5G Networks Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT Webcentral Limited and its controlled entities FOR THE YEAR ENDED 30 JUNE 2023 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 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 Registrar 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 Report Board of Directors Directors’ 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 16 19 34 39 42 44 46 47 48 80 81 86 23 Chairman's Address As Chairman of Webcentral, I am proud to present to you the Annual Report for Financial Year 2023. 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. This year has been a consolidation period for our SME sector with the successful launch of the .au Top Level Domain (TLD) in September 2022. On the back of this growth of 100,000 new .au domains we have also seen the growth of our SME hosting and email services. We have migrated over 20,000 Microsoft email product users to our internal OX mail platform producing significant margin improvement and we have provided certainty for these users as their previous email product was no longer offered. In December 2022 we acquired a domains business ‘New Domain’ and, as the owners, have taken charge of our Melbourne IT brand with a focus on corporate clients providing much needed service and support with brand protection. Webcentral has made significant progress in FY23 building on the transformation of the business in FY22 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 has faced several challenges during the year, which have seen a decline in revenue at one of the Group’s data centres servicing the digital currency market and pricing pressure from government contracts. However, the company has seen an improvement in hardware supply chain resulting in faster delivery times and project work across the business. The significant achievements in FY23 is shown by the Company’s strong financial performance with revenue growth across the Company’s customer segments and 134% improvement in operating cash flows in FY23. The Board’s ongoing focus on capital management and returns to shareholders was demonstrated by the resumption of dividends to shareholders. Looking forward to FY24, 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 FY23. Yours sincerely, Joe Gangi Chairman "Looking forward to FY24, Webcentral is focused on continued organic revenue growth and the ongoing improvement of systems and processes to enhance and simplify customer experience." 45Managing Director’s Report 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 50 people in Melbourne, Sydney and Brisbane, further enhancing the customer experience. Strong organic revenue growth was achieved across the Company’s customer segments delivering overall revenue growth for the company of 2.9% to $96.1M for FY23. Operating cashflows significantly improved in the second half of FY23 on the back of this revenue growth with operating cashflows of $8.0M for FY23. 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 As Managing Director of Webcentral, I am proud to present our Annual Report on the business operations for Financial Year 2023. 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 2023 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 $4.6M 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% of all sales, 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 "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." 67Webcentral customer segments and product offerings Webcentral provides a broad range of digital services to more than 330,000 Retail, Enterprise and Wholesale customers across Australia, New Zealand, Asia and the USA. Revenue growth was achieved across all customer segments in 2023: Domains Cloud, Email & Webhosting Data Centre Networks & Voice Managed Services Hardware & Software Digital Marketing Services / Segment Retail Enterprise Wholesale TOTAL REVENUE $'000 98,000 96,000 94,000 92,000 90,000 88,000 96,138 93,428 2022 2023 Growth 2.9% 98WWWRevenue growth across all customer segments Retail customer growth in ARPU in FY23 and significant increase in lifetime value per customer $400 $350 $300 $250 $200 $150 $100 $50 $0 13% ARPU Growth 15% FY21 FY22 FY23 FY21 FY22 FY23 Lifetime value per customer $4.0k Lifetime value per customer $2.7k (+41%) Enterprise and Wholesale: Strong new sales, customer re-signs and pipeline Enterprise and Wholesale Pipeline • New sales of $7.4M TCV1 in FY23 • Existing customer re-signs of $4.9M TCV1 • Strong sales pipeline of $8.9M recurring revenue 4.0 3.5 3.0 2.5 $M 2.0 1.5 1.0 0.5 0.0 Cloud Data Centre MIT Networks and Voice Wholesale Enterprise 1. Total Contract Value 101110Webcentral in the Community Webcentral is committed to making sustainability a priority across all of its operations. The Company has formed an Environmental, Social and Governance Committee (ESG Committee) to support it in fulfilling its ESG responsibilities, meeting stakeholder expectations and fostering an approach of continuous improvement, for the benefit of its shareholders, customers, employees, suppliers and host communities. Webcentral’s key ESG initiatives are as follows. Environmental Initiatives Data Centre Power Usage Webcentral acknowledges that it is a significant consumer of electricity, particularly arising from its Data Centre (DC) operations. Accordingly, Webcentral is taking ongoing action to minimise its power consumption. In the ever-evolving digital landscape, our DCs play a crucial role in supporting the storage, processing and transmission of vast amounts of data. As the demand for computing resources continues to soar, we are actively undertaking initiatives to optimise our infrastructure. Our main focus in this regard is improving our Power Usage Effectiveness (PUE). PUE is a metric that quantifies the energy efficiency of a data centre by comparing the total power consumed by the facility to the power consumed by its IT equipment. Reducing PUE not only contributes to cost savings but also decreases environmental impact. We have undertaken the following initiatives to improve our PUE across all our data centres over time: • Hot Aisle/Cold Aisle Containment: Cooling constitutes a significant portion of a data centre's energy consumption. To improve PUE, we have so far installed cold aisle containment at our North Sydney Data Centre (NSDC), Sydney Data Centre (SDC) and Adelaide Data Centre (ADC). Plans are in progress to install cold aisle containment at Melbourne Data Centre (MDC) and Brisbane Data Centre (BDC). These measures ensure that cooling resources are directed precisely where they are needed, minimising wastage. • Blanking plates: Blanking plates are a crucial element of hot aisle/cold aisle containment strategies. In this configuration, server racks are arranged in alternating rows with hot exhaust air expelled into the hot aisle and cool air delivered to the front of the racks through the cold aisle. Blanking plates prevent hot air from recirculating back to the cold aisle, ensuring that the cooling system operates efficiently and reduces energy waste. We have manufactured our own 5GN branded blanking plates and installed them in all our racks across all our data centres. • Building Management System: Accurate temperature monitoring using a Building Management System (BMS) promotes energy efficiency and cost savings. By closely monitoring temperature levels, we can fine-tune our cooling operations to avoid overcooling and excessive energy consumption. This contributes to reduced electricity bills and a more sustainable operational footprint. We have installed a BMS including temperature and humidity sensors in all our data centres which are monitored 24/7. • Optimisation of Computer Room Airconditioning Units: We constantly monitor the temperature of our cold aisle via the BMS system and adjust temperature setpoints on the Computer Room Airconditioning (CRAC) units according to the IT load fluctuations on the DC floor to ensure we are not overcooling and wasting energy. In all our DC’s except SDC, we have variable speed drives on all the CRAC unit motors which automatically adjust their speed according to the air flow required to maintain our temperature SLA’s and prevent the motors from running at 100% 24/7 unnecessarily. • Improved lighting quality: By replacing outdated lighting fixtures with LEDs, data centres can achieve substantial energy savings, contributing to the overall reduction in PUE. SDC has an LED lighting system with sensor control and we have recently installed the same system at MDC, with plans in place to do the same at our other data centres. • IT Equipment Upgrades and Consolidation: Upgrading and consolidating IT equipment is a crucial initiative in data centre optimisation. This involves modernising hardware, streamlining infrastructure, and maximising resource utilisation. Our networks team has identified legacy systems, outdated equipment and redundant or underutilised equipment that consume space, energy, and maintenance resources. • Monitoring: As a result of all the improvements mentioned we are noticing a steady overall improvement in our data centre power usage efficiency which is contributing to cost savings and improving our energy footprint. The monthly PUE for FY23 MDC and SDC is shown below: MDC PUE Change 2022-2023 1.62 1.60 1.60 1.58 1.56 1.64 1.61 1.59 1.56 1.54 1.53 1.52 Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun SDC PUE Change 2022-2023 1.98 1.99 1.98 1.96 1.96 1.96 1.94 1.94 1.96 1.95 1.88 1.86 Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun PUE - total electricity consumption / UPS load Other Environmental Initiatives Webcentral procures significant volumes of IT equipment and is consequently responsible for the disposal of significant volumes of obsolete equipment. At all locations and facilities operated by Webcentral we maintain processes to recycle obsolete equipment through appropriate e-waste disposal services. Several of Webcentral’s ‘data centres maintain ISO 9001 (Quality Management Systems) and 14001 (Environmental Management Systems) accreditations demonstrating that it has appropriate systems in place to maintain quality operational standards and manage its environmental impact. Webcentral’s offices in Melbourne, Sydney and Brisbane are in modern, high-quality buildings with high National Australian Build Environment Ratings System (NABERS) ratings. Social Initiatives Diversity & Inclusion Webcentral continues to support the increased representation of women in the technology sector and convened two events during the year with industry-leading female host speakers. These events continue to provide a valuable means for female staff from across the Company’s operations to network with one another, exchange ideas, raise any concerns they have and listen to inspiring as well as 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. Other initiatives included the convening of ‘Wear it Purple Day’, to provide a visible sign of support to a diverse range of staff across the organisation and celebrations to acknowledge other causes and initiatives. 1213 In addition, Webcentral’s domain name services, data centres and managed services business maintain ISO 27001 (Information Security Management System) accreditation. By retaining accreditations under these internationally recognised standards, Webcentral can demonstrate that it has appropriate systems in place to maintain quality information security management systems, in the core business areas so accredited. 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. Funds were also donated to The Toccolan Club, a not-for-profit group devoted to raising funds for Australian charities. 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, and is working with AFL Cape York foundation, providing domains, hosting and a free website. Other initiatives included the convening of ‘RUOK’ morning tea, to support the charity that encourages people to stay connected, have conversations and help others through difficult times; and ‘Pink Ribbon’ afternoon tea, to support the National Breast Cancer Foundation. A number of Committees have also been active during the year, each with significant staff representation. The committees are the Culture Committee, Environment, Social and Governance Committee, and Work Health and Safety Committee Governance Initiatives As an ASX listed company, Webcentral is bound by various legislative and regulatory requirements, including the Corporations Act 2001, ASX Listing Rules, Telecommunications (Interception and Access) Act 1979 and the requirements of our Registrar Agreements with auDA (.au Domain Administration Limited) and ICANN. Webcentral also complies with the ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations’ (4th Edition) - further detail is provided at pages 34 to 38 of this report. Flexible and Safe Workplaces Webcentral recognises that there is no one-size-fits- all solution to the way we work. 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 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. Webcentral’s offices also maintain ISO 45001 (Work Health and Safety Management System) accreditation. Webcentral is keen to celebrate staff achievements and conducts Staff Recognition Awards on a quarterly basis. All staff have the opportunity to vote for high- achieving staff and prizes are awarded for the top three nominations. In addition, each year Webcentral hosts a Service Awards event to celebrate the achievements of our employees with ten or more years of service. Webcentral also offers employees free shares annually under its Employee Share Scheme. Other Social Initiatives Webcentral is committed to giving back to the community. Webcentral’s Managing Director, Joe Demase, is passionate about supporting 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 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 1415 Board of Directors Managing Director 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 telecommuni- cations sector amongst both the Australian and UK divisions, along with over 25 years of business experience, allowing Joe to skil- fully identify market opportunities across the board. Joe displays an abundance of experience, having succeeded in a broad range of executive positions. Non-Executive Director Natalie has over 20 years experience in the online space having held senior manage- ment 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 Na- talie has been the CEO of Vivi International, an Australian owned EdTech software or- ganisation. Natalie has been an independent director of Webcentral since October 2020. Joe Demase Natalie Mactier Company Secretaries Glen Dymond 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, Broadspec- trum Limited and ConnectEast Group. Glen's commercial finance and operations expe- rience 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 undergo- ing rapid growth and change. Chairman Joe has over 30 years’ experience in corpo- rate 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. Non-Executive Director Jason has deep knowledge and experience in the IT and Telecommunications indus- tries. 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. Joe Gangi Jason Ashton 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. Michael Wilton 1617Directors' Report Your Directors submit their report for the year ended 30 June 2023. Directors were in office for the entire period unless otherwise stated. Directors Mr. J. Gangi Mr. J. Demase Ms. N. Mactier Mr. J. Ashton Managing Director and Chief Executive Officer Mr. J. Demase Chief Executive Officer – Melbourne IT Mr. Jonathan Horne (from 1 December 2022) Chief Financial Officer Mr. G. Dymond Chief Operating Officer Mr. J. Stevens Company Secretaries Mr. M. Wilton Mr. G. Dymond Details of Directors' experience, expertise and directorships 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 20 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 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. Other Current Listed Company Directorships • Nil Former Listed Company Directorships In Last Three Years • 5G Networks Limited 1918Directors’ Report Directors’ Report 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; and • 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 Year ended 30-Jun-23 $’000 30-Jun-22 $’000 96,138 12,825 93,428 17,561 (19,019) (24,738) (19,019) (24,883) CONTINUING OPERATIONS Total revenue from contracts with customers Underlying EBITDA(1) from Continuing Operations Loss after tax from continuing operations Loss after tax attributable to members of the parent 1. Refer section below – Management performance measures – underlying EBITDA Revenue for the period was $96.14 million, representing growth of 2.9% compared to the prior comparative period (PCP) of $93.43 million. The loss of the Group for the period after providing for income tax amounted to $19.02 million (2022: $24.74 million loss). The underlying EBITDA of the Group for the period of $12.83 million was 27.0% lower than the prior comparative period of $17.56 million, after adjusting for non-operating items including a non-cash goodwill impairment expense of $14.08 million, non-cash share-based payments expense of $1.55 million, and acquisition, restructuring other non-recurring costs of $3.5 million. The major contributors to the decline in underlying EBITDA was the $3.26 million reduction in non-recurring hosting revenue and transitional services income and the reduction in networks and data centre revenue. The goodwill impairment charge has arisen due to the assessment of the carrying value of goodwill and intangible assets at year-end and the impact of higher discount rates. The non-cash impairment expense recognises the decline in revenue at one of the Group’s data centres servicing the crypto mining market and pricing pressure from government contracts. The non-cash impairment charge has no impact on the Group's debt facilities, covenants or liquidity. Segment Revenue Data Centres, Network & Cloud Managed Services Webcentral Intersegment eliminations Total Revenue FY23 $’000 22,117 20,239 53,782 - 96,138 FY22 $’000 24,638 19,465 50,106 (781) 93,428 Alternative segment presentation The Group has restructured its operations into the following customer segments following the merger between Webcentral and 5G Networks Limited in November 2021: • Retail: domains, web hosting, email hosting and digital marketing services to consumer and small and medium enterprise customers • Enterprise: cloud hosting, domain names, data centre, networks and voice, IT managed services, hardware and software and digital marketing products and services provided to Enterprise and Government customers • Wholesale: cloud hosting, data centre, networks and voice products and services provided to wholesale telecommunications and Segment information is provided below in relation to these segments. These reporting segments will apply from reporting periods from 1 July 2023. Segment Revenue Retail Enterprise Wholesale FY23 $000 51,118 37,108 7,912 FY22 $000 48,863 37,022 7,543 Change 4.6% 0.2% 4.9% The Group achieved revenue growth across its Retail, Enterprise and Wholesale customer segments in FY23 due to the following initiatives: • The successful launch of the new .au domain name TLD generating more than $4.6 million in sales from more than 100,000 new .au domain names registered; • Growth in SME hosting and email services including the migration of 20,000 Microsoft email product users to our internal OX mail platform with significant gross margin increase; • Improvement in hardware supply chain resulting in faster delivery times and project work across the business, with hardware revenue up 21% to $8.15 million in FY23; • 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; • 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; • Strong wholesale and enterprise customer growth with more than $5.9 million annual recurring revenue sold in FY23, existing customer renewals of $4.9 million and sales pipeline of $8.9 million; and • Customer value increase with 13 to 15% ARPU growth achieved for Melbourne IT and Webcentral respectively compared to the PCP. Other key strategic and financial growth highlights for the year ended 30 June 2023 were as follows: • Acquisition of New Domain Services, a premium domain email and webhosting services business with the owner taking the charge of the Melbourne IT brand with a focus on corporate clients and providing much needed service and support with brand protection; • Ongoing automation of customer portals, the launch of the Dark Fibre product and completion of the fibre network with more than 120 kilometres of fibre installed 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; and • Strong capital position with $4.5 million cash and $4.5 million of available debt at 30 June 2023 (of which $1.5 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: Year ended 30-Jun-23 $’000 30-Jun-22 $’000 (22,217) 12,447 1,546 3,475 184 3,313 14,077 (24,382) 13,630 8,833 2,798 904 3,706 12,072 CONTINUING OPERATIONS (Loss) / Profit before tax Depreciation and amortisation expense Share based expenses Finance costs (excl. bank charges and merchant fees) Acquisition costs Non-recurring costs Impairments of financial assets, goodwill, fixed assets and intangible assets Underlying EBITDA 12,825 17,561 2021Directors’ Report Directors’ Report Acquisitions and investing activities 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 1 December 2022, the Company announced the acquisition of New Domain Services, a premium domain email and webhosting services business with 25,000 customers with normalised revenue of $2 million and normalised EBITDA of $1.2 million. The acquisition price was $5 million with $3.5 million paid in cash at Completion and up to $1.5 million payable within 12 months of Completion. The acquisition was funded from existing cash reserves and from the Group’s acquisition debt facility with CBA. New Domain Services has been integrated with the Group’s Melbourne IT business and New Domain vendor Jonathan Horne has been appointed as Chief Executive Officer of the combined business to drive growth in corporate domains services. It is expected that the acquisition will also benefit the broader Webcentral business as customer services changes, process improvements and product innovation are rolled out to Webcentral’s business. During the period the Group also continued to invest in its fibre network build throughout several capital cities and had completed more than 120 km and connected more than 50 data centres as at the date of this report. Capital structure On 3 August 2022, the Company announced the launch of an on-market share buyback (Buyback). During the year the Company acquired a total of 5,401,820 ordinary shares on-market pursuant to the Buyback for total consideration of $955,278. All shares acquired were cancelled during the period. During the year, the following ordinary shares were issued: • 1,000,000 ordinary shares were issued on 11 October 2022 to the vendors of the ColoAu business at an issue price of $0.1366 per share to satisfy the earn-out payable in respect of the ColoAu acquisition in July 2020; • 346,611 ordinary shares were issued on 4 November 2022 pursuant to the Dividend Reinvestment Plan at an issue price of $0.15 per share; and • 2,088,646 ordinary shares were issued on 31 March 2023 under the Employee Share Plan at an issue price of $0.09 per share. During the year, the following unlisted options were issued: • 900,000 options under the Executive and Director Share Option Plan (ESOP) at an exercise price of $0.20, subject to the satisfaction of service vesting conditions and expiry date of five years after grant; • 2,000,000 options under the Executive Equity Plan (EEP) at an exercise price of $0.20, subject to the satisfaction of service vesting conditions and expiry date of five years after grant; • 260,000 options under the EEP at an exercise price of $0.20, subject to the satisfaction of performance and service vesting conditions and expiry date of three years after grant; • 4,000,000 options under the EEP at an exercise price of $0.17, subject to the satisfaction of service vesting conditions and expiry date of five years after grant; • 250,000 options under the EEP at an exercise price of $0.17, subject to the satisfaction of performance and service vesting conditions and expiry date of three years after grant; • 250,000 unlisted options at an exercise price of $0.20 during the period to service providers of the Group; • 1,750,000 options under the ESOP at an exercise price of $0.11, subject to the satisfaction of service vesting conditions and expiry date of five years after grant; and • 1,500,000 options under the EEP at an exercise price of $0.11, subject to the satisfaction of service vesting conditions and expiry date of five years after grant. During the year, 1,700,000 unlisted options issued under the ESOP and EEP were forfeited and cancelled. On 24 February 2023 a variation of the Company’s debt facilities with Commonwealth Bank of Australia (CBA) was approved in order to reallocate limits from the acquisition facility to the market rate loan facility of $2.0 million and from the bank guarantee facility to the equipment lease facility of $0.55 million. In addition, the maturity date for the acquisition facility was extended to 31 March 2024. On 23 August 2023, CBA approved an amendment to the Net Leverage Ratio covenant in relation to the period ended 30 June 2023 to increase it to 3.50 times. There was no financial impact to the Group and all other financial covenants and undertakings under the Debt Facility Agreement were met in relation to the period ended 30 June 2023. The Group expects to comply with all financial covenants for FY24. As the amendment was received after reporting date, the Group is required to classify an amount of $25.1 million as a current liability in the Statement of Financial Position even though these amounts are not repayable within 12 months of reporting date. Material Business Risks The material business risks that have the potential to impact on the future prospects of the Group include: Customer retention and revenue growth The continued strong growth in sales and profitability of the Group depends on a number of factors, including attracting new customers on a sufficiently profitable basis, and retaining and increasing revenue from existing customers. Customer revenue growth is particularly dependent upon the provision of consistently high-quality customer service and continued satisfaction of sales objectives. If these growth factors were to be impaired, the financial performance and reputation of Group would be adversely affected. The Group’s success is heavily reliant on its positive reputation, and particularly its customer satisfaction, in relation to its operating brands. The occurrence of any unforeseen issue or event which impacts the performance of the Group’s services may result in a diminution of customer satisfaction and loyalty and place the reputation of the Group’s brands at risk. These implications bear a risk of adversely impacting the financial performance of the Group’s business. Competition The digital services industry is rapidly evolving with a heightened environment of change characterised by disruptive technologies. The Group therefore faces potential loss of its competitive or market position as a result of potential product innovation by existing competitors or new entrants to the market. The Group may not anticipate or respond to any such developments with sufficient speed to maintain its market position. Other competitive risks faced by the Group include price competition, competitor marketing campaigns, mergers of, or acquisitions by, competitors and possible new entrants to the market. Changes in technology The digital services industry is evolving rapidly with the frequent introduction of new technologies, products and innovations. Consumer behaviours, preferences and trends are also constantly changing upon the onset of new methods of communication and digital platforms. The Group must likewise evolve and adapt its products and service offering to maintain pace with the industry in which it operates and to maintain its competitive position. Given the pace of change, there is no guarantee that the Group will be able to continue to introduce new and superior products, or products that are perceived to be new and superior by consumers, at the rate seen by other competitors in the market generally. The Group’s ability to do so is constrained by factors including its available capacity, resources and capital to invest in product development, innovation and design. This may adversely impact on the Group’s long- and short-term business performance. The Group’s businesses are heavily dependent on information communication technology for the delivery of their various services, across large geographic distance, and it has invested significantly in technology to maximise the efficiency of its operations. Should these systems not be adequately maintained, secured and updated, or the Group’s disaster recovery processes not be adequate, system failures may negatively impact the Group’s performance. The Group has undertaken IT transformation programs in recent years which are still in progress and may cause unexpected disruptions, fail to provide anticipated benefits or otherwise be unsuccessful. A significant implementation and migration failure could result in a major impact on the Group’s customer retention, revenues, costs and reputation. Infrastructure and technology failure The Group relies on its technical infrastructure and networks to provide its customers with a highly reliable service. There may be a failure to deliver this level of service as a result of numerous factors, including human error, power loss, failure of third-party equipment, services or networks, improper maintenance by landlords and security breaches. Service interruptions, regardless of their cause, may cause contractual and other losses to the Group. Cyber and security risks Protection of customer and third-party data is critical to the Group’s ongoing business and any breaches of this could have significant negative financial ramifications. The Group retains a significant amount of sensitive customer and third-party information. Customers and third parties have high expectations regarding the protection of their information. Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly complex and demanding. Failures or breaches of data protection systems can result in reputational damage, regulatory impositions (such as for breaches of the Privacy Act 1988 (Cth)) and financial loss, including claims for compensation by customers or penalties by telecommunications regulators or other authorities. As a technology business, the Group’s business may be particularly adversely affected by technological disruptions, including through impacts of malicious third-party applications or other form of cyber-attack on the Group that could result in failures and interfere with its systems, products and platforms. It is possible that the measures taken by the Group will not prevent unauthorised access to its systems and technologies, risking third party access to confidential or otherwise sensitive data. This could lead to loss of key business or customer information, reputational damage and claims from customers or other third parties whose data may be affected. If, as a consequence, the Group is unable to provide services to its customers, it may experience loss of market share, damage to reputation and brand, customer compensation claims and regulatory action. This may result in the Group incurring significantly increased expenses or suffering reduced revenue. Compliance risks The Group relies on certain accreditations and licences to operate their businesses. In particular, the Group holds a carrier licence under the Telecommunications Act 1997 which is essential to operate as a carrier of telecommunications infrastructure. If this licence or other licences were to be cancelled it could severely restrict the ability of the Group to operate and could result in the Group breaching a number of its contractual obligations. Several of the Group’s domain registry businesses are ICANN and .auDA accredited Registrars. Such accreditation is essential for the Group to operate as a domain registrar business and provide customers with domain name services. If accreditation were to be lost, it could severely restrict the Group’s ability to operate as a domain name service provider and could result in the Group breaching its contractual obligations. 2223Directors’ Report Directors’ Report The Group’s businesses are reliant on wholesale licences to provide digital services to customers and cannot be assured that it will continue to be provided with these brand licences. If the Group were to not have such brand licences, its ability to attract customers or provide attractive offerings could be negatively affected, which in turn could have a material adverse effect on its business, financial condition and results or operations of the Group. The Group operates in a highly regulated environment with several accreditation and licensing compliance obligations. These compliance obligations have strong penalties for non-compliance, including undertakings or the imposition of substantial civil and criminal penalties. Possible changes to existing regulation may impose substantial risks to the Group’s businesses and increased compliance costs. The Group is also exposed to risks from unexpected regulatory policies, outcomes or decisions by regulators empowered to regulate the telecommunications sector, including the Australian Competition & Consumer Commission and the Australian Communications and Media Authority which may result in an increase in compliance costs and delays in having to seek additional, or variations to, government approvals, adverse impacts upon the Group’s ability to continue to acquire goods and services from existing suppliers from foreign countries, or fines and penalties being imposed for contraventions of relevant laws. Availability of equipment The Group is dependent upon third party suppliers for IT and network infrastructure and, in some cases, licences, services, equipment and content from parties over whom the Group may have no direct operational or financial control. If any of these third party providers fail to maintain their products, solutions, services or offerings properly or fails to respond and adapt quickly to any of the Group’s requirements, customers may experience service interruptions. The dependence on these third party suppliers for support and delivery of certain core business functions means that the impact of the COVID-19 pandemic, regulatory changes or issues with the Group’s supply chain could have a significant adverse impact on the timeliness or cost of building or maintaining the Group’s network. There is also a risk that third party suppliers may provide services or products with defects, which may lead to network underperformance or other impacts on customers. This could, in turn, adversely affect the Group’s market share or revenue. Equity and debt market risks The Group’s ability to service its existing debt depends upon its financial performance and cash flows which to some extent are subject to general economic, financial, regulatory and other factors beyond the control of the Group. If the Group is unable to generate sufficient cash flow to meet specific debt repayment obligations, it may face additional financial penalties, higher interest rates or difficulty obtaining further funding in the future. The Group is subject to the risk that it may not be able to refinance its bank debt facilities when they fall due or that the terms (including in relation to pricing) on refinancing will be less favourable than the existing terms. If there is a deterioration in the level of debt market liquidity, this may prevent the Group from being able to refinance some or all of its debt. In addition, the Group may in the future require additional debt or equity capital in order to fund growth strategies, in particular for acquisition opportunities that may arise from time to time. There is a risk that the Group may be unable to access debt or equity funding from the capital markets on favourable terms, or at all. Financial and economic conditions The financial performance of the Group and the value of its shares may fluctuate due to various factors, including movements in the Australian and international capital markets, recommendations by brokers and analysts, interest rates, exchange rates, inflation, Australian and international economic conditions, change in international economic conditions, change in government, fiscal, monetary and regulatory policies, prices of commodities, global geo-political events and hostilities, global health pandemics and acts of terrorism, investor perceptions and other factors that may affect the Group’s financial position and earnings. In the future, these factors may affect the Group and may cause the price of its shares to fluctuate and trade below current prices. In light of recent global macroeconomic events, including the impact of the recent COVID-19 pandemic, Australia may experience an economic recession or downturn of uncertain severity and duration which could impact the Group’s ability to attract and retain customers, to invest sufficiently to develop, adopt and integrate the latest technologies into existing infrastructure, and to secure and maintain third party suppliers for IT and network infrastructure over whom the Group may have no direct operational or financial control. These economic disruptions may adversely impact the Group’s earnings and assets, as well as the value of its shares. Employee relations and personnel risks The Group’s ongoing success depends in part upon its ability to retaining its key employees. If there is a departure of key employees the Group’s business could be adversely affected. The Group may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the business. Certain key executives and other employees of the Group may terminate their management positions or their employment contracts on their own initiative. If members of the Group’s senior management depart, the Group may not be able to find effective replacements in a timely manner, or at all, and its business may be disrupted. Dividends No final dividend was or is proposed to be declared with respect to the current period. No interim dividend was paid. A dividend of $0.005 per share was paid on 4 November 2022 in respect of the year ended 30 June 2022, franked to 20%. No dividends were paid in the prior corresponding period. Significant changes in affairs There were no significant changes in the state of affairs of the Group during the year ended 30 June 2023. Significant events after reporting date On 23 August 2023, CBA approved an amendment to the Net Leverage Covenant in relation to the period ended 30 June 2023 to increase it to 3.50 times. 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 Group, the results of those operations, or the state of affairs of the Group in future financial years. Likely devlopments, business strategies and prospects The Company’s strategy for FY24 and future years is to achieve revenue and EBITDA growth across each of its customer segments to deliver growth in returns to its shareholders. The Company believes that the continued growth in demand for digital, cloud and network services will support the growth in demand for the Company’s products and services. The Board also expects to focus on EBITDA-accretive acquisition of businesses that complement the Company’s existing products and services. Further information on the Group’s future prospects are contained in the Chairman’s and Managing Director’s Reports on pages 4 and 7 respectively. 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 2023, 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 11 5 1 Name of Director Joseph Gangi Joe Demase Natalie Mactier Jason Ashton Eligible Attended Eligible Attended Eligible Attended 11 11 11 11 11 11 11 11 5 5 5 5 5 5 5 5 1 1 1 1 1 1 1 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 not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Group or any related entity against a liability incurred by the auditor. During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any related entity. 2425Directors’ Report Remuneration Report (Audited) 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 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 Audit Pty Ltd. 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; and • 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 2023 $ 2022 $ - - 75,000 75,000 114,111 114,111 203,155 203,155 114,111 278,155 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 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 39. 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 22 September 2023 The Directors present the Webcentral Limited 2023 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 Other key management personnel: Jonathan Horne – CEO, Melbourne IT (appointed 1 December 2022) Glen Dymond - Chief Financial Officer and Company Secretary Garry White - National Sales Director John Stevens – Chief Operating Officer 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. Group performance and link to remuneration In considering the Group's performance and benefit of shareholder's wealth, the Nomination and Remuneration Committee had regard to the following measures in respect of the current financial year and the previous four financial years: Measure 2023 $'000 2022 $'000 20211 $'000 20191 $'000 20181 $'000 Underlying EBITDA from continuing operations2 12,825 17,561 11,928 14,794 24,564 Net loss after tax (19,109) (24,738) (61,922) (131,222) (2,326) Measure Dividend Change in share price 2023 Cents 2022 Cents 20211 Cents 20191 Cents 20181 Cents - 0.5 - - 8.0 (8.5) (26.5) 9.5 (158.0) (166.0) Share price close 12.5 21.0 47.5 38.0 196.0 1. The financial year end date for the Group was changed from 31 December to 30 June after the financial year ended 31 December 2019. The measures for 2021 represent the 18-month period ended 30 June 2021 2. Underlying EBITDA from continuing operations is a management performance measure (Earnings before Interest, Tax, Depreciation and Amortisation) that the Group believes 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. 2627Remuneration Report (Audited) Remuneration Report (Audited) (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 short-term performance objectives implemented for the following KMP in relation to FY23 were as follows: KMP STI targets for the year STI achieved and forfeited for the year Glen Dymond (i) Projects to increase revenue or reduce operating costs (i) Achieved: 87.5% / $35,000 This target reflects the importance of ongoing improvement of systems and processes and the identification and achievement of revenue and cost synergies Forfeited: 12.5% / $5,000 Assessed by reference to the actual achievement of revenue increase or cost savings compared to project targets (ii) Group Revenue and EBITDA targets (ii) Achieved: 0% / $0 This target reflects the importance of achieving Revenue and EBITDA growth and the Group’s financial performance Forfeited: 100% / $40,000 Assessed by reference to the Group’s revenue and EBITDA for FY23 Garry White (i) Projects to increase revenue or reduce operating costs This target reflects the importance of ongoing improvement of systems and processes and the identification and achievement of revenue and cost synergies (iii) Total achieved: 43.8% / $35,000 Total forfeited: 56.2% / $45,000 (i) Achieved: 100% / $7,500 Forfeited: 0% / $0 Assessed by reference to the actual achievement of revenue increase or cost savings compared to project targets (ii) Group Revenue and EBITDA targets (ii) Achieved: 0% / $0 This target reflects the importance of achieving Revenue and EBITDA growth and the Group’s financial performance Forfeited: 100% / $80,000 Assessed by reference to the Group’s revenue and EBITDA for FY23 (iii) Total achieved: 8.6% / $7,500 Total forfeited: 91.4% / $80,000 (i) Achieved: 69% / $41,136 Forfeited: 31% / $18,864 Assessed by reference to the actual achievement of revenue targets and industry funding to support marketing objectives (ii) Achieved: 40% / $24,000 Forfeited: 60% / $36,000 Assessed by reference to the successful project delivery and lower than forecast product revenue for FY23 (iii) Total achieved: 54.3% / $65,136 Total forfeited: 45.7% / $54,864 John Stevens (i) Delivery of .AU TLD launch This target reflects the importance of the .AU TLD domain launch to the Group’s revenue growth (ii) NBN Product Launch This target reflects the importance of the NBN product launch to the Group’s revenue growth The grant dates following bonuses were paid in respect of FY23: • Glen Dymond - 31 August 2022 and 28 February 2023; • Garry White - 31 August 2022; and • John Stevens - 30 November 2022 and 30 April 2023. 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. The Webcentral Executive Equity Plan (EEP) was adopted in April 2022 for executives and senior leaders of the Group. During the year ended 30 June 2023 the Group issued 6,100,000 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. (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 $ $ $ $ $ Options and Performance Rights3 $ Termination Pay Total Performance Based4 $ $ % Managing Director Joe Demase 2023 2022 291,667 276,923 Other Management personnel - - - - 50,000 4,934 25,292 302,934 23,077 7,559 23,568 1,657,422 23,077 2,534 14,834 62,663 122,756 - 225,306 35,000 208,992 76,800 228,819 7,500 - 19,671 19,319 16,159 217,773 38,400 10,537 276,923 65,136 23,077 - 6,134 6,278 6,134 5,335 6,134 - 25,292 23,568 - 39,413 28,475 25,292 138,397 23,568 123,391 25,292 99,028 189,615 - 10,385 4,272 16,784 94,916 1,145,471 107,636 131,984 25,870 116,002 642,435 2022 893,303 115,200 63,318 23,444 87,488 1,904,204 2023 2022 2023 2022 2023 2022 2023 2022 2023 Jonathan Horne5 Glen Dymond Garry White John Stevens6 Total KMP excluding Non-Executive Directors Total Non- Executive Directors (Section E) 2023 281,818 2022 234,236 - - - - - - 8,591 490,119 4,962 701,573 Total KMP 2023 1,427,289 107,636 131,984 25,870 124,593 1,132,554 2022 1,127,539 115,200 63,318 23,444 92,450 2,605,777 - - - - - - - - - - - - - - - - 674,827 1,988,549 225,864 - 350,816 363,432 422,301 419,004 495,590 315,972 2,169,398 3,086,957 780,528 940,771 2,949,926 4,027,728 45% 83% 28% - 21% 29% 35% 39% 33% 30% 35% 65% 63% 75% 42% 68% 1. Represents STIs accrued in relation to the 2023 financial period. 2. Represents the cost to the business of any non-cash business benefits provided. 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 Jonathan Horne commenced on 1 December 2022. 6. Mr John Stevens commenced on 1 November 2021. 2829 Remuneration Report (Audited) Remuneration Report (Audited) Options and Rights Granted as Remuneration The following table lists the inputs to the Black-Scholes-Merton models used for the LTI Grants: Name Balance at 1 July 2022 Grant Details Exercised Exercised Lapsed Balance at 30 June 2023 No. Grant Date No. Fair Value $000 No. Value $000 No. No. Key Management Personnel Joe Gangi Joe Demase Natalie Mactier Jason Ashton Jonathan Horne Glen Dymond John Stevens KMP Total Garry White 1,300,000 1,500,000 20,000,000 1,500,000 1,500,000 - - - - - - - - - - - - - 14/12/2022 4,000,000 308 300,000 01/09/2022 29/06/2023 01/09/2022 29/06/2023 1,000,000 29/06/2023 300,000 500,000 300,000 500,000 500,000 23 32 23 32 32 27,100,000 - 6,100,000 450 - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,500,000 20,000,000 1,500,000 1,500,000 4,000,000 1,100,000 2,100,000 1,500,000 33,200,000 The key criteria for performance rights and options granted during the period are as follows: • 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 $0.16 for the 6,100,000 performance rights and options granted during the period. The following table summarises information about performance rights and options held by KMP as at 30 June 2023. 5,000,000 performance rights are exercisable at period end (2022: 5,000,000 performance rights): Issue Date and Type Number Grant Date Vesting Date Expiry Date Weighted Average Exercise Price 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 21/12/2026 2021 Options - Director 4,500,000 22/12/2021 22/12/2023 21/12/2026 2021 Options – Executive (3) 2,600,000 15/07/2021 15/07/2023 15/07/2026 2022 Options – Executive (3) 600,000 01/09/2022 01/09/2024 01/09/2027 2022 Options – Executive (5) 2,000,000 14/12/2022 14/12/2023 14/12/2027 2022 Options – Executive (6) 2,000,000 14/12/2022 14/12/2024 14/12/2027 2023 Options – Executive (1) 1,500,000 29/06/2023 29/06/2025 29/06/2028 1. Vesting period is dependent on the achievement of inclusion in the S&P ASX300 Index. 23,700,000 $0.20 $0.45 $0.45 $0.45 $0.20 $0.17 $0.17 $0.11 $0.37 2020 Rights 2021 Rights 2021 Options 2021 Options (3) 2022 Options (3) 2022 Options (5) 2022 Options (6) 2023 Options (1) Share price Dividend yield Expected volatility Risk-free interest rate Fair value per option $0.415 $0.465 $0.465 $0.475 $0.175 $0.16 $0.16 $0.13 0.0% 0.0% 0.0% 0.0% 2.9% 3.1% 3.1% 3.8% 73.4% 45.0% 45.0% 73.4% 96.1% 93.3% 93.3% 92.8% 0.38% 1.27% 1.27% 0.69% 3.50% 3.06% 3.06% 3.93% $0.3031 $0.192 $0.3031 $0.205 $0.08 $0.07 $0.08 $0.06 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. (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 Mr Joe Gangi Ms Natalie Mactier Mr Jason Ashton1 Total Period Cash Salary & fees $ 110,000 103,333 90,000 81,288 81,818 49,615 281,818 2023 2022 2023 2022 2023 2022 2023 2022 234,236 Cash STI $ Annual leave Superannuation Long service leave $ $ $ Options and Performance Rights $ Total Performance related $ % - - - - - - - - - - - - - - - - - - - - 8,591 4,962 8,591 4,962 - - - - - - - - 163,373 273,373 308,041 411,374 163,373 253,373 308,041 389,329 163,373 253,782 85,491 140,068 490,119 780,528 701,573 940,771 60% 75% 64% 79% 64% 61% 63% 75% 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. 1. Mr Jason Ashton was appointed on 24 November 2021. 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. 3031 Remuneration Report (Audited) Remuneration Report (Audited) (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 2022 or date of appointment Received on the exercise of option or right Net Other Changes Balance at 30 June 2023 Directors Joe Gangi Joe Demase Natalie Mactier Jason Ashton Total Directors Other Management Personnel (OMP) Jonathan Horne Glen Dymond Garry White John Stevens Total OMP Group Total 7,745,040 55,793,184 1,000,000 4,967,147 69,505,371 - 1,539,813 6,235,048 - 7,774,861 77,280,232 - - - - - - - - - - - - 2,875,535 - - 7,745,040 58,668,719 1,000,000 4,967,147 2,875,535 72,380,906 - - - 74,000 74,000 - 1,539,813 6,235,048 74,000 7,848,861 2,949,535 80,229,767 Voting and comments made at the Company’s Annual General Meeting The Company received 96.3% of ‘yes’ votes on its Remuneration Report for the financial year ending 30 June 2022. The Company received no specific feedback on its Remuneration Report at the Annual General Meeting. 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 2023 $000 128 - 128 Other Transactions with Key Management Personnel During the year, the Group has conducted the following related party transactions: • A total of $213,191 (2022: $154,294) was paid to Studio Inc., an entity related to Joe Demase, for the design of marketing materials for the Group. • A total of $18,315 (2022: nil) was paid to Mr Hunter Demase for sales consulting services. All transactions are carried at commercial third-party rates. There were no other transactions with KMP during the year ended 30 June 2023. End of Remuneration Report This report, incorporating the Remuneration Report is signed in accordance with a resolution of Directors. Joe Gangi Chairman 22 September 2023 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 $350,000 Unspecified 6 months Jonathan Horne $250,000 Unspecified 3 months Glen Dymond $270,000 Unspecified 3 months Garry White $270,000 Unspecified 3 months John Stevens $300,000 Unspecified 3 months Loans to Key Management Personnel (i) Executive and Direct 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 year no loans were provided under the Executive and Director Share Plan (2022: $400,000) (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. Loan repayments of $148,400 were made during the year ended 30 June 2022 ($74,200 from Glen Dymond and $74,200 from Garry White). No repayments were made during the year ended 30 June 2023. The loans are full recourse loans and repayable on termination of employment of the relevant employees. 3233 Corporate Governance Statement Corporate Governance Statement 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. 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 3435Corporate Governance Statement Corporate Governance Statement Compliant Principle 6 – Respect the rights of security holders 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 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 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. 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. 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 Principle 4 – Safeguard the integrity of corporate reports The Board has established an Audit and Risk Committee (‘ARC’) which operates under an audit and risk committee charter. Compliant Principles and Recommendations Compliance Comply 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 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. 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. Compliant 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. 3637Corporate Governance Statement Auditors' Independence Declaration Principles and Recommendations Compliance The ARC meets at least four times each year and a risk review is conducted in relation to each reporting period. Comply Compliant 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 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 Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 Grant Thornton Audit Pty Ltd GPO Box 4736 Level 22 Tower 5 Melbourne VIC 3001 Collins Square 727 Collins Street T +61 3 8320 2222 Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Auditor’s Independence Declaration To the Directors of Webcentral Limited Auditor’s Independence Declaration 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 2023, I declare that, to the best of my knowledge and belief, To the Directors of Webcentral Limited there have been: In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to a of Webcentral Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, the audit; and there have been: b a no contraventions of any applicable code of professional conduct in relation to the audit. 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 Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 22 September 2023 M A Cunningham Partner – Audit & Assurance Melbourne, 22 September 2023 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. www.grantthornton.com.au ‘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). ACN-130 913 594 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 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. 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 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards 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). Legislation. 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 w 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 3839Webcentral Limited and its controlled entities ABN: 21 073 716 793 FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 4041Consolidated Statement of Comprehensive Income Consolidated Statement of Comprehensive Income For the year ended 30 June 2023 For the year ended 30 June 2023 (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 Year ended Notes 30-Jun-23 $’000 30-Jun-22 $’000 (19,019) (24,883) - 145 (19,019) (24,738) (17,953) (25,862) - 145 (17,953) (25,717) 30-Jun-23 cents per share 30-Jun-22 cents per share (5.79) (5.79) (5.47) (5.47) (8.50) (8.50) (8.56) (8.56) 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 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 assets Share-based payment expenses Acquisition costs Non-recurring 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 Year ended Notes 30-Jun-23 $’000 30-Jun-22 $’000 5 6 10 14 8 22 22 96,138 38 96,176 93,428 3,304 96,732 (26,035) (24,285) (7,198) (751) (5,067) (722) (435) (604) (2,493) (34,371) (5,675) - (14,077) (1,546) (184) (3,313) (8,529) (3,918) (3,475) (118,393) (22,217) 3,198 (19,019) (6,225) (1,461) (4,999) (814) (373) (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) 52 (36) 1,014 1,066 (943) (979) TOTAL COMPREHENSIVE INCOME FOR THE YEAR (17,953) (25,717) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 4243 Consolidated Statement of Financial Position Consolidated Statement of Financial Position As at 30 June 2023 As at 30 June 2023 (Continued) Notes 30-Jun-23 30-Jun-22 $’000 $’000 Notes 30-Jun-23 30-Jun-22 $’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 TOTAL EQUITY 27 13 19 11 8 21 22 - 13,229 487 9,698 - 23,414 25,359 14,784 451 8,072 2,507 51,173 106,580 101,684 10,270 28,933 200,521 201,301 (132,049) (134,661) (58,202) 10,270 (37,707) 28,933 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Prepayments of domain name registry charges 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 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 11 16 12 13 15 8 14 27 16 17 27 13 19 11 18 4,498 5,088 6,279 1,089 3,998 20,952 9,805 10,376 21,067 2,719 890 50,280 725 36 95,898 5,367 4,049 5,585 669 3,409 19,079 15,670 15,177 22,059 2,387 - 50,212 5,198 835 111,538 116,850 130,617 14,666 29,158 3,937 3,536 124 25,440 2,182 4,123 83,166 14,893 571 3,456 3,907 35 23,409 1,250 2,990 50,511 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 4445 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows For the year ended 30 June 2023 For the year ended 30 June 2023 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 Year ended Notes 30-Jun-23 $’000 30-June-22 $’000 BALANCE AT 1 JULY 2022 Loss for the period Other comprehensive income Dividend paid 201,301 - - - Total comprehensive income for the period 201,301 Transactions with owners in their capacity as owners: Shares issued on exercise of Options Share issued - Dividend reinvestment plan 137 52 Cancellation of shares pursuant to on-market buy back (955) Share issue costs Share based compensation Balance at 30 June 2023 BALANCE AT 1 JULY 2021 Loss for the period Other comprehensive income (14) - 200,521 80,061 - - Total comprehensive income for the period 80,061 - - - - - - - - - - - - - - - (134,661) (37,707) 28,933 - (19,019) (19,019) 1,066 - 1,066 - (1,476) (1,476) (133,595) (58,202) 9,504 - - - - 1,546 - - - - - 137 52 (955) (14) 1,546 (132,049) (58,202) 10,270 - - - - - - - - - - - 28,933 (19,019) 1,066 (1,476) 9,504 137 52 (955) (14) 1,546 10,270 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest paid Income tax paid Payments for acquisition and restructuring costs NET CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Net cash on purchase of New Domain Purchase of plant and equipment Purchase of intangible assets Sublease payments received Net Cash on Purchase of ColoAU Net Cash on Purchase of Intergrid 12,300 (12,824) 79,537 (29,681) 49,856 Consideration paid in relation to deferred capital payments of North Sydney Data Centre - (24,883) (24,883) 145 (24,738) Investments in listed companies (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 reorganization 132,340 (11,196) (150,680) Cancellation of treasury shares held by 5G Networks Limited (11,196) 11,196 Shares issued on exercise of Options Cancellation of shares under unmarketable parcel facility Share issue costs Share based compensation Balance at 30 June 2022 1,115 (1,005) (14) - 201,301 - - - - - - - - (124) 4,822 (29,536) 29,536 - - - - - - - 1,115 (1,005) (138) 4,822 - - 1,115 (1,005) (138) 4,822 28,933 - - - - - - (134,661) (37,707) 28,933 Return of capital and dividends received from investments Proceeds from sales of CNW shares NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of shares on exercise of options Proceeds from borrowings Payment of performance rights Payment of security deposit Payments of share buyback 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 NET DECREASE IN CASH AND CASH EQUIVALENTS Net foreign exchange differences Cash and cash equivalents at beginning of period CASH AND CASH EQUIVALENTS AT END OF PERIOD 105,455 (94,019) 4 (3,235) - (184) 8,021 (3,500) (3,746) (2,411) 60 - - - - 33 5,487 106,865 (98,087) 111 (2,856) (57) (2,554) 3,422 - (5,856) (1,336) 1,835 (8) (602) (499) (5,417) 136 - (4,077) (11,747) - 8,800 - (40) (1,914) (5,539) - - (1,476) (4,696) (4,865) 1,025 5,412 (4,013) (376) - (1,095) (182) (305) - (5,925) (5,459) (921) (13,784) 52 5,367 4,498 (19) 19,170 5,367 20 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. 4647 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 2023 were authorised for issue in accordance with a resolution of the directors on 22 September 2023. 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. 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; and • 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 22 September 2023. Going concern The financial report for the financial year ended 30 June 2023 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 2023 the Group recorded a loss after tax of $19,019,000 (2022: Loss $24,738,000), operating cash inflows of $8,021,000 (2022: $3,422,000), financing cash outflows of $4,865,000 (2022: $5,459,000), and a deficit of current assets to current liabilities of $62,214,000 (2022: $31,432,000). At year end the Group had $4.5 million of cash on hand and available debt facilities of $4.5 million, of which $1.5 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 $14.08 million, acquisition, restructuring and other non-recurring costs of $3.5 million, and non-cash share-based payments expense of $1.55 million. The major contributors to the decline in underlying EBITDA was the $3.26 million reduction in non-recurring hosting revenue and transitional services income and the reduction in networks and data centre revenue. The goodwill impairment charge has arisen due to the assessment of the carrying value of goodwill and intangible assets at year-end and the impact of higher discount rates. The non-cash impairment expense recognises the decline in revenue at one of the Group’s data centres servicing the digital currency market and pricing pressure from government contracts. The non-cash impairment charge has no impact on the Group's debt facilities, covenants or liquidity. The acquisition, restructuring and non-recurring costs are considered to be one-off and non-recurring in nature. 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 2024 (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: • annual renewal of .au domain names following launch in the period from March to September 2022; • continued growth in CPanel hosting products; • wholesale and enterprise customer growth with more than $5.9 million annual recurring revenue sold in FY23; • enterprise and wholesale sales pipeline of $8.9 million; and • continued growth in hardware sales with sales closed of $2.0 million in FY23 for delivery in FY24. A conservative cash forecast for the period to September 2024 (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 2023 which indicates a positive operating cashflow for the period to September 2024 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 $4.5 million (excluding $1.5 million acquisition facility), and other available sources of funding and indicate that the Group has sufficient funding headroom. 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 $11.3 million, borrowings and other financial liabilities not expected to be payable or settled in cash of $30.7 million, trade payables and other creditors not payable of $4.3 million, payroll provisions of $3.1 million, property lease liabilities of $3.7 million and deferred revenue balances of $26.4 million. The Directors have also considered the Group’s compliance with its debt facility agreement with CBA and the amendment to the Net Leverage Ratio covenant in relation to the period ended 30 June 2023 to increase it to 3.50 times. As the amendment was received after reporting date, the Group is required to classify an amount of $25.1 million as a current liability in the Statement of Financial Position even though these amounts are not repayable within 12 months of reporting date. 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 2023 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 4849Notes to the Financial Statements Notes to the Financial Statements 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 non- controlling 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 pre-existing 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. 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) Hardware and software sales 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 – cloud hosting (email and web including website build) 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. 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. (v) Rendering of Services – digital 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 5051Notes to the Financial Statements Notes to the Financial Statements to be evenly over time in line with the contracted term as the customer simultaneously receives and consumes the benefits of online marketing services. 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 income 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) Dividend Dividend is defined as distributions of profits to holders of equity investments in proportion to their holdings of a particular class of capital and it is recognised as dividend income on the basis when the shareholder’s right to receive payment is established. 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 accounts for a head lease and sublease as two separate contracts, applying both lessee and lessor accounting requirements respectively. 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. 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. 5253Notes to the Financial Statements Notes to the Financial Statements 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 Tiger 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 comprehensive income 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 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. 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. 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 5455Notes to the Financial Statements Notes to the Financial Statements 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 2022. 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. 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. Segment information for the reporting period is as follows: 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, 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 2023 Segment Revenue Cost of goods sold Gross margin Other income Rent and office expenses Marketing and travel expenses Employee benefits expenses Other expenses Total Adjusted EBITDA1 Data Centres, Network & Cloud $'000 Managed Services Webcentral $'000 $'000 Total $'000 22,117 (16,105) 6,012 - (139) (249) (11,036) 20,239 (9,930) 10,309 - (127) (249) (7,433) 53,782 (14,173) 39,609 38 (338) (1,995) (15,902) Impairment of goodwill, fixed assets and intangible assets (14,077) - - Share-based payment expenses Acquisition costs Restructuring costs Depreciation and amortisation expenses (7,517) (790) (4,140) Finance costs Loss before income tax expense Total Segment assets Total Segment liabilities 23,361 21,308 8,385 7,648 85,104 77,624 96,138 (40,208) 55,930 38 (604) (2,493) (34,371) (5,675) 12,825 (14,077) (1,546) (184) (3,313) (12,447) (3,475) (22,217) 116,850 106,580 5657Notes to the Financial Statements Notes to the Financial Statements 2022 Segment Revenue Cost of goods sold Gross margin Other income Rent and office expenses Marketing and travel expenses Employee benefits expenses Other expenses Total Adjusted EBITDA1 Impairment of financial assets Impairment of goodwill, fixed assets and intangible assets Share-based payment expenses Acquisition costs Restructuring costs Data Centres, Network & Cloud $'000 Managed Services $'000 Webcentral $'000 Elimination $'000 Total $'000 24,638 (15,888) 8,750 - (107) (179) (11,546) (578) (11,494) 19,465 (8,405) 11,060 - (85) (179) (7,777) - - 50,106 (13,872) 36,234 3,304 (218) (1,430) (16,637) - - (781) 8 (773) - - - - - - - - - 93,428 (38,157) 55,271 3,304 (410) (1,788) (35,960) (2,856) 17,561 (578) (11,494) (8,833) (904) (3,706) (13,630) (2,798) (24,382) 130,617 101,684 Depreciation and amortisation expenses (6,887) (1,169) (5,574) Finance costs Loss before income tax expense Total Segment assets Total Segment liabilities 38,494 29,967 14,355 11,175 77,768 60,542 1. 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. Alternative segment presentation The Group has restructured its operations into the following customer segments following the merger between Webcentral and 5G Networks Limited in November 2021: • Retail: domains, web hosting, email hosting and digital marketing services to consumer and small and medium enterprise customers • Enterprise: cloud hosting, domain names, data centre, networks and voice, IT managed services, hardware and software and digital marketing products and services provided to Enterprise and Government customers • Wholesale: cloud hosting, data centre, networks and voice products and services provided to wholesale telecommunications and Segment information is provided below in relation to these segments. These reporting segments will apply from reporting periods from 1 July 2023. 5. Revenue from contracts with customers The revenue breakdown by product and service line for the year ended 30 June 2023 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 2023 $'000 2022 $'000 32,039 24,360 8,661 7,638 12,089 3,201 8,150 96,138 29,407 22,595 10,168 7,989 11,994 4,512 6,763 93,428 8,150 6,763 87,988 96,138 86,665 93,428 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 2023 Goods transferred at a point in time - - Services transferred over time 32,039 24,360 - 8,661 - - 7,638 12,089 For the year ended 30 June 2022 Goods transferred at a point in time - - - - - Services transferred over time 29,407 22,595 10,168 7,989 11,994 - 3,201 - 4,512 8,150 - 6,763 - 8,150 87,988 6,763 86,665 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. 8. Income tax Consolidated 2023 $’000 2022 $’000 Dividend income Interest income Sublease income Management fees from transitional service agreements in relation to the sale of Enterprise and TPP Wholesale businesses Sundry income Total Other Income Consolidated 2023 $’000 2022 $’000 33 5 - - - 38 168 21 197 2,460 458 3,304 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 (2022: 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 2023 2022 Number Number 328,328,188 291,056,455 Weighted average number of shares used in calculating earnings per share and diluted earnings per share (A) INCOME TAX BENEFIT / (EXPENSE) (Loss) / profit before income tax (22,217) (24,382) Tax at the Group's statutory income tax rate of 30% (2022: 30%) 6,665 7,315 Tax effect amounts which are not deductible in calculating taxable income: Non-deductible goodwill impairment charge (1,644) (3,448) Other tax-exempt income Expense on performance rights and options Other non-deductible expenses Net under/over Unrecognised tax loss for the year Over provision from period and business combination (10) (464) (10) 848 (2,187) - 10 (2,650) (343) (313) (994) 67 Actual tax benefit / (expense) 3,198 (356) Tax expense comprises: - Current tax - Deferred tax - origination and reversal of temporary differences Aggregate Income tax expense at the effective income tax rate (B) DEFERRED TAX ASSETS AND LIABILITIES - 3,198 - (356) 3,198 (356) Deferred tax assets are comprised of the following temporary differences:1 Allowable section 40-880 (blackhole) deductions – written down value Accrued expenses and provisions Other 946 7,540 609 870 7,439 20 Tangible and intangible assets (3,028) (5,229) ACA impact on depreciating asset – written down value R&D capitalised labour (89) - (122) (3) Brand and Customer contract (5,088) (5,482) NET DEFERRED TAX ASSET / DEFERRED TAX LIABILITY 890 (2,507) As at 30 June 2023, the Group has unrecognised income tax losses of $42,019,217 tax-effected at 30% (2022: $34,807,742), and capital losses of $87,869,863 arising from the sale of businesses in previous financial years (2022: $87,869,863). 5859 Notes to the Financial Statements Notes to the Financial Statements 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: 10. Trade and other receivables Trade receivables Consolidated Allowance for impairment of receivables Cash at bank and in hand Total cash and cash equivalents 2023 $’000 2022 $’000 4,498 4,498 5,367 5,367 Unsecured loans – at call1 Other receivables Consolidated 2023 $’000 2022 $’000 4,747 (238) 4,509 424 155 5,020 (1,768) 3,252 424 373 (b) Reconciliation of loss after tax to net cash flows from operating activities 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. Total trade and other receivables 5,088 4,049 Consolidated 2023 $’000 2022 $’000 Loss after income tax (19,019) (24,883) Non-cash flows in profit: Depreciation and amortisation 12,447 13,683 Employee benefits expenses Share-based payment expenses Impairment expenses Deferred tax movement 371 1,546 14,077 (3,245) 854 8,833 11,494 (332) Other non-cash expenses / (income) 475 (2,409) Changes in assets and liabilities net of effects of purchases and disposals of controlled entities: Movement in trade and other receivables 1,039 1,243 Movement in other assets 1,283 (1,572) Movement in deferred tax asset Movement in trade and other payables Movement in employee benefits provisions Movement in Income tax payable Movement in other Liabilities Net cash from operating activities 1,617 (977) (371) (89) (1,133) 8,021 379 (1,839) (854) (57) (1,119) 3,422 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 2023 and 1 July 2022 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. 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 2023 and 30 June 2022 was determined as follows: 30-Jun-23 30-Jun-22 ECL Rate Gross $’000 ECL $’000 ECL Rate Gross $’000 ECL $’000 Current 0.0% 1,751 0.1% 946 - (1) 0.0% 2,475 0.0% 324 1-30 days past due 31-60 days past due 61-90 days past due 91 days + past due Closing balance 6.0% 92 (5) 0.0% 171 39.9% 133 (53) 0.0% 132 9.8% 1,825 (179) 92.2% 1,918 (1,768) 4,747 (238) 5,020 (1,768) Contract liabilities consist of the following: Deferred revenue Consolidated 2023 $’000 2022 $’000 25,440 23,409 Contract liabilities - current 25,440 23,409 Deferred revenue Contract liabilities - non-current 9,698 9,698 8,072 8,072 Movement of contract liabilities during the period Balance as at 1 July Add: customer payments received Consolidated 2023 $’000 2022 $’000 23,409 60,734 23,748 56,609 Less: revenue released to P&L (58,963) (57,390) Reclassification from non-current liabilities 260 442 Contract liabilities (current) 25,440 23,409 Balance as at 1 July Reclassification to current liabilities Net customer payments received Contract liabilities (non-current) 8,072 (260) 1,886 9,698 8,551 (442) (37) 8,072 The large ECL in 91 days + in 2022 was a result of large write-offs of legacy historical debtor balances that had been fully provided for in previous financial years. The closing balance of the trade receivables loss allowance as at 30 June 2023 reconciles with the trade receivables loss allowance opening balance as follows: Opening loss allowance as at 1 July 2021 Net additional provision for ECL’s taken to the P&L Loss allowance as at 30 June 2022 Transfer to other receivables/trade receivables Loss allowance as at 30 June 2023 $’000 1,190 578 1,768 (1,530) 238 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 2023 $’000 2022 $’000 1,089 1,089 669 669 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. Movement of contract assets during the period - - - - As at 1 July Additions Cash received As at 30 June Consolidated 2023 $’000 2022 $’000 669 1,967 (1,547) 1,089 620 1,730 (1,681) 669 6061Notes to the Financial Statements Notes to the Financial Statements 12. Property, Plant and Equipment Leasehold improvements $'000 Plant and equipment $'000 Total $'000 Gross carrying amount At 1 July 2022 4,427 27,103 31,530 Assets acquired in the business acquisition Additions Disposals Closing Value at 30 June 2023 - 2 (19) 4,410 8 8 3,893 (10) 3,895 (29) 30,994 35,404 Depreciation and impairment (3,430) (12,430) (15,860) (434) - - (3,970) (5,344) (4,404) (5,344) 9 9 (3,864) (21,735) (25,599) At 1 July 2022 Depreciation Impairment (refer note 14) Disposals Closing value at 30 June 2023 Carrying Amount 30 June 2023 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 Depreciation and impairment Balance at 1 July 2021 Depreciation Disposals Closing value at 30 June 2022 Carrying Amount 30 June 2022 (1,943) (1,487) - (8,477) (3,989) 36 (10,420) (5,476) 36 (3,430) (12,430) (15,860) 997 14,673 15,670 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: Depreciation expense of right-of-use assets 2023 $’000 2022 $’000 3,879 4,722 Interest expense on lease liabilities Rent expense - short-term leases 1,166 (167) 1,166 28 Right-of-use asset Right-of-use assets Building $’000 IT equipment $’000 Total $'000 Additions during the year Disposals during the year Depreciation expense 14,626 2,277 (89) (3,751) Impairment (refer note 14) (3,109) As at 30 June 2023 9,954 551 - - 15,177 2,277 (89) (129) (3,880) - 422 (3,109) 10,376 Right-of-use assets Premises $’000 Other equipment $’000 Total $'000 As at 1 July 2021 Additions during the year Derecognition of lease receivables Disposals during the year Depreciation expense As at 30 June 2021 14,930 3,205 1,127 (43) (4,593) 14,626 548 132 - - (129) 551 15,478 3,337 1,127 (43) (4,722) 15,177 The impairment charge against Lease Right-of-use assets has arisen due to the allocation of an impairment charge against other assets of the Cash Generating Unit (CGU) pro-rata based on the carrying amount of assets of the CGU. Refer to note 14 for further details. 546 9,259 9,805 As at 1 July 2022 Lease receivables Lease liabilities 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 2023 $’000 2022 $’000 2,993 - - (1,127) 94 (1,960) - - - - - - - - 1. Disposals due to early termination of sublease and the balance was transferred to ROU Consolidated 2023 $’000 2022 $’000 3,903 34 3,937 3,319 137 3,456 Current Obligations under property leases Obligations under equipment leases Non-current Obligations under property leases 13,191 14,713 Obligations under equipment leases 38 71 13,229 14,784 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 8 2 1-7 years 4 years 1-4 years 2 years 2 years 2 years 4 6 0 4 6 0 0 0 0 The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2023 were as follows: Within 1 year 1-2 year 2-3 year 3-4 years 4-5 years After 5 years Total Minimum lease payments due 30 June 2023 Lease payments Finance charges Net present values 30 June 2022 Lease payments Finance charges Net present values 4,989 (1,037) 3,952 4,554 (1,098) 3,456 4,825 (756) 4,069 4,500 (866) 3,634 4,058 (491) 3,567 4,124 (630) 3,494 3,375 (286) 3,089 3,288 (412) 2,876 1,438 (133) 1,305 3,364 (257) 3,107 1,305 (122) 1,183 1,909 (236) 1,673 19,990 (2,825) 17,165 21,739 (3,499) 18,240 6263 Notes to the Financial Statements Notes to the Financial Statements 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 2023 $’000 2022 $’000 167 167 28 28 14. Goodwill The following table shows the movements in goodwill: The recoverable amount of the CGU is determined based on value-in-use calculations. To determine the value-in-use, management estimates expected future cash flows from each CGU 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 2028 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 CGU and reflect current market assessments of the time value of money and asset- specific risk factors. CGU Discount Rate Consolidated 2023 $’000 2022 $’000 Data Centres, Networks and Cloud Managed Services Webcentral 10.5% 13.1% 11.5% Impairment Charge for Goodwill An impairment charge of $14.08 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 FY23 compared 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 FY23. The impairment is allocated first to reduce the carrying amount of goodwill to the CGU and to other assets of the CGU pro rata on the basis of the carrying amount of assets in the CGU. There has been no other individual assets available to reduce to below its fair value. Gross carrying amount Balance at beginning of period 61,706 61,706 Acquired through business combination (refer note 20) 5,547 - Balance at end of the period 67,253 61,706 Accumulated impairment Balance at beginning of period (11,494) - Impairment loss recognised (5,479) (11,494) Balance at end of the period (16,973) (11,494) Carrying amount at end of the period 50,280 50,212 Impairment Disclosures and Testing of Goodwill Goodwill is allocated to the Group’s cash generating units (CGU), 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 2023 $’000 2022 $’000 - 5,536 44,744 50,280 5,479 5,536 39,197 50,212 Item / $000 Goodwill Lease right of use asset: Various Fixed assets Oher intangibles: Customer contract Brand name Total CGU1 5,479 3,109 5,344 44 101 14,077 No impairment charge was recorded for the Managed Services and Webcentral segments as their respective recoverable amounts exceeds their carrying values by $8.0 million and $92.6 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 21% and 19% respectively and the revenue growth rate would need to decrease to 2.6% and 1.1% 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 2022 Additions Disposals Closing Value at 30 June 2023 Amortisation and impairment At 1 July 2022 Amortisation Impairment loss recognised (refer note 14) Closing value at 30 June 2023 Carrying Amount at 30 June 2023 Gross carrying amount At 1 July 2021 Additions Disposals 18,932 1,554 - 20,486 (3,295) (1,918) (101) (5,314) 15,172 4,017 - - 4,017 (1,380) (620) (44) (2,044) 1,973 18,932 4,017 - - - - Closing Value at 30 June 2022 18,932 4,017 Amortisation and impairment Balance at 1 July 2021 Amortisation Impairment loss recognised Closing value at 30 June 2022 Carrying Amount at 30 June 2022 (1,377) (1,918) - (3,295) 15,637 (577) (803) - (1,380) 2,637 4,856 806 (230) 5,432 (1,214) (490) - (1,704) 3,728 3,775 1,081 - 4,856 (542) (672) - (1,214) 3,642 180 51 - 231 (37) - - (37) 194 - 180 - 180 - (37) - (37) 143 27,985 2,411 (230) 30,166 (5,926) (3,028) (145) (9,099) 21,067 26,724 1,261 - 27,985 (2,496) (3,430) - (5,926) 22,059 6465Notes to the Financial Statements Notes to the Financial Statements (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 $2.59m 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 internal 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 2023 $’000 2022 $’000 3,057 2,878 201 123 617 200 74 257 Other assets - current 3,998 3,409 Other prepayments Other assets - non-current 36 36 835 835 17. Trade and other payables 20. Business Acquisitions Details of the net assets acquired and goodwill are as follows: Trade creditors Accrued liabilities Deposits received in advance Other creditors Total trade and other payables Consolidated 2023 $’000 2022 $’000 11,737 1,442 289 1,198 14,666 11,917 888 231 1,857 14,893 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 Consolidated 2023 $’000 2022 $’000 GST and PAYG due to ATO 3,904 2,804 Payroll tax provision Other 111 108 186 - Other liabilities - current 4,123 2,990 19. Employee Benefits Provisions Current Annual leave Long service leave Wages payable Superannuation payable Accrued bonuses and sales commission Consolidated 2023 $’000 2022 $’000 1,796 2,007 935 13 682 110 934 61 738 167 Employee benefits provisions - current 3,536 3,907 Non-current Long service leave Employee benefits provisions - non-current 487 487 451 451 New Domain Services On 7 December 2022, the Company completed the acquisition of New Domain Services, a premium domain email and webhosting services business with 25,000 customers with normalised revenue of $2 million and normalised EBITDA of $1.2 million. The Company acquired all of the shares in Bachco Pty Ltd and Terrific.com.au Pty Ltd. The acquisition was funded from existing cash reserves and from the Group’s acquisition debt facility with CBA. The acquisition price was $5 million with $3.5 million paid in cash at Completion and deferred payments of $1.5 million payable within 12 months of Completion. A deferred payment of $0.5 million was paid on 14 July 2023. An earn-out may be payable in respect of revenue growth for the six-months ended 30 June 2023 and for the financial year ending 30 June 2024. The purpose of the acquisition is to drive revenue growth in corporate domains services. New Domain Services has been integrated with the Group’s Melbourne IT business and New Domain vendor Jonathan Horne has been appointed as Chief Executive Officer of the combined business. It is expected that the acquisition will also benefit the broader Webcentral business as customer services changes, process improvements and product innovation are rolled out to Webcentral’s business. The goodwill value of $5.55 million identified in relation to the acquisition is provisional as the Company continues to obtain information in relation to the acquisition and determine the fair value of assets and liabilities. The acquisition of New Domain Services has been assessed under the requirements of AASB 3: Business Combinations and has been assessed to meet the requirements of a business combination. Fair value of consideration transferred Note $000 Amount settled in cash Deferred payments Contingent consideration Total consideration Recognised amounts of identifiable net assets Other assets Total current assets Prepayment of domain name registrations Property, plant and equipment Deferred tax asset Intangible assets Total non-current assets Contract liabilities – current Trade and other payables Deferred tax liability Employee benefits Provisions Total current liabilities Contract liabilities – non-current Total non-current liabilities Identifiable net assets Goodwill on acquisition Consideration transferred settled in cash Net cash outflow on acquisition Acquisition costs charged to expenses 3,500 1,500 203 5,203 32 32 88 8 619 a 1,554 2,269 (1,201) (57) (466) (76) (70) (1,870) (775) (775) (344) 5,547 3,500 3,500 20 6667Notes to the Financial Statements Notes to the Financial Statements a. Identifiable intangible asset – customer contracts An intangible asset has been recognised in relation to the customer relationships held by New Domain Services at the time it was acquired by the Company. The asset has been valued under the Multi-Period Excess Earnings Method (MPEEM) whereby an estimate of future cash flows has been discounted to present-value. The key assumptions used in the valuation are the forecast revenue growth of 2.5% p.a., observed customer churn of 20% p.a. and weighted average cost of capital of 10-11%. Acquisition-related costs of $20,000 are not included as part of consideration transferred and have been recognised as an expense in the consolidated statement of profit or loss, as part of acquisition expenses. The purchase agreement included two potential earn-out amounts payable in cash if the combined Melbourne IT and New Domain Services businesses achieve revenue growth targets for the six-month period ending 30 June 2023 and for the financial year ending 30 June 2024. The contingent consideration amount has not been adjusted to present value amount as the adjustment would be immaterial. The goodwill that arose on the combination can be attributed to the revenue synergies and growth in the corporate domains services business expected to be derived from the combination and the value of the workforce of New Domain Services which cannot be recognised as an intangible asset. Goodwill has been Movements in ordinary shares on issue allocated to the cash-generating unit of Webcentral as at 30 June 2023. The goodwill that arose from this business combination is not expected to be deductible for tax purposes. From the date of the acquisition to 30 June 2023, New Domain Services contributed $0.9 million revenue and $0.5 million profit to the Group’s EBITDA. If the business was acquired at the beginning of the financial year, New Domain Services would have contributed $1.54 million revenue and $0.86 million profit to the Group’s EBITDA. 21. Issued Capital During the period, 1,000,000 ordinary shares were issued to the vendors of the ColoAu business to satisfy the earn- out payable in respect of the ColoAu acquisition in July 2020, 346,611 ordinary shares were issued pursuant to the Dividend Reinvestment Plan and 2,088,646 ordinary shares were issued under the Employee Share Plan. During the year, 5,401,820 ordinary shares were cancelled pursuant to an on-market buy-back. Consolidated 2023 $’000 2022 $’000 Issued and paid-up capital Ordinary shares each fully paid 200,521 201,301 30 June 2023 30 June 2022 Number of shares $'000 Number of shares $'000 Beginning of the financial period 331,092,792 201,301 114,261,123 80,061 - Issue of shares to vendor - Issues of shares under Dividend Reinvestment Plan - Acquisition of subsidiaries through internal reorganisation 1,000,000 346,611 - 137 52 - - - - - 212,902,341 121,144 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 31 March 2023, 2,088,646 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 6,100,000 options to key management personnel under the Executive and Director Share Option 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 26,995,000 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. No treasury shares were issued during the year (2022: 2,000,000). Movements in treasury shares: 30 June 2023 30 June 2022 22. Reserves Share-based payments reserve Other reserve Foreign currency reserve Reorganisation reserve Total Share-based payment reserve Balance at the beginning of the period Arising on share-based payments Balance at the end of the year Consolidated 2023 $’000 2022 $’000 13,017 5,450 288 11,471 4,436 236 (150,804) (150,804) (132,049) (134,661) 2023 $’000 2022 $’000 11,471 1,546 13,017 6,649 4,822 11,471 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 2023 $’000 2022 $’000 4,436 1,014 5,379 (943) Balance at the end of the year 5,450 4,436 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. - Cancellation of shares through share buyback (5,401,820) (955) - Shares issued following exercise of options - Share issued as consideration for services - Shares issued following exercise of performance rights - Cancellation of shares – unmarketable parcel facility - Transaction costs for share issue - - - - - - 125,000 200,000 5,000,000 (4,278,509) - - - - (14) - Shares issued and fully paid 327,037,583 200,521 328,209,955 - Issue of shares to employees under Employee Share Plan 2,088,646 - - - 882,837 2,000,000 - Issue of shares under ESOP End of the financial period 329,126,229 200,521 331,092,792 201,301 - 25 90 1,000 (1,005) (14) 201,301 - - Number of shares 2,000,000 - - - 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 $'000 Number of shares $'000 Foreign currency reserve Balance at the beginning of the period - - - - Currency translation differences 69,524,461 (11,196) Balance at the end of the year 2023 $’000 2022 $’000 236 52 288 272 (36) 236 The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. - (69,524,461) 11,196 - - 2,000,000 2,000,000 - - 6869 Notes to the Financial Statements Notes to the Financial Statements Forfeited during the year2 (1,700,000) (900,000) 2022 Options – Executive (4) 260,000 3/10/2022 N/A 3/10/2025 Outstanding at year end 44,070,000 35,110,000 2022 Options – Executive (5) 2,000,000 14/12/2022 14/12/2023 14/12/2027 Reorganisation reserve 2023 $’000 2022 $’000 Balance at the beginning of the period (150,804) - Acquisition of subsidiaries Elimination of Non-Controlling Interest Reclassification of shares still held by 5GN in WCG Share issue costs - - - - (132,340) (29,536) 11,196 (124) Balance at the end of the year (150,804) (150,804) Reorganisation reserve is used to record any difference arising when applying a book-value method to business 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. The Webcentral Executive Equity Plan (EEP) was adopted in April 2022 for executives and senior leaders of the Group. The key criteria for options issued under the ESOP and EEP during the year are the completion of tenure periods between one and three years and the achievement of 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. (a) Rights and options held at the beginning of the reporting period There were 35,110,000 rights and options held as at 1 July 2022 in relation to the ESOP and EEP. (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: 2023 Number 2022 Number Outstanding at the beginning of the year 35,110,000 13,400,000 Granted during the year1 10,660,000 29,610,000 Vested and exercised during the year Lapsed during the year - (7,000,000) - - 1. During the year, 6,650,000 Options were issued under the ESOP and 4,010,000 Options were issued under the EEP. 2. During the year, 600,000 Options were forfeited under the ESOP and 1,100,000 were forfeited under the EEP. (c) Rights and options vested during the reporting period During the year, no Performance Rights were vested (2022: 10,000,000) and 350,000 Options were vested (2022: 2,000,000). (d) Rights and options forfeited during the reporting period During the year, 600,000 Options were forfeited by employees (2022: 900,000) with a weighted average exercise price of zero (2022: nil) under the ESOP and 1,100,000 Options were forfeited by employees (2022: nil) with a weighted average exercise price of zero (2022: nil) under the EEP. (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 2023. 5,000,000 Performance Rights and 350,000 Options are exercisable at 30 June 2023 (2022: 5,000,000 Rights): 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 22/12/2023 21/12/2026 2021 Options - Executive (1) 250,000 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) 4,500,000 15/07/2021 15/07/2023 15/07/2026 2022 Options – Executive (1) 260,000 13/04/2022 N/A 13/04/2025 2022 Options – Executive (2) 4,100,000 02/06/2022 02/06/2024 02/06/2027 2022 Options – Executive (3) 2,600,000 1/09/2022 1/09/2024 1/09/2027 2022 Options – Executive (6) 2,000,000 14/12/2022 14/12/2024 14/12/2027 2022 Options – Executive (7) 250,000 14/12/2022 14/12/2024 14/12/2025 2023 Options – Executive (1) 3,250,000 29/06/2023 29/06/2025 29/06/2028 44,070,000 2.47 3.48 3.36 2.59 2.75 3.04 1.79 3.92 4.17 2.26 4.46 4.46 2.46 5.00 3.56 $0.45 $0.485 $0.485 $0.45 $0.26 $0.25 $0.20 $0.20 $0.17 $0.17 $0.17 $0.11 $0.26 (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: Share price Dividend yield Expected volatility Risk-free interest rate Fair value per option 2020 Rights 2021 Rights 2021 Options 2021 Options (1) 2021 Options (2) 2021 Options (3) 2022 Options (1) 2022 Options (2) 2022 Options (3) 2022 Options (4) 2022 Options (5) 2022 Options (6) 2022 Options (7) 2023 Options (1) 2023 Options (2) $0.415 $0.465 $0.465 $0.44 $0.53 $0.475 $0.275 $0.225 $0.175 $0.145 $0.16 $0.16 $0.16 $0.13 $0.13 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.9% 3.6% 3.1% 3.1% 3.1% 3.8% 3.8% 73.4% 45.0% 45.0% 73.4% 73.4% 73.4% 73.4% 73.4% 96.1% 94.6% 93.3% 93.3% 93.3% 92.8% 92.8% 0.38% 1.27% 1.27% 0.42% 0.68% 0.69% 2.74% 3.28% 3.50% 3.70% 3.06% 3.06% 3.06% 3.93% 3.93% $0.3031 $0.192 $0.3031 $0.16 $0.23 $0.205 $0.20 $0.09 $0.08 $0.06 $0.07 $0.08 $0.07 $0.06 $0.05 7071Notes to the Financial Statements Notes to the Financial Statements 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 $0.15 (2022: $0.42). The total consolidated share-based payment expense for the year was $1.55 million (2022: $8.83 million). 24. Dividends During the year a dividend of $0.005 (half a cent) per ordinary share was paid in respect of the year ended 30 June 2022 (2022: nil). The Directors have not recommended the payment of a final dividend in respect of the financial year ended 30 June 2023. 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. The parent entity for the group is Webcentral Limited and following information is the financial position for Webcentral Limited. Parent Entity Statement of Financial Position As at 30 June 2023 Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net Assets 2023 $’000 2022 $’000 72,415 73,273 17,219 16,063 89,634 89,336 82,502 6,382 71,479 4,823 88,884 76,302 750 13,034 Contributed equity 218,859 219,646 Share-based payments reserve 5,830 4,285 Reorganisation reserve (104,762) (104,762) Foreign currency reserve Profit reserve Retained earnings Total Equity 53 200 (1,941) (1,479) (117,289) (104,856) 750 13,034 Loss of the parent entity Total comprehensive loss of the parent entity (11,746) (14,160) (10,680) (15,139) 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 2023 (30 June 2022: 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 2023 Equity Holding at 30 June 2022 5G Networks Pty Ltd 5G Network Operations Pty Ltd 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 Uber Global 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 Netregistry Domains Pty Ltd Webcentral Services Pty Ltd ACN 132 400 787 Pty Ltd Planetdomain Pty Ltd ACN 063 963 039 Pty Ltd ACN 139 714 686 Pty Ltd Bachco Pty Ltd Terrific.com.au Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand Australia Australia Australia Australia Australia Australia 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% 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. 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% 100% 100% 100% N/A N/A 7273Notes 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 2023 or 30 June 2022. 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 2023 Cash and cash equivalents Trade and other receivables Unsecured loans Other investments Total financial assets 30 JUNE 2023 Non-current borrowings Non-current lease liabilities Current borrowings Trade and other payables Lease liabilities Other financial liabilities Total financial liabilities 30 JUNE 2022 Cash and cash equivalents Trade and other receivables Unsecured loans Other investment 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 4,498 4,664 - - 9,162 - 13,229 29,158 14,666 3,937 - 60,990 5,367 3,625 - - 8,992 25,359 14,784 571 14,893 3,456 - 59,063 - - 424 - 424 - - - - - 2,182 2,182 - - 424 - 424 - - - - - 1,250 1,250 - - - 725 725 - - - - - - - 5,198 5,198 - - - - - - - 4,498 4,664 424 725 10,311 - 13,229 29,158 14,666 3,937 2,182 63,172 5,367 3,625 424 5,198 14,614 25,359 14,784 571 14,893 3,456 1,250 60,313 Borrowings include the following financial liabilities: CURRENT At amortised cost: Obligations under bank loan1 NON-CURRENT At amortised cost: Obligations under bank loan1 Consolidated 2023 $’000 2022 $’000 29,158 29,158 571 571 - - 25,359 25,359 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. On 23 August 2023, CBA approved an amendment to the Net Leverage Ratio covenant in relation to the period ended 30 June 2023 to increase it to 3.50 times. There was no financial impact to the Group and all other financial covenants and undertakings under the Debt Facility Agreement were met in relation to the period ended 30 June 2023. The Group expects to comply with all financial covenants for FY24. As the amendment was received after reporting date, the Group is required to classify an amount of $25.1 million as a current liability in the Statement of Financial Position even though these amounts are not repayable within 12 months of reporting date. 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 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: • Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. • 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 2023: 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 Unsecured loans Financial liabilities 30-Jun-23 30-Jun-23 725 424 Contingent consideration 30-Jun-23 2,182 There have been no transfers between Level 1, 2 and 3 during the period. - - - - - - 725 424 2,182 7475 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 2023: Total facility amount Amount drawn $’000 34,600 $’000 30,067 Unused financing facilities $’000 4,533 34,600 30,067 4,533 CBA loan facilities Total 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 2023 or 30 June 2022. 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. Consolidated 2023 $’000 2022 $’000 4,498 4,498 5,367 5,367 The table below sets out the maturity periods of the financial liabilities of the consolidated Group as at 30 June 2023 and 30 June 2022. All carrying amounts of IT equipment finance are undiscounted contractual cash flows. Aa3 rated cash & cash equivalents Total Contracted maturities at 30 June 2023 < 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 14,666 281 37 - - 289 29 2,182 - 566 37 - - 28,022 18 - 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 14,893 315 37 - - 256 30 1,250 - 497 43 - - 24,862 12 - Total $’000 14,666 29,158 121 2,182 Total $’000 14,893 25,930 122 1,250 - - - - - - - - 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 nil (2022: Loss of $578,000) in profit and loss in respect of impairment provision for receivables for the year ended 30 June 2023. 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 2023, 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 $24,150,000 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 March 2024 in respect of the acquisition facility and July 2025 in respect of the Term Facility. 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 2023, 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-23 30-Jun-22 $’000 $’000 235 200 435 344 234 578 (2,381) (2,534) (1,946) (1,956) 7677 Notes to the Financial Statements Notes to the Financial Statements 29. Auditors' remuneration 2023 $’000 2022 $’000 During the year ended 30 June 2023, the following fees were paid or payable for services provided by Grant Thornton: Audit and review Taxation compliance services Due diligence services 443,481 114,111 - 427,535 203,155 75,000 557,592 705,690 30. Events subsequent to reporting date On 23 August 2023, CBA approved an amendment to the Net Leverage Covenant in relation to the period ended 30 June 2023 to increase it to 3.50 times. 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. The following sensitivity is based on foreign currency risk exposures in existence at the reporting date. At 30 June 2023, 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) 2023 $000 2022 $000 2023 $000 2022 $000 175 (214) 173 (211) 175 (214) 173 (211) 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 0.636 to 0.778 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. The Group is not expected to have a material exposure to this risk in respect of the Group’s debt facilities with CBA as it is forecast to comply with all financial covenants and other obligations under these facilities and it has a strong relationship with CBA. 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 2023 $’000 2022 $’000 Short-Term Employee Benefits 1,693 1,330 Post-Employment Benefits Termination Payments Share based Payments Total 125 - 1,132 2,950 92 - 2,606 4,028 Detailed remuneration disclosures are provided in the remuneration report on pages 27 to 33. Transactions with related parties During the year, the Group has conducted the following related party transactions: • A total of $213,191 (2022: $154,294) 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 total of $18,315 were paid to Mr Hunter Demase for sales consulting services (2022: nil). All transactions are carried at commercial third-party rates. 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 2023 $’000 128 - 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. 7879Directors’ Declaration Independent Auditors’ Report 1. In the Directors’ opinion: (a) The financial statements and notes of Webcentral Limited for the year ended 30 June 2023 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 2023 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 2023. Independent Auditor’s Report To the Members of Webcentral Limited Report on the audit of the financial report 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 3. Note 2 confirms that the consolidated financial statements also comply with international financial reporting standards. Opinion 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, 22 September 2023 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 2023, the consolidated statement of profit or loss and other 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 2023 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. 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. 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. 8081 Independent Auditors’ Report Independent Auditors’ Report Key audit matter How our audit addressed the key audit matter Going Concern – Note 2 Revenue Recognition – Note 5 In the financial year ended 30 June 2023, the Group recorded Our procedures included, amongst others: revenue of $96,138,000. There is a risk of potential overstatement of revenue given there is pressure placed on • Obtaining an understanding of the processes and controls used by the Group in evaluating contracts under the five- the performance of the Group against market expectations. step model of AASB 15 Revenue Contracts with The Group offers diverse and services to its customers that Customers; require different patterns of revenue recognition due to • Reviewing revenue recognition policies of individual varying contractual terms, which require the identification of customer agreements and contractual arrangements to performance obligations and the determination of how the ensure compliance with AASB 15; Group satisfies those obligations. This area is a key audit matter because of the financial • Selecting a sample of revenue transactions to verify that revenue was being recognised in accordance with revenue significance of revenue to the consolidated statement of profit recognition policies; or loss and other comprehensive income, and the judgement involved in determining appropriate revenue recognition for these various services. • 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. Goodwill and Other Long-Lived Assets Impairment Assessment – Note 14 and Note 15 As disclosed in Note 14 and Note 15 of the financial report, Our procedures included, amongst others: goodwill amounted to $50,280,000 following the acquisition of • Assessing management’s determination of the Group New Domains and the impairment loss recognised during the period. having three CGUs based on the nature of the business and the economic environment in which they operate; At 30 June 2023, Webcentral Limited also has other • Reviewing the impairment model for compliance with intangibles of $21,067,000 consisting of customer contracts, AASB 136 Impairment of Assets; brand names, capitalised software and marketing related intangibles. In accordance with AASB 136 Impairment of Assets, goodwill 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 • 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; − Assessing management’s key assumptions for reasonableness and obtaining available evidence to support key assumptions; − Considering the reasonableness of the revenue and forecasting of future cash flows and applying an appropriate cost forecasts against prior year forecasts and current discount rate which inherently involves a high degree of year actuals; estimation and judgement by management. − Performing sensitivity analysis of the key assumptions; − Testing the underlying calculations for mathematical accuracy of the model; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. For the year ended 30 June 2023, the Group recorded a loss Our procedures included, amongst others: after tax of $19,019,000, operating cash inflows of • Assessing the cash flow forecast prepared by $8,021,000, financing cash outflows of $4,865,000 and a deficit of current assets to current liabilities of $62,214,000. management for at least 12 months from the anticipated date of signing the financial statements and evaluating the At the year end, the Group had cash on hand of $4,498,000, reasonableness of inputs and assumptions used in the and available debt facilities of $4.5 million, of which forecast; $1.5 million is for the purpose of business acquisitions. Accordingly, testing the availability of sufficient funding for the Group to meet its key obligations is considered to be 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. • Analysing and challenging key assumptions in Webcentral Limited’s budget for the twelve-month period from the expected date of signing; • Discussing with management their future plans for the Group; • Reviewing ASX announcements to gather an understanding of the strategy of the business; • 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; • Reviewing the solvency position of the Group and assessing the solvency position paper prepared by management; • Substantively testing the balances included in the solvency workings prepared by management and evaluating any items which have been excluded/included from this assessment; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Acquisition of New Domains – Note 20 On 7 December 2022, the Group acquired New Domain Our procedures included, amongst others: Services, a premium domain reseller and hosting provider. The acquisition price was $5,000,000 and goodwill recognised in respect of the acquisition was $5,547,000. • Reading the executed acquisition agreements and determining if the transaction meets the business combination requirement in line with the Australian The transaction requires management to consider if the Accounting Standards (AASBs); purchase consideration constitutes an acquisition of a business combination under AASB 3 Business Combinations. • Testing the accuracy of the purchase consideration against the executed acquisition agreements; Accounting for these transactions is a complex and judgmental exercise requiring management to determine the fair value of acquired assets and liabilities as well as the goodwill arising on acquisition and as a result has been assessed as a key audit matter. • Assessing the fair values of the acquired assets and liabilities recognised, including: − Assessing the valuation of identified intangible assets recognised as part of the purchase price allocation calculations; and − Assessing the mathematical accuracy of any identified intangibles calculations; • Assessing the appropriateness of accounting policies, including compliance with the AASBs; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with the accounting standards. #10212419v2 #10212419v2 Grant Thornton Australia Limited Grant Thornton Australia Limited 8283 Independent Auditors’ Report Independent Auditors’ Report Information other than the financial report and auditor’s report thereon Responsibilities The Directors of the Company 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, 22 September 2023 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 2023, but does not include the financial report and our auditor’s report thereon. 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 Company 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 27 to 33 of the Directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Webcentral Limited, for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. #10212419v2 Grant Thornton Australia Limited #10212419v2 Grant Thornton Australia Limited 8485 Shareholder information Shareholder information 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. The shareholder information set out below was applicable as at 15 September 2023. Webcentral Limited Issued capital ordinary shares: 329,126,229 as at 15 September 2023. 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 Boutique Capital Pty Ltd ATF Tectonic Opportunities Fund Shares % 56,515,128 17.27% 24,320,007 6.05% Total 80,835,135 23.32% Distribution of Equity Shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Shares Number Held Number of Holders 228,065 11,530,718 13,227,013 66,026,225 238,114,208 329,126,229 394 3,992 1,773 2,303 308 8,770 There were 4,554 unmarketable parcels as at 15 September 2023. The 20 Largest Holders of Each Class of Quoted Equity Securities % 17.5% 8.4% 6.2% 2.0% 2.0% 1.9% 1.1% 0.8% 0.8% 0.8% 0.6% 1.0% 0.6% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 1,504,284 1,474,333 1,470,588 1,470,588 1,460,204 154,382,984 46.9% Holder J D MANAGEMENT GROUP PTY LTD BNP PARIBAS NOMINEES PTY LTD PACIFIC CUSTODIANS PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR ALBERT SAYCHUAN CHEOK & MR ERIC VICTOR CHEOK ECKERT INVESTMENTS PTY LTD ARKTREE NOMINEES PTY LTD MOLINI INVESTMENTS PTY LTD MR GARRY EDWIN WHITE HL GANGI PTY LTD NZAU INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 Number 57,628,060 27,715,876 20,330,076 6,503,131 6,479,979 6,341,709 3,714,018 2,526,666 2,512,438 2,500,001 2,000,000 3,356,064 1,833,334 1,788,323 MR GIANNI ANDREA VERROCCHI & MRS DEANNE JOSELYN VERROCCHI 1,773,312 ALBERT CHEOK MR GIUSEPPE ANTHONY MAZZACCA GANGI SERVICES PTY LTD PAC EQUITIES PTY LTD MR SAMUEL SCOTT NUNAN Total Unissued equity securities Number of options issued: 46,995,000 Securities exchange The Company is listed on the Australian Securities Exchange. 8687Webcentral Head Office Level 7, 505 Little Collins Street, Melbourne 3000 88

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