GO2 People : June 2022 Quarterly Report & Appendix 4C

For personal use only

ASX ANNOUNCEMENT 29 July 2022

Appendix 4C: Operations Update & Quarterly Cashflow Report

Quarter Ended 30 June 2022

The Go2 People Ltd (ASX:GO2) ("GO2" or the "Company") is pleased to release its quarterly 4C Cashflow Report and Operations Update for Q4 FY2022 (Quarter).

Operations Update

The focus of the Quarter was to implement a program of margin increases across the Group's Apprenticeship and Recruitment lines of business, whilst reducing overheads to "right-size" the cost structure.

Given the general shortage of workers across almost all industries and high demands for training and up-skilling of both new entrants into the workforce and existing workforce participants, the Group is enjoying both high demand from existing clients and strong inbound new business enquiry across all of its service lines. This is now starting to be reflected in revenue, with the Group achieving its highest revenue month on record in June 2022, of $7 million.

Further highlights for the Quarter included the commencement of Transition to Work, Employability Skills Training and Career Transition Assistance contracts with the Department of Employment and Workplace Relations, ongoing growth of the Traffic Management division, and ongoing high levels of demand for services, especially in the Apprenticeship business.

In addition, wage inflation provides margin tailwinds in calculating the Company's percentage-based fees. A combination of higher wages, increased margins and the realised benefits of previously implemented cost reduction measures now flowing through, are all expected to have a positive impact on performance, commencing 1 July 2022.

GO2 has now largely completed significant foundation-building projects, notably in the risk management, compliance and IT functions of the business. Further incremental investments will be considered on a business case / value-add basis to align with future growth.

Covid and flu-related challenges peaked for the business in the Quarter, with 20% of the internal staff being ill in May alone, along with similar levels of absenteeism across on-hired employees, apprentices and students within the training business. Additional challenges were experienced with the Queensland floods affecting Recruitment

The GO2 People Ltd

Level 2, 182 St Georges Terrace

Perth WA 6000

ASX: GO2

ACN: 616 199 896

www.thego2people.com.au

For personal use only

revenue across all 3 months of the quarter. We expect that the peak impacts of both of these factors have now passed.

Pleasingly, following the recent appointment of a new Group CFO (refer ASX announcement 30 March 2022) and new General Manager of Recruitment, the leadership team is now settled and making profound financial and operational improvements in the business.

Cashflow Update

The Company used $1.4 million in net operating cash during Q4FY22, compared to net operating outflows of $297K for Q3FY22. The increase in cash consumed is a result of significant revenue growth experienced in the business. Consequently cash collections can lag direct expenditure outflows during these periods. Cash receipts from customers increased from $15 million to approximately $21 million, an increase of 40% over Q3FY22, and direct operating cash outflows increased, from $10 million to$18 million, which resulted in timing differences.

At 30 June 2022, the Company also experienced a delayed payment from a major client of some $882K. These circumstances are not unusual at 30 June, where entities are seeking to maximise their cash balances at their 30 June balance date. The overdue amount was received subsequent to the Quarter end, and the account now continues to be conducted within agreed terms. Had this amount been received when due the quarterly net operating cash outflow would have been reduced to$518K.

Staff and administration cash outflows combined reduced from $4.9 million in Q3FY22 to $3.4 million in Q4FY22, pursuant to the Company's ongoing commitment to continuous improvement and as consequence of its expense rationalisation strategies.

The net cash outflow from financing activities for the Quarter, in the amount of $285K,is predominantly related to the movement in the Company's ScotPac debtor

financing facility - see subsequent discussion hereunder regarding the nature andreporting of this facility.

At 30 June 2022, the Company had available cash of $2.5 million - however as previously noted had the overdue client amount been received available cash would have been $3.38 million. The Company also had $3.5 million in unused financing facilities available at quarter end, which includes both the ScotPac facility mentionedabove and further explained below, and a Multi Option Facility with Bankwest.

The Appendix 4C accompanies this announcement.

The GO2 People Ltd

Level 2, 182 St Georges Terrace

Perth WA 6000

ASX: GO2

ACN: 616 199 896

www.thego2people.com.au

For personal use only

Board Changes

During the Quarter the Company announced the resignations of Mr Tony Fitzpatrick and Mr Robert Stockdale as Non-Executive Directors of the Board. Both directors were founders of Skill Hire in 1996, who transitioned to the Board of The GO2 People Limited on 31 May 2021 as an independent Non-Executive Directors following the acquisitionof Skill Hire by GO2.

Post Quarter-end the Company announced the resignations of Mrs Sophie Ray and Mrs Susan Hansen from the Board. The Company has now moved to a more streamlined Board structure, with Independent Non-Executive Chair Darren Cooper and Independent Non-Executive Director John Manning, now joined by Shawn Murphy who has been elevated from CEO to Group Managing Director. Thesechanges will bring further operating cost savings to the Group.

Labour Hire Debtor Funding Facility - Treatment in Appendix 4C

Whilst the GO2 labour hire entities have access to a debtor finance facility provided by Scottish Pacific with an overall facility limit of $15 million, drawings under the facility are limited to an approved ratio of invoices outstanding (generally 80%) against approved and debtor-insured clients. As qualifying client invoices are issued by the Company, Scottish Pacific advances the Company the proportion of that invoice according to the pre-approved ratio for that client, and in due course as client payment is received it is first directed to repaying the particular facility advance relevant to that invoice plus interest, with the balance being received by theCompany.

The main benefit of the facility is in circumstances where particular clients have agreements allowing extended payment terms beyond end-of-month, and the Company uses the facility to fund the "cashflow gap" between payment of labour hire employees (generally weekly) and receipt of payment from the client following end-of-month. Note however that, due to the fees and interest associated with the facility, the Company uses it selectively - where client payment arrangements are shorter, the Company makes an assessment of its current working capital position and may decide not to pre-fund certain invoices under the facility, but rather to carry themin its working capital reserves and collect the full invoice amount, thereby avoiding the associated interest and fees and improving margins.

Historically, at Section 7.1 of the Appendix 4C detailing "Financing Facilities", the Company has reported the total $15m facility limit, and has described the nature of the facility in the notes at Section 7.6, including providing further detail about the amount available for draw down against approved invoices at the end of the quarter. To provide clarity regarding the nature of this facility and the drawings available underit, from this accompanying Appendix 4C and going forward, the Group will now

The GO2 People Ltd

Level 2, 182 St Georges Terrace

Perth WA 6000

ASX: GO2

ACN: 616 199 896

www.thego2people.com.au

For personal use only

instead include only the amount available for drawing against approved invoices at Section 7.1, and will detail the total facility limit in the note to Section 7.6.

If future quarters have operating cashflow deficits, the Company will calculate the Estimated Quarters of Funding Available at Section 8.5 using the amount actually available for drawing against qualifying invoices at the quarter end, rather than the overall Facility Limit. This methodology has been adopted for the current quarter.

Note that, had the overdue debtor amount been received on time, the quarters of available cash and funding would be:

		As	Pro-
		Reported	Forma*
8.1	Net Cash From /(Used In) operating activities	(1,414)	(532)
8.2	Cash and cash equivalents at quarter end	2,523	3,405
8.3	Unused finance facilities available at quarter end	3,479	3,479
8.4	Total available funding (8.2 + 8.3)	6,002	6,884
8.5	Estimated quarters of funding available (8.4 ÷ 8.1)	4	13

* assuming large debtor payment was received on time

ATO Liabilities

As announced to ASX on 17 August 2021, 24 December 2021 and 17 January 2022, the Company has lodged a number of superannuation guarantee statements with the ATO on behalf of GO2 subsidiary entities for periods from 2015 where employeesuperannuation was paid, but outside of statutory timeframes.

The total amount of the superannuation guarantee liabilities owing is $3.36 million. The Company has fully provided for the SGC liabilities and continues to negotiate with the ATO, with the assistance of specialist consultants, to access a payment plan to discharge these liabilities over time given their nature (no employees were out of pocket for superannuation, merely paid late - in many cases by only a matter of days,with the bulk of the liabilities having been self-investigatedand self-reported).

The GO2 People Ltd

Level 2, 182 St Georges Terrace

Perth WA 6000

ASX: GO2

ACN: 616 199 896

www.thego2people.com.au

For personal use only

Additionally, the Company is in negotiation with the ATO regarding payment plans for its historical income tax and integrated client account liabilities and, subject to appropriate payment plans being secured, plans to make the repayments out of operating margins and excess working capital over a period of time.

Whilst the Company had expected having payment arrangements with the ATO in place by 30 June, post-Covid the ATO is taking a more thorough approach to assessing and granting payment plans, and requires more detailed information to undertake its assessments than has been the case over the past couple of Covid- affected years. The Company has now appointed the Tax division of William Buck to assist with its applications and its ATO negotiations, and hopes to have all ATO liabilities under approved payment plans shortly.

Corporate

During the Quarter 97,219,834 GO2 Fully paid ordinary shares were released from voluntary escrow. The shares are currently quoted and were issued as Initial Consideration for the acquisition of Skill Hire Australia Pty Ltd ('Skill Hire'), which was completed in May 2021. The holders of these shares remain the Company's top 3shareholders.

The Company has 406,638,254 fully paid ordinary shares on issue at 30 June 2022, ofwhich 97,219,834 are held in voluntary escrow.

Related Parties Payments During the Quarter

For the purposes of ASX Listing Rule 4.7C.3, payments of $98k to related parties as disclosed at Item 6 of the Appendix 4C relate to payments to Directors for agreedDirectors' salaries, fees and superannuation.

The GO2 People Ltd

Level 2, 182 St Georges Terrace

Perth WA 6000

ASX: GO2

ACN: 616 199 896

www.thego2people.com.au