5G Networks
Annual Report 2022

Plain-text annual report

2022 ANNUAL REPORT Webcentral Limited and its controlled entities FOR THE YEAR ENDED 30 JUNE 2022 Corporate Directory Directors Joseph Gangi (Non-Executive Chairman) Joseph Demase (Managing Director) Natalie Mactier (Non-Executive Director) Jason Ashton (Non-Executive Director) Company Secretaries Glen Dymond Michael Wilton Registered Office and Principal Place of Business Level 7, 505 Little Collins Street Melbourne, VIC, 3000 Tel: 1300 638 734 Company Number ACN 073 716 793 ABN 21 073 716 793 Country of Incorporation Australia ASX Code: WCG Company Domicile and Legal Form Webcentral Limited is the parent entity and an Australian Company limited by shares Legal Advisors Cornwalls Level 4, 380 Collins Street Melbourne, VIC, 3000 Share Register Link Market Services Limited Tower 4, 727 Collins Street Melbourne, VIC, 3000 Auditors Grant Thornton Audit Pty Ltd Tower 5, 727 Collins Street Melbourne, VIC, 3000 Internet address www.webcentral.au Contents Corporate Directory Chairman’s Address Managing Director's Operational Report Directors’ Report Remuneration Report Corporate Governance Statement Auditors' Independence Declaration Financial Statements ∙ ∙ ∙ ∙ ∙ Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Directors' Declaration Independent Auditors’ Report Shareholder Information 2 4 7 27 33 39 44 48 50 52 53 54 86 87 91 23 "With further improvements to customer journey and support, the successful launch of new product bundles and a major refresh of the Company ’s digital marketing strategy." The significant achievements in FY22 were shown by the Company’s strong financial performance with underlying EBITDA growth of 13.5% to $17.6M and revenue growth of 5.5% to $97M for FY22. The Board’s ongoing focus on capital management and returns to shareholders was demonstrated by the resumption of dividends to shareholders, with the Company very pleased to announce a final dividend of 0.5 cents per share for FY22 payable in November 2022. The Company also completed an unmarketable parcel share sale facility for small shareholders during the year. Looking forward to FY23, Webcentral is focused on continued organic revenue growth and the ongoing improvement of systems and processes to enhance and simplify customer experience. On behalf of the Board, I am extremely grateful for the support of our shareholders, customers, suppliers and business partners and thank our Managing Director, staff and executives for their outstanding achievements in FY22. Yours sincerely, Joe Gangi Chairman Chairman's Address As Chairman of Webcentral, I am proud to present to you the Annual Report for Financial Year 2022. The successful merger of Webcentral with 5G Networks Limited in November 2021 completed the integration of the two businesses, creating the largest Australian owned digital services business and operator of fibre networks, cloud and data centres. The merger brought together the resources and strengths of Webcentral and 5G Networks with the combined business focused on profitable revenue growth. The benefits of the merger are now being realised including integrated product and marketing strategies, one highly motivated team and simplified organisational structure, consolidation onto 5GN’s cloud and network infrastructure, and a consolidated equity and debt capital base and associated corporate cost synergies. Webcentral has made significant progress in FY22 building on the transformation of the business in FY21 with further improvements to customer journey and support, the successful launch of new product bundles and a major refresh of the Company’s digital marketing strategy, and continued platform and system improvements to improve customer experience and improve efficiencies. The Company’s continued focus during the year on simplifying the customer journey and purchasing process included website cart development, process automation and customer self-service options and other innovations such as customer chatbots. These improvements have resulted in increased customer engagement and retention as evidenced by customer satisfaction metrics including Net Promoter Score (NPS) and customer reviews and ratings on third party customer review websites. Most pleasing has been the return to profitable organic revenue growth following the relaunch of the Company’s digital marketing strategy across the Company’s brands including Webcentral, Melbourne IT Corporate and 5G Networks. This strategy was the cornerstone of the successful launch of the new .au domain in March 2022. 45Managing Director’s Report As Managing Director of Webcentral, I am proud to present our Annual Report on the business operations for Financial Year 2022. This year has been transformational for Webcentral with the successful integration of the business with 5G Networks following the merger of the companies in November 2021, a return to profitable revenue growth following the implementation of strategic marketing initiatives including new products and the launch of .au, and continued customer service improvements and simplification of business processes. In early 2022 a multi-channel marketing initiative was implemented across online and digital, radio advertising and the strategic St Kilda Football Club sponsorship, delivering a significant increase in brand awareness and online traffic. This initiative was the cornerstone of the successful .au domain launch in late-March 2022 resulting in 10% of eligible Webcentral customers registering their new .au in the first three months, generating more than $1.2M of sales. These marketing initiatives have also resulted in an uplift in new customers, growing by over 12%. The continued simplification and bundling of product offerings resulted in significant organic growth including the 250% uplift in new hosting customers from bundling with new domain name registrations. We have seen hosting products grow from 6% of domain sales to 25%, the refresh of our hosting products and communication strategy have led to this significant uplift. Significant progress has also been achieved in 5G Networks with the successful launch of new products including Cloudport and the ongoing automation of customer portals, the launch of the Dark Fibre product connecting over 50 Data centres in Sydney, Melbourne, Brisbane and Adelaide coupled with simplification of the customer journey. Continued work on the strategic business transformation programs initiated in 2021 to simplify and automate customer interactions have led to further customer service improvements efficiencies and have delivered Webcentral’s highest ever customer satisfaction ratings, with more than 95% of customers satisfied after contacting our care team. These strategic programs are critical to our ongoing success and will continue to underpin the sustained achievement of profitable revenue growth. As the largest Australian based online service provider, Webcentral continues to invest in our onshore customer care team with more than 70 people in Melbourne, Sydney, Brisbane and Townsville. further enhancing the customer experience. Webcentral’s strong financial performance in FY22 reflects the successful strategic initiatives implemented during the year, the merger and integration benefits realised and continued focus on cost management, with underlying EBITDA growth of 13.5% to $17.6M achieved in FY22. Strong organic revenue growth was achieved in domains, email and hosting services delivering overall revenue growth for the company of 5.5% to $97M for FY22. Operating cashflows significantly improved in the second half of FY22 on the back of this revenue growth with underlying operating cashflows of $8.5M for FY22. In conclusion, I am very excited about the future for Webcentral. Our Board, executive team, and people are committed to delivering and executing our strategy to drive continued growth and deliver improvements for customers, in addition to creating improved shareholder value in the years to come. I would like to thank our employees for all their commitment and hard work, and our shareholders who continue to back our strategy and enjoy the exciting ride we are on. Yours sincerely, Joe Demase Managing Director 67"We’re unashamedly Australian, offering local support and infrastructure to local customers." An Aussie Brand for Aussie Customers Webcentral is an Australian owned digital services company and a leading provider of cloud enabling solutions offering businesses a full product suite of innovative and scalable digital services across Australia and New Zealand. Webcentral services more than 330,000 small and medium businesses (SMB) and 2,500 Enterprise, Wholesale and Government customers, empowering them to grow and thrive in the online world. Our portfolio of digital services is extensive, with market leading offers across domain management, website development and hosting, office and productivity applications and online marketing. Webcentral currently owns and operates its own Nationwide highspeed Data Network with points of presence in all major Australian capital cities. In addition, the Company offers managed cloud solutions through its Cloud and Data Centre capabilities as well as managed services to optimise customers’ IT and network environments. Supporting this is the Company’s combined rack capacity of over 1,000 racks through its owned and operated Data Centres across Melbourne, Sydney, Brisbane and Adelaide. Our customer focussed heritage has been built on expertise, innovation and personalised service; critical attributes delivered through our culture and embraced by our people. This is demonstrated through more than 25 years of online industry leadership across Australia’s digital foundation brands such as Melbourne IT, Netregistry and WME and the 5G Networks brand established in 2017. The Webcentral mission is dedicated to leading online success for our customers. We achieve this by building trusted and valued client relationships which convert successful business outcomes at each milestone across the customers’ digital journey. Webcentral is proudly Australian as one of the first domain and hosting providers established in 1997 combined with the 5G Networks business established in Melbourne in 2017. Webcentral’s Australian contact centre teams are based in Melbourne, Sydney, Brisbane and Townsville and are available 24 hours a day, 7 days a week to meet the needs of our valuable customers. Our data centres are located in inner-city and suburban locations in Melbourne, Sydney, Adelaide and Brisbane, providing quick and convenient access for our Enterprise, Government and Wholesale customers. We’re unashamedly Australian, offering local support and infrastructure to local customers. "Our customer "Our customer focussed heritage focussed heritage has been built has been built on expertise, on expertise, innovation and innovation and personalised personalised service." service." 89"We work with our customers to realise their business ideas and help them optimise every opportunity within the online space." Oliver Thompson – Account Manager Customer Centric Focus Significant improvement in customer ratings since 2020 75 50 25 0 -25 -50 -75 75 50 25 0 -25 -50 -75 25 20 25 22 24 21 20 22 24 29 31 30 27 29 26 28 42 35 47 39 41 44 48 48 51 47 57 53 58 53 43 48 48 49 54 52 29 43 41 33 32 39 2017 2018 2019 2020 2021 2022 25 24 22 22 17 25 28 21 54 52 51 63 63 61 60 51 44 39 34 34 36 44 39 35 49 50 58 58 52 42 40 32 40 45 46 35 42 22 28 20 22 17 2017 2018 2019 2020 2021 2022 * Melbourne IT Continued customer service improvements Webcentral has continued to invest in its onshore Customer Care team: 95% of all customer service calls are handled in Australia 93% of customers contacting our Customer Care teams were satisfied with the level of service 70+ More than 70 onshore support staff in our Customer Care teams 95% of customers are satisfied after speaking to a member of our offline sales team* 1011Webcentral in the Community Webcentral is committed to making sustainability a key priority across all of its operations. Social Initiatives Webcentral is committed to giving back to the community. Webcentral’s Managing Director, Joe Demase, is passionate about supporting the vulnerable youth in Australia and giving them the opportunity to succeed. He has had a longstanding relationship with the Lighthouse Foundation and has taken his passion with him to Webcentral. The Lighthouse Foundation provides homes and therapeutic care programs to children and young people impacted by long-term neglect, abuse and homelessness. Through Joe’s careful guidance, Webcentral continues to provide support to the Lighthouse Foundation. Webcentral supplies laptops and provides free internet access to young people living in Lighthouse Foundation homes, and also provides job opportunities to Lighthouse Foundation youth to work in customer care roles across the business. In addition, Webcentral employees are passionate about giving time and money to address the many issues that face our world today. To support employees’ passion for giving, Webcentral matches employee donations of time and money to non-profit organisations. Webcentral has matched funds raised by its employees for the Beach2Beach fundraising event for children with San Filippo syndrome and supported several employees participating in Dry July, an initiative encouraging people to go alcohol- free in July to raise funds for people affected by cancer. Webcentral’s strategic partnership with the St Kilda Football Club includes its ongoing support of the Danny Frawley Centre for Health and Wellbeing. The Centre aims to lead the national conversation on mental health and create a sustainable fundraising platform to help grow a resilient and thriving community to achieve better mental health outcomes. In support of the Centre, Webcentral donated 100% of the proceeds from the sale of .au domain registrations associated with the Spud’s Lunch event. Webcentral has also supported AFL House by refurbishing and donating surplus IT equipment for students. Fostering diversity and inclusion Webcentral recognises that women are underrepresented in the technology industry. To address the issue of underrepresentation of women in technology, Webcentral implemented the Women in Technology and Women Rising programs. Natalie Mactier, a Director of the Board of Webcentral and the Chair of the Audit and Risk Committee recently convened the inaugural Women in Technology event. This event gathers together more than 70 women across the Company’s operations to network with one another, exchange ideas, raise any concerns they have and listen to inspiring and influential keynote speakers. Webcentral also sponsors the participation of employees in the Women Rising program, a leadership development course overseen by Microsoft for women to equip them with the tools they need to rise through the ranks and succeed in the technology industry. Flexible and safe workplaces Webcentral recognises that there is no one-size- fits-all solution to the way we work. As such, it has been responsive to the constantly changing landscape of the modern workplace as a result of the COVID-19 pandemic. To meet the changing realities of the modern-day working environment, Webcentral has established work-from-home policy to provide further and ongoing flexibility to all of its employees. Each team is allocated onsite days that require employees of those teams to attend office in person, otherwise employees have the flexibility to work from home. In addition, Webcentral’s data centres are certified to ISO45001 Standards for the Work Health and Safety Management System. "Webcentral is proud of its contributions to the communities in which we operate and will continue to develop partnerships with important community organisations" – Joe Demase, Managing Director Environmental Initiatives Webcentral’s operations have potential impact on the environment in a number of ways. The most significant of these is climate change. Webcentral recognises that it is a significant consumer of electricity, particularly through its data centre operations, and is actively seeking ways to reduce its power consumption. Webcentral’s Kidman Park Data Centre, Sydney Data Centre and Melbourne Data Centre are ISO 14001 certified data centres. ISO 14001 is an internationally recognised standard that sets out the criteria for an environmental management system. Being ISO 14001 certified at these three data centres means that Webcentral has systems in place to ensure that it can constantly identify, manage, monitor and control environmental issues so as to improve its environmental impact. ISO 14001 accreditation also helps Webcentral improve its environmental performance at these data centres through more efficient use of resources and reduction of waste. Webcentral recently upgraded 5 of its Computer Room Airconditioning (CRAC) Units at its Sydney Data Centre (SDC). These CRAC Units were replaced with state-of-the-art Electronically Commutated (EC) fans. The main benefits of these new EC fans are that they are highly efficient and have an extended service life. The Company is also in the process of installing a new cold aisle containment system at its North Sydney Data Centre (NSDC). Introducing a new cold aisle containment system at NSDC means that hot and cold airstreams are separated and prevents the mixing of both kinds of air streams. The containment of cold air within the aisles will provide significant energy savings over the original traditional uncontained configuration of the NSDC. These initiatives will significantly improve the Company’s energy efficiency at these data centres. Webcentral is also a significant consumer of IT equipment and is responsible for the disposal of a significant amount of obsolete equipment each year. At all locations and facilities operated by Webcentral we have implemented processes to recycle obsolete equipment through appropriate e-waste disposal services. In addition, Webcentral is conscious of minimising the environmental impact of its office spaces across the country. Webcentral’s offices in Brisbane and Melbourne are housed in state-of-the-art buildings with high National Australian Build Environment Ratings System (NABERS) ratings. vv1213Global Network Connectivity and Data Centres We believe that all businesses deserve access to the best digital services and technology available. Our systems and technology have been simplified and integrated to offer Australian business enterprise grade digital services at small business rates. Through these digital capabilities, our solutions will always be easy to use, scalable and fit for purpose. With more than 330,000 customers and over 500,000 domains registered, Webcentral is well positioned to provide easy to use and integrated product and service offers as our customers progress their journey with the digital economy. Our customers are also increasingly aware of the significant risks associated with growing online services such as data security. Our merger with 5G Networks provided an important opportunity to enhance the security environment for our customers. Not only do we comply with certified policies and effective security protocols, but all critical infrastructure is owned and located here in Australia, offering enhanced data security and ongoing protection from cyber-attacks. Webcentral will continue to focus on developing our systems to introduce new and innovative products and services. This innovation will extend to new capabilities such as automated service delivery which will be driven by digital intelligence technologies that further support every milestone along the customers’ digital journey. High Performance Digital Solutions for Australian Business Webcentral assists Australian small to medium business get online, and once there, provides technologies and services that support their ongoing growth and success. Our portfolio of digital services is extensive, with market leading offers across domain management, website development and hosting, office and productivity applications and online marketing. We know the local market and we work with our customers to accelerate their business ideas and ensure they optimise every opportunity within the online space, from the purchase of a domain name and webhosting through to a full suite of digital marketing services. Our digital technology solutions are underpinned by world class customer service that is based here in Australia. Our customers also appreciate that we have the critical infrastructure located here in Australia and that we have certified security protocols so that all data remains secure and their business protected from cyber-attacks. “It’s not enough that our digital technology and service is the best. It must also meet the strictest security requirements from industry regulators and authorities such as auDA. Marco Mattiuzzo, Chief Technology Officer Global Points of Presence (PoPs) Webcentral / 5GN has deployed global network infrastructure with an ever-increasing list of on-net data centres and PoPs. Our infrastructure is located in major Australian metropolitan areas and extends to Singapore, New Zealand, Japan and the United States. Once connected to this network, a customer can create virtual network connections to any PoP and its connected services. Tokyo Brisbane Los Angeles Dallas Singapore Perth Adelaide Melbourne Auckland Sydney 5GN CloudPort provides scalable connectivity between multiple data centres, clouds and network environments. CloudPort enables the creation of private point-to-point connectivity by utilising 5GN’s state-of-the-art Ethernet fabric network between a customer connected on any of 5GN’s Points of Prescence (POPs) and a host of Data Centres, 5GN private cloud, multiple public clouds and other services. JAPANNEW ZEALANDAUSTRALIASINGAPOREUNITED STATESAUSTRALIAAUSTRALIAAUSTRALIAUNITED STATESAUSTRALIA1415Cloud Domains Email Hosting Digital Marketing Web Hosting A Complete Array of Products and Services for Your Business Journey We now deliver a suite of products and services that can evolve with the needs of Australian business; services which effectively support the entire digital journey as customers progress and build online success. Whether registering a domain name with a website or the launch of their e-commerce platform, our customers can be confident in selecting Webcentral services for accelerating their online growth and claiming their share of Australia’s digital economy. Domain name registration As a market leader for many years, Webcentral has registered more than 500,000 domain names in Australia and New Zealand. We partner with all major domain accreditation authorities to ensure the domain name registration process is easy as possible for our customers. Once registered customers can start building and developing their online presence. Webcentral can also assist business to further manage and protect their branded assets with a range of domain extensions such as .au, .com.au, net.au, and org.au. Email hosting Email addresses that match domain names are important in establishing a professional image for any brand – a position designed to support growth and success. Our portfolio of email products include full-featured self-service platforms so customers can efficiently and confidently self-manage emails, contacts and calendars from anywhere in the world. Web hosting With more than 20 years in supporting the online success of Australian business, our organisa- tion clearly demonstrates industry expertise and leadership with web services and hosting. Located here in Australia, our web hosting solutions are fast, reliable, and comply with industry certified security standards. The world class website security service and SSL certificate programs are the foundations to Webcentral ensuring all customer data is protected from viruses, hackers and identity thieves. Accordingly, Webcentral offers a range of different hosting packages uniquely designed for Australian business. We work with customers to identify the best web hosting plan for their future success and can choose from many options including cPanel or Virtual Private Server (VPS) hosting. Critically, all services are delivered with unlimited support from our Australian domiciled support teams. Digital marketing services As Australia’s online experts for Australian business, we assist customers to plan their digital journey and establish roadmaps for growth and business success. Our digital marketing makes it easy for customers to fully engage with all our digital services, so they can focus on what they do best – building their business. Webcentral offers multiple solutions for website design to ensure their online presence is on-brand, engaging and built to succeed. Customers may choose to build it themselves using our convenient and effective website builders or we can offer a fully customised design service. Webcentral offers three primary digital marketing services to build online success: Search Engine Optimisation (SEO), Pay Per Click advertising (PPC) and social media advertising. We also provide our customers with effective audit and performance monitoring services to ensure their digital programs are always delivering online growth and business success. 1617Managed Services Data Networks Data Centre Hardware and Software Cloud Data Centres and Cloud The 5GN Cloud solution seamlessly combines private cloud, public cloud and national data centres, or- chestrated and governed from a single management platform. 5GN Cloud is a multi-cloud ecosystem that seamlessly integrates globally recognised hyper-scalers such as Alibaba, AWS and Azure with high speed connectivity and market leading data centres. Locally hosted in the 5GN data centres across Sydney, Melbourne, Brisbane and Adelaide, the solution creates simplicity, flexibility and control for organisations seeking to optimise cloud tech- nologies for modernising existing infrastructure or updating legacy digital operations. The 5GN Cloud Federation offers customer choice and the flexibility to deploy workloads across multi-cloud architectures. Public and private clouds are easily managed in combination with data centres and networks, enabling you to deploy workloads across any of the platforms within the federated marketplace. 5GN’s five data centres are located in critical capital city locations in Sydney, Melbourne, Brisbane and Adelaide and are built as true Tier 3 N+2 facilities, coupled with ISO accreditation and 24/7 onsite security to meet the highest uptime and performance standards. Data Networks A range of secure data network solutions are offered in Australia and international locations in Singapore, Japan, New Zealand and the United States to including 5GN’s CloudPort solution and Dark Fibre service. CloudPort provides scalable connectivity between multiple data centres, clouds and network environ- ments and enables the creation of private point-to- point connectivity by utilising 5GN’s state-of-the- art Ethernet fabric network between a customer connected on any of 5GN’s Points of Prescence (POPs) and a host of Data Centres, 5GN private cloud, multiple public clouds and other services. 5GN Dark Fibre service provides a dedicated fibre pair to each customer which they can use and manage entirely, offering connectivity to over 80 Data Centres in major metro areas with bandwidth scalability and route diversity. Managed Services Solutions which optimise our customers’ ICT environments to accelerate the future opportuni- ties presented by digital transformation through strategic consulting, hybrid IT, migration services and 24/7 dedicated Australian based service management and support. Webcentral offers a range of Managed Services which empower its customers on their digital journey and unlock the success of their business. These services assist in developing, implementing and managing customers’ IT strategies and including consulting services, embedded support teams with dedicated on-site resources and expert business application support. End to end service management for data networks, cloud and data centre services assists in the opti- misation of customers’ technology and platforms, supporting their critical internal systems and processes with onsite and remote service management, combined with Australian based 24/7 technical support teams. Digital platform & service monitoring services ensure optimal business performance and business continuity through dedicated support teams and committed service levels. Tailored business solutions can be implemented for any project or business requirement including the installation and maintenance of complex hardware and software solutions. 1819Kick the .com Kick the .com goodbye goodbye . c o m yourbusiness .au . c o m yourbusiness .au The home of .au The home of .au Have you got your ? .au AUsome launch of .au Cut out flap The new .au top level domain name was released in late March 2022 by auDA, the Australian domain administrator. The launch of .au has been a huge success for Webcentral with 10% of eligible Webcentral customers registering their new .au domain name in the first three months after release. For the period to June 2022 nearly 25,000 new .au domains were registered generating $1.22 million in sales. In addition 12% of .au registrations were new customers to Webcentral helping to increase Webcentral’s domains market share. A significant revenue opportunity remains with over 200,000 existing Webcentral customers still eligible to register their new .au domain. The .au launch was led by a multi channel marketing approach across digital, radio advertising and the strategic sponsorship agreement with the St Kilda Football Club, delivering a significant increase in brand awareness and online traffic. Many Webcentral customers are already experiencing the benefits of their .au including: ∙ Stronger cyber security for their business and protection of their customer base from cyber attacks and cybercriminals – indeed the the Australian Cyber Security Centre recommends all Australian businesses register their .au domain immediately to protect their customers and their business ∙ Better search engine optimisation (SEO) results and more users directed to their websites ∙ Great ecommerce conversion rates and online sales transactions ∙ A shorter, more concise domain ∙ Highlighting their Australian presence Webcentral has itself experienced the strong benefits of moving to .au with a 30% increase in Google Page 1 rankings, 15% more website users, a 41% increase in ecommerce conversion rates and 32% greater online sales transactions. SINCE THE LAUNCH OF WEBCENTRAL.AU 25,000+ .au domains sold1 $1.2M sales1 15% 32% 41% New Users on our website Increase in transactions Ecommerce conversions rate 1. To 30 June 2022 2021RESILIENCE Our People HONESTY COLLABORATION INTEGRITY ACCOUNTABILITY RESPECT Making a difference Making a difference everyday everyday Webcentral is a dynamic place for passionate people committed to supporting and growing our customers’ businesses across small and medium business, enterprise and government. Our values are key to the commitment to service excellence by our people Honesty Resilience When we succeed, so do our customers. Whatever the challenge, we’re ready to face it and deliver solutions that fit. We get to know our customers so we can ensure our work is tailored to their unique business requirement. We take every job and every opportunity seriously and dedicate the time and effort for quality results. Respect Webcentral is an awesome place to do great work. We are a people business and we respect that every person delivers valuable outcomes for the business and our customers. We lend a hand, support each other, laugh and have fun. We’re all playing on the same team here, and it shows. Similarly we respect our customers and their endeavours to create successful business outcomes. That respect is best demonstrated with skilled, efficient and responsive customer service delivery, teamed with the best technology around. Even in times of uncertainty our teams can bring the best technology and people together to deliver amazing outcomes for our customers. The world and the workplace is subject to ongoing change and disruption. At Webcentral we value and celebrate our teams’ ability to adapt, change and keep improving our offer for customers, even in times of adversity. We are resilient. Collaboration Individually, we create incredible solutions. But it’s when we collaborate that really great ideas come to life. We are always up for open conversations and are ready to listen to new ideas. And because we trust each other, we’re not afraid to share our thoughts or ask for help. When it comes to implementing new ideas, we move together to ensure our customers get value from the fruits of our labour. We support and uplift each other to deliver, without fail. Accountability Integrity We work hard at Webcentral and we never shirk our responsibilities. Our team members always take ownership of their decisions, actions, performance and behaviour. It’s all about building trust and staying committed to doing the right thing for the business, and our customers. We will always do the right thing. If someone needs a hand we will stop and help. If things look like they are getting off course, we’ll help navigate, even if that is not part of our role. It’s all about behaviours designed to boost everyone in the entire team. Because we’re all playing on the same team here, and it shows. 2223“ Our people continuously strive to collaborate and work as one to make a difference to our customers every day to drive their success.“ Steve Marchese, Head of People & Culture Board Members Managing Director Chairman Joe comes from a background in building a host of successful businesses, including the completion of two ASX listings in the telecommunications sector. Joe has been Managing Director of Webcentral since October 2020. Further to this, Joe has acquired experience in the telecommunications sector amongst both the Australian and UK divisions, along with over 25 years of business experience, allowing Joe to skilfully identify market opportunities across the board. Joe displays an abundance of experience, having succeeded in a broad range of executive positions. Joe has over 30 years’ experience in corporate management and governance and has been an independent director of Webcentral since October 2020. Joe is a Non-Executive Director of Assisi Aged Care, a member of the Industry Advisory Committee to the Faculty of Chemical and Environmental Engineering at RMIT University and an active advisor to several private sector boards. He also provides consulting services to the Local Government sector. His corporate experience is focused on risk management, an area that he is particularly passionate about, that enables him to offer advice on risk mitigation and business sustainability. Joe Gangi Non-Executive Director Non-Executive Director Joe Demase Natalie Mactier Natalie has over 17 years experience in the online space having held senior management and Executive roles at Australian start-up and scale-up organisations. With a background in Sales and Marketing, Natalie helped build online brands SEEK and Kidspot before being approached by Square Peg capital to create School Places, an online private school marketplace. Since 2018 Natalie has been the CEO of Vivi International, an Australian owned EdTech software organisation. Natalie has been an independent director of Webcentral since October 2020. Company Secretaries Chief Financial Officer and Joint Company Secretary Glen has more than 25 years’ experience in senior finance and operations management roles at several ASX-listed entities, including 5G Networks Limited, Zenitas Healthcare Limited, Spotless Group Limited, Broadspectrum Limited and ConnectEast Group. Glen's commercial finance and operations experience has been achieved across a diverse range of business programs. This includes process development to drive financial performance, as well as client commercial management and driving successful change management across organisations undergoing rapid growth and change. Glen Dymond Jason has deep knowledge and experience in the IT and Telecommunications industries. Jason was co-founder (1993) and Managing Director of leading ISP Magna Data which was acquired in 1999. Jason was also co-founder (2002) of ASX listed BigAir Group Limited and was its Chief Executive Officer from 2006 until its acquisition by Superloop Limited in 2016 (ASX: SLC). Jason served as an Executive Director at Superloop from 2016 to 2018 prior to joining the Board of 5G Networks Limited in 2019. Jason has been an independent director of Webcentral since November 2021. General Counsel and Joint Company Secretary Michael is a capital markets and M&A lawyer, having more than 25 years’ experience in those sectors. He also has substantial legal expertise in IT and telecommunications. In addition to his role at Webcentral, Michael is a partner in the Melbourne office of Cornwalls Lawyers. Jason Ashton Michael Wilton Our Leadership Team The goal at Webcentral is to make a difference every day to challenge the current and design the future. We empower customers to collaborate, optimise and connect with digital technology and services. To do this, we also understand technology leadership can only be achieved through the talented and experienced people who work every day to support our customers and the Webcentral business. Our team is supported by a highly competent and talented Board and Executive Team with a broad range of experience in technology, telecommunications and IT businesses, leading and guiding the Webcentral business through a period of enormous change and improvement. Executive Team By embracing the company's core values, the Webcentral business has continued to grow and deliver value for customers and shareholders. The company is tremendously proud that our people have embraced this challenge, with energy, positive attitude and the dedication to ensure our customers remain a key focus. This approach has been successfully achieved through their deep understanding of their role, combined with the guidance and commitment of our leadership teams. Throughout the company's transformation journey over the last few years, our people, our processes and our business has become more resilient. Chief Operating Officer Sales Director John has over 30 years of industry experience, including several executive roles within telecommunications, managed services and networking companies. Previously John was the General Manager for Service Assurance and Operations at nbnCo, where he was responsible for the transformation and restoration of nbn customer services nationally. Prior to that he was Head of Operations for Macquarie Cloud Services. Garry White Garry comes from a successful background in both the ICT and telecommunications sectors, holding over 20 years of experience. Garry has delivered success for leading organisations across Australia, New Zealand, Hong Kong, Singapore and the UK, including being the Sales Director for one of Australia’s major Telco companies. Executive General Manager, Operations Chief Technology Officer Chris holds extensive experience in the telecommunication sector. Previously General Manager for Fibre Deployment at Sky Bridge Group Pty Ltd, Chris was responsible for the delivery of NBN fibre construction services to over 15,000 end user premises and management of over 1100 field contractors. Complimenting Chris’ experience is a Masters in Business Administration (MBA) and Prince 2 Project Management. Head of People & Culture Steve is a psychologist who has worked across a range of sectors for over 25 years. He has always had an interest in organisation development and growth and the complexities of the intricate relationship between people and the organisation. Steve is passionate about driving positive workplace culture and relationships, working closely with staff across all levels of the organisation to develop environments where people feel valued, and experience a sense of connection to their organisation. Marco Mattiuzzo Joel Bruce Marco has a strong background in providing IT services to legal firms and barristers across Australia. With over 10 years experience in ICT and specialising in virtualisation and data centre services, Marco’s current focus lies on maximising value for the clients of Webcentral. Executive National Field Manager Joel has over 20 years’ experience in the ICT industry, with a strong background in providing IT support and consulting services to some of Australia’s largest organisations. A significant proportion of Joel’s career has been dedicated to managing large technical teams to ensure customers achieve successful business outcomes through the use of digital technology. John Stevens Chris Demase Steve Marchese 2425Directors' Report Your Directors submit their report for the year ended 30 June 2022. Directors were in office for the entire period unless otherwise stated. Directors Mr. J. Gangi Mr. J. Demase Ms. N. Mactier Mr. J. Ashton - appointed 24 November 2021 Chief Executive Officer Mr. J. Demase Chief Financial Officer Mr. G. Dymond Chief Operating Officer Mr. J. Stevens – appointed 1 November 2021 Company Secretaries Mr. M. Wilton Mr. G. Dymond Details of Directors' experience, expertise and directorships Details of Directors in office during the period are presented below: Joe Gangi Non-Executive Director and Chair Member of the Audit & Risk Committee and Member of the Nomination & Remuneration Committee Experience and Expertise Mr Gangi has over 30 years’ experience in corporate management and governance and has been an independent director of the Company since October 2020. He is a member of the RMIT University, Engineering Faculty, Industry Advisory Committee and is an active advisor to several private sector boards. He also provides consulting services to the Local Government sector. His expertise lies in business management and leadership with a focus on business sustainability, growth and development, strategic and client relationship management and risk management. Joe’s business management skills are underpinned by the management of several business units across the Asia Pacific region in the professional engineering services sector while his technical experience is demonstrated by the successful delivery of several industrial manufacturing projects. Other Current Directorships • Assisi Aged Care Previous Directorships In Last Three Years • 5G Networks Limited Natalie Mactier Non-Executive Director Chair of the Audit & Risk Committee and Member of the Nomination & Remuneration Committee Experience and Expertise Natalie has over 17 years’ experience in the online space having held senior management and Executive roles at Australian start-up and scale-up organisations. With a background in Sales and Marketing, Natalie helped build online brands SEEK and Kidspot before being approached by Square Peg capital to create School Places, an online private school marketplace. Since 2018 Natalie has been the CEO of Vivi International, an EdTech software organisation helping drive student engagement and build teacher capacity globally. Other Current Listed Company Directorships • Nil Former Listed Company Directorships In Last Three Years • Nil Joe Demase Managing Director & CEO Member of the Audit & Risk Committee and Member of the Nomination & Remuneration Committee Experience and Expertise Mr Demase comes from a background in building a host of successful businesses, including the completion of two ASX listings in the telecommunications sector. Further to this, Joseph has acquired experience in the telecommunications sector amongst both the Australian and UK divisions, along with over 25 years of business experience, allowing Joseph to skilfully identify market opportunities across the board. Joseph displays an abundance of experience, having succeeded in a broad range of executive positions. Other Current Listed Company Directorships • Powerhouse Ventures Limited Former Listed Company Directorships In Last Three Years • 5G Networks Limited Jason Ashton Non-Executive Director Appointed 24 November 2021 Member of the Audit & Risk Committee and Chair of the Nomination & Remuneration Committee Experience and Expertise Mr Ashton has deep knowledge and experience in the IT and Telecommunications industries. Jason was co-founder (1993) and Managing Director of leading ISP Magna Data which was acquired in 1999. Jason was also co-founder (2002) of ASX listed BigAir Group Limited and was its Chief Executive Officer from 2006 until its acquisition by Superloop Limited in 2016 (ASX: SLC). Jason Ashton served as an Executive Director at Superloop from 2016 to 2018 prior to joining the Board of 5G Networks Limited in 2019. 2726 Directors’ Report Directors’ Report Other Current Listed Company Directorships • Nil Former Listed Company Directorships In Last Three Years • 5G Networks Limited Company Secretaries Mr Glen Dymond Company Secretary since 2020 Mr Dymond has more than 25 years’ experience in senior finance and operations management roles at several ASX-listed entities, including Zenitas Healthcare Limited, Spotless Group Limited, Broadspectrum Limited and ConnectEast Group. Mr Dymond’s commercial finance and operations experience has been achieved across a diverse range of business programs. This includes process development to drive financial performance, as well as client commercial management and driving successful change management across organisations undergoing rapid growth and change. Mr Michael Wilton Company Secretary since 2020 Mr Wilton has a wealth of domestic and international experience, spanning across mergers and acquisitions and equity capital market strategies, most recently as a partner at Cornwalls and Norton Rose Fulbright prior to that. His expertise includes public company takeovers, private treaty sales and acquisitions, joint ventures and corporate reconstructions. His ECM experience includes a number of IPOs and many secondary capital raisings for ASX listed companies. In the IT and Telecommunications sector, Michael has worked with the Commonwealth Government on a number of major transactions including the Telstra privatisation and the State of Victoria where he was engaged in a number of large government IT and Telecommunications projects. Principal activities The Group’s principal activities during the year were: • the supply of cloud-based solutions, managed services and network services • the operation of fibre and wireless infrastructure and management of cloud computing environment • the operation of data centre facilities • the supply of domain name registrations and renewals, website and email hosting, website development, search engine marketing and social advertising campaigns for businesses in Australia and New Zealand There have been no significant changes in the nature of these activities. Review and results of operations 12 months ended 30-Jun-22 $’000 30-Jun-21 $’000 93,428 17,561 87,089 15,466 CONTINUING OPERATIONS Total revenue from contracts with customers Underlying EBITDA(1) from Continuing Operations 1. Refer section below – Management performance measures – underlying EBITDA A review of the operations of the Group during the period and the results of those operations found that the revenue and other income for the period was $96.73 million, consisting of revenue of $93.43 million and other income of $3.3 million and representing growth of 5.5% compared to the prior comparative period of $91.69 million. The loss of the Group for the period after providing for income tax amounted to $24.74 million (2021: $5.86 million loss). The underlying EBITDA of the Group for the period of $17.6 million was 13.5% higher than the prior comparative period of $15.46 million, after adjusting for non-operating items including a non-cash goodwill impairment expense of $11.49 million, share-based payments expense of $8.83 million, restructuring costs of $3.71 million in relation to the merger between the Group and 5G Networks Limited (5GN) and other non-recurring items, and acquisition costs of $0.90 million. The goodwill impairment charge has arisen due to the assessment of the carrying value of goodwill and intangible assets at year-end. The non-cash impairment expense recognises the uncertainty caused by the COVID-19 pandemic and the potential impacts to the Group's revenue and operating results. The non-cash impairment charge has no impact on the Group's debt facilities, covenants or liquidity. The share-based payments expense was significantly higher than the prior comparative period as they represent costs for two listed companies for a portion of the year and due to the accelerated vesting of performance rights and options and the cancellation of options pursuant to the merger between the Group and 5GN during the period. The ongoing annual share-based payments expense is expected to be significantly lower at approximately $1.5 million. The key strategic and growth highlights for the year ended 30 June 2022 were as follows: • Organic growth initiatives including the launch of the new .au domain name generating more than $1.2 million in sales, the successful launch of hosting products in April 2022 and the continued development of other new product releases • A multi-channel marketing initiative was implemented across online and digital, radio advertising and the strategic St Kilda Football Club sponsorship, delivering a significant increase in brand awareness and online traffic • Ongoing automation of customer portals, the launch of the Dark Fibre product connecting over 50 Data centres in Sydney, Melbourne, Brisbane and Adelaide coupled with simplification of the customer journey • Improved customer retention from focus on customer service improvement including the introduction of website chatbots and simplifying the customer journey, together with improved systems and billing processes • Customer value increase with ARPU growth achieved compared to the prior comparative period • Strong wholesale and enterprise customer growth with more than $4.0 million sales in FY22 • Significant improvement to customer satisfaction and net promoter scores • Continued fibre network rollout with more than 100 kilometres rolled out and more than 50 data centres connected • Completion of integration and merger with 5G Networks Limited in November 2021 • Strategic acquisition of 18.5% of Cirrus Networks Holdings The key financial highlights for the year ended 30 June 2022 included: • Underlying EBITDA of $17.6 million was 13.5% higher than the prior comparative period, after adjusting for non-operating items including a non-cash goodwill impairment expense of $11.49 million, share-based payments expense of $8.83 million, restructuring costs of $3.71 million in relation to the merger between the Group and 5GN, and acquisition costs of $0.90 million • Cost reductions due to initiatives to reduce third party data centre, cloud and network costs, labour cost efficiencies from customer service improvements and other automation synergies, and overhead cost savings following the merger with 5GN • Significant reduction in property lease costs from the exit of surplus office space • Revenue of $96.73 million, representing growth of 5.5% compared to the prior comparative period • Growth in average revenue per customer • Strong capital position with $5.4 million cash and $10.8 million of available debt at 30 June 2022 of which $10.5 million is for the purpose of business acquisitions. Management performance measures – underlying EBITDA The Group makes use of a management performance measure, “Underlying EBITDA” (Earnings before Interest, Tax, Depreciation and Amortisation). The Group believes that Underlying EBITDA is useful for users of financial reports when assessing the Group’s underlying business performance and profit generation after adjusting for non-recurring and unusual items affecting comparability between financial periods. Underlying EBITDA is also the primary financial performance indicator used by the Group and is the basis for driving internal business decision-making as well as setting remuneration and reward outcomes. Underlying EBITDA is a non-IFRS and unaudited performance measure and therefore may not be comparable with measures sharing similar descriptions by other entities. A reconciliation of Underlying EBITDA to statutory IFRS performance measures (profit before tax) is shown below: 12 months ended 30-Jun-22 $’000 30-Jun-21 $’000 (24,382) 13,630 8,833 2,798 904 3,706 12,072 (5,545) 12,188 2,874 2,027 2,207 1,715 - CONTINUING OPERATIONS (Loss) / Profit before tax Depreciation and amortisation expense Share based expenses Finance costs (excl. bank charges and merchant fees) Acquisition costs Restructuring costs Impairment of financial assets and goodwill Underlying EBITDA 17,561 15,466 Merger with 5G Networks Limited On 16 July 2021, the Company announced that it had entered into a Merger Implementation Agreement (MIA) with 5G Networks Limited (5GN) under which it was proposed that the two companies merge by way of a scheme of arrangement (Scheme), subject to 5GN shareholder approval and court approval in accordance with Part 5.1 of the Corporations Act 2001. On 12 November 2021, the merger (Merger) between 5GN and the Company was effected by way of scheme of arrangement between 5GN and its shareholders, with each 5GN shareholder receiving two new Webcentral shares for each 5GN share held. The record date was 16 November 2021, the new Webcentral shares were allotted on 23 November 2021 and all 5GN shares were transferred to Webcentral on the same day. From this date 5GN has been a wholly-owned subsidiary of the Company. 5GN was suspended from trading on ASX on 12 November 2021 and subsequently delisted from ASX on 25 November 2021. The shares in the Company held by 5GN were subsequently cancelled via a selective reduction of capital in January 2022 following shareholder approval at the Company’s 2021 Annual General Meeting held on 21 December 2021. 2829Directors’ Report Directors’ Report Prior to the Merger, 5GN controlled the Group for the purposes of AASB 10: Consolidated Financial Statements and accounted for the acquisition of Webcentral under AASB 3: Business Combinations, conducting acquisition accounting for the period ended 30 June 2021. Following the Merger, 5GN shareholders hold approximately 73% of the Company’s ordinary shares and therefore continue to control the Group. In the company’s judgement, the continuation of existing accounting values is consistent with the accounting which would have occurred if the assets and liabilities had already been in structure suitable to the Merger, and most appropriately reflects the substance of the internal restructure. Accordingly the consolidated financial report of Webcentral Limited (the accounting acquiree, being the Company) for the period ended 30 June 2022 has been presented as a continuation of the pre-existing accounting values of assets and liabilities in the 5G Networks Limited (the accounting acquirer) consolidated financial statements and includes the financial results for the consolidated group under 5G Networks Limited for the period from 1 July 2021 to 23 November 2021 and the consolidated group under Webcentral Limited for the period from 24 November 2021 to 30 June 2022. The comparative information presented in the financial report represents the financial position of 5G Networks Limited as at 30 June 2021; and the financial performance of 5G Networks Limited for the year ended 30 June 2021. Acquisitions and investing activities On 30 July 2021, the Group announced that it held 8.86% of the ordinary shares in Cirrus Networks Holdings Limited (ASX: CNW) (Cirrus) and launched an on-market takeover bid (Takeover Bid) for Cirrus at an offer price of 3.2 cents per share. On the same day, the Group received credit approval for a $10.5 million debt facility with Commonwealth Bank of Australia for the purpose of funding the Takeover Bid, and a Debt Facility Amendment Deed was subsequently executed with CBA. The Takeover Bid closed on 16 September 2021 at which time the Group held 16.74 % of the ordinary shares in Cirrus. The Group holds 18.5% of the ordinary shares in Cirrus at year-end. On 22 August 2022, the Company sold all of the shares held in Cirrus Networks Holdings Limited at 3.2 cents per share for total consideration of $5.5 million. During the period the Group also continued to invest in its fibre network build throughout several capital cities and had completed more than 100 km and connected 51 data centres as at the date of this report. Capital structure During the year, 212,902,341 ordinary shares were issued pursuant to the Merger with 5GN for consideration of all of the shares in 5GN, 7,325,000 ordinary shares were issued following the exercise of options and performance rights for total consideration of $1,515,000, and 882,837 ordinary shares were issued to employees under the Employee Share Plan. In January 2022, 69,524,461 ordinary shares held by 5GN were cancelled via a selective reduction of capital pursuant to the Merger. In June 2022, 4,278,509 ordinary shares were cancelled pursuant to an unmarketable share sale facility. During the year, 9,450,000 options were issued under the Executive and Director Share Option Plan (ESOP) at an exercise price of $0.45, subject to the satisfaction of service vesting conditions and expiry date of five years after grant, 260,000 options were issued under the Executive Equity Plan (EEP) at an exercise price of $0.26, subject to the satisfaction of service vesting conditions and expiry date of three years after grant, 4,900,000 options were issued under the EEP at an exercise price of $0.25, subject to the satisfaction of service vesting conditions and expiry date of five years after grant, and 15,000,000 performance rights were issued to the Managing Director at an exercise price of $0.45, subject to the satisfaction of service vesting conditions and performance conditions and expiry date five years after grant. In addition, 1,000,000 unlisted options were issued at an exercise price of $0.45 and 250,000 unlisted options were issued at an exercise price of $0.25 during the year to service providers of the Group. In September 2021 the Group increased its debt facilities with Commonwealth Bank of Australia (CBA) by $10.5 million to $27.0 million. In June 2022 the Group’s debt facilities with CBA were consolidated following the merger with 5GN and the maturity date was extended to July 2025. Dividends There were no dividends paid during the year (2021: $0.01 (1 cent) per ordinary share paid in respect of the year ended 30 June 2020). The Directors have recommended the payment of a final dividend of 0.5 cents per ordinary share declared in respect of the financial year ended 30 June 2022. Significant changes in affairs The Company’s name was changed from Webcentral Group Limited to Webcentral Limited following approval by the Company’s shareholders at its general meeting held on 3 November 2021. On 12 November 2021, the Merger between 5GN and the Company was effected by way of scheme of arrangement between 5GN and its shareholders, with each 5GN shareholder receiving two new Webcentral shares for each 5GN share held. From this date 5GN has been a wholly- owned subsidiary of the Company. Other than as stated above, there were no other significant changes in the state of affairs of the Group during the year ended 30 June 2022. Significant events after reporting date On 3 August 2022 the Company announced the launch of an on-market share buy-back of ordinary fully paid shares (buy-back). Between 22 August 2022 and 26 September 2022, the Company acquired 5,276,500 ordinary shares on-market for total consideration of $935,853. On 5 September 2022 the Company cancelled 2,559,460 ordinary shares and on 19 September 2022 the Company cancelled 1,226,573 ordinary shares. On 22 August 2022, the Company sold all of the shares held in Cirrus Networks Holdings Limited at 3.2 cents per share for total consideration of $5.5 million. On 26 August 2022, 2.9 million options were issued under the ESOP and EEP to executives and managers of the Company at an exercise price of $0.20. No other matter or circumstance has arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. Likely developments, business strategies and prospects The Chair’s Report on page 4 and the Managing Director’s report on page 7 contains further information on the likely developments, business strategies and prospects of the Group. Meetings of Directors The number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2022, and the numbers attended by each Director were: Full meetings of Directors Meetings of Committees Audit and Risk Nomination and Remuneration Number of meetings held 13 3 2 Name of Director Eligible Attended Eligible Attended Eligible Attended Joseph Gangi Joe Demase Natalie Mactier Jason Ashton 13 13 13 6 11 13 12 6 3 3 3 2 3 3 3 2 2 2 2 1 2 2 2 1 Insurance of Officers During the period, Webcentral Limited agreed to pay a premium to insure the Directors and secretaries of the Group and its Australian-based controlled entities. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer of the Group against a liability incurred as such by an officer. Indemnity of auditors The Group has agreed to indemnify its auditors, Grant Thornton, to the extent permitted by law, against any claim by a third party arising from the Group’s breach of its agreement. The indemnity requires the Group to meet the full amount of any such liabilities including a reasonable amount of legal costs. 3031Directors’ Report Remuneration Report (Audited) Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 44. Rounding The Group is a type of Company referred to in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000, or in certain cases, to the nearest dollar. Corporate governance The Company's Corporate Governance Statement is available on the Company's website www.webcentral.au. Signed in accordance with a resolution of the Board of Directors: Joe Gangi Chair Melbourne 28 September 2022 Proceedings on behalf of the Company No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. Non-Audit Services The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group and/or the Group are important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the period are set out below in relation to the Group’s current auditor, Grant Thornton. The Board of Directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor • None of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: Consolidated 2022 $ 2021 $ 75,000 75,000 124,343 124,343 203,155 203,155 131,895 131,895 278,155 256,238 OTHER ASSURANCE SERVICES Due Diligence Services Total Remuneration for Other Assurance Services TAXATION SERVICES Tax Compliance Services Total Remuneration for Taxation Services Total Remuneration for Non-Audit Services The Directors present the Webcentral Limited 2022 remuneration report, outlining key aspects of our remuneration policy and framework as well as remuneration awarded this year. It has also been audited as required by section 308(3C) of the Corporations Act 2001. The Report is structured as follows: (a) Key management personnel (KMP) covered in this report (b) Remuneration policy and link to performance (c) Elements of remuneration (d) Remuneration expenses for executive KMP (e) Non-executive Director arrangements (f) Other statutory information (A) Key Management Personnel (KMP) Covered in this Report Directors: Joseph Gangi - Non-Executive Chair Natalie Mactier - Non-Executive Director Joseph Demase - Managing Director Jason Ashton - Non-Executive Director from 24 November 2021 Other key management personnel: Glen Dymond - Chief Financial Officer and Company Secretary Garry White - National Sales Director John Stevens – Chief Operating Officer from 1 November 2021 There have been no changes in KMP since the end of the reporting period. (B) Remuneration Policy and Link to Performance Our remuneration committee is currently made up of all directors. The Committee makes recommendations to the Board with respect to appropriate remuneration and incentive policies for executive Directors and senior executives that: a. Motivate Executive Directors and senior executives to pursue long term growth and success of the Group within an appropriate control framework; b. Demonstrate a clear correlation between key performance and remuneration; and c. Align the interests of key leadership with the long-term interests of the Group’s shareholders. Executive KMP Remuneration Policy Statement Consistent with contemporary Corporate Governance standards Webcentral remuneration policy aims to set employee and executive remuneration that is fair, competitive and appropriate for the markets in which it operates. Specific objectives of the policy include the following: a. Ensuring executive remuneration packages involve a balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the Group’s circumstances and objectives; b. A proportion of executives’ remuneration is structured in a manner designed to link reward to corporate and individual performances; and c. Ensure that incentive plans are designed around appropriate and realistic performance targets that measure relative performance and provide rewards when they are achieved. (C) Elements of Remuneration Fixed Annual Remuneration Executives may receive their fixed remuneration as cash, superannuation and fringe benefits. Short-term Incentives (“STI”) – Operational Bonuses The following bonuses were paid in respect of FY22: • A bonus of $76,800 was paid to Glen Dymond representing 55% achievement of projects and $63,200 was forfeited; and • A bonus of $38,400 was paid to Garry White representing 27% achievement of projects and $101,600 was forfeited. The bonuses paid to Glen Dymond and Garry White were granted on 14 September 2021, 12 November 2021, 11 March 2022 and 13 May 2022 in line with the achievement of projects. No other short-term incentives were paid to KMP during the year. Long-term Incentives The Webcentral Executive and Director Share Option Plan (ESOP) was adopted in December 2020 for directors and executives of the Group. In April 2022, the Group adopted an Executive Equity Plan (EEP) for executives and senior leaders of the Group. During the year ended 30 June 2022 the Group issued 22,100,000 performance rights and share options to KMP under the ESOP as a means of rewarding and incentivising directors and executives. Further details of the performance rights and share options, including details of rights issued during the financial year, are set out in section D below. 3233Remuneration Report (Audited) Remuneration Report (Audited) (D) Remuneration Expenses for Executive KMP The following table shows details of the remuneration expense recognised for the Group’s executive key management personnel for the current and previous financial year measured in accordance with the requirements of the accounting standards. Remuneration paid to Directors and executives is valued at the cost to the Group. Key Management Personnel Remuneration Short Term Benefits Post employment benefits Share based payments Other Name Period Cash salary Cash STI1 Annual leave Other2 Superannuation $ $ $ $ $ Performance Rights and Options3 $ Termination Pay Total Performance Based4 $ $ % Managing Director Mr Joe Demase Other Management Glen Dymond Garry White John Stevens5 2022 2021 2022 2021 2022 2021 2022 2021 Mr Brett Fenton6 Mr Tristan Sternson7 2022 2021 2022 Former Key Management Personnel - - - - - - - - - - - - 5,620 - 221,730 94,368 20,302 2021 55,263 Mr Brendan White8 2022 - 2021 222,449 37,151 2,677 Mr Fraser Bearsley9 2022 - 62,978 - - - 5,796 2021 2022 Total KMP excluding Non-Executive Directors 276,923 - - - 23,077 7,559 23,568 1,657,422 - 1,988,549 - 215,698 - 322,023 537,721 208,992 76,800 19,319 6,278 23,568 28,475 - 105,000 - 102,740 - - 217,773 38,400 10,537 5,335 23,568 123,391 - 105,000 - 111,301 - - 189,615 10,385 4,272 16,784 94,916 - - - - - - - 363,432 207,740 419,004 216,301 315,972 - - 87,694 456,052 - - - - 66,667 - 19,987 307,180 - - 46,102 123,612 - - - - - - - - - - - 31,958 - 5,784 - 24,916 - 8,736 - - - - - - - - - 893,303 115,200 63,318 23,444 87,488 1,904,204 - 3,086,957 2021 562,420 341,519 34,395 429,739 71,394 322,023 153,783 1,915,273 Total Non- Executive Directors (Section E) 2022 234,236 2021 411,356 - - - - - - 4,962 701,573 29,738 161,100 Total KMP 2022 1,127,539 115,200 63,318 23,444 92,450 2,605,777 - - - 940,771 602,193 4,027,728 2021 973,776 341,519 34,395 429,739 101,132 483,123 153,783 2,517,467 83% 60% 29% 51% 39% 49% 30% N/A N/A 21% N/A - N/A 12% N/A - 65% 35% 75% 27% 68% 33% 1. Represents STIs accrued in relation to the 2022 and 2021 financial periods. 2. Represents the cost to the business of any non-cash business benefits provided, For 2021 this item also includes the allocation of salary costs charged from 5GN to Webcentral for current KMP. 3. Represents the expense recorded during the period in relation to the fair value of Performance Rights and Options. 4. Calculated as STI plus Performance Rights and Options expense, as a proportion of total remuneration. These two elements represent the at-risk and discretionary amount payable which will vary depending on the financial performance of the Company and achievement of individual KPIs. They are in addition to the fixed remuneration. 5. Mr John Stevens commenced on 1 November 2021. 6. Mr Brett Fenton was a KMP until 29 October 2020. Their information has been included up to that date. 7. Mr Tristan Sternson was a KMP until 11 February 2020. Their information has been included up to that date. 8. Mr Brendan White was a KMP until 13 November 2020. Their information has been included up to that date. 9. Mr Fraser Bearsley was a KMP until 23 March 2020. Their information has been included up to that date. Options and Rights Granted as Remuneration Name Balance at 1 July 2021 Grant Details Exercised Exercised Lapsed Balance at 30 June 2022 Key Management Personnel Joe Gangi Joe Demase Natalie Mactier Jason Ashton Glen Dymond Garry White John Stevens KMP Total No. Grant Date No. Fair Value $000 No. Value $000 No. No. 1,000,000 22-Dec-21 1,500,000 308 1,000,000 10,000,000 22-Dec-21 15,000,000 2,880 5,000,000 1,000,000 22-Dec-21 1,500,000 - - - - 22-Dec-21 1,500,000 15-Jul-21 300,000 15-Jul-21 1,300,000 15-Jul-21 1,000,000 308 308 59 257 198 1,000,000 - - - - 303 1,516 303 - - - - 12,000,000 22,100,000 4,318 7,000,000 2,122 - - - - - - - - 1,500,000 20,000,000 1,500,000 1,500,000 300,000 1,300,000 1,000,000 27,100,000 The key criteria for performance rights and options granted during the period are as follows: • Performance Rights (Joe Demase) – Webcentral achieves inclusion in the S&P ASX300 Index. • Options (Joe Gangi and Natalie Mactier) – the completion of tenure periods of two years. There is no performance condition in relation to these options as the Board considers the service condition is sufficient. • Options (Executives) - – the completion of tenure periods of two years. There is no performance condition in relation to these options as the Board considers the service condition is sufficient. The weighted average fair value per option is $0.1953 for the 22,100,000 performance rights and options granted during the period. The following table summarises information about performance rights and options held by Directors as at 30 June 2022. 5,000,000 performance rights are exercisable at period end (2021: nil): Issue Date and Type Number Grant Date Vesting Date Expiry Date 2020 Performance Rights - Director 5,000,000 18/12/2020 22/09/2021 18/12/2025 2021 Performance Rights - Director 15,000,000 22/12/2021 -1 22/12/2026 2020 Options - Director 2021 Options - Director 4,500,000 22/12/2021 22/12/2023 22/12/2026 2,600,000 15/07/2021 15/07/2023 15/07/2025 1. Vesting period is dependent on the achievement of inclusion in the S&P ASX300 Index. 27,100,000 Weighted Average Exercise Price $0.20 $0.45 $0.45 $0.45 $0.40 The fair values of options granted were determined using a variation of the binomial option pricing model that takes into account factors specific to the ESOP, such as the vesting period. The following principal assumptions were used in the valuation. The following table lists the inputs to the models used for the LTI Grants: Share price Dividend yield Expected volatility Risk-free interest rate 2020 Rights 2021 Rights 2021 Options - Directors 2021 Options - Executives $0.415 0% 73.40% 0.375% $0.465 0% 45.00% 1.265% $0.465 0% 45.00% 1.265% $0.45 0% 73.40% 0.69% The dividend yield is zero as the Group has not paid a dividend for the previous two reporting periods. The expected volatility was determined using the group's average five-year share price. The risk-free rate is derived from the yield on Australian Government Bonds of an appropriate term. Historical share price volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future volatility. 3435 Remuneration Report (Audited) Remuneration Report (Audited) (E) Non-Executive Director Arrangements Current Board fees are $110,000 per annum for Joe Gangi and $90,000 per annum for Natalie Mactier and Jason Ashton. The table below represent the amounts paid during the periods in which their services were provided. Short term benefits Post Employment benefits Long term benefits Share based payments Non-Executive Directors Period Salary & fees $ STI $ Annual leave Super contri- bution Long service leave $ $ $ Performance Rights and Options $ Total Performance related $ % Mr Joe Gangi1 2022 103,333 Ms Natalie Mactier2 Mr Jason Ashton3 Former Directors Mr Andrew Reitzer4 Mr Karl Siegling5 Mr Andrew Macpherson6 Mr Larry Bloch7 Ms Naseema Sparks8 Total 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 58,333 81,288 40,000 49,615 - - 113,341 - 76,678 - 55,689 - 48,096 - 19,219 2022 234,236 2021 411,356 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,962 - - 10,767 - 7,284 - 5,291 - 4,569 - 1,826 4,962 29,737 1. Mr Joe Gangi was appointed 16 October 2020 and has been Chair of the Board since 27 October 2020. 2. Ms Natalie Mactier was appointed on 22 October 2020. 3. Mr Jason Ashton was appointed on 24 November 2021. 4. Mr Andrew Reitzer was Chair until 27 October 2020 and retired on 10 November 2020. 5. Mr Karl Siegling retired on 10 November 2020. 6. Mr Andrew Macpherson retired on 22 October 2020. 7. Mr Larry Bloch retired on 16 August 2020. 8. Ms Naseema Sparks retired on 27 February 2020. - - - - - - - - - - - - - - - - - - 308,041 411,374 80,550 138,883 308,041 389,329 80,550 120,550 85,491 140,068 75% 58% 79% 67% 61% - - - - - - - - - - - - - 124,108 - 83,962 - 60,980 - 52,665 - 21,045 - - - - - - - - - - - 701,573 940,771 161,100 602,193 75% 27% All non-executive Directors enter into a service agreement with the Group in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office of Director. (F) Other Statutory Information Shareholdings The numbers of shares in the Group held (directly, indirectly or beneficially) during the financial year by KMP, including their related parties, are set out below. Balance at 1 July 2021 or date of appointment Received on the exercise of option or right Net Other Changes Balance at 30 June 2022 Directors Joe Gangi Joe Demase Natalie Mactier Jason Ashton Total Directors Other Management Personnel (OMP) Glen Dymond Garry White Total OMP Group Total 2,941,176 11,951,206 - 588,235 15,480,617 919,999 1,411,764 2,331,763 17,812,380 Voting and comments made at the Company’s Annual General Meeting The Company received 91.6% of ‘yes’ votes on its Remuneration Report for the financial year ending 30 June 2021. The Company received no specific feedback on its Remuneration Report at the Annual General Meeting. Service Agreements Remuneration and other terms of employment for the Managing Director and other Key Management Personnel are formalised in an Executive Service Agreement between the Company and each executive: Executive Base Salary Term of agreement Notice period Joseph Demase $300,000 Unspecified 6 months Glen Dymond $250,000 Unspecified 3 months Garry White $250,000 Unspecified 3 months John Stevens $300,000 Unspecified 3 months 1,000,000 5,000,000 1,000,000 3,803,864 38,841,978 - - 4,378,912 7,745,040 55,793,184 1,000,000 4,967,147 7,000,000 47,024,754 69,505,371 - - - 619,814 4,823,284 5,443,098 1,539,813 6,235,048 7,774,861 7,000,000 52,467,852 77,280,232 Loans to Key Management Personnel (i) Executive and Direct or Share Plan Under the Executive and Director Share Plan the Company may loan its Executives some or all of the amount of the exercise price for options exercised to acquire shares. Such loans are non-recourse and no interest is charged in respect of the loan amounts. The executive does not have a beneficial interest in the shares until the loan is repaid with any such shares subject to a holding lock. For accounting purposes, this arrangement is not considered as loan receivable but considered as share-based payment in substance. The granting of a loan is considered to be a modification to the existing option. Any increase in the fair value of the option recognised as an expense immediately at the date the loan is granted. If the executive fails to repay the loan, the Company can sell some of the shares to repay the loan. In the event that the shares are sold for an amount less than the value of the loan, the executive is only required to repay the loan out of the sale proceeds. The Company has no other recourse against the employee. During the period two directors were provided with a loan under the Executive and Director Share Plan for a total amount of $400,000. 3637 Remuneration Report (Audited) Corporate Governance Statement (ii) Other Loans During the year ended 30 June 2021, the Group granted loans of $280,000 to key management personnel, $140,000 each (Glen Dymond and Garry White) to allow them to take up shares in a capital raising being undertaken by the Company. The loans have been repaid by $74,200 by Glen Dymond and $74,200 by Garry White during the year ended 30 June 2022. The table below provides aggregate information relating to the Company’s loans to KMP during the year: Balance at the start of the year Repayment from KMP Balance at the end of the year 2022 $000 346 (218) 128 Other Transactions with Key Management Personnel During the year, the Group has conducted the following related party transactions: • A total of $154,294 (2021: $164,129) was paid to Studio Inc., an entity related to Joe Demase, for the design of marketing materials for the Group. All transactions are carried at commercial third-party rates. • A payment of $4.013 million was made to J D Management Pty Ltd (JDM), an entity controlled by Joe Demase, as consideration for the cancellation of 8 million Performance Rights in relation to shares in 5G Networks Limited held by JDM that were cancelled pursuant to the Merger with the Company in November 2021. There were no other transactions with KMP during the year ended 30 June 2022. End of Remuneration Report This report, incorporating the Remuneration Report is signed in accordance with a resolution of Directors. Joe Gangi Chairman 28 September 2022 The Board of Webcentral Limited (the Company) recognises the need for the highest standards of corporate behaviour and accountability. The Board is committed to optimising security holder returns within a framework of ethical business practices. Webcentral’s corporate governance practices and policies comply with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition) (the Governance Principles and Recommendations), the ASX Listing Rules and the Corporations Act 2001 (Cth). This Statement reflects a summary of Webcentral’s corporate governance framework, policies and procedures that are in place and operating as at the date of this report. Further information on Webcentral’s corporate governance policies, including Board and Committee charters, are available from the Corporate Governance page of the Company’s website. Principles and Recommendations Compliance Comply Principle 1 – Lay solid foundations for management and oversight 1.1 Establish the functions expressly reserved to the Board and those delegated to management, and disclose those functions. The Board is responsible for the overall corporate governance of the Company. It has adopted various charters and key corporate governance documents which set out the policies and procedures followed by the Company. 1.2 Undertake appropriate checks before appointing a person as a director, and provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. The Company has, and will continue to conduct, appropriate searches in relation to all appointed and future nominated directors. It will carry out necessary background checks, including ASIC Banned & Disqualified Persons Register and bankruptcy searches for all appointed and future nominated directors. The Company has published profiles of its directors on the Company’s website outlining biographical details, other directorships held, commencement date of office and level of independence. Compliant Compliant 1.3 Have a written agreement with each director and senior executive setting out the terms of their appointment. The Company has written agreements with each director and senior executive. On appointment of directors and senior executives the Company will issue necessary written agreements outlining the terms of their appointment. Compliant 1.4 The company secretary should be accountable directly to the Board on all matters to do with the proper functioning of the Board. 1.5 Establish a diversity policy and disclose the policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them, for reporting against in each reporting period. 1.6 Have a process for periodically evaluating the performance of the Board, its committees and individual directors, and disclose that process and, at the end of each reporting period, whether such performance evaluation was undertaken in that period. The Company Secretary reports directly to the Board, through the Chairman, on matters relating to the proper functioning of the Board. All Directors have access to the Company Secretary. Compliant The Company is committed to promoting a diverse workplace where everyone is treated with respect regardless of gender, age, race, disability, language, cultural background or sexual preference. Compliant The Company has a Diversity & Inclusion Policy that outlines how it meets the highest standard of inclusion and respect. The Diversity & Inclusion Policy is available from the Corporate Governance page of the Company’s website. The Nomination and Remuneration Committee (‘NRC’) is responsible for, among other things, reviewing the Board’s performance, policies and practices, and reviewing the performance of its Committees and the Board and Committee Chairs. Compliant The NRC, which operates under a nomination and remuneration committee charter, currently comprises the following Directors: • Jason Ashton (Committee Chair, Independent, Non-Executive Director); • Joe Gangi (Independent, Non-Executive Director); • Natalie Mactier (Independent, Non-Executive Director); and • Joe Demase (Managing Director and CEO). The NRC meets at least twice a year and operates in accordance with its charter which is available on the Corporate Governance page of the Company’s website. 3839 Corporate Governance Statement Corporate Governance Statement Comply Compliant Compliant Principles and Recommendations Compliance 1.7 The Company should have a process evaluating the performance of the Company’s senior executives, and disclose that process and, at the end of each reporting period, whether such performance evaluation was undertaken in that period. The Managing Director (MD) reviews the performance of the senior executives on a regular basis throughout the reporting period. Additionally, the Board reviews the Managing Director’s performance throughout the reporting period. These reviews were conducted in the current reporting period. Principle 2 – Structure the Board to be effective and add value 2.1 The Company should have a nomination committee, which has at least three members, a majority of independent directors and is chaired by an independent director. The functions and operations of the nomination committee should be disclosed. A Nomination and Remuneration Committee (‘NRC’) has been established with its own charter and currently comprises the following Directors: • Jason Ashton (Committee Chair, Independent Non-Executive Director); • Joe Gangi (Independent, Non-Executive Director); • Natalie Mactier (Independent, Non-Executive Director) and • Joe Demase (Managing Director and CEO). The primary objective of the NRC is to assist the Board with the discharge of its responsibilities with respect to constitution of the members of the Board of Directors and the remuneration of directors and senior management as set out in its charter which is available on the Corporate Governance page of the Company’s website. 2.2 Have and disclose a board skills matrix, setting out what the board is looking to achieve in its membership. The NRC undertakes its deliberations in accordance with the rules set out in its charter. The NRC seeks to ensure that the Directors have a broad range of experience, expertise, skills, qualifications and contacts and that they are relevant to the Company and its business. 2.3 Disclose the names of the directors that the Board considers to be independent directors, and an explanation of why the Board is of that opinion if a factor that impacts on independence applies to a director, and disclose the length of service of each director The Board considers Natalie Mactier (Non-Executive Director, appointed 22 October 2020), Joe Gangi (Non-Executive Director, appointed 16 October 2020) and Jason Ashton (Non-Executive Director, appointed 24 November 2021) to be independent directors. The Board notes that Joseph Demase is not an independent director for the purposes of the Governance Principles and Recommendations. Mr Demase is Managing Director and Chief Executive Officer of the Company. Compliant Compliant 2.4 A majority of the Board should be independent directors. The Board is presently comprised of four directors, of which three are independent, non-executive directors. Compliant 2.5 The Chair of the Board should be an independent director and should not be the CEO. The Chair of the Board, Joe Gangi, is an independent, non-executive director. 2.6 The Company should have a program for inducting new directors and providing appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as a director effectively The Board Charter provides a program for inducting new directors and requires that directors have access to opportunities for professional development so as to ensure the continual development of their skills and knowledge. The Board Charter is available on the Corporate Governance page of the Company’s website. Compliant Compliant Principle 3 – Act lawfully, ethically and responsibly 3.1 The Company should articulate and disclose its values The Company articulates and discloses its guiding principles and values in its Code of Conduct. The Code of Conduct is available on the Corporate Governance page of the Company’s website. Compliant Principles and Recommendations Compliance 3.2 The Company should have a Code of Conduct and ensure that any material breaches of that Code are reported. The Company has a Code of Conduct that articulates the standards of behaviour it expects of its directors, senior executives and employees. Comply Compliant 3.3 The Company should have a whistleblower policy and ensure that the Board is informed of any material breaches reported under that policy. 3.4 The Company should have an anti-bribery and corruption policy and ensure that the Board is informed of any material breaches reported under that policy The Code also sets out the process for identifying and reporting material breaches of the Code. The Code of Conduct is available on the Corporate Governance page of the Company’s website. The Company encourages directors, senior executives and employees to speak up about any unlawful, unethical or irresponsible behaviour within the organisation. Compliant The Company has a Whistleblower Policy to guide the directors, senior executives and employees as to the practices necessary to report unlawful, unethical or irresponsible behaviour. The Policy is available on the Corporate Governance page of the Company’s website. The Company recognises the serious criminal and civil penalties that may be incurred and the reputational damage that may be done, if the Company and any of its directors, as well as officers, employees, contractors, consultants and other persons that act on its behalf, engages in bribery or corruption. The Company has an Anti-Bribery and Corruption policy that articulates the standards of behaviour it expects of its directors, senior executives and employees as regards observing and upholding the prohibition on bribery and related improper conduct. The Company’s Anti-Bribery and Corruption Policy is available on the Corporate Governance page of the Company's website. Compliant Principle 4 – Safeguard the integrity of corporate reports 4.1 The Company should have an audit committee, which consists of only non- executive directors, a majority of independent directors, is chaired by an independent chairman who is not chairman of the Board, and has at least three members. The functions and operations of the audit committee should be disclosed. 4.2 The Board should, before approving financial statements for a financial period, receive a declaration from the CEO and CFO that, in their opinion, the financial records have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company, formed on the basis of a sound system of risk management and internal controls, operating effectively. 4.3 The Company’s auditor should attend the AGM and be available to answer questions from security holders relevant to the audit. The Board has established an Audit and Risk Committee (‘ARC’) which operates under an audit and risk committee charter. Compliant The Audit and Risk Committee members are: • Natalie Mactier (Committee Chair, Independent, Non-Executive Director); • Joe Gangi (Independent, Non-Executive Director); • Jason Ashton (Independent, Non-Executive Director); and • Joseph Demase (Managing Director and CEO). The ARC oversees the Company’s corporate reporting process pursuant to the rules of its Charter which is available on the Corporate Governance page of the Company’s website. In accordance with section 295A of the Corporations Act 2001 (Cth), each year the CEO and CFO state in writing to the Board that, for the relevant financial year, the financial records of the Company have been properly maintained, the financial statements and the notes comply with the accounting standards and give a true and fair view of the financial position and performance of the Company, and that their statement has been provided on the basis of a sound system of risk management and internal control which is operating effectively. Compliant External auditors attend the Company’s Annual General Meeting and are available to answer reasonable questions from security holders in relation to the conduct of the audit, the preparation and content of the independent audit report and the accounting policies adopted by the Company. Compliant 4041Corporate Governance Statement Corporate Governance Statement Principles and Recommendations Compliance Comply Principles and Recommendations Compliance Principle 5 – Make timely and balanced disclosure 5.1 The Company should have a written policy for complying with its continuous disclosure obligations under ASX Listing Rule 3.1. 5.2 The Company should ensure that its Board receives copies of all material market announcements promptly after they have been made. 5.3 The Company should release copies of presentation materials on the ASX Market Announcements Platform ahead of the presentation. The Company has a Disclosure Policy which is designed to ensure that all material matters are appropriately disclosed in a balanced and timely manner and in accordance with the requirements of the ASX Listing Rules. The Policy is available on the Corporate Governance page of the Company’s website. Compliant The Company’s Disclosure Policy provides that the Board receives market announcements promptly after they have been made. Compliant The Policy is available on the Corporate Governance page of the Company’s website. The Company diligently releases copies of all of its presentation materials on the ASX Market Announcements Platform ahead of presentations. Compliant Principle 6 – Respect the rights of security holders 6.1 The Company should provide information about itself and its governance to investors via its website The Corporate Governance landing page on the Company’s website contains a range of documents concerning information about the entity and its governance that security holders can download. Compliant Further information about the Company’s Corporate Governance regime can be found on the Corporate Governance page of the Company’s website. 6.2 The Company should have an investor relations program that facilitates effective two- way communication with investors. The Company will use its website, half year and annual reports, market announcements and media disclosures to communicate with its security holders, as well as encourage participation at general meetings. Compliant 6.3 The Company should disclose how it facilitates and encourages participation at meetings of security holders. The Company’s security holders have the opportunity to ask questions of the Company’s external auditors who attend the Company’s annual general meeting. Compliant 6.4 The Company should ensure that all substantive resolutions at a meeting of security holders are decided by a poll. 6.5 The Company should give security holders the option to receive communications from, and send communications to, the Company and its security registry electronically. Principle 7 – Recognise and manage risk 7.1 The Board should have a committee to oversee risk with at least three members, a majority of whom are independent directors; and is chaired by an independent director. Further, the Company has adopted a range of appropriate technologies to facilitate two-way engagement at its annual general meetings. All resolutions at meetings of security holders are decided on a poll. Compliant The Company’s security holders have the option to electronically receive communications from, and send communications to, the Company and its security registry. Compliant The Board has established an Audit and Risk Committee (‘ARC’) which operates under an audit and risk committee charter. Compliant The Audit and Risk Committee members are: • Natalie Mactier (Committee Chair, Independent Non-Executive Director); • Joe Gangi (Independent, Non-Executive Director); • Jason Ashton (Independent, Non-Executive Director); and • Joseph Demase (Managing Director and CEO). The ARC oversees the Company’s corporate reporting process pursuant to the rules of its Charter which is available on the Corporate Governance page of the Company’s website. 7.2 The Board should review the Company’s risk management framework at least annually; and disclose, in relation to each reporting period, whether such a review has taken place. 7.3 The Company should disclose if it has an internal audit function, how the function is structured and what role it performs, or if it does not have an internal audit function, that fact and the processes the Company employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 7.4 The Company should disclose whether the Company has any material exposure to economic, environmental and social sustainability risks and, if so, how it manages those risks. The ARC meets at least four times each year and a risk review is conducted in relation to each reporting period. Comply Compliant The ARC oversees the Company’s internal audit program. It reviews and approves the Company’s internal audit plan and monitors the progress of the Company’s internal audit. Compliant The Board does not believe that the Company has any such material risks. While the Company is not exposed to such risks, the Board has adopted an Environment & Sustainability Policy to deal with such risks if they are ever to eventuate. The Environment & Sustainability Policy is available on the Corporate Governance page of the Company’s website. Compliant Principle 8 – Remunerate fairly and responsibly 8.1 The Board should have a remuneration committee which is structured so that it consists of a majority of independent directors, is chaired by an independent director, and has at least three members. The functions and operations of the remuneration committee should be disclosed. 8.2 The Company should disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. 8.3 The Company should have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme, and disclose that policy or a summary of it. A Nominations and Remuneration Committee (‘NRC’) has been established with its own charter and consists of the following Directors: Compliant • Jason Ashton (Committee Chair, Independent, Non-Executive Director); • Joe Gangi (Non-Executive Director); • Natalie Mactier (Independent, Non-Executive Director); and • Joe Demase (Managing Director and CEO). The primary objective of the NRC is to assist the Board with the discharge of its responsibilities as set out in its charter which is available on the Corporate Governance page of the Company’s website. The NRC oversees the policies and practices regarding the remuneration of non-executive directors, and the remuneration of executive directors and other senior executives. Compliant The Company operates an Executive and Director Share Option Plan (ESOP) in which directors and senior management participate. In accordance with the Company’s Share Trading Policy, participants are not permitted to enter into transactions which limit economic risk without written clearance. Compliant 4243Auditors' Independence Declaration Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Auditor’s Independence Declaration To the Directors of Webcentral Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Webcentral Limited for the year ended 30 June 2022, I declare that, 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 audit; and b. no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 28 September 2022 www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. w 4445 Webcentral Limited and its controlled entities ABN: 21 073 716 793 FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 4746Consolidated Statement of Comprehensive Income Consolidated Statement of Comprehensive Income For the year ended 30 June 2022 For the year ended 30 June 2022 (Continued) Loss for the period attributable to: Members of the parent Non-controlling interests Total comprehensive income attributable to: Members of the parent Non-controlling interests Loss per share from continuing operations Basic loss per share Diluted loss per share Loss per share attributable to members of the parent Basic loss per share Diluted loss per share 12 months ended Notes 30-Jun-22 $’000 30-Jun-21 $’000 (24,883) 145 (24,738) (25,862) 145 (25,717) (4,710) (1,154) (5,864) (4,438) (1,154) (5,592) 30-Jun-22 cents per share 30-Jun-21 cents per share (8.50) (8.50) (8.56) (8.56) (4.37) (4.37) (0.90) (0.90) 7 7 7 7 CONTINUING OPERATIONS Revenue Other income Revenue and other income Network and data centre costs Domain registration costs Cloud and hosting costs Software and licencing costs Direct labour costs External labour costs Other direct costs Rent and office expenses Marketing and travel expenses Employee benefits expenses Other expenses Impairment of financial assets Impairment of goodwill Share-based payment expenses Acquisition costs Restructuring costs Depreciation expenses Amortisation expenses Finance costs Total expenses Loss before income tax Income tax (expense) / benefit Loss after tax OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX Items that will be reclassified to profit or loss in subsequent years: Currency translation differences Items that will not be reclassified to profit or loss in subsequent years: Change in fair value of equity instruments designed at fair value through other comprehensive income Other comprehensive income for the year, net of income tax 12 months ended Notes 30-Jun-22 $’000 30-Jun-21 $’000 5 6 10 14 8 22 22 93,428 3,304 96,732 87,089 4,603 91,692 (24,285) (25,317) (6,225) (1,461) (4,999) (7) (814) (366) (410) (1,788) (35,960) (2,856) (578) (11,494) (8,833) (904) (3,706) (10,195) (3,435) (2,798) (121,114) (24,382) (356) (24,738) (36) (943) (979) (5,432) (1,456) (3,030) (515) (1,715) - (989) (1,122) (32,203) (3,597) (850) - (2,874) (2,207) (1,715) (9,769) (2,419) (2,027) (97,237) (5,545) (319) (5,864) 272 - 272 TOTAL COMPREHENSIVE INCOME FOR THE YEAR (25,717) (5,592) The above Consolidated Statement of Profit and Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Consolidated Statement of Profit and Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 4849 Consolidated Statement of Financial Position Consolidated Statement of Financial Position As at 30 June 2022 As at 30 June 2022 (Continued) Notes 30-Jun-22 30-Jun-21 $’000 $’000 Notes 30-Jun-22 30-Jun-21 $’000 $’000 Non-Current Liabilities Borrowings Lease liability Employee benefits Contract liabilities Deferred tax liabilities Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Share capital Reserves Accumulated losses Equity attributable to members of the parent Non-controlling interests TOTAL EQUITY 27 13 19 11 8 21 22 25,359 14,784 451 8,072 2,507 51,173 20,579 16,394 547 8,551 12,106 58,177 101,684 117,255 28,933 49,856 201,301 (134,661) (37,707) 28,933 - 28,933 80,061 12,300 (12,824) 79,537 (29,681) 49,856 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Prepayments of domain name registry charges Lease receivables Contract assets Other assets Total Current Assets Non-Current Assets Plant and equipment Right-of-use assets Intangible assets Prepayments of domain name registry charges Lease receivable Deferred tax assets Goodwill Other financial assets Other assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Borrowings Lease liability Employee benefits Provision for income tax Contract liabilities Other financial liabilities Other liabilities Total Current Liabilities 9 10 13 11 16 12 13 15 13 8 14 27 16 17 27 13 19 11 18 5,367 4,049 5,585 - 669 3,409 19,079 15,670 15,177 22,059 2,387 - - 50,212 5,198 835 111,538 19,170 5,963 5,398 1,892 620 1,056 34,099 15,873 15,478 24,228 2,429 1,101 9,978 61,706 725 1,494 133,012 130,617 167,111 15,643 571 3,456 3,907 35 23,409 500 2,990 50,511 19,293 428 5,885 4,712 146 23,748 1,100 3,766 59,078 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes 5051 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows For the year ended 30 June 2022 For the year ended 30 June 2022 Notes Share Capital Treasury Shares Reserves Accumulated Losses Total equity attributable to owners of the Company Non- controlling interest Total Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 BALANCE AT 1 JULY 2021 Loss for the period Other comprehensive income 80,061 - - Total comprehensive income for the period 80,061 - - - - 12,300 (12,824) 79,537 (29,681) 49,856 - (24,883) (24,883) 145 (24,738) (979) - (979) - (979) 11,321 (37,707) 53,675 (29,536) 24,139 Transactions with owners in their capacity as owners: Acquisitions of subsidiaries through internal reorganisation Cancellation of treasury shares held by 5G Networks Limited Shares issued on exercise of Options 21 21 Cancellation of shares under unmarketable parcel facility Share issue costs Share based compensation Balance at 30 June 2022 BALANCE AT 1 JULY 2020 Loss for the period Other comprehensive income 1,115 (1,005) (14) - 201,301 38,644 - - Total comprehensive income for the period 38,644 Transactions with owners in their capacity as owners: Non-controlling interests arising on acquisition of a subsidiary Shares issued on exercise of Options Shares issued pursuant to Dividend Reinvestment Plan Share issued to vendors to acquire business Share issued as consideration for financial advisory services rendered Capital raising Share issue costs Dividend recognised and paid Share based compensation Deemed disposal of partial interests in a subsidiary arising from issuance of shares - 1,752 90 9,226 200 31,377 (1,228) - - - Balance at 30 June 2021 80,061 132,340 (11,196) (150,680) (29,536) 29,536 (11,196) 11,196 - - - - - - - 1,115 (1,005) (138) 4,822 - - - (124) 4,822 - - 1,115 (1,005) (138) 4,822 28,933 35,655 - - - - - - - (134,661) (37,707) 28,933 5,125 (8,114) 35,655 - (4,710) (4,710) (1,154) (5,864) 272 - 272 - 272 5,397 (12,824) 31,217 (1,154) 30,063 - - - - - - - (1,067) 2,874 5,096 - - - - - - - - - - - (28,807) (28,807) 1,752 90 9,226 200 31,377 (1,228) (1,067) 2,874 5,096 - - - - - - - - 280 1,752 90 9,226 200 31,377 (1,228) (1,067) 2,874 5,376 12,300 (12,824) 79,537 (29,681) 49,856 - - - - - - - - - - - - - - - - - - - - 12 months ended Notes 30-Jun-22 $’000 30-June-21 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Receipt from government grants Payments to suppliers and employees Interest received Interest paid Income tax paid Payments for restructuring and acquisition costs NET CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment and intangible assets Purchase of intangible assets Sublease payments received Consideration paid in relation to deferred capital payments of North Sydney Data Centre Net Cash on Purchase of ColoAU Net Cash on Purchase of Intergrid Net Cash on Purchase of Webcentral Limited Investments in listed companies Return of capital and dividends received from investments Return of pledged bank deposits Loans from / (to) employees 20 106,865 - (98,807) 111 (2,856) (57) (2,554) 3,422 (5,856) (1,336) 1,835 (499) (8) (602) - (5,417) 136 - - 95,247 432 (83,513) 231 (2,027) (305) (1,572) 8,493 (7,619) - 1,136 (1,083) (2,400) (1,748) 1,102 - 115 1,397 (920) NET CASH FLOWS USED IN INVESTING ACTIVITIES (11,747) (10,020) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from issues of shares on exercise of options Proceeds from borrowings Payment of performance rights Payment of security deposit Repayment of borrowings Payment of capital raising costs Payment of borrowing costs Payment of dividend on ordinary shares Payment of lease liabilities NET CASH FLOWS USED IN FINANCING ACTIVITIES - 1,025 5,412 (4,013) (376) (1,095) (182) (305) - (5,925) (5,459) 36,819 1,752 22,159 - - (52,487) (1,811) - (977) (6,854) (1,399) NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (13,784) (2,926) Net foreign exchange differences Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD (19) 19,170 5,367 (22) 22,118 19,170 9 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 5253 Notes to the Financial Statements Notes to the Financial Statements 1. Corporate Information The consolidated financial statements of Webcentral Limited (‘the Company’ or ‘Webcentral’) and its subsidiaries (collectively, ‘the Group’) for the year ended 30 June 2022 were authorised for issue in accordance with a resolution of the directors on 28 September 2022. Webcentral Limited is a limited company, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange (ASX). The Company is a for-profit entity. The Company’s name was changed from Webcentral Group Limited to Webcentral Limited following approval by the Company’s shareholders at its general meeting held on 3 November 2021. Operations and Principal Activities The Group’s principal activities during the year were: • the supply of cloud-based solutions, managed services and network services • the operation of fibre and wireless infrastructure and management of cloud computing environment • the operation of data centre facilities • the supply of domain name registrations and renewals, website and email hosting, website development, search engine marketing and social advertising campaigns for businesses in Australia and New Zealand Registered Office and Principal Place of Business The registered office and principal place of business of the Company is Level 7, 505 Little Collins Street, Melbourne VIC 3000. 2. Statement of Significant Accounting Policies Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs. The Financial Statements were authorised for issue, in accordance with a resolution of the Directors on 28 September 2022. Merger of Webcentral and 5G Networks Limited On 16 July 2021, the Company announced that it had entered into a Merger Implementation Agreement (MIA) with 5G Networks Limited (5GN) under which it was proposed that the two companies merge by way of a scheme of arrangement (Scheme), subject to 5GN shareholder approval and court approval in accordance with Part 5.1 of the Corporations Act 2001. On 12 November 2021, the merger (Merger) between 5GN and the Company was effected by way of scheme of arrangement between 5GN and its shareholders, with each 5GN shareholder receiving two new Webcentral shares for each 5GN share held. The record date was 16 November 2021, the new Webcentral shares were allotted on 23 November 2021 and all 5GN shares were transferred to Webcentral on the same day. From this date 5GN has been a wholly-owned subsidiary of the Company. 5GN was suspended from trading on ASX on 12 November 2021 and subsequently delisted from ASX on 25 November 2021. The shares in the Company held by 5GN were subsequently cancelled via a selective reduction of capital in January 2022 following shareholder approval at the Company’s 2021 Annual General Meeting held on 21 December 2021. Prior to the Merger, 5GN controlled the Group for the purposes of AASB 10: Consolidated Financial Statements and accounted for the acquisition of Webcentral under AASB 3: Business Combinations, conducting acquisition accounting for the period ended 30 June 2021. Following the Merger, 5GN shareholders hold approximately 73% of the Company’s ordinary shares and therefore continued to control the Group. In the Company’s judgement, the continuation of existing accounting values is consistent with the accounting which would have occurred if the assets and liabilities had already been in structure suitable to the Merger, and most appropriately reflects the substance of the internal restructure. In the Company’s judgement, the Merger between Webcentral and 5GN is considered to be an internal restructure and therefore a continuation of the existing 5GN consolidated business immediately prior to the Merger. Accordingly the consolidated financial report of Webcentral Limited (the accounting acquiree, being the Company) for the period ended 30 June 2022 has been presented as a continuation of the pre-existing accounting values of assets and liabilities in the 5G Networks Limited (the accounting acquirer) consolidated financial statements and includes the financial results for the consolidated group under 5G Networks Limited for the period from 1 July 2021 to 23 November 2021 and the consolidated group under Webcentral Limited for the period from 24 November 2021 to 30 June 2022. The comparative information presented in the financial report represents the financial position of 5G Networks Limited as at 30 June 2021; and the financial performance of 5G Networks Limited for the year ended 30 June 2021. The non-controlling interest recorded in 5G Networks Limited in relation to other shareholders in Webcentral prior to the Merger were reversed against Reorganisation Reserve in equity on consolidation level. The costs incurred in relation to the issue of new Webcentral shares to 5GN shareholders were allocated to the reorganisation reserve account. These costs consist of ASX listing fees and ASX CHESS settlement charges of $123,844. On 30 August 2022 Webcentral and 5GN were granted relief by the Australian Securities and Investments Commission (ASIC) analogous to ASIC Corporations (Wholly-Owned Companies) Instrument 2016/785 (Relief) in respect of the year ended 30 June 2022. The effect of the Relief is that 5GN is relieved from certain obligations under the Corporations Act 2001 in respect of the financial year ending 30 June 2022 (FY22) including: • the requirement to prepare a standalone financial report and directors’ report; • the requirement to have the standalone financial report audited and to obtain an auditor’s report for 5GN; and • the requirements to report to its members and send reports to members as requested. Webcentral is also relieved from certain obligations under the Corporations Act 2001 in relation to the reporting of wholly-owned subsidiaries. This Relief is only required for 5GN’s current financial year ending 30 June 2022. Thereafter, 5GN will automatically become eligible for the exemptions contained in ASIC Corporations (Wholly-Owned Companies) Instrument 2016/785. Absent this Relief, 5GN would have been required to prepare a financial report and comply with other requirements of the Act, as it was a “disclosing entity” for part of its current financial year by virtue of being listed on ASX until the merger of Webcentral and 5GN in November 2021 when 5GN became a wholly-owned subsidiary of Webcentral. There has been no changes in ownership of any members of 5G Networks Pty Ltd to the deed of cross guarantee between Webcentral and any of its wholly-owned entities that occurs following the end of 30 June 2022 and before the lodgement of its consolidated financial statements for the year ended 30 June 2022. Going concern The financial report for the financial year ended 30 June 2022 has been prepared on the going concern basis that contemplates the continuity of normal business activities and the realisation of assets and extinguishment of liabilities in the ordinary course of business. For the year ended 30 June 2022 the Group recorded a loss after tax of $24,738,000 (2021: Loss $5,864,000), operating cash inflows of $3,422,000 (2021: $8,493,000), financing cash outflows of $5,459,000 (2021: $1,399,000), and a deficit of current assets to current liabilities of $31,432,000 (2021: $24,979,000). At year end the Group had $5.4 million of cash on hand and available debt facilities of $10.8 million, of which $10.5 million is for the purpose of business acquisitions. The significant items which contributed to the Group’s loss after tax for the year were the non-cash goodwill impairment expense of $11.49 million, acquisition, restructuring and transaction costs of $4.6 million in relation to the Merger and associated restructuring activities, acquisition-related activities, and non-cash share-based payments expense of $8.83 million. The goodwill impairment charge has arisen due to the assessment of the carrying value of goodwill and intangible assets at year-end. The non-cash impairment expense recognises the uncertainty caused by the COVID-19 pandemic and the potential impacts to the Group's revenue and operating results. The non-cash impairment charge has no impact on the Group's debt facilities, covenants or liquidity. The acquisition, restructuring and transaction costs are considered to be one-off and non-recurring in nature. The share-based payment expense was significantly higher than prior years as they represent two listed companies and due to the acceleration of options vesting period due to the Merger. The ongoing annual share-based payments expense is expected to be significantly lower at approximately $1.5 million. The Directors regularly monitor the Group’s cash position and cash forecast and on an ongoing basis consider a number of strategic and operational plans and initiatives to ensure that adequate funding continues to be available for the Group to meet its business objectives. The Group’s cash forecast for the period to September 2023 (i.e. 12 months after the issue of the Group’s financial report) indicates that is generating a positive operating cashflow and that it does not require additional funding from external debt or equity providers. The specific growth initiatives and sales pipeline that support the operational growth forecast include: • release of .au domain name in March 2022 • CPanel hosting product launch in April 2022 • NBN product launch in August 2022 • wholesale customer sales closed in FY22 of $2.3 million and wholesale sales pipeline of $3.6 million • direct customer sales closed in FY22 of $1.8 million and direct sales pipeline of $5.7 million • hardware sales closed of $1.6 million in FY22 for delivery in FY23 A conservative cash forecast for the period to September 2023 (i.e. 12 months after the issue of the Group’s financial report) has also been prepared on the basis of a continuation of the Group’s revenue in July 2022 which indicates a positive operating cashflow for the period to September 2023 and that it does not require additional funding from external debt or equity providers. The Directors have undertaken solvency tests at year- end and as at the signing date of Group’s financial report which consider the Group’s ability to pay liabilities that are due within 30 days of each date. These tests consider the current assets and liabilities expected to be settled within 30 days, available debt funding of $3.8 million (excluding $10.5 million acquisition facility) and other available sources of funding and indicate that the Group has sufficient funding headroom. 5455Notes to the Financial Statements Notes to the Financial Statements The solvency tests consider current assets that are expected to be converted to cash and current liabilities that are not payable within 30 days including prepayments and current assets of $0.4 million, borrowings and other financial liabilities not expected to be payable or settled in cash of $1.8 million, trade payables and other creditors not payable of $3.2 million, payroll provisions of $2.5 million, property lease liabilities of $2.5 million and deferred revenue balances of $24.5 million. The Directors have taken the factors above into consideration and determined that there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable and the Directors consider the going concern basis of preparation to be appropriate for this consolidated financial report. New or Amended Accounting Standards not yet adopted in the period At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by AASB. None of these Standards or amendments to existing Standards have been adopted early by the Group. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group’s financial statements. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Webcentral Limited as at 30 June 2022 and the result of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the ‘Business Combinations’ accounting policy for further details. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly inequity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Business Combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquire and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquirer’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. Subsequent changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition date fair value of assets acquired, liabilities assumed and any noncontrolling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the preexisting fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquiree. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition- date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Foreign currency transactions Both the functional and presentation currency of the Group and its Australian subsidiaries is Australian dollars (AUD). Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. The functional currency of the Group’s New Zealand subsidiaries is New Zealand dollars (NZD). The assets and liabilities of overseas subsidiaries are translated into the presentation currency of the Group at the rate of exchange ruling at the reporting date, and the statement of comprehensive income is translated at the weighted average exchange rates for the period. The exchange differences arising on retranslation are taken directly to other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in the determination of profit and loss for the period. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designed as hedges of such investments, are taken to the foreign currency translation reserve in equity. When a foreign operation is sold, or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences is recognised in the statement of comprehensive income, as part of the gain on sale or loss on sale where applicable. Income Tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. (i) Current Taxes Current tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (ii) Deferred Taxes Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. (iii) Tax Consolidation The Group and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 January 2006. Members of the tax consolidated group have entered into a tax-funding agreement. Each entity is responsible for remitting its share of the current tax payable (receivable) assumed by the head entity. In accordance with UIG 1052 and Group accounting policy, the Group has applied the ‘separate taxpayer within group approach’, in which the head entity, Webcentral Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. 5657Notes to the Financial Statements Notes to the Financial Statements In addition to its own current and deferred tax amounts, the Group also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax credits assumed from controlled entities in the tax consolidated group. The allocation of taxes to the head entity is recognised as an increase/decrease in the controlled entity’s inter-company accounts with the tax consolidated Group head entity. Members of the Group have entered into a tax-sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement, on the grounds that the possibility is remote. Revenue Revenue is recognised either at a point in time or over time when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. All revenue is stated net of the amount of Goods and Services Tax (GST). (i) Sale of Goods Sale of hardware and software products for a fixed fee is recognised as revenue when the goods are delivered and control is transferred to the customer. (ii) Rendering of Services – network and voice, data centre, managed services The Group provides network, voice, data centre and managed services under fixed-price and variable price contracts. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised over time based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. If the contract includes a variable fee, revenue is recognised in the amount to which the Group has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced. (iii) Rendering of Services – domain name registration Domains revenue primarily consists of domain registrations and renewals, as well as aftermarket sales. Domain registrations are assessed as a distinct service that provides a customer with the exclusive use of the domain name over the contracted period, including the provision of Domain Name System services. Consideration is recorded as income received in advance when it is received, which is typically at the time of sale and revenue, with the exception of aftermarket sales, is recognised evenly over the contract period as performance obligation is satisfied. As the customer simultaneously receives and consumes the benefits of the domain services provided, this revenue is recognised evenly over the contract period. Aftermarket sales are recognised as revenue when ownership of the domain has been transferred. (iv) Rendering of Services – hosting (email and web) Hosting revenue primarily derives from website and email hosting services provided over a contracted period of time. Where consideration is received in advance of performance, it is initially recorded as income received in advance. Revenue is recognised as the performance obligations are satisfied, which is considered to be evenly over the contracted term that the hosting services are provided. (v) Rendering of Services – online marketing Online marketing revenue consists of search engine optimisation (SEO), pay-per-click (PPC) advertising, and social media advertising. Where consideration is received in advance of performance, it is initially recorded as income received in advance. Revenue is recognised as the performance obligations are satisfied, which is considered to be evenly over time in line with the contracted term as the customer simultaneously receives and consumes the benefits of online marketing services. (vi) Rendering of Services – website build Website build revenues consist of fees charged for the creation of websites for customers. Where the Group has an enforceable right to payment for performance completed to date, and no alternative use for the asset, it recognises revenue over the period of the build based on time incurred, because there is a direct relationship between the Group’s effort and the transfer of service to the customer. In the absence of such a right, the Group recognises revenue at a point in time being transfer of the website to the customer. Revenue from the build of websites are recognised over an average build period of three months. Contract fulfilment costs incurred in advance of revenue recognition are capitalised when they are directly attributable to the contract, generate the resources to satisfy the performance obligations, and will be recovered. These costs are expensed over the period when revenue is recognised. Other Income Other income includes miscellaneous items including expense recoveries. Other revenue is recognised when it is received or when the right to receive payment is established. (i) Interest Interest revenue is recognised as interest accrues under the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (ii) R&D Tax offset income Non-refundable R&D tax offset is recognised as income under Government Grant approach (AASB 120) when there is reasonable assurance that it will be received as a reduction in current or future income tax liabilities. It is recognised in the statement of comprehensive income in the same period that the related costs are recognised as expenses and relates to refundable amounts on approved expenses. (iii) Government Grant Income Government grant income is only recognised when there is reasonable assurance that the entity will comply with the conditions attaching to them, and the grant will be received. Leases (i) The Group as a lessee As a lessee, the Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract. That coveys the right to use as asset (the underlying asset) for a period of time in exchange for consideration’. Measurement and recognition of leases as a lessee At the commencement date, the Group recognises a right- of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted lease payments using its incremental borrowing rate. The weighted-average rate applied is in the range of 6%-8%. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), and variable payments based on an index or rate stated in the lease agreements. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. (ii) The Group as a lessor The Group is an intermediate lessor of some subleases, which were previously classified as operating leases under AASB 16: Leases . The Group accounts for a head lease and sublease as two separate contracts, applying both lessee and lessor accounting requirements respectively. On the date of initial application, the Group reassessed its existing operating subleases to determine whether the sublease is classified as an operating or finance lease under AASB 16. The reassessment is based on the remaining contractual terms of the head lease and sublease with reference to the right-of-use assets associated with the head lease and not the underlying asset. On identifying finance subleases that were previously classified as operating subleases, the Group derecognises the ROU asset relating to the head lease that is transferred to the sublessee and recognises the net investment in the sublease equal to the present value of lease receivables. Where the interest rate implicit in the sublease cannot be readily determined, the Group utilises the incremental borrowing rate from the head lease (adjusted for any initial direct costs associated with the sublease) to discount the lease receivable to its present value. When finance subleases terminate earlier, the Group apply the derecognition and impairment requirement in AASB 9 to the net investment in the lease to derecognise the residual present value of lease receivables by adding the right to use asset relating to the head lease. The Group is required to calculate an expected credit loss for the lease receivable in accordance with AASB 9 and elected to apply the simplified approach to recognise the lifetime expected credit losses of the lease receivable. The Group considered both historical information and a forward outlook in determining the lifetime expected credit loss on lease receivables. Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings of current liabilities on the statement of financial position. 5859Notes to the Financial Statements Notes to the Financial Statements Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Property, Plant and Equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is provided on a straight-line or diminishing value basis on all plant and equipment. Major depreciation periods are: Leasehold improvements Lease term or 6 years if the lease term is over 6 years Plant and equipment 2 to 10 years Furniture and fittings 2 to 5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Intangible Assets (i) Goodwill Goodwill arises on the acquisition of a business combination. Goodwill is calculated as the excess sum of: • the consideration transferred; • any non-controlling interest; and • the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of net identifiable assets acquired. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Goodwill is allocated to the Group's cash-generating units representing the lowest level at which goodwill is monitored. (ii) Brand name and customer contracts Brand names and customer contracts acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values. Brand names and customer contracts are amortised on a straight-line basis over their estimated useful lives of five to ten years. (iii) Capitalised Software Costs relating to the research phase of the project are expensed while costs relating to the development phase are capitalised as Capitalised Software when the project meets the definition of an asset; and is identifiable. The costs capitalised are being amortised over a useful life of four to six years. Impairment of Non-financial Assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Financial Instruments (i) Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. (ii) Classification and measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets, other than those designated and effective as hedging instruments, are classified into one of the following categories: • amortised cost • fair value through profit or loss (FVTPL), or • fair value through other comprehensive income (FVOCI). Financial assets at amortised cost All of the Group’s financial assets are classified as financial assets at amortised cost as they meet the following conditions: • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, restricted cash, trade and other receivables fall into this category of financial assets. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at FVTPL. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply (see below). The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in The Pistol and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of IFRS 9 ’Financial Instruments’, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Financial assets designated at fair value through OCI (FVOCI) Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under AASB 132: Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. The Group elected to classify irrevocably its Other non- listed and listed equity investments under this category. (iii) Impairment of Financial assets The Group assesses on a forward-looking basis the expected credit losses associated with other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group makes use of a simplified approach in accounting for trade receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Refer to Note 10 for a detailed analysis of how the impairment requirements of AASB 9 are applied. (iv) Classification and measurement of financial liabilities The Group’s financial liabilities include trade and other payables, loans and borrowings, derivative financial instruments and contingent consideration. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method, which are carried subsequently at fair value with gains or losses recognised in profit or loss. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. 6061Notes to the Financial Statements Notes to the Financial Statements Provisions, Contingent Assets and Contingent Liabilities Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Any reimbursement that the Group is virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. Employee benefits (i) Wages and Salaries and Annual Leave Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long Service Leave The liability for long service leave is recognised in current and non-current liabilities, depending on the unconditional right to defer settlement of the liability for at least 12 months after the reporting date. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality Australian corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share-based payments The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans are cash-settled. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period. Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium. Issued Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year. Earnings Per Share Basic earnings per share is calculated by dividing the profit attributable to the owners of the Group, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax (‘GST’) and Other Similar Taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. In accordance with the accounting treatment of the merger between the Company and 5G Networks Ltd, the comparative information presented in the financial report represents the financial position of 5G Networks Limited as at 30 June 2021; and the financial performance of 5G Networks Limited for the year ended 30 June 2021. 3. Critical Accounting Judgements, Estimates and Assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances and with the exceptions of income tax and revenue recognition, were the same as those applied in the Group’s last annual financial statements for the year ended 30 June 2021. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Prepayments of domain name registry charges Prepayments of domain name registry charges are direct costs to fulfil a contract. The Group defers these costs as an asset and amortises the asset over the contract period, consistent with the satisfaction of performance obligations and the recognition of revenue. The Group re-assesses costs to fulfil contracts on a periodic basis to reflect significant changes in the expected timing of satisfying performance obligations to which the asset relates, and when there is a significant change in the carrying amount of the asset. Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtor’s financial position. Estimation of Useful Lives of Assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Goodwill and Other Indefinite Life Intangible Assets The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in Note 2. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Leases 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 premises leases to lease the assets for additional terms of five 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. 6263Notes to the Financial Statements Notes to the Financial Statements 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 excluded the renewal period as part of the lease term for leases of rental premises as the Group is not reasonably certain to exercise the renewals. Income Tax The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities based on the Group’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Recovery of Deferred Tax Assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Long Service Leave Provision As discussed in Note 2, the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present values of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. Business Combinations Business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Merger with 5G Networks Limited In the Company’s judgement, the Merger between Webcentral and 5GN is considered to be an internal restructure and therefore a continuation of the existing 5GN consolidated business immediately prior to the Merger. Accordingly, the continuation of existing accounting values is consistent with the accounting which would have occurred if the assets and liabilities had already been in structure suitable to the Merger, and most appropriately reflects the substance of the internal restructure. 4. Segment Information Management currently identifies the operating segments monitored by the Group’s Chief Operating Decision Maker (“CODM”) as being Data Centres, Network and Cloud Applications and Managed Services, and Webcentral. • Data Centres, Networks and Cloud Applications: Data Centres, Networks and Cloud are interrelated and consist of the provision of data centre services (physical, virtual machines and colocation in non-5GN owned DCs), network infrastructure included cross connects, 5GN owned and non-5GN owned fibre networks and cloud applications. • Managed Services including Voice, Hardware / Software and other: Managed IT services including on-site and remote IT support, professional services and project management, provision of voice services and hardware and software procurement. These services are typically bundled into one product or service. • Webcentral: Webcentral domains, email, web hosting and digital marketing business Segment information for the reporting period is as follows: a. Adjusted EBITDA Adjusted EBITDA excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings such as restructuring costs, legal expenses and impairments where the impairment is the result of an isolated, non- recurring event. It also excludes the effects of equity- settled share-based payments and unrealised gains or losses on financial instruments. Interest income and finance cost are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the group. Segment Revenue Data Centres, Network & Cloud Managed Services Webcentral Intersegment eliminations Consolidated Revenue Cost of goods sold Gross Margin Other income Rent and office expenses Marketing and travel expenses 2022 $'000 2021 $'000 24,638 19,465 50,106 (781) 93,428 (38,157) 55,271 3,304 (410) (1,788) 27,723 25,326 35,305 (1,265) 87,089 (37,465) 49,624 4,603 (989) (1,122) Employee benefits expenses (35,960) (32,203) Other expenses Total Adjusted EBITDA Data Centres, Network & Cloud Managed Services Webcentral Total Adjusted EBITDA (2,856) 17,561 2,613 1,999 12,949 17,561 (4,447) 15,466 3,150 3,946 8,370 15,466 b. Reconciliations of operating profit (loss) before income tax Adjusted EBITDA reconciles to operating profit before income tax as follows: 2022 $'000 2021 $'000 Total adjusted EBITDA Impairment of financial assets Impairment of intangible assets Share-based payment expenses Acquisition costs Restructuring costs Depreciation and amortisation expenses Finance costs Loss before income tax expense 17,561 (578) (11,494) (8,833) (904) (3,706) (13,630) (2,798) (24,382) 16,316 (850) - (2,874) (2,207) (1,715) (12,188) (2,027) (5,545) (c) Segment assets Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of the segment. Data Centres, Network & Cloud Managed Services Webcentral Total segment assets 2022 $'000 2021 $'000 38,494 14,355 86,097 138,946 21,554 17,029 128,528 167,111 5. Revenue from contracts with customers The revenue breakdown by product and service line for the year ended 30 June 2022 is shown below: CONTINUING OPERATIONS Types of goods of service Cloud Domains Network & Voice Data Centres Managed Services Digital Marketing Hardware & Software Total revenue from contracts with customers Timing of revenue recognition Goods and services transferred at a point in time Services transferred over time Total revenue from contracts with customers 2022 $'000 2021 $'000 29,407 22,595 10,168 7,989 11,994 4,512 6,763 93,428 27,763 15,012 9,217 8,489 13,378 2,405 10,825 87,089 6,763 10,825 86,665 93,428 76,264 87,089 The Group’s revenue disaggregated by pattern of revenue recognition is as follows: Cloud Domains Network & Voice Data Centres Managed Services Digital Marketing Hardware & Software Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 For the year ended 30 June 2022 Goods transferred at a point in time - - - - - - 6,763 6,763 Services transferred over time 29,407 22,595 10,168 7,989 11,994 4,512 - 86,665 For the year ended 30 June 2021 Goods transferred at a point in time - - - - - - 10,825 Services transferred over time 27,763 15,012 9,217 8,489 13,378 2,405 - 10,825 76,264 6465 Notes to the Financial Statements Notes to the Financial Statements 6. Other Income Other income includes miscellaneous items including expense recoveries. Other revenue is recognised when it is received or when the right to receive payment is established. Consolidated 2022 $’000 2021 $’000 - 168 21 - 197 2,460 478 116 99 1,350 132 2,428 Government grant income Dividend income Interest income Gain on remeasuring equity interest to fair value upon control obtained Sublease income Management fees from transitional service agreements in relation to the sale of Enterprise and TPP Wholesale businesses1 Sundry income Total Other Income 458 3,304 - 4,603 1. Under the terms of the Transitional Services Agreement for the sale of the TPP Wholesale Reseller business, the Group is entitled to receive ongoing management fees associated with the separation of the business until the Agreement ceases. 7. Earnings per share Basic Earnings Per Share (EPS) amounts are calculated by dividing net loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted EPS amounts are calculated by dividing net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. There were no dilutive potential ordinary shares in existence during the year (2021: Nil) as the share options and performance rights of the Company were antidilutive. The following represents the share data used in the EPS computations: Consolidated 2022 $’000 2021 $’000 291,056,455 107,668,0001 Weighted average number of shares used in calculating earnings per share and diluted earnings per share 1. Due to the number of ordinary shares increasing subsequent to the Merger of the Company with 5GN, the calculation of basic and diluted earnings per share have been adjusted as if the Merger took place at the beginning of the comparative period. 8. Income tax Consolidated 2022 $’000 2021 $’000 (A) INCOME TAX BENEFIT / (EXPENSE) (Loss) / profit before income tax (24,382) (5,545) At the Group's statutory income tax rate of 30% (2021: 30%) 7,315 1,663 Tax effect amounts which are not deductible in calculating taxable income: Non-deductible goodwill impairment charge (3,448) Other tax-exempt income 10 Expense on performance rights and options (2,650) Other non-deductible expenses Rate change Derecognition of DTA Net under/over Unrecognised tax loss for the year Over provision from period and business combination (343) - - (313) (994) 67 - 419 (862) (645) 157 (166) (619) (203) (63) Actual tax benefit / (expense) (356) (319) Tax expense comprises: - Over provision from prior period and business combination - Deferred tax - origination and reversal of temporary differences Aggregate Income tax expense at the effective income tax rate - (13) (356) (306) (356) (319) (B) DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets are comprised of the following temporary differences:1 Allowable section 40-880 (blackhole) deductions – written down value Accrued expenses and provisions - - - 741 9,237 9,978 Deferred tax liabilities are comprised of the following temporary differences: Allowable section 40-880 (blackhole) deductions – written down value 870 Accrued expenses and provisions 7,439 Other 20 - - - Tangible and intangible assets (5,229) (5,812) ACA impact on depreciating asset – written down value (122) R&D capitalised labour (3) 4 - 10. Trade and other receivables Trade receivables Allowance for impairment of receivables Consolidated 2022 $’000 2021 $’000 5,020 (1,768) 4,990 (1,190) 3,252 3,800 Unsecured loans – at call1 Other receivables Total trade and other receivables 424 373 4,049 983 1,180 5.963 1. Unsecured loans represent loans granted to key management personnel and employees to allow them to take up shares in a capital raising undertaken by Webcentral Limited in FY21. The loans are expected to be extinguished following the payment of FY22 bonuses. The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers. The expected loss rates are based on the payment profile for sales over the past 48 months before 30 June 2022 and 1 July 2021 respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. As at 30 June 2022, the Group has unrecognised income tax losses of $34,807,742 tax-effected at 30% (2021: $9,856,208), and capital losses of $87,869,863 arising from the sale of the TPP Wholesale Reseller business, and the sale of the Enterprise business (2021: $87,869,863). 9. Cash and Cash Equivalents (a) Reconciliation of cash and cash equivalents For the purposes of the statement of cash flows, cash includes cash at bank and in hand net of bank overdrafts. Cash at the end of the year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank and in hand Total cash and cash equivalents Consolidated 2022 $’000 2021 $’000 5,367 5,367 19,170 19,170 (b) Reconciliation of loss after tax to net cash flows from operating activities Consolidated 2022 $’000 2021 $’000 Loss after income tax (24,883) (4,710) Non-cash flows in profit: Depreciation and amortisation Employee benefits expenses Share-based payment expenses Gain on remeasuring equity interest to fair value upon control obtained Impairment expenses Other expenses 13,683 854 8,833 12,188 864 2,874 - (1,350) 11,494 (2,740) - (822) Changes in assets and liabilities net of effects of purchases and disposals of controlled entities: Movement in trade and other receivables Movement in other assets Movement in deferred tax asset Movement in intangibles 1,243 (855) (1,572) 379 - 5,745 (220) (350) Brand and Customer contract (5,482) (6,298) Movement in trade and other payables (1,839) (2,270) NET DEFERRED TAX ASSET / DEFERRED TAX LIABILITY (2,507) (12,106) (2,507) (2,128) 1 As 5G Networks Ltd and Webcentral Ltd did not form a tax consolidated group until November 2021 following the merger, deferred tax asset and deferred tax liability for the period ended 30 June 2021 cannot be offset. Movement in employee benefits provisions Movement in Income tax payable Movement in other Liabilities Net cash from operating activities (854) (57) (1,119) 3,422 116 - (2,717) 8,493 6667Notes to the Financial Statements Notes to the Financial Statements Trade receivables are written off (i.e. derecognised) when there is no reasonable expectation of recovery. Failure to make payments within 120 days from the invoice date and failure to engage with the Group on alternative payment arrangement amongst other is considered indicators of no reasonable expectation of recovery. On the above basis the expected credit loss for trade receivables as at 30 June 2022 and 30 June 2021 was determined as follows: Current 0-30 days past due 31-60 days past due 61-90 days past due 91 days + past due Closing balance 30-Jun-22 Gross $’000 ECL Rate ECL $’000 ECL Rate 30-Jun-21 Gross $’000 ECL $’000 0.0% 0.0% 0.0% 0.0% 47.9% 2,475 324 171 132 1,918 5,020 - - - - (1,768) (1,768) 6.2% 4.1% 5.5% 9.8% 55.1% 2,101 647 296 122 1,824 4,990 (131) (26) (16) (12) (1,005) (1,190) The closing balance of the trade receivables loss allowance as at 30 June 2022 reconciles with the trade receivables loss allowance opening balance as follows: Opening loss allowance as at 1 July 2020 Net additional provision for ECL’s taken to the P&L Loss allowance as at 30 June 2021 Net additional provision for ECL’s taken to the P&L Loss allowance as at 30 June 2022 $’000 340 850 1,190 578 1,768 In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a large number of customers in various industries and geographical areas. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good. 11. Contract Assets and Liabilities Contract assets consist of the following: Contract assets1 Work in progress Consolidated 2022 $’000 2021 $’000 669 669 620 620 1. The Group makes uses of a simplified approach in accounting for contract assets and records the loss allowance as lifetime expected credit losses. After the assessment of contract asset on a collective basis, the Group determined to apply zero as the loss rate. Contract liabilities consist of the following: Deferred revenue Consolidated 2022 $’000 2021 $’000 23,409 23,748 Contract liabilities - current 23,409 23,748 Deferred revenue Contract liabilities - non-current 8,072 8,072 8,551 8,551 12. Property, Plant and Equipment Leasehold improvements $'000 Plant and equipment $'000 Total $'000 Gross carrying amount At 1 July 2021 Additions Disposals Closing Value at 30 June 2022 4,432 - (5) 21,861 5,969 (727) 26,293 5,969 (732) 4,427 27,103 31,530 13. Leases The Group has leases for data centres and related facilities, and offices premises. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. Set out below are the amounts recognised in profit and loss during the period: 2022 $’000 2021 $’000 4,722 4,897 Depreciation and impairment Depreciation expense of right-of-use assets (1,943) (1,487) - (8,477) (3,989) 36 (10,420) (5,476) 36 Interest expense on lease liabilities Rent expense - short-term leases 1,166 28 1,402 53 (3,430) (12,430) (15,860) Right-of-use asset At 1 July 2021 Depreciation Disposals Closing value at 30 June 2022 Carrying Amount 30 June 2022 Gross carrying amount At 1 July 2020 Assets acquired in the business acquisition Additions Disposals Closing Value at 30 June 2021 997 14,673 15,670 2,002 1,920 522 (12) 11,975 2,887 6,999 - 13,977 4,807 7,521 (12) 4,432 21,861 26,293 Depreciation and impairment Balance at 1 July 2020 Depreciation Disposals Closing value at 30 June 2021 Carrying Amount 30 June 2021 (684) (4,876) (5,560) (1,271) 12 (3,601) (4,872) - 12 (1,943) (8,477) (10,420) 2,489 13,384 15,873 Right-of-use assets Building $’000 Other equipment $’000 Total $'000 14,930 3,205 1,127 (43) 548 132 - - 15,478 3,337 1,127 (43) (4,593) (129) (4,722) As at 1 July 2021 Additions during the year Derecognition of lease receivables Disposals during the year Depreciation expense As at 30 June 2022 14,626 551 15,177 Right-of-use assets Premises $’000 Other equipment $’000 Total $'000 12,369 10,509 (3,178) 645 30 13,014 10,539 - (3,178) (4,770) (127) (4,897) As at 1 July 2020 Adjustments during the year Disposals during the year Depreciation expense As at 30 June 2021 14,930 548 15,478 6869Notes to the Financial Statements Notes to the Financial Statements Lease receivables Lease liabilities The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2022 were as follows: Set out below is a reconciliation of lease receivables for finance leases where the Group is a lessor: Opening balance Assets acquired in the business acquisition Additions Disposals1 Interest income Receipts from lessees Closing balance 2022 $’000 2,993 - - (1,127) 94 (1,960) - 2021 $’000 - 5,402 383 (983) 132 (1,941) 2,993 1. Disposals due to early termination of sublease and the balance was transferred to ROU Set out below is a maturity analysis of lease receivables for finance leases where the Group is a lessor: Maturity analysis - contractual undiscounted cash flows Within 1 year 1-2 year 2-3 year After 3 years Total undiscounted lease receivable at 30 Jun Unearned finance income Net investment in lease 2022 $’000 2021 $’000 - - - - - - - 1,987 378 391 439 3,195 (202) 2,993 Current Obligations under property leases Obligations under equipment leases Consolidated 2022 $’000 2021 $’000 3,319 137 3,456 5,641 244 5,885 Non-current Obligations under property leases 14,713 16,288 Obligations under equipment leases 71 106 14,784 16,394 Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. Some leases contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security. For leases over data centres and office premises the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure items of property, plant and equipment and incur maintenance fees on such items in accordance with the lease contracts. The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognised on balance sheet: Right-on-use asset No of right-on- use assets leased Range of remaining term Average remaining lease term No of leases with extension options No of leases with variable payments linked to an index No of leases with termination options Data centres and related facilities Office premises IT Equipment 5 12 2 1-9 years 4 years 1-5 years 2 years 2 years 2 years 5 6 0 5 6 0 0 0 0 30 June 2022 Lease payments Finance charges Net present values 30 June 2021 Lease payments Finance charges Net present values Within 1 year 1-2 year 2-3 year 3-4 years 4-5 years After 5 years Total Minimum lease payments due 4,554 (1,098) 3,456 7,098 (1,213) 5,885 4,500 (866) 3,634 5,966 (919) 5,047 4,124 (630) 3,494 3,523 (724) 2,799 3,288 (412) 2,876 3,341 (528) 2,813 3,364 (257) 3,107 2,504 (354) 2,150 1,909 (236) 1,673 4,064 (478) 3,586 21,739 (3,499) 18,240 26,496 (4,216) 22,280 Lease payments not recognised as a liability The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. The expense relating to payments not included in the measurement of the lease liability is as follows: Short-term leases Total Consolidated 2022 $’000 2021 $’000 28 28 53 53 14. Goodwill The following table shows the movements in goodwill: Gross carrying amount Balance at beginning of period Acquired through business combination Balance at end of the period Accumulated impairment Balance at beginning of period Impairment loss recognised Balance at end of the period Consolidated 2022 $’000 2021 $’000 61,706 - 61,706 - (11,494) (11,494) 16,567 45,139 61,706 - - - Carrying amount at end of the period 50,212 61,706 Impairment Disclosures and Testing of Goodwill Goodwill is allocated to the Group’s cash generating units, which are the units expected to benefit from the synergies of the business combinations in which the goodwill arises. Data Centres, Networks and Cloud Managed Services Webcentral Goodwill allocation at 30 June Consolidated 2022 $’000 2021 $’000 5,479 5,536 39,197 50,212 16,973 5,536 39,197 61,706 The recoverable amount of the cash-generating units is determined based on value-in-use calculations. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. A value in use model was developed to provide a forecast of free cash flows for the five financial years ending on 30 June 2027 and a terminal value, based on a one-year budget approved by the Board followed by an extrapolation of expected cash flows for the units’ remaining useful lives using growth rates of 2.5% per annum for year 2 onward being the long-term target CPI rate. The present value of the expected cash flows of each CGU is determined by applying a suitable discount rate. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value 7071Notes to the Financial Statements Notes to the Financial Statements of money and asset-specific risk factors. The discount rate has been based upon an estimate of CGU weighted average cost of capital (WACC). The WACC adopted for each CGU is summarised below: to the prior year due to the cessation of legacy customer contracts, the conversion of higher value data centre contracts into lower value cloud services contracts, and forecast revenue growth not achieved in FY22. Low High Data Centres, Networks and Cloud 9.7% 11.0% Managed Services Webcentral 12.1% 12.90% 10.6% 12.10% Impairment Charge for Goodwill An impairment charge of $11.49 million was recorded for the Data centres, network and cloud segment based on impairment testing indicating that the carrying value exceeded the recoverable amount of the CGU as at 30 June 2022. The underlying reasons for the impairment charge were the reduction in revenue in FY22 compared No impairment charge was recorded for the Managed Services and Webcentral segments as their respective recoverable amounts exceeds their carrying values by $28.8 million and $83.3 million respectively. Sensitivity analysis undertaken on the key impairment model assumptions indicates that in order for the recoverable amounts to be equal to their carrying values for the Managed Services and Webcentral segments, the discount rate would need to increase to 82% and 28% respectively and the revenue growth rate would need to decrease to negative 1.8% and negative 0.8% respectively. Management are not aware of any events that are expected to have an adverse effect on revenue growth. 15. Other intangible assets The following table shows the movements in other intangible assets: Customer contract $'000 Brand name Capitalised software Marketing Related Intangibles $'000 $'000 $'000 Total $'000 Gross carrying amount At 1 July 2021 Additions Disposals Closing Value at 30 June 2022 Amortisation and impairment At 1 July 2021 Amortisation Closing value at 30 June 2022 Carrying Amount at 30 June 2022 Gross carrying amount At 1 July 2020 Assets acquired in the business acquisition Additions Disposals 18,932 - - 18,932 (1,377) (1,918) (3,295) 15,637 372 18,560 - - 4,017 - - 4,017 (577) (803) (1,380) 2,637 - 4,017 - - Closing Value at 30 June 2021 18,932 4,017 Amortisation and impairment Balance at 1 July 2020 Amortisation Closing value at 30 June 2021 Carrying Amount at 30 June 2021 (78) (1,299) (1,377) 17,555 - (577) (577) 3,440 3,775 1,081 - 4,856 (542) (672) (1,214) 3,642 - 3,425 350 - 3,775 - (542) (542) 3,233 - 180 - 180 - (37) (37) 143 - - - - - - - - - 26,724 1,261 - 27,985 (2,496) (3,430) (5,926) 22,059 372 26,002 350 - 26,724 (78) (2,418) (2,496) 24,228 (a) Marketing-related intangibles Market-related intangibles represent website development. They have been assessed as having an effective life of five years. (b) Brand Name and Customer Contracts Brand names and customer contracts acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values. Brand names and customer contracts are amortised on a straight-line basis over their estimated useful lives of five to ten years. (c) Capitalised software Costs relating to the research phase of the project are expensed while costs relating to the development phase are capitalised as Capitalised Software when the project meets the definition of an asset; and is identifiable. The costs capitalised are being amortised over a useful life of four to six years. Included in capitalised software is $2.59 million of capitalised labour and other directly attributable costs. The capitalised labour in progress which has not started amortisation relates to product and service customer platform enhancements. The remaining balance of capitalised software relates to legacy software and cloud platforms from acquired entities, as well as newly developed software platforms eligible to begin amortisation during the year. 16. Other assets Other assets consist of the following: Other prepayments Inventory Bond payments Other Consolidated 2022 $’000 2021 $’000 2,878 200 74 257 526 172 78 280 Other assets - current 3,409 1,056 Other prepayments Bond payments Other assets - non-current 835 - 835 1,044 450 1,494 17. Trade and other payables Trade creditors Accrued liabilities Deferred consideration Deposits received in advance Other creditors Total trade and other payables Consolidated 2022 $’000 2021 $’000 11,917 10,190 888 750 231 1,857 15,643 3,319 1,941 303 3,540 19,293 All amounts are short-term. The carrying values of trade and other payables are considered to be a reasonable approximation of fair value. 18. Other Liabilities GST and PAYG due to ATO Payroll tax provision Other liabilities - current Consolidated 2022 $’000 2021 $’000 2,804 186 2,990 3,352 414 3,766 19. Employee Benefits Provisions Current Annual leave Long service leave Wages payable Superannuation payable Accrued bonuses and sales commission Non-current Long service leave Consolidated 2022 $’000 2021 $’000 2,007 934 61 738 167 3,907 451 451 1,883 1,079 201 516 1,033 4,712 547 547 7273Notes to the Financial Statements Notes to the Financial Statements issued following the exercise of options and performance rights for total consideration of $1,115,000. In January 2022, 69,524,461 ordinary shares held by 5GN were cancelled via a selective reduction of capital pursuant to the Merger. These shares were classified as treasury shares from 23 November 2021 at the time the scheme became effective. In June 2022, 4,278,509 ordinary shares were cancelled pursuant to an unmarketable parcel share sale facility. Consolidated 2022 $’000 2021 $’000 Issued and paid-up capital Ordinary shares each fully paid 201,301 80,061 20. Business Acquisitions Colocation Australia (“ColoAu”) On 8 July 2020, the Company acquired the business and assets of ColoAU. The goodwill value of $3.015 million identified in relation to the acquisition is final. Intergrid Group Pty Ltd On 17 March 2021, the Group completed the acquisition of 100% of Intergrid Group Pty Ltd. A deferred payment of $0.60 million was paid on 20 July 2021 due to the achievement of target revenue and customer churn rates. The goodwill value of $2.928 million identified in relation to the acquisition is final. 21. Issued Capital During the period, 241,322,246 ordinary shares were issued pursuant to the Merger with 5GN for consideration of all of the shares in 5GN and 7,325,000 ordinary shares were Movements in ordinary shares on issue 30 June 2022 30 June 2021 Number of shares $'000 Number of shares $'000 Beginning of the financial period - Acquisition of subsidiaries through internal reorganisation - Shares issued following exercise of options - Share issued as consideration for services - Shares issued following exercise of performance rights - Shares cancellation – unmarketable parcel facility - Issue of shares pursuant to Share purchase plan - Issue of shares to vendor - Issue of shares under a Placement - Issues of shares under Dividend Reinvestment Plan - Issue of shares as consideration for WCG off-market takeover - Issue of shares as consideration of financial advisory services rendered - Transaction costs for share issue 114,261,123 212,902,341 125,000 200,000 5,000,000 (4,278,509) - - - - - - - 80,061 121,144 25 90 1,000 (1,005) - - - - - - 86,748,245 38,644 - 730,000 - 2,000,000 - 3,398,111 777,569 15,279,175 58,788 4,743,253 - 552 - 1,200 - 3,874 980 27,503 90 8,246 114,942 200 (14) - (1,228) 80,061 - - Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share Based Payments – Employee Shares On 22 March 2022, 882,837 ordinary shares were issued to employees under an Employee Share Plan as free shares. Shares acquired under this plan carry all of the same rights and obligations of other shares, except for any rights attaching to shares by reference to a record date prior to the date of issue or transfer. Share Based Payments – Options During the year the Group issued 27,100,000 options to directors and employees under the Executive and Director Share Plan and the Executive Equity Plan as a means of rewarding and incentivising key employees. Further details of the performance rights, including details of rights issued during the financial year, are set out in Note 23. There were 20,000,000 performance rights and 15,110,000 unlisted options on issue at the end of the year. Treasury Shares The loans granted under Executive and Director Share Plan (Note 23) are limited in recourse over the shares issued on exercise of the options, and the Company placed a holding lock over these shares to secure repayment. These shares were treated as treasury shares. During the year, the Group has issued 2,000,000 treasury shares. Movements in treasury shares: 30 June 2022 30 June 2021 Number of shares $'000 Number of shares $'000 69,524,461 (11,196) (69,524,461) 11,196 Beginning of the financial period - Acquisition of subsidiaries through internal reorganisation - Cancellation of treasury shares held by 5G Networks Limited - Issue of shares under ESOP End of the financial period 2,000,000 - - - - - - - - - - 22. Reserves Consolidated 2022 $’000 2021 $’000 Share-based payments reserve Other reserve Foreign currency reserve 11,471 4,436 236 Reorganisation reserve (150,804) 6,649 5,379 272 - Total (134,661) 12,300 Share-based payment reserve Balance at the beginning of the period Arising on share-based payments Balance at the end of the year 2022 $’000 2021 $’000 6,649 4,822 11,471 3,775 2,874 6,649 The share-based payments reserve is used to recognise the value of equity-settled share-based payment transactions provided to employees, including KMP, as part of their remuneration. Refer to note 23 for further details of these plans. Other reserves Balance at the beginning of the period Change in fair value of equity instruments Dividend recognised and paid Deemed disposal of partial interests in a subsidiary arising from issuance of shares 2022 $’000 2021 $’000 5,379 (943) - - 1,350 - (1,067) 5,096 Balance at the end of the year 4,436 5,379 Other reserves represent the fair value reserve (for equity investments at fair value through equity). The fair value reserve of financial assets at FVOCI is used to record changes to the fair value of non-current financial asset as disclosed in note 27 to the financial statements. Foreign currency reserve Balance at the beginning of the period Currency translation differences Balance at the end of the year 2022 $’000 2021 $’000 272 (36) 236 - 272 272 The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries Shares issued and fully paid 328,209,955 201,301 113,850,083 - Issue of shares to employees under Employee Share Plan - Issue of shares under ESOP End of the financial period 882,837 2,000,000 - - 111,040 300,000 331,092,792 201,301 114,261,123 80,061 2,000,000 7475 Notes to the Financial Statements Notes to the Financial Statements (a) Rights and options held at the beginning of the reporting period There were 13,400,000 rights and options held as at 1 July 2021 in relation to the ESOP. (b) Movement of rights and options during the reporting period The following table summarises the movement in performance rights and options issued during the year: 2022 Number 2021 Number Outstanding at the beginning of the year 13,400,000 169,156 Granted during the year1 29,610,000 13,400,000 Vested and exercised during the year2 (7,000,000) Lapsed during the year - - - Forfeited during the year3 (900,000) (169,156) Outstanding at year end 35,110,000 13,400,000 1. 2 3. During the year, 15,000,000 Performance Rights and 9,450,000 Options were issued under the ESOP and 5,160,000 Options were issued under the EEP. During the year, 10,000,000 Performance Rights were vested of which 5,000,000 Performance Rights were exercised and 2,000,000 Options were vested and exercised under the ESOP. During the year, 900,000 Options were forfeited under the ESOP. (c) Rights and options vested during the reporting period During the year, 10,000,000 Performance Rights were vested (2021: nil) and 2,000,000 Options were vested (2021: Nil) under the ESOP. (d) Rights and options forfeited during the reporting period During the year, 900,000 Options were forfeited by employees (2021: 169,156) with a weighted average exercise price of zero (2021: nil) under the ESOP. Reorganisation reserve 2022 $’000 2021 $’000 Balance at the beginning of the period - Acquisition of subsidiaries1 (132,340) Elimination of Non-Controlling Interest2 (29,536) Reclassification of shares still held by 5GN in WCG Share issue costs3 11,196 (124) Balance at the end of the year (150,804) - - - - - - 1 2 3 To eliminate 5GN contributed equity balance as part of accounting for the internal reorganisation as the contributed equity of the WCG consolidated group will need to be that of WCG not 5GN To eliminate the NCI previously recognised in the consolidated financial statements of 5GN in relation to WCG as part of the internal reorganisation as there is now no longer an NCI in the WCG consolidated group Share issue costs associated with the merger and issue of new WCG shares Reorganisation reserve is used to record any difference arising when applying a book-value method to busniess combinations under common control. 23. Share-based Payments - Performance Rights and Options The Group operates two long-term incentive (LTI) plans as a means of rewarding and incentivising directors, executives and senior leaders of the Group. The Webcentral Executive and Director Share Option Plan (ESOP) was adopted in December 2020 for directors and executives of the Group. In April 2022 the Group adopted an Executive Equity Plan (EEP) for executives and senior leaders of the Group. The key criteria for options issued under the ESOP during the year are as follows: • Performance Rights: Achieve inclusion in the ASX300 index • Options: Completion of tenure periods of two years and individual KPIs The Performance Rights and options will not give the holder a legal or beneficial interest in ordinary fully paid shares in the Company until those Performance Rights and options vest. Prior to vesting, Performance Rights and options do not carry a right to vote or receive dividends. When the Performance Rights and options have vested, ordinary fully paid shares will be allocated, and these shares will rank equally with existing Company shares. (e) Rights and options held at the end of the reporting period The following table summarises information about Performance Rights and Options held by Directors and employees as at 30 June 2022. 5,000,000 Performance Rights are exercisable at 30 June 2022 (2021: nil): Issue Date and Type Number Grant date Vesting date Expiry date Weighted average exercise price Weighted average remaining contractual life 2020 Performance Rights - Director 5,000,000 18/12/2020 22/09/2021 18/12/2025 $0.20 2021 Performance Rights - Director 15,000,000 22/12/2021 N/A 21/12/2026 $0.45 2021 Options - Director 4,500,000 22/12/2021 21/12/2023 21/12/2026 2021 Options - Executive (1) 700,000 01/02/2021 01/02/2023 01/02/2026 2021 Options - Executive (2) 100,000 29/03/2021 29/03/2023 29/03/2026 2021 Options – Executive (3) 4,650,000 15/07/2021 15/07/2023 15/07/2026 2021 Options – Executive (4) 260,000 13/04/2022 N/A 13/04/2025 2021 Options – Executive (5) 4,900,000 02/06/2022 02/06/2024 02/06/2027 35,110,000 $0.45 $0.485 $0.485 $0.45 $0.26 $0.25 $0.39 3.47 4.48 4.36 3.59 3.75 4.04 2.79 4.92 4.29 (f) Pricing model: LTI grants The fair values of options granted were determined using a variation of the binomial option pricing model that takes into account factors specific to the Executive Share Plan, such as the vesting period. The following principal assumptions were used in the valuation: The following table lists the inputs to the models used for the LTI Grants: 2020 Rights 2021 Rights 2021 Options 2021 Options (1) 2021 Options (2) 2021 Options (3) 2022 Options (4) 2022 Options (6) 2022 Options (6) Share price $0.415 $0.465 $0.415 $0.44 $0.53 $0.465 $0.475 $0.275 $0.225 Dividend yield 0% 0% 0% 0% 0% 0% 0% 0% 0% Expected volatility 73.40% 45.00% 45.00% 73.40% 73.40% 45.00% 73.40% 73.40% 73.40% Risk-free interest rate 0.375% 1.265% 0.375% 0.42% 0.68% 1.265% 0.69% 2.74% 3.28% Fair value per option $0.3031 $0.192 $0.3031 $0.16 $0.23 $0.205 $0.20 $0.14 $0.09 7677 Notes to the Financial Statements Notes to the Financial Statements The dividend yield is zero as the Group has not paid a dividend for the previous two reporting periods. The expected volatility was determined using the group's average five-year share price. The risk-free rate is derived from the yield on Australian Government Bonds of an appropriate term. The weighted average fair value of the performance rights and options granted during the year was $0.42 (2021: $0.30). The total consolidated share-based payment expense for the year was $8.83 million. 24. Dividends There were no dividends paid during the year (2021: $0.01 (1 cent) per ordinary share paid in respect of the year ended 30 June 2020). The Directors have recommended the payment of a final dividend of 0.5 cents per ordinary share in respect of the financial year ended 30 June 2022. 25. Parent Information The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. Parent Entity Statement of Financial Position As at 30 June 2022 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets 2022 $’000 2021 $’000 73,273 51,126 16,063 42,707 89,336 93,833 71,479 4,823 76,302 13,034 1,943 10,118 12,061 81,772 Contributed equity 219,646 80,124 Share-based payments reserve 4,285 6,236 Reorganisation reserve Foreign currency reserve Profit reserve Retained earnings Total Equity (104,762) 200 (1,479) (104,856) 13,034 - - 283 (4,871) 81,772 Loss of the parent entity Total comprehensive loss of the parent entity (14,160) (15,139) (1,453) (1,453) Guarantees During the reporting period, each of the companies in the Group, including Webcentral Limited provided a cross guarantee to CBA for the facilities provided by CBA (refer note 27). Contingent Liabilities The parent entity did not have any contingent liabilities as at 30 June 2022 (30 June 2021: Nil). 26. Controlled entities Investments in controlled entities are initially recognised at cost, being the fair value of the consideration given. Following initial recognition, investments are measured at cost less any accumulated impairment losses. The consolidated financial statements include the financial statements of Webcentral Limited and the subsidiaries in the following table: Name Country of Incorporation Equity Holding at 30 June 2022 Equity Holding at 30 June 2021 5G Network Operations Pty Ltd 5G Networks Pty Limited Enspire Australia Pty Ltd Asian Pacific Telecommunications Pty Ltd Anittel Pty Ltd Hostworks Pty Limited Hostworks Group Pty Limited Logic Communications Pty Ltd Modular IT Pty.Ltd. Australian Pacific Data Centres Pty Ltd 5G Networks Finance Pty Ltd Intergrid Group Pty Ltd Web Marketing Experts Pty Ltd Nothing But Web Pty Ltd Domainz Limited Results First Limited Uber Global Ltd Melbourne IT GP Holdings Pty Ltd Names By Request Pty Ltd Uber Business Pty Ltd Netregistry Group Pty Ltd Netregistry Pty Ltd Netregistry Wholesale Pty Ltd Netregistry Services Pty Ltd Netregistry Operations Pty Ltd Webcentral Services Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 1. Webcentral Limited and its subsidiaries were controlled by 5G Networks Ltd until the merger of 5G Networks Ltd with Webcentral Limited in November 2021. -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 7879Notes to the Financial Statements Notes to the Financial Statements 27. Financial Risk Management The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. Financial Risk Management Objectives The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, accounts receivable and payable, loans to and from subsidiaries, and leases. The main purpose of non-derivative financial instruments is to raise finance for Group operations. The Group does not have any derivative instruments at 30 June 2022 or 30 June 2021. The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements, are as follows. Amortised cost $’000 FVTPL $’000 FVOCI $'000 Total $’000 30 JUNE 2022 Cash and cash equivalents Trade and other receivables Unsecured loans Other investments Total financial assets 30 JUNE 2022 Non-current borrowings Non-current lease liabilities Current borrowings Trade and other payables Lease liabilities Other financial liabilities Total financial liabilities 30 JUNE 2021 Cash and cash equivalents Trade and other receivables Unsecured loans Other investment Total financial assets 30 JUNE 2021 Non-current borrowings Current borrowings Trade and other payables Other financial liabilities Total financial liabilities 5,367 3,625 - - 8,992 25,359 14,784 571 15,643 3,456 - 59,813 19,170 5,963 - - 25,133 20,579 428 19,293 - 40,300 - - 424 - 424 - - - - - 500 500 - - 983 - 983 - - - 1,100 1,100 - - - 5,198 5,198 - - - - - - - - - - 725 725 - - - - - 5,367 3,625 424 5,198 14,614 25,359 14,784 571 15,643 3,456 500 60,313 19,170 5,963 983 725 26,841 20,579 428 19,293 1,100 41,400 Borrowings include the following financial liabilities: CURRENT At amortised cost: Obligations under bank loan1 NON-CURRENT At amortised cost: Obligations under bank loan1 Consolidated 2022 $’000 2021 $’000 571 571 428 428 25,359 25,359 20,579 20,579 The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that the market participants act in their economic best interest. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within their fair-value hierarchy, described as follows, based on the lowest level of input that is significant to the fair value measurement as a whole: Security arrangements 1 The bank loans are from Commonwealth Bank of Australia (CBA) and they are secured with a fixed charge over particular assets and a floating charge over other collateral. • Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Fair Value Measurement of Financial Instruments The Group measures financial instruments such as derivatives at fair value at each reporting date. Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The fair- value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • in the principal market for the asset or liability, or • in the absence of a principal market, in the most advantageous market for the asset or liability • Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. • Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The following table provides the fair value measurement hierarchy of the Group’s financial assets and liabilities as at 30 June 2022: Fair value measurement using Note Date of valuation TOTAL Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) $’000 $’000 $’000 $’000 Assets / (liabilities) measured at fair value Financial assets Investment in The Pistol shares Investment in Cirrus Networks Holdings Limited 30-Jun-22 30-Jun-22 725 4,473 Unsecured loans 30-Jun-22 424 Financial liabilities Contingent consideration 30-Jun-22 500 There have been no transfers between Level 1, 2 and 3 during the period. - 4,473 - - - - - - 725 - 424 500 On 22 August 2022, the Company sold all of the shares held in Cirrus Networks Holdings Limited at 3.2 cents per share for total consideration of $5.5 million. 8081 Notes to the Financial Statements Notes to the Financial Statements Capital Management For the purpose of the Group's capital management, capital includes issued capital, all other equity reserves attributable to the equity holders of the parent and debt capital, principally raised from the Group’s banking partners, but inclusive of other debt- like instruments, such as earn-outs due. The Board’s primary objective is to maximise the value of the Group’s operations to its shareholders. The Group manages its capital structure and financing facilities and makes adjustments in light of changes in economic and market conditions, requirements of the business operations and requirements of its financial covenants. To maintain or adjust the capital structure, the Group may raise or repay debt, adjust the dividend payment to shareholders, return capital to shareholders, issue new shares, or sell assets to fund these activities. Liquidity Risk The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. Cash flows realised from financial assets in the table below reflect management’s expectation as to the timing of realisation. Actual timing may therefore defer from that disclosed. The table below sets out the available financing facilities as at 30 June 2022: CBA loan facilities Total Total facility amount Amount drawn Unused financing facilities $’000 41,600 41,600 $’000 30,815 30,815 $’000 10,785 10,785 The table below sets out the maturity periods of the financial liabilities of the consolidated Group as at 30 June 2022 and 30 June 2021. All carrying amounts of IT equipment finance are undiscounted contractual cash flows. Contracted maturities at 30 June 2022 < 6 Months 6-12 Months 1-2 Years 2-5 Years >5 Years Trade & Other Payables Borrowings Interest on Borrowings Other Financial Liabilities $’000 $’000 $’000 $’000 $’000 14,912 315 37 - - 256 30 500 - 497 43 - - 24,862 12 - Contracted maturities at 30 June 2021 < 6 Months 6-12 Months 1-2 Years 2-5 Years >5 Years Trade & Other Payables Borrowings Interest on Borrowings Other Financial Liabilities $’000 $’000 $’000 $’000 $’000 18,973 213 27 600 320 216 22 500 - 319 32 - - 20,254 37 - Total $’000 14,912 25,930 122 500 Total $’000 19,293 21,007 118 1,100 - - - - - 5 - - Treasury Risk The Board’s overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Foreign Currency Risk The Group conducts some of its business in US dollars ('USD') and is therefore exposed to movements in the AUD/USD dollar exchange rate. The Group actively manages the gross margin risk by its foreign currency risk management strategy. Both the functional and presentation currency of the Group is in Australian dollars (AUD). The consolidated Group contains functional currencies in USD and NZD. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. The exchange differences arising on the retranslation are taken directly to other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in the determination of profit and loss for the year. At 30 June 2022, the Group had the following exposures to USD denominated assets and liabilities, where the functional currency is not USD. The Group's exposure to foreign currency changes for all other currencies is not material. Assets and liabilities that are designated in cash flow hedges are not included: Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Net exposure 30-Jun-22 30-Jun-21 $’000 $’000 344 234 578 103 10 113 (2,534) (1,956) (615) (502) Credit Risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. There are no material amounts of collateral held as security at 30 June 2022 or 30 June 2021. Credit risk is managed on a Group basis and reviewed regularly by the Board. It arises from exposures to customers as well as through deposits with financial institutions. The following table provides information regarding the credit risk relating to cash and money market securities based on Moody’s counterparty credit ratings. Aa3 rated cash & cash equivalents Total Consolidated 2022 $’000 2021 $’000 5,367 5,367 19,170 19,170 The Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the Group. The Group has recognised an impairment loss of $578,000 (2021: Loss of $850,000) in profit and loss in respect of impairment provision for receivables for the year ended 30 June 2022. The movements in the provision for impairment of receivables were outlined in Note 10. Interest Rate and Market Risk Market risk is the risk that changes in market prices, such as interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising returns. At 30 June 2022, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. All of the Group’s equipment loans and leases are at a fixed interest rate. The Group’s long-term borrowings, totalling $25,359,000 are interest only payment loans. Monthly cash outlays of approximately $115,000 per month are required to service the interest payments. An official increase /decrease in interest rate of 150 basis points would have an adverse/ favourable effect before tax of $369,000 per annum. The percentage change is based on the expected volatility of interest rates using market data and analysis forecasts. No principal repayments are required until July 2025. 8283 Notes to the Financial Statements Notes to the Financial Statements The following sensitivity is based on foreign currency risk exposures in existence at the reporting date. At 30 June 2022, had the AUD moved as illustrated in the table below with all other variables held constant, post-tax profit and equity would have been affected as follows: Net profit Higher / (Lower) Equity Higher / (Lower) 2022 $000 2021 $000 2022 $000 2021 $000 173 (211) 45 (55) 173 (211) 45 (55) Consolidated - AUD/USD +10% - AUD/USD -10% The Group also has exposures to foreign exchange when retranslating foreign currency subsidiaries into AUD. The sensitivity range has been determined using an expected range of 0.641 to 0.784 USD/AUD for the retranslation of USD denominated balances for the forthcoming year. The Group has determined that the sensitivity for the Group’s exposure to the NZD is not material. Sensitivity Analysis As the Group’s equipment loans are not material to the Group and at a fixed interest rate, no sensitivity analysis has been performed, as any +/- variation in interest rates would not have a material impact on the post-tax profit for the remaining period of the loans. A change in interest rates on the Cash on Deposit would not have a material impact to the Group and therefore no sensitivity analysis has been performed. Debt Maturity and Refinancing Risk Refinancing risk is the risk that the Group is not able to refinance the full amount of its ongoing debt requirements on appropriate terms and pricing. These exposures are not material to the Group’s operations at this point. 28. Related party disclosures Subsidiaries Details relating to subsidiaries are included in Note 26. Ultimate and direct parent Webcentral Limited is the ultimate parent entity in the wholly owned Group comprising the Company and its wholly owned controlled entities. Key Management Personnel (KMP) Compensation Consolidated 2022 $’000 2021 $’000 Short-Term Employee Benefits 1,330 1,779 Post-Employment Benefits Termination Payments Share based Payments Total 92 - 2,606 4,028 101 154 483 2,517 Detailed remuneration disclosures are provided in the remuneration report on pages 33 to 38. Transactions with related parties During the year, the Group has conducted the following related party transactions: • A total of $154,294 (2021: $164,129) was paid to Studio Inc, an entity related to Joe Demase, for the design of marketing materials for the Group. All transactions are carried at commercial third-party rates. • A payment of $4.013 million was made to J D Management Pty Ltd (JDM), an entity controlled by Joe Demase, as consideration for the cancellation of 8 million Performance Rights in relation to shares in 5G Networks Limited held by JDM that were cancelled pursuant to the Merger with the Company in November 2021. Terms and conditions of related party trading transactions Purchases from related parties are made at arm’s length at normal market prices and on normal commercial terms. The Group settles related party trade payables according to the payment conditions confirmed by the supplier of invoices and are non interest bearing and generally on 30 day terms from invoice. Transactions with key management personnel The table below provides aggregate information relating to the Company’s loans to key management personnel during the year: Balance at the start of the year Repayment from KMP Balance at the end of the year 2022 $’000 346 (218) 128 Under the Executive Share Plan the Company may loan its Executives some or all of the amount of the exercise price for options exercised. Such loans are non-recourse and no interest is charged in respect of the loan amounts. During the period, the loans of $0.22 million have been repaid. Refer to Note 10 for details. 29. Auditors' remuneration 2022 $’000 2021 $’000 Year ended 30 June 2022, the following fees were paid or payable for services provided by Grant Thornton: Audit and review Taxation compliance services 427,535 203,155 513,061 131,895 Due diligence services 75,000 124,343 705,690 769,299 30. Events subsequent to reporting date On 3 August 2022, the Company announced an on- market share buy-back of ordinary shares. Between 22 August 2022 and 26 September 2022, the Company acquired 5,276,500 ordinary shares on-market for total consideration of $935,853. On 5 September 2022 the Company cancelled 2,559,460 ordinary shares and on 19 September 2022 the Company cancelled 1,226,573 ordinary shares. On 22 August 2022, the Company sold all of the shares held in Cirrus Networks Holdings Limited at 3.2 cents per share for total consideration of $5.5 million. On 26 August 2022, 2.9 million options were issued under the ESOP and EEP to executives and managers of the Company at an exercise price of $0.20. Other than the above, there has not been any other matter or circumstance in the interval between the end of the year and the date of this report that has materially affected or may materially affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. 8485Directors’ Declaration Independent Auditors’ Report 1. In the Directors’ opinion: (a) The financial statements and notes of Webcentral Limited for the year ended 30 June 2022 are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards (Including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declaration required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the year ended 30 June 2022. Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Independent Auditor’s Report To the Members of Webcentral Limited 3. Note 2 confirms that the consolidated financial statements also comply with international financial reporting standards. Report on the audit of the financial report Signed in accordance with a resolution of the Directors made pursuant to section 303(5) of the Corporations Act 2001. On behalf of the Board of Directors Joe Demase Managing Director Melbourne, 28 September 2022 Opinion We have audited the financial report of Webcentral Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a b giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. w 8687 Independent Auditors’ Report Independent Auditors’ Report Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue recognition – Note 5 In the financial year ended 30 June 2022, the Group recorded Our procedures included, amongst others: revenue of $93,428,000. There is a risk of potential overstatement of revenue given there is pressure placed on the performance of the Group against market expectations. The Group offers diverse products and services to its customers that require different patterns of revenue recognition due to varying contractual terms, which require the identification of performance obligations and the determination of how the Group satisfies those obligations. This is a key audit matter because of the financial significance of revenue to the consolidated statement of profit or loss and other comprehensive and the judgement involved in determining appropriate revenue recognition for these various services. (cid:120) (cid:120) (cid:120) Obtaining an understanding of the processes and controls used by the Group in evaluating contracts under the five- step model of AASB 15 Revenue from Contracts with Customers; Reviewing revenue recognition policies of individual customer agreements and contractual arrangements to ensure compliance with AASB 15; Selecting a sample of revenue transactions to verify that revenue was being recognised in accordance with revenue recognition policies; Analytically reviewing revenue streams against forecasts and prior corresponding period to identify and assess potential anomalies; Testing the accuracy of deferred revenue recorded by the Group during the period; and Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. (cid:120) (cid:120) (cid:120) Going Concern – Note 2 For the year ended 30 June 2022 the Group recorded a loss after tax of $24,738,000, operating cash inflows of $3,422,000, financing cash outflows of $5,459,000, and a deficit of current assets to current liabilities of $31,432,000. At year end the Group had $5,367,000 of cash on hand , which in the opinion of the Directors will support the Group’s funding requirements for twelve months from the date of this report. Accordingly, testing the availability of sufficient funding for the Group to meet its obligations is considered a key part of our going concern assessment. This has been assessed as a key audit matter due to the judgement required by management in preparing their forecasts, preparing their solvency assessment and evaluating their ability to continue as a going concern. Our procedures included, amongst others: (cid:120) Assessing the cash flow forecast prepared by management for at least 12 months from the anticipated date of signing the financial statements and evaluating the reasonableness of inputs and assumptions used in the forecast; (cid:120) Analysing and challenging key assumptions in Webcentral’s Limited’s budget for the twelve-month period from the expected date of signing; (cid:120) Discussing with management their future plans for the Group; (cid:120) Reviewing ASX announcements to gather an understanding of the strategy of the business; (cid:120) Inquiring of management as to whether they are aware of any events or conditions beyond the period of Management’s assessment that may cast significant doubt on Webcentral Limited’s ability to continue as a going concern; (cid:120) Reviewing the solvency position of the Group and assessing the position paper prepared by management; (cid:120) Substantially test the balances included in the solvency workings prepared by management and evaluate any items that have been excluded from this assessment; and (cid:120) Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Goodwill and other long-lived assets impairment assessment – Note 14 and note 15 Merger of Webcentral Limited and 5G Networks Limited – Note 2 and note 22 As disclosed in Note 14 and Note 15 of the financial report Goodwill amounted to $50,212,000 and other intangibles of $22,059,000 at 30 June 2022 as a result of acquisitions over recent years. In accordance with AASB 136 Impairment of Assets, goodwill and other intangible assets acquired in a business combination must be allocated to the Group’s cash-generating units (“CGUs”). For each CGU to which goodwill has been allocated, the Group is required to assess if the carrying value of the CGU is in excess of the recoverable value. The goodwill and other long-lived assets impairment assessment has been assessed as a key audit matter due to the judgement required by management in preparing a value in use model to satisfy the impairment test as prescribed in AASB 136, including the significant estimation involved in forecasting of future cash flows and applying an appropriate discount rate which inherently involves a high degree of estimation and judgement by management. Our procedures included, amongst others: (cid:120) Assessing management’s determination of the Group (cid:120) (cid:120) (cid:120) (cid:120) having three CGU based on the nature of the business and the economic environment in which the units operate; Reviewing the impairment model for compliance with AASB 136; Assessing whether management has the requisite expertise to prepare the impairment model; Assessing the reasonableness and appropriateness of inputs and assumptions to the model, with involvement of our internal valuation specialist; Evaluating management’s future cash flow forecasts and obtain an understanding of the process by which they were developed; o o o o Assessing management’s key assumptions for reasonableness and obtaining available evidence to support key assumptions; Considering the reasonableness of the revenue and cost forecasts against prior years forecasts and current year actuals; Performing a sensitivity analysis on the key assumptions; Testing the underlying calculations for mathematical accuracy of the model; and (cid:120) Assessing the impairment expense that has been recorded in the period and evaluating if this in line with expectation from review of the impairment model and the recalculation of our internal valuation specialist; (cid:120) Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. On the 1st of October 2021, 5G Networks Limited and Webcentral Ltd announced to the market a proposed merger where Webcentral Ltd acquired all of the issued ordinary shares by way of scheme of arrangement. The scheme of arrangement became legally effective on the 12th of November 2021 with 5G Networks Limited delisting from the Australian Stock Exchange (ASX). This resulted in consolidated accounts being prepared and lodged with the ASX for the twelve month period ending 30 June 2022. Accounting for this transactions is a complex exercise requiring management to use significant judgment to determine the treatment under the accounting standards. As such this has been identified as a key audit matter. Our procedures included, amongst others: (cid:120) Reviewing the technical memorandum prepared by management, the position paper prepare by managements’ expert and the scheme of arrangement lodged with the ASX; (cid:120) Evaluating the competency and objectivity of managements expert; (cid:120) Evaluating the treatment of the merger in line with accounting standards and involve an internal technical expert to review the memorandum prepared by management; (cid:120) Assessing the reasonableness and appropriateness of assumptions utilised by management in the technical memorandum; (cid:120) Reviewing the journals recorded as part of this transaction and agreeing them with the technical memorandum prepared by management; and (cid:120) Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Grant Thornton Australia Limited Grant Thornton Australia Limited 8889 Independent Auditors’ Report Shareholder information The shareholder information set out below was applicable as at 26 September 2022. Webcentral Limited Issued capital ordinary shares: 327,306,759 as at 26 September 2022. Substantial Shareholders Substantial shareholders and the number of equity securities in which it has an interest, as shown in the Company’s register of Substantial Shareholders is: Holder J D Management Pty Ltd, JMD Superannuation Fund, Studio Incorporate Pty Ltd and Joseph Demase Shares % 56,515,128 17.27% Total 56,515,128 17.27% Distribution of Equity Shares Voting Rights The voting rights attached to each class of equity securities are set out below: Ordinary Shares On a show of hands every member present at a meeting in person, or by proxy, shall have one vote, and upon a poll each share shall have one vote. The Number and Class of Restricted Securities Subject to Voluntary Escrow that are on Issue Voluntary Escrow There are no securities subject to Voluntary Escrow. Ordinary Shares Number Held Number of Holders Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 250,584 13,242,772 15,475,348 73,677,614 100,001 – and over 224,660,441 Total 327,306,759 There were 3,603 unmarketable parcels as at 26 September 2022. 411 4,557 2,067 2,605 302 9,942 Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors’ for the financial report The Directors of the Group are responsible for the preparation of the 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 financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.pdf.This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 33 to 38 of the Directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Webcentral Limited, for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Group are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 28 September 2022 Grant Thornton Australia Limited 9091 Shareholder information The 20 Largest Holders of Each Class of Quoted Equity Securities Rank Holder Number 55,474,469 18,352,253 14,096,949 11,059,489 6,016,187 4,965,780 3,798,536 3,714,018 3,000,000 2,823,284 2,526,666 2,512,438 2,231,469 2,137,819 1,658,330 1,630,000 1,504,284 1,470,588 1,460,204 % 16.9% 5.6% 4.3% 3.4% 1.8% 1.5% 1.2% 1.1% 0.9% 0.9% 0.8% 0.8% 0.7% 0.7% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 142,206,075 43.4% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 J D MANAGEMENT GROUP PTY LTD PACIFIC CUSTODIANS PTY LIMITED BNP PARIBAS NOMINEES PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED DANEILA DONA GANGI & GIUSEPPE GANGI MR ALBERT SAYCHUAN CHEOK & MR ERIC VICTOR CHEOK NSR INVESTMENTS PTY LTD MR GARRY EDWIN WHITE ECKERT INVESTMENTS PTY LTD ARKTREE NOMINEES PTY LTD MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD B F A PTY LTD MR WEI CAI ALBERT CHEOK GANGI SERVICES PTY LTD 20 PAC EQUITIES PTY LTD Total Unissued equity securities Number of options issued: 40,185,000 Securities exchange The Company is listed on the Australian Securities Exchange. MR GIANNI ANDREA VERROCCHI & MRS DEANNE JOSELYN VERROCCHI 1,773,312 92Webcentral Head Office Level 7, 505 Little Collins Street, Melbourne 3000 94

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