 1 Professor Dianne Yerbury 1 Ms Ekaterina Shkurko 1 Ms Fatma Saaoud 1 Mr Richard Reilly 1

Signed in accordance with a resolution of the directors made pursuant to the Co-operatives (Adoption of National Law) Act 2012 (NSW) On behalf of the Directors,

Joseph Merhi Chairman / Director Dated 20th September 2018 in Sydney, New South Wales

DIRECTORS’ DECLARATION

8

Directors’ Declaration The directors’ declare that:

a. The attached consolidated financial statements and notes thereto comply with International Financial Reporting Standards, as noted in note 1 to the financial statements;

b. The attached consolidated financial statements and notes thereto give a true and fair view of the financial position and performance of the group;

c. In the directors’ opinion, the attached consolidated financial statements and notes

thereto are in accordance with the Co-operatives (Adoption of National Law) Act 2012 (NSW), and;

d. In the directors’ opinion, there are reasonable grounds to believe that the group will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors made pursuant to Co-operatives (Adoption of National Law) Act 2012 (NSW). On behalf of the Directors,

Joseph Merhi Director / Chairman Dated 20th September 2018 in Sydney, New South Wales

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

9

Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2018

Note

30 June 2018 $

31 August 2017 $

Revenue 2(a) 155,768,527 184,805,066 Cost of sales 2(b) (115,281,915) (134,802,434) Gross profit 40,486,612 50,002,632 Other income 2(a) 1,891,216 13,873,623 Marketing expenses (1,590,069) (2,768,016) Occupancy expenses 2(b) (13,056,069) (18,680,146) Employee benefit expenses 2(b) (18,322,982) (28,457,963) Depreciation & amortisation expenses 2(b) (2,176,854) (3,060,933) Administration expenses (5,784,184) (9,979,020) Borrowing costs 2(b) (221,209) (331,465) Profit / (Loss) before income tax 1,226,461 598,712 Income tax expense 2(c) - - - Profit / (Loss) after income tax 1,226,461 598,712 Other comprehensive Income - - Total comprehensive Profit / (Loss) 1,226,461 598,712

Notes to the consolidated financial statements are included on pages 13 to 31

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

10

Consolidated Statement of Financial Position as at 30 June 2018 Current Assets

Note

30 June 2018 $

31 August 2017 $

Cash and bank balances 15(a) 3,833,215 5,413,914 Trade & other receivables 4 13,071,578 13,528,513 Inventories 5 24,286,415 25,102,091

Total Current Assets 41,191,208 44,044,518

Non-Current Assets Property, plant & equipment 7 13,561,003 11,514,057 Intangible assets 8 11,233,942 11,934,257

Total Non-Current Assets 24,794,945 23,448,314 Total Assets 65,986,153 67,492,832 11,514,057 Current Liabilities Trade & other payables 9 28,096,813 40,715,150 Borrowings 10,000,000 - Employment benefit provisions 10 733,499 911,513 Total Current Liabilities 38,830,312 41,626,663 Non-Current Liabilities Employment benefit provisions 10 454,375 432,539 Total Non-Current Liabilities 454,375 432,539 Total Liabilities 39,284,687 42,059,202 NET ASSETS 26,701,466 25,433,630 Equity Members’ shares 11 33,035,013 32,993,638 Accumulated losses (6,333,547) (7,560,008) TOTAL EQUITY 26,701,466 25,433,630


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

11

Consolidated Statement of Changes in Equity for the year ended 30 June 2018

Note Members’

Shares $

(Accumulated Losses) / Retained Earnings

$ Total

$ Balance at 31 August 2016 32,912,644 (8,158,720) 24,753,924 Contribution during the year 80,994 - 80,994 Loss for the year - 598,712 598,712 Balance at 31 August 2017 11 32,993,638 (7,560,008) 25,433,630 Contribution during the year 11 41,375 - 41,375 Profit for the year - 1,226,461 1,226,461 - Balance at 30 June 2018 11 33,035,013 (6,333,547) 26,701,466


CONSOLIDATED STATEMENT OF CASH FLOWS

12

Consolidated Statement of Cash Flows for the year ended 30 June 2018

Note 30 June 2018

$ 31 August 2017

$ Cash Flows from Operating Activities Receipts from customers 176,199,133 201,091,243 Payments to suppliers & employees (184,107,756) (200,508,970)

Net Cash Provided by Operating Activities 15(b) (7,908,623) 582,273 Cash Flows from Investing Activities Payment for property, plant & equipment (3,556,302) (4,662,463) Payment for intangibles - - Payment for license fee - - Interest received 64,060 104,213 Net Cash (Used in) Investing Activities (3,492,242) (4,558,250) Cash Flows from Financing Activities Net proceeds from issue of shares 41,375 80,994 (Repayment of) / Drawdown from borrowing facilities

10,000,000 -

Interest paid (221,209) (331,465) Net Cash (Used in) by Financing Activities 9,820,166 (250,471) Net (decrease)/increase in cash and cash equivalents

(1,580,699) (4,226,448)

Cash and cash equivalents at beginning of the year

5,413,914 9,640,362

Cash and cash equivalents at the year end 15(a) 3,833,215 5,413,914


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13

1. Summary of Accounting Policies

Statement of Compliance The financial report is a general purpose financial report which has been prepared in accordance with the New South Wales Co-operatives Act 1992 (as amended), and the basis of accounting specified by all Accounting Standards and Interpretations, and the disclosure requirements of the following applicable Australian Accounting Standards and Interpretations:

AASB 101: Presentation of Financial Statements

AASB 107: Statement of Cash Flows AASB 108: Accounting Policies, Changes in Accounting Estimates and

Errors AASB 1054: Australian Additional Disclosures

The financial report comprises the consolidated financial statements of the Co-operative and Co Info Pty Ltd. For the purpose of preparing the consolidated financial statements, the Co-operative is a not for-profit entity. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with A-IFRS ensures that the consolidated financial statements and the notes of the Co-operative and the group comply with International Financial Reporting Standards (‘IFRS’). The consolidated financial statements were authorised for issue by the Directors on 17th August 2018. Basis of Preparation The financial report has been prepared on the basis of historical cost. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All accounts are presented in Australian dollars, unless otherwise stated. Critical Accounting Judgments and key Sources of Estimation, Uncertainty In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. 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. Judgments made by management in the application of A-IFRS that have significant effects on the consolidated financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the consolidated financial statements.


14

1. Summary of Accounting Policies (cont’d)

Critical Accounting Judgments and key Sources of Estimation, Uncertainty (cont’d) Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

During the year the directors reconsidered the recoverability of intangible assets which have been included in the consolidated statement of financial position at 30 June 2018 with a carrying amount of $11,233,942 (31 August 2017: $11,934,257). The directors are confident that the carrying amount of the assets will be recovered in full, even if returns are reduced. The recoverability is closely monitored, and adjustments will be made in future periods if market activity indicates that such adjustments are appropriate. The Co-operative reviews the condition of its inventory and makes a provision against obsolete and slow-moving items which have been identified as no longer suitable for sale or use. Management estimates the net realisable value for inventory based on the latest sale prices and current market conditions. The Co-operative carries out an inventory review at each balance sheet date to ensure the appropriateness of the provision.

New Accounting Standards Issued / Revised and Adopted In the current year, the Co-operative has adopted all the new and revised Standards and Interpretations that are relevant to its operations and effective for the current annual reporting year. The adoption of these new accounting Standards did not have any material impact. New Accounting Standards and not yet adopted In the opinion of the directors, there were no new accounting standards or interpretations that have been issued that are expected to have a material impact on the results of the entity's operations in the current and future periods. New Accounting Period The Co-operative’s current accounting period is the year ended 30 June 2018, and its comparative accounting period is from 1 September 2016 to 31 August 2017. Therefore, the results are not directly comparable. As per decision at the Annual General Meeting, it was agreed to align The Co-operatives Financial year end with the majority of other Australian companies. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Co-operative and entities (including special purpose entities) controlled by the Co-operative (its subsidiaries). The Co-operative has power over its subsidiaries and is exposed or has right to variable returns and also has the ability to use its power to affect their returns. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.


15

1. Summary of Accounting Policies (cont’d) Basis of Consolidation (cont’d) Income and expense of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Co-operative and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Co-operative. The following significant accounting policies have been adopted in the preparation and presentation of the financial report: (a) Foreign Currency

All foreign currency transactions during the financial year have been brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date. Exchange differences are recognised in net profit or loss in the year in which they arise.

(b) Property Plant and Equipment Assets acquired are recorded at the cost of acquisition, being the purchase consideration determined as at the date of acquisition plus costs incidental to the acquisition. Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis, except for motor vehicles which are depreciated on a diminishing value basis, so as to write off the net cost or other re-valued amount of each asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period.


16


Property Plant and Equipment (cont’d) The following estimated useful lives are used in the calculation of depreciation: Plant and equipment 5 years Safes 20 years Furniture and Fittings 5 -10 years

(c) Inventories Inventories are valued at the lower of cost and net realisable value. All freight and in

store charges are directly allocated to inventory. Net realisable value is the selling price in the ordinary course of business, less the estimated selling expense.

(d) Income 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 the tax rates and tax laws that have been enacted or substantively enacted by the 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). Taxation is provided using the principle of mutuality whereby profits arising out of sales to members are not subject to taxation. Deferred income tax is accounted for using the comprehensive balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise 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 year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities are offset when the entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period 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.


17


(d) Income Tax (cont’d) Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. The Co-operative and its wholly-owned Australian resident entity Co Info Pty Ltd have formed a tax-consolidated group with effect 1st September 2009 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is University Co-operative Bookshop Limited. The members of the tax-consolidated group are identified in note 1(d). Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the Co-operative (as head entity in the tax-consolidated group).

(e) Impairment of Assets At each reporting date, the Co-operative reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Co-operative estimates the recoverable amount of the cash-generating unit to which the asset belongs. Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed.

Recoverable amount is the higher of fair value less costs to sell and value in use. In 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 for which the estimates of future cash flows have not been adjusted.


18


(e) Impairment of Assets (cont’d) An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.

(f) Employee Benefits Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. When settlement of employee benefit liabilities gives rise to the payment of employment on-costs, a liability is recognised for those on-costs as well as the employee benefit. The employee on-costs determined to arise are payroll tax, workers compensation and superannuation benefit. Provisions made in respect of annual and long service leave entitlements 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. Provisions made in respect of other employee benefits for annual leave and long service leave 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 Co-operative in respect of services provided by employees up to the reporting date. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken each year is less than the annual entitlement for sick leave.

(g) Receivables Trade receivables and other receivables are recorded at amortised cost due less any allowance for doubtful debts.


19


(h) Accounts Payable Trade payables and other accounts payable are recognised when the Co-operative becomes obliged to make future payments resulting from the purchase of goods and services.

(i) Revenue Recognition Revenue from sale of goods and disposal of other assets is recognised when the Co-operative has transferred to the buyer significant risks and rewards of ownership of the goods and assets. Revenue arising from the rendering of services are recognised when its probable that the economic benefit will flow to Co Info Pty Ltd and stage of completion at the balance sheet date is measured reliably.

(j) Financial Instruments Issued by the Co-operative Debt and equity instruments are classified as either liability or as equity in accordance with the substance of the contractual arrangement.

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

for 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 consolidated statement of cash flows 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 classified as operating cash flows.

(l) Going Concern The financial report has been prepared on the going concern basis, which assumes that The Co-operative will be able to realise its assets and discharge its liabilities in the normal course of business

(m) Provisions

Provisions are recognised when the Co-operative has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.


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(m) Provisions (cont’d) When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is probable that recovery will be received and the amount of the receivable can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

(n) Member Shares

During the 2016 financial year, the company amended its Constitution and the Membership Terms and Conditions with respect to membership fees. The $25 upfront fees received from each new Members include a $1 share recorded as a share capital contribution (note 12) and a $24 membership processing fee recorded as other income (note 2 (a)). The changes have been reflected in the financial statements from 1 September 2015.

2. Profit and Loss from Operations Profit and Loss from operations includes:

(a) 30 June

2018 $

31 August 2017

$ Sales revenue – sale of goods 159,036,145 200,273,475 Less: Discounts to members (2,299,782)

(8,087,801)

Less: Discounts to non-members (1,068,943) (7,536,109) Commission on sale of course notes 101,107 155,501 155,768,527 184,805,066

Other Income Interest income 64,060 104,213 Membership processing fee 1(n) 784,909 1,886,187 Sundry income 1,042,247 1,235,208 Bargain purchase income - 10,648,015 1,891,216 13,873,623


21

(b) Profit / (Loss) before tax for the year has

been arrived at after charging/(crediting)

2018 2017 Cost of sales 115,281,915 134,802,434 Borrowing Costs: Interest 221,209 331,465 Depreciation, Amortisation of Non-

Current Assets:

Depreciation 1,261,179 1,955,476 Amortisation 915,675 1,105,457 Operating lease rental expenses 13,056,069 18,680,146 Net foreign exchange loss 5,440 30,825 Employee Benefit Expenses 18,322,982 28,457,963

(c) Income Tax

2018 $

2017 $

The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statement as follows:

Profit/(Loss) from ordinary activities 1,226,461 598,712 Income tax benefit calculated at 30% 367,938 179,613 Permanent Differences Profit/(Loss) attributable to members 169,144 175,425 (Deductible)/non-deductible expenses (849,848) (2,906,529) Members share of superannuation expense 62,357 (179,868) Deferred tax not recognised 854,751 2,633,971 Other (6,016) 97,389

Income tax (benefit)/ expense attributable to operating profit

- -


22

(c) Income Tax (cont’d) Deductible temporary differences and unused tax losses for which no deferred tax assets have been recognised are attributable to the following:

2018

$ 2017

$ Tax losses (Revenue in nature) 8,199,003 7,948,594 Deductible temporary differences (854,751) (1,315,496) 7,344,252 6,633,098 Deferred tax liability attributable to deductible temporary differences amounting to $854,751 (2017: DTA $1,315,496) has not been recognised in the balance sheet as the Co-operative is unlikely to be in a taxable position in the near future.

3. Remuneration of Auditors

2018 $

2017 $

Audit fee 48,410 47,000 Tax and other services 5,600 5,600

54,010 52,600 827,254

The auditor of the Co-operative is countplus One Audit Pty Limited.

4. Trade & Other Receivables

2018 $

2017 $

Trade receivables 7,242,391 9,747,028 8 7,242,391 9,747,028 Sundry receivables 5,129,773 2,974,496

Prepayments and other receivables 699,414 806,989 13,071,578 13,528,513 9,747,028

Note: The terms of trade are 30 days from invoice date.


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5. Inventories

2018

$ 2017

$ Finished goods 25,199,316 26,574,467 Provision for shrinkage & obsolescence (912,901) (1,472,376)

24,286,415 25,102,091 6. Subsidiary

Detail of the Co-operative’s subsidiaries at the end of the reporting period is as follows:

Name of subsidiary Principle activities

Place of incorporation and operation

Proportion of ownership interest and voting power held by group

Co Info Pty Ltd Trading Australia 100%

7. Property, Plant & Equipment

2018

$ 2017

$ Gross Carrying Amount Opening Balance 26,470,934 17,424,493 Additions 3,405,153 9,101,046 Disposals (130,185) (54,605) Closing Balance 29,745,902 26,470,934 Accumulated Depreciation Ope Opening Balance

14,956,877 13,035,352 Disposals (33,157) (33,951) Depreciation expense 1,261,179 1,955,476 Closing Balance 16,184,899 14,956,877 Net Book Value 13,561,003 11,514,057


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8. Intangible assets

2018

$ 2017

$ Goodwill:

Carrying amount at cost

7,570,585 1,628,263 Sold during the year - (335,678) Acquired during the year - 6,278,000 Accumulated impairment (143,334) (143,334)

Closing Balance - goodwill 7,427,251 7,427,251

License fee: Carrying amount at cost

2,385,714 2,385,714

Additions - - Accumulated amortisation (1,065,721) (879,554)

Closing Balance – license fee 1,319,993 1,506,160

Other capitalised costs: Carrying amount at cost

5,481,986 5,266,687

Additions 215,360 215,299 Accumulated amortisation (3,210,648) (2,481,140)

Closing Balance – other 2,486,698 3,000,846 Closing Balance intangible assets 11,233,942 11,934,257

The recoverable amount of the consolidated entity's goodwill has been determined by a value-in-use calculation using a discounted cash flow model, based on a 2 year projection period approved by management and extrapolated for a further 3 years using a steady rate, together with a terminal value. Goodwill of $6,278,000 arose during last year as a result of the acquisition of business assets of Australian Geographic. The goodwill is allocated to the trademark licence and distribution agreements. The agreements have been modelled for impairment testing as one cash generating unit. Management have estimated growth in accordance with the business strategy and have no reason to revise this estimation based on current performance. The recoverable amount of the trademark licence and distribution agreement exceeded the carrying amount by $3,200,000. The directors have made judgements and estimates in respect of impairment testing of goodwill. Should the revenue decrease by more than 5%, goodwill may need to be impaired. Management believes that other reasonable changes in assumptions on which the recoverable amount of goodwill is based, would not cause the carrying amount to fall below its recoverable amount. The balance of goodwill relates to other business assets acquired over the past few years. Management note that the recoverable amounts exceed the carrying amounts.


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8. Intangible assets (cont’d)

It was determined by reference to the cash generating unit’s value in use that the goodwill associated with the company’s activities during the year was not impaired. (2017: not impaired).

9. Trade & other Payables

2018

$ 2017

$ Trade payables 20,833,101 31,425,539 Accrued charges 7,012,485 9,061,971 GST payable 251,227 227,640

28,096,813 40,715,150

Note: Terms of trade of creditors either are 7-30 days or are on forward charge. Forward charge payments are settled after the peak university enrolment period. This is a standard practice in the academic book industry. 10. Employee Benefit Provisions

The aggregate of employee benefit liability recognised and included in the consolidated financial statements is as follows; 2018 2017 $ $ Current 733,499 911,513 Non-current 454,375 432,539 1,187,874 1,344,052

11. Members’ Shares 19

2018 $

2017 $

Shares – issued prior to 12 months 32,993,638 32,912,644 Shares – issued within 12 months 41,375 80,994 33,035,013 32,993,638


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12. Borrowings

2018

$ 2017

$ Total Facilities

Working capital 16,000,000 16,000,000

Used at reporting date Working capital 10,000,000 -

Unused at reporting date

Working capital 6,000,000 16,000,000

The Group banking facilities are with National Australia Bank Limited (NAB). The facilities are secured by the assets of University Co-operative Bookshop Limited. The terms of the facilities are:

(i) The loan facility if utilised is payable on due date i.e. 28 February and 31 August each year and available to draw on 1 October and 1 May each year.

13. Related Party Disclosure During the year, directors purchased goods which were domestic or trivial in nature from the Co-operative on the same terms and conditions available to other Members. The following table sets out each director’s relevant interest in the shares of the Co-operative as at the date of this report.

Director Name

Fully Paid Ordinary Shares

Mr Joseph Merhi 1 Mr Brad Newton 1 Professor Dianne Yerbury 1 Ms Ekaterina Shkurko 1 Ms Fatma Saaoud 1 Mr Richard Reilly 1


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14. Key Management Personnel Remuneration The directors of University Co-operative Bookshop Ltd during the year are as stated in the Directors’ Report. The following table discloses the remuneration of the directors and specified executives being the key management personnel of the Co-operative.

30 June

2018 $

31 August 2017

$ Employees’ and directors short term benefits 1,392,487 1,655,190 For the purposes of this report all amounts paid to directors are considered to be

remuneration. Under the rules of the Co-operative, the amount paid to the employee director is at the discretion of the board and is not included in the directors’ remuneration approved by the members at the annual general meeting. In the case of one director, Ms Janice Harkins, who was an employee of the Co-operative, remuneration includes the total remuneration as an employee and a director. Ms Janice Harkins resigned as employee and director in September 2018.

15. Notes to the Consolidated Statement of Cash Flows (a) Cash & Cash Equivalents For the purposes of the consolidated statement of cash flows, cash & cash

equivalents includes cash on hand, in banks and investments in money market instruments, net of outstanding bank overdrafts and short-term payables. Cash & cash equivalents at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to the related items in the balance sheet as follows.

2018 2017 $ $ Cash & cash equivalents 3,833,215 5,413,914

(b) Reconciliation of Profit / (Loss) after Tax to Net Cash Flows from Operating

Activities 2018 2017 $ $ Net profit / (loss) after income tax 1,226,461 598,712 Depreciation expenses 1,261,179 1,955,476 Amortisation expenses 915,675 1,105,457 Amortisation licence fee 32,847 47,133 Bargain purchase - (10,648,015) Interest received (64,060) (104,213) Interest paid 221,209 331,465 3,593,311 (6,713,985)


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15. Notes to the Consolidated Statement of Cash Flows (cont’d) b) Reconciliation of Profit / (Loss) after Tax to Net Cash Flows from Operating Activities (cont’d) Changes in net assets & liabilities (Increase)/decrease in current assets: Trade & other receivables and other financial

assets

456,935 (1,504,100) Inventories 815,646 3,191,676 Increase/(decrease) in liabilities: Trade & other payables (12,618,337) 5,382,865 Employment benefit provisions (156,178) 225,817 Net Cash Provided by Operating Activities (7,908,623) 582,273

16. Segment Information The Co-operative operates predominantly in one industry and one geographical area, being the retail distribution of books, study aids, games, toys, and gadgets.

17. Financial Instruments (a) Risk management The Co-operative’s activities expose it to a variety of financial risks including market risk, credit risk, liquidity risk and interest rate risk. Financial risk management is carried out by the Audit, Risk & Corporate Governance Committee of the Board. Financial risk exposures are regularly reported by the management team and are monitored by the Chief Financial Officer and the Board. (b) Capital risk management The Co-operative’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for members and benefits for other stakeholders.

(c) Market risk Foreign exchange risk Foreign exchange risk represents the risk that the value of a financial instrument fluctuates as a result of a change in foreign exchange rates. The Co-operative has no sales denominated in foreign currency and less than 1% of purchases are from overseas suppliers denominated in US Dollars, Euro and GB Pound.


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17. Financial Instruments (cont’d)

(d) Credit risk Credit risks associated with the sale of goods represent the primary credit risk for the Co-operative as embodied in the trade receivables and other receivables balances (Note 4). The Co-operative has policies in place to mitigate this risk including performing credit checks on all new customers. In addition, the group monitors payment against terms and will stop supply when customers fall into arrears. Credit risks on cash balances are mitigated by transacting only with reputable financial institutions. (e) Interest rate risk Cash flow interest rate risk The Co-operative does have significant cash assets that derive interest revenue at a floating rate on short term deposit. Accordingly, the Co-operative’s operating cash flows are exposed to changes in market interest rates on these assets. The Co-operative does not have any fixed interest rate assets or liabilities and therefore is not exposed to fair value interest rate risk. (f) Liquidity and interest risk tables Non-derivative financial liabilities The Group is exposed to liquidity and interest risk when it encounters difficulty in meeting obligations associated with financial liabilities. Liquidity risk is managed by maintaining sufficient cash reserves and by monitoring forecast cash flows. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Interest Rate %

0-3

months 3 months to 1 year

1-5 years 2018 Trade and other payables - 28,096,813 - - Borrowings 3.58 10,000,000 - - 2017 Trade and other payables - 40,715,150 - - Borrowings 3.58 - - -


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17. Financial Instruments (cont’d)

(f) Liquidity and interest risk tables (cont’d) Non-derivative financial assets The following table details the Group’s remaining contractual maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the non-derivative financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis. The table includes both interest and principal cash flows.

Interest Rate %

0-3

months 3 months to 1 year

1-5 years 2018 Trade and other receivable - 13,071,578 - - Cash and bank balances 3.2 3,833,215 - - 2017 Trade and other receivable - 13,528,513 - - Cash and bank balances 3.2 5,413,914 - -

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

18. Commitments Operating leases relate to campus store and Australian Geographic retail stores with lease terms of between 3 to 7 years. The Co-operative does not have an option to purchase the leased assets at the expiry of the lease period.

2018 2017 Non-Cancellable Operating Leases $ $ Not longer than 1 Year 10,608,821 11,880,130 Longer than 1 year and not longer than 5 years

19,816,757 20,872,827 Longer than five years 42,388 197,265 30,464,966 32,950,222

Capital expenditure commitments 555,000 253,500

Bank Guarantees 1,833,956 2,148,388


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19. Parent company 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 to note 1 for a summary of the significant accounting policies relating to the group.

Financial position

2018

$ 2017

$ Assets Current assets 34,353,598 37,572,698 Non-current assets 24,790,662 23,413,956 Total assets 59,144,260 60,986,654 Liabilities Current liabilities 39,785,079 38,202,897 Non-current liabilities 454,375 432,539 Total liabilities 40,239,454 38,635,436 Net assets 18,904,806 22,351,218 Equity Members share 33,035,013 32,993,638 Accumulated losses (14,130,207) (10,642,420) Total equity 18,904,806 22,351,218

Financial performance Profit / (loss) for the year (3,487,787) (3,200,863) Other comprehensive income - -

Total comprehensive profit / (loss) for the year (3,487,787) (3,200,863)

20. Contingent liability There are no contingent liabilities

21. Events after reporting period There are no events after the reporting period to be disclosed.

22. Additional Company Information The University Co-operative Bookshop Limited is a registered Australian body, incorporated and operating in Australia. Registered Office & Principal Place of Business Level 1, 15 Foster Street, Surry Hills NSW 2010

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