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More than
you expect.
2012–13 ANNUAL RePOR t
Contents
Overview
1
Financial Report
Message from the Chairman 2
Corporate Governance
Managing Director’s Report
Our Board
Our Team
3
5
6
Directors’ Report
Auditor’s Independence
Statement
7
8
12
32
Financial Statements
Consolidated Statement
of Profit and Loss and
Other Comprehensive
Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Financial
Statements
Directors’ Declaration
Independent Auditor’s
Report
33
34
35
36
37
38
73
74
Shareholding Information
76
Unrivalled
Customer
Care
Customer care and life time
relationships are at the heart
of everything we do. So we go
further to be better.
Proactive
never
complacent
CSG’s proven success over the
last 20 years is based on making
things happen and a can do
attitude. We actively engage
and always stay one step ahead.
Our Vision:
To become the first choice
brand in every market
segment we operate.
We will create sustainable
value through innovative
products and services,
which will be delivered
with unrivalled customer
care and passion.
1
CSG ANNUAL REPORT 2012–13 Message from
the Chairman
Over the coming year, I look
forward to CSG achieving a
number of growth targets
including growing EBITDA
organically by between
16 to 25 per cent.
In September 2012, we returned $56.5 million as a 20 cents per
share fully franked dividend. In April 2013 we distributed a further
$25.0 million, or 9 cents per share, as a capital return. We also
undertook a buy back of 4.4 million shares at a cost of $2.1 million.
Subject to Australian Tax Office approval and shareholder
approval, we intend to return a further 4 cents per share in
December 2013.
The Board’s objective is to distribute $25 million, or 9 cents per
share, per annum over the medium term.
Retaining and motivating the right people is key to executing on our
business strategy. One of the most exciting initiatives in this regard
has been commencement of a significant long term incentive plan
for executives and a staff share plan for the vast majority of CSG
staff in Australia and New Zealand. I strongly believe in the benefits
of aligning management and employees with shareholders’
interests, and that the best way to achieve this is through share
ownership. I look forward to the years ahead where, if CSG delivers
the shareholder return thresholds, executives have the potential
to own approximately 5 per cent of the Company.
Over the coming year, I look forward to CSG achieving a number
of growth targets including growing EBITDA organically by
between 16 to 25 per cent.
I would like to commend Managing Director, Julie-Ann Kerin and
her management team for their efforts in leading the turnaround
in the business. While there is still much work to do, the team has
executed on the initial stages of their plan admirably.
Yours sincerely
Tom Cowan
Tom Cowan
CSG’s management
and staff have
performed
exceptionally well
over the year, often
in times of pressure
to achieve growth
and reduce costs.
Dear Fellow Shareholders,
It is with pleasure that I present CSG’s Annual Report for 2013.
Over the course of the year, CSG has delivered a significant
turnaround in business performance. What is even more exciting
is that the executive team have also managed during the period
to position the business for strong growth over the medium term.
Initiatives which will drive this growth include the development
of the Australian Finance business, a new vision for the Business
Solutions division and some significant contract wins in
Enterprise Solutions.
Throughout the 2013 financial year, CSG also returned a
significant amount of capital to shareholders.
2
Managing
Director’s
Report
Julie-Ann Kerin
Dear Shareholders,
The past year has been a significant year in the history of the Company. Following the
sale of our Technology Solutions business to NEC last year we embarked on a program
to ensure that the business had a solid platform from which to grow into the future.
This resulted in some significant cost reductions and restructuring of the business
along with the establishment of an Executive Management Team to provide the
leadership we require to move forward and capitalise on the opportunities we see
for growth and improved productivity.
In December we launched our new brand with our new
promise to our customers, shareholders and staff to deliver
“More than you expect”.
We launched our vision statement:
“To become the first choice brand in every market segment we
operate. We will create sustainable value through innovative
products and services, which will be delivered with unrivalled
customer care and passion.”
At the start of this financial year, CSG set itself some key goals
to achieve.
Financial Achievements
For the full year, our underlying EBITDA was $23.2 million which
represented a 76 per cent growth on the previous corresponding
period. As a direct result of cost saving initiatives, our underlying
EBITDA margins expanded from 6.5 per cent to 12.6 per cent.
The second half of the year also saw growth in equipment sales,
with an increase in equipment revenue of 18 per cent.
In addition, CSG Finance Solutions exceeded expectations with
a book growth of 16 per cent to a total of $115.5 million.
At the start of the year, CSG had set an ambitious target of
achieving an annualised cost saving of $13 million through
improved efficiencies and restructuring. This goal has been
met. We have consolidated the businesses, and commenced
actitivites to create greater operating efficiencies across the
business. Progress has been made on a further annualised cost
saving of $4 million through opportunities to reduce duplication
in back office systems and other efficiencies.
3
CSG ANNUAL REPORT 2012–13 Managing
Director’s
Report
The launch of our new brand coupled
with the planned introduction of a new
self-service environment provides
CSG with the differentiator of achieving
our vision of becoming the first
choice brand for our customers.
Innovation and Growth Achievements
People Goals
No successful company thrives without a healthy culture.
To achieve this critical goal, CSG has established a new
Executive Management Team and implemented one of the most
generous share schemes for Executives and staff of any publicly
listed company in Australia.
Over the coming year we will continue with the reorganisation
of the Company to further reduce costs and improve customer
satisfaction.
Conclusion
Without a doubt, this has been an extremely busy year for CSG.
Our business transformation plan, whilst ambitious, will give us
the platform for further growth and efficiencies.
None of these achievements would have been possible without
the support of the Board or the hard work and dedication of our
CSG staff. I would like to thank our customers for their continued
support, our Board and our staff for their continued commitment
to the success of the business.
Yours sincerely
Julie-Ann Kerin
In line with our motto of being a company that delivers ’More than
You Expect’, CSG has driven innovation through the Company
which has established a platform for future growth.
We launched a new customer portal, in a trial to select customers.
This new offering is the first step in achieving our goal to extend
our billing relationship with our customers. Through the portal,
CSG customers can not only log service calls, download their bills
and perform their regular contact with CSG in a secure, online
environment, but they can also order new and value added
products such as stationery and office supplies and recycling
services. Over the coming year, we expect this to be rolled out
to a significant proportion of our customer base in Australia and
New Zealand.
On 15 March 2013, we launched CSG Finance Solutions,
providing a further opportunity to re-engage with our customers.
Based on CSG’s established business in New Zealand, CSG
Finance Solutions provides a credit facility for our customers to
lease printers and multi-function devices. We saw a rapid uptake
of this new offering by Australian customers with a $15.1 million
book achieved by the end of June 2013.
Over the course of the year we also grew the pipeline for our
new division of Enterprise Solutions. This provides managed
print services and positions CSG to leverage from the Standing
Offer Arrangement we have with the Queensland Department
of Education, Training and Employment. The appointment of a
new Senior Executive to head the division is an important step
to position the division for growth in future years.
Customer Achievements
The launch of our new brand coupled with the planned
introduction of a new self-service environment provides CSG
with the differentiator of achieving our vision of becoming the
first choice brand for our customers.
We have also improved our service management system and
have set ourselves the goal of improving customer retention
over the coming year.
4
Our Board
Tom Cowan
B.Com (Hons)
Non-Executive Chairman
Ian Kew
B.Econ, FAICD
Non-Executive Director
Philip Bullock
BA, Dip Ed, MBA, AICD
Non-Executive Director
Julie-Ann Kerin
AICD
Managing Director
5
CSG ANNUAL REPORT 2012–13 Our Team
CSG’s Executive
Management Team:
Neil Lynch
Chief Financial Officer
In the role of Chief
Financial Officer,
Neil brings with him
significant public
company experience together with
extensive accounting and finance skills
after spending 11 years with Virgin Blue
Airlines Limited (Virgin Australia). As a
foundation employee at Virgin Australia,
Neil was involved in the development of
all aspects of the finance team through
several roles with the most recent being
General Manager of Finance.
Prior to Virgin Australia, Neil worked in a
variety of finance roles in both private
practice and large corporate organisations.
Neil is a Chartered Accountant with degrees
in both Commerce and Economics from the
University of Queensland.
Duncan Powell
Chief Operating
Officer
Duncan joined CSG in
April 2013, bringing to
the position a wealth
of experience in executive operational roles
for a number of service delivery companies.
These companies include Foxtel, Sensis and
Skilled Group (Excellior) where Duncan
held senior operational roles.
Duncan has also led business
transformation teams to improve
companies’ future operating models.
He has transformed the front, middle
and back office programs and operating
systems to streamline and improve
managed service delivery.
6
Stephen Birrell
Executive General
Manager,
Enterprise Solutions
Stephen is a proven
business leader with
over 25 years’ experience in the Aerospace,
Information Technology and Government
sectors. His career has included senior
executive roles with leading organisations
in Australia, the United States, Asia and
Europe. Prior to joining CSG in June 2013,
Stephen was the General Manager of
NEC Australia’s Strategic Business Unit,
accountable for achieving strategic growth
objectives and business expansion in Asia
and the Middle East.
Other senior management roles Stephen
has held include leading the relationship
with the US Navy on Australia’s largest
defence export program; advising the
Dubai Government on the development of
Dubai World Central; and leading a major
aviation safety program for Boeing in China.
Stephen is a former Officer in the Royal
Australian Air Force.
Warwick Beban
Executive General
Manager CSG
Business Solutions,
New Zealand
Warwick has been
the General Manager of Konica Minolta New
Zealand since 2007 and was appointed Chief
Executive Officer in 2013. With over 15 years’
experience in the Document Technology
business, Warwick started working with Ubix
Document Technology in 1991 and during his
10 year career with them, was promoted to
Southern Regional Manager, responsible for
the company’s operation in the lower North
Island and all of the South Island. After five
years with Telecom New Zealand as Head of
Business and Corporate for Telecom Mobile,
Warwick re-joined Ubix as part of Konica
Minolta. He has a Bachelor of Science Degree
and Masters of Science with First Class
Honours from Massey University.
Declan Ramsay
Executive General
Manager,
CSG Business
Solutions Australia
Declan has more
than 20 years’ experience within the print
sector. He has been with CSG since 2006
where he managed and controlled the then
Xerox Business Centre key accounts as the
Major Account Manager before becoming
the Brisbane Sales Manager in July 2007
and then Queensland General Manager. In
February 2012 Declan was appointed to the
role of Regional General Manager for NT/
QLD. In July 2012, Declan was appointed
as the Executive General Manager of
CSG Business Solutions Australia. Declan
has a strong background in sales and
management of highly professional and
motivated teams covering all facets of a
print sales organisation.
Dianne Silvestro
Executive General
Manager, People
and Culture
As a senior HR
generalist with
extensive hands-on leadership experience;
Dianne demonstrates the ability and
accountability to perform strategic and
operational aspects of all HR functions
including strategic planning, employment
law, change management, performance
management, talent attraction and
retention, industrial relations, OH&S,
risk management and organisational
development. Previous HR experience in
various industries, multi-disciplinary and
highly unionised environments has enabled
Dianne to have experience working in
diverse organisational cultures and values
and having the responsibility for developing
and implementing effective HR strategies
across these organisations.
In addition to completing a Certificate
IV – Assessment & Workplace Training,
Graduate Certificate of Business Studies
(major Personnel) from Victoria University
and a Post Graduate Diploma in Business
Administration (major Human Resources)
form RMIT; Dianne has also completed an
extensive Mediation Training program.
CSG Limited
Financial
Report
2012–13
7
Corporate Governance Statement
The Board of CSG Limited (‘Company’) is committed to protecting shareholders’ interests
and keeping investors fully informed about the performance of the Company’s businesses.
The Directors have undertaken to perform their duties with honesty, integrity, care and
diligence, according to the law and in a manner that reflects high standards of governance.
The Directors have established the following processes to protect the interests and
assets of shareholders and to ensure high standards of integrity and governance.
The Board has adopted a formal:
• Board Charter
• Audit Committee Charter
• Nomination and Remuneration Committee Charter
• Code of Conduct for Directors and Officers
Further, the Board has also adopted policies with respect to:
• Independence and Conflicts of Interest
• Risk Management
• Board Performance Evaluation
• CEO Performance Evaluation
• Continuous Disclosure and External Communications
• Securities Trading
• Remuneration
• Diversity
Copies of these charters and policies are available to
shareholders on request.
This corporate governance statement outlines the Company’s
practices for the year-ended 30 June 2013 and as at the date
of this Report. It is referenced against the revised Corporate
Governance Principles and Recommendations issued by the
ASX Corporate Governance Council.
Lay solid foundations for management and oversight
The Directors of the Company are accountable to shareholders
for the proper management of business and affairs of the
Company. The Board fulfils these obligations by delegating
certain business development responsibilities to the Managing
Director, but retains the following responsibilities as set out in
the Board Charter:
• agreeing with the Managing Director the annual cycle
and process for review of strategic plans, including which
stakeholders are to be involved and how
• ensuring that the whole Board is directly involved in the
strategic planning and review processes
• ensuring that strategy development includes proper
consideration by the Board and management of associated
risks and opportunities
• ensuring that all approved strategic plans include clear and
measurable financial and other objectives
• requiring that business plans and budgets are prepared and
provided to the Board to support the agreed strategic plans
• monitoring and reviewing the performance of the Company
against the agreed strategic plans and goals
• monitoring the Executive Management Team’s performance
The Board is responsible for the development of appropriate
internal controls to monitor and supervise the implementation
of agreed strategies and policies and the financial and other
performance of the Company against approved strategies,
budgets, and delegations.
The Board delegates responsibility for day-to-day management
of the Company to the Managing Director. The Company has
adopted a Delegated Authorities Manual which establishes
delegations and approval levels throughout the business. The
Managing Director is responsible for executing the delegations
contained in the manual but must consult the Board on matters
that are sensitive, extraordinary or of a strategic nature.
The Board has adopted a Remuneration Policy to govern the
process for evaluating the employees of the Company, including
the performance of the Executive Management Team. For
the 2013 financial year, the Board measured the Executive
Management Team against the performance objectives set
out in the Remuneration Report on page 23.
Structure the Board to add value
Composition of the Board
At the end of the 2013 financial year, the Board comprised of
four Directors, two of whom are Non-Executive and independent
Directors as defined by the Corporate Governance Principles
and Recommendations. The Managing Director is an Executive
Director. The skills, experience and appointment date of each
Director is set out on pages 12 and 13 of this Report.
Whilst the number of independent Directors on the Board does
not constitute a majority, the number of independent Non-
Executive Directors does constitute 50 per cent of the Board
and all Directors bring an independent judgment to bear on Board
decisions. The Directors are considering the most appropriate
composition of the Board given the current nature and scale
of the Company’s residual businesses following the sale of
the Technology Solutions business in July 2012. The Board has
commenced a search process for a further Non-Executive
Director during the 2014 financial year.
All Directors (except the Managing Director) are subject to
retirement by rotation but may stand for re election by the
shareholders every three years. The term of the Managing
Director’s appointment is governed by her terms of engagement.
The composition of the Board is determined by the Board and,
where appropriate, external advice is sought. The Board are
cognizant of the following principles and guidelines in determining
the composition of the Board:
The Majority of the Board should be Independent Directors
Based on the Corporate Governance Principles and
Recommendations, to be independent, a Director should be
Non Executive and:
8
• not be a substantial shareholder of the Company or an officer
of or otherwise associated, directly or indirectly, with a
substantial shareholder of the Company
• not have, within the last three years, been employed in an
executive capacity by the Company or another company within
the group, or been a Director after ceasing to hold any such
employment
• not be a principal or employee of a professional advisor or
consultant to a company in the group whose annual billings to
the group represent more than 5 per cent of the advisor’s or
consultant’s total annual billings or greater than 5 per cent of the
Company’s annual (before tax) profit
• not be a supplier or customer whose annual revenues from the
group represent more than 5 per cent of the Company’s annual
(before tax) profit or more than 5 per cent of the supplier’s or
customer’s total annual revenue
• not have a material contractual relationship with the Company
or another group company other than as a Director
• be free from any interest and any business or other relationship,
which could, or could reasonably be perceived to, materially
interfere with the Director’s ability to act in the best interests
of the Company
• not have served on the Board for a period which could, or
could reasonably be perceived to, materially interfere with the
Director’s ability to act in the best interests of the Company
Mr Ian Kew and Mr Philip Bullock are considered by the Board to
be independent.
The Chairman, Mr Tom Cowan, is a Non-Executive Director but
is not independent due his shareholding in the Company being
categorised as substantial. However, the Board considers that the
Chairman is independent from management and the business
operations and acts in the best interests of the Company.
All Directors are expected to bring independent views and
judgement to all Board discussions and decision-making.
Independent Professional Advice
A procedure has been determined for each Director to have the
right to seek independent professional advice at the Company’s
expense, subject to the prior approval of the Chairman.
Director Selection
As far as practicable, the Board should comprise people
who bring robust and independent judgement to the Board.
When a vacancy exists through whatever cause, or where it
is considered that the Board would benefit from the services
of a new Director with particular skills, the Nomination and
Remuneration Committee are to nominate candidates for the
Board’s consideration for Board membership. The Board looks
to ensure that an appropriate balance of skills, experience and
expertise is achieved. A selection procedure is then completed,
which includes a review of the candidates’ independence.
The Board appoints the most suitable candidate who, in
accordance with clause 13.10 of the Company’s constitution,
must retire but may stand for re election at the next annual
general meeting of shareholders.
Review of Board Performance
The Board has adopted a policy in relation to Board Performance
Evaluation. Due to the Board focusing on the Company’s
consolidation and growth phase after the sale of the Technology
Solutions division in July 2012, the Board did not carry out a
performance evaluation in the last financial year. It is intended
that an evaluation will be carried in the 2014 financial year.
A standing item is included on the agenda at the end of each
Board meeting to encourage Directors to provide regular
feedback on the conduct of Board meetings or any other
Board business to assist in the continual improvement of
Board processes.
Board Committees
The Board has established an Audit Committee and a
Nomination and Remuneration Committee which operate
under formal Charters that clearly set out each Committees’
roles, responsibilities, composition, structure, membership
requirements and the procedures for inviting non-Committee
members to attend meetings. The Board has not established
a separate risk management committee, as the Board has
determined that these matters are appropriately addressed by
the Audit Committee or the full Board.
The names of the members of each Committee and their
attendance at Committee meetings is set out on page 13
of this Report.
Promote ethical and responsible decision making
Code of Conduct
The Company has developed a Code of Conduct to guide the
Company’s Directors, Managing Director, Chief Financial Officer
and other senior executives in respect of ethical behaviour.
This Code of Conduct is designed to maintain confidence in the
Company’s integrity and the responsibility and accountability
of all individuals within the Company for reporting unlawful and
unethical practices.
The Code of Conduct embraces such areas as:
• Conflicts of interest
• Use of information or position
• Use of Company property
• Confidentiality
• Fair trading
• Compliance with the law
• Whistle blowing
• Political contributions and activities
Share Trading Policy
The Company has adopted a formal Securities Trading Policy,
which applies to Directors, the Company Secretary, all senior
executives and key management personnel and employees
of the Company and their associates (‘Officers’).
The Officers may not deal in any of the Company’s security
at any time if they have inside information.
An Officer may trade in securities:
• in the six (6) week period after the release to the ASX of the
half-yearly and annual results
• in the four (4) week period after the end of the AGM or after
the release of a section 708A Cleansing Notice
• at any time the Company has a prospectus open
but only if they have no inside information and the trading is
not for short term or speculative gain.
9
CSG ANNUAL REPORT 2012–13 Corporate Governance Statement (Continued)
An Officer may trade in securities at other times only if:
• they are personally satisfied that they are not in possession
of inside information
• with respect to Directors, Company Secretary, senior
executives and key management personnel, have obtained the
approval of the Chairman or in the case of any proposed trade
by the Chairman, of another Non Executive Director nominated
by the Board for the purpose
• in the case of all others, they have obtained the approval of the
Company Secretary
Directors and all senior executives and key management
personnel must advise the Company Secretary in writing of
the details of completed transactions within 2 business days
following each transaction. Such notification is necessary
whether or not prior authority has been required. The Secretary
must maintain a register of securities transactions. The
Company must comply with its obligations to notify ASX in
writing of any changes in the holdings of securities or interest in
securities by Directors.
Diversity Policy
The Company has adopted a Diversity Policy which, consistent
with its organisational values and strategic goals, focuses upon
gender, ethnicity/culture, disability and flexibility as key levers
linked to building a high performing and sustainable organisation.
Key principles include:
• facilitating equal employment opportunities based on relative
ability, performance and potential
• building and maintaining a safe work environment by taking
action against inappropriate workplace and business behaviour
including harassment, bullying, victimisation and vilification
• develop flexible work practices to meet the differing needs
of our employees at different stages of their life cycle in the
context of business requirements
• attracting and retaining a skilled and diverse workforce as an
employer of choice
• making a contribution to the economic, social and educational
well-being of the communities we serve
• creating an inclusive workplace culture
The Diversity Policy is implemented by the Executive
Management Team under the direction of the Managing Director.
Achievement of the objectives under the policy are measured
by implementation of the following key benchmarks each of
which are reviewed annually as a minimum, or upon presentation
of results:
1. Percentage of senior management women to exceed
30 per cent;
2. Percentage of women across the company to exceed
25 per cent; and
3. Conduct a diversity audit by 31 March each year.
During the 2013 financial year, gender diversity within the
Company was:
Description
Measure
Proportion of women employed
by CSG
26% of CSG’s employees
are female
Proportion of women holding
Senior Executive Positions
32 % of CSG’s Senior
Executive Team are female
Proportion of women on the
CSG Board
25% of the Board of
Directors are female
The Company’s Diversity Policy and Code of Conduct can be
found at www.csg.com.au
Safe guard integrity in financial reporting
The Board has an Audit Committee that:
• consists only of Non-Executive Directors and has three
(3) members
• has a majority of independent Directors
• is chaired by an independent chair, who is not the Chairman
of the Board
All members of the Committee are financially literate and have an
understanding of the industry in which the Company operates.
The Audit Committee will provide an independent review of:
• the effectiveness of the accounting and internal control
systems and management reporting, which are designed to
safeguard Company assets
• financial information produced by the Company
• the accounting policies adopted by the Company
• the quality of the internal and external audit functions
• external auditor’s performance and independence as well as
considering such matters as replacing the external auditor
where and when necessary
• internal audit plans including identified risk areas
• the Company’s exposure to significant risks, strategic and
operational improvements in risk management planning and
implementation and insurance strategies
Make timely and balanced disclosure
The Board recognises that the Company, as a publicly listed
entity, will have an obligation to make timely and balanced
disclosure in accordance with the requirements of the ASX
Listing Rules and the Corporations Act 2001. The Board also
is of the view that an appropriately informed shareholder base,
and market in general, is essential to an efficient market for the
Company’s securities. The Board is committed to ensuring
that shareholders and the market have timely and balanced
disclosure of matters concerning the Company.
The Company has adopted a formal Continuous Disclosure
and External Communications Policy to ensure compliance
with its continuous disclosure requirements and to allow the
market to be appropriately informed of the Company’s strategy
and performance.
10
Amongst other matters, this Policy requires the immediate
notification to ASX of information concerning the Company that
a reasonable person would expect to have a material effect on
the price or value of the Company’s securities as prescribed
under ASX Listing Rule 3.1, except where such information is
not required to be disclosed in accordance with the exception
provisions of the Listing Rules.
A copy of the Policy can be found at www.csg.com.au.
Respect the rights of shareholders
Communication Strategy
The Board recognises that the shareholders are the beneficial
owners of the Company and respects their rights and will
continually seek ways to assist shareholders in the exercise of
those rights.
The Board also recognises that as owners of the Company, the
shareholders may best contribute to the Company’s growth,
value and prosperity if they are informed. To this end, and as set
out in the Continuous Disclosure and External Communications
Policy, the Board seeks to empower shareholders by:
• communicating effectively with shareholders through
periodic disclosure and market briefings
• enabling shareholders access to balanced and
understandable information about the Company,
its operations and proposals
• assisting shareholders participation in general meetings
All shareholders are entitled to receive a hard copy of the
Company’s annual and half-yearly reports upon request.
All information released to the ASX is made available on the
Company’s website.
Participation in Meetings
The Board is committed to assisting shareholders participation
in meetings. In particular, the Company will request that a
representative of the Company’s external auditor is present at
all Annual General Meetings and that shareholders have
adequate opportunity to ask questions of the auditor at that
meeting concerning the audit and preparation and content of
the auditor’s report.
Recognise and manage risk
The Board carries overall responsibility to all stakeholders for the
identification, assessment, management and monitoring of the
risks faced by the Company.
The Company has adopted a formal Risk Management Policy,
which is available to shareholders on its website. This Policy
aims to ensure that the Board implements appropriate risk
management policies and procedures in order to protect the
assets and undertaking of the Company.
Following the Company’s consolidation phase after the sale of
the Technology Solutions division, the Board and Management
are progressing with the development of a Risk and Reporting
Framework suitable to the residual CSG businesses.
In accordance with s.295A of the Corporations Act 2001,
the Board requires that the Managing Director and the Chief
Financial Officer state in writing that the Company’s financial
reports present a true and fair view, in all material respects, of the
Company’s financial condition and operating results and are in
accordance with relevant accounting standards. The Board has
received that assurance.
Further, and under the Company’s Risk Management Policy, the
Managing Director and the Chief Financial Officer must provide
written confirmation to the Board that all assurances given by
management in respect of the integrity of financial statements
are founded on sound systems of risk management and internal
compliance and control which implement the policies adopted
by the Board.
Remunerate fairly and responsibly
The Board’s primary remuneration objectives are to motivate
Directors and management to pursue the long-term growth and
success of the Company within an appropriate control framework
and to demonstrate a clear relationship between key executive
performance and remuneration. The Board believes that it is in
the interest of all stakeholders in the Company for there to be in
place a Remuneration Policy that attracts and retains talented
and motivated Directors, managers and employees so as to
encourage enhanced performance of the Company.
As noted previously, the Board has established a Nomination
and Remuneration Committee that:
• consists of a majority of independent Directors
• is chaired by an independent chair
• has three (3) members
Please refer to page 13 of this Report for membership
and attendance details.
The Committee is responsible for the following, amongst
other matters:
• reviewing and approving the appropriate remuneration
of Directors, the Managing Director and the Executive
Management Team of the Company
• ensuring that remuneration levels take into account risks
involved, demands and time requirements of each role,
and relevant industry and related benchmarks
• developing and recommending to the Board remuneration
incentive programs such as bonus schemes and Company
share schemes
• developing, maintaining and monitoring appropriate
remuneration policies and procedures
• ensuring that the structure of Non Executive and Executive
Directors’ remuneration is clearly distinguished
• ensuring that equity-based executive remuneration is paid
in accordance with thresholds set in plans, as disclosed to,
or approved by shareholders
• reviewing and approving appropriate disclosures to be included
in the Company’s annual report regarding the Committee, its
activities and performance
The Board has recently adopted a new Remuneration Policy to
govern remuneration paid to employees and senior executives,
including Non-Executive Directors.
Please refer to the Remuneration Report set out on pages 21 to 30
of this Report for details of remuneration for all Directors and key
management personnel.
11
CSG ANNUAL REPORT 2012–13 Directors’ Report
The Directors present their report together with the financial report
of the consolidated entity consisting of CSG Limited (’CSG’ or ’the
Company’) and its subsidiaries (’CSG Group’), for the financial year
ended 30 June 2013 and auditor’s report thereon. This financial report
has been prepared in accordance with Australian Accounting Standards.
1 Directors
The qualifications, experience and special responsibilities of
each person who has been a Director of the Company at any time
during or since the end of the financial year is provided below,
together with details of the company secretary as at the year end.
Mr. Thomas Cowan
B.Com (Hons)
Non-Executive Chairman
Member, Audit and Risk Management Committee
Member, Nomination and Remuneration Committee
Tom Cowan is a Partner at TDM Asset Management (TDM),
a private, Sydney based investment group. Prior to TDM,
Tom worked in mergers and acquisitions at Investec Wentworth
and KPMG Corporate Finance, with a focus on the technology,
gaming and healthcare sectors.
He has a Bachelor of Commerce (Honours – Class 1) from the
University of Sydney. Tom is currently a Non-Executive Director
of Baby Bunting Ltd, Australia’s largest baby goods retailer.
Appointed 8 February 2012
Appointed Chairman 15 August 2012
Ms. Julie-Ann Kerin
AICD
Managing Director
Julie-Ann Kerin has more than 20 years’ experience as a senior
executive, managing both private and public companies across
the information technology sector. In 2008, Julie-Ann was
appointed Group-General Manager where she oversaw the
Technology Solutions Division of CSG.
Following the resignation of the founding CEO, Denis Mackenzie,
Julie-Ann was appointed to the role of Managing Director of
the group.
Prior to joining CSG, Julie-Ann was responsible for the global
management of operations and staff across Asia, the United
States, Australia and Europe for a number of organisations.
As a Principal of Gramercy Venture Advisors, Julie-Ann focused
on corporate finance and international business development
for early stage technology companies. She has also held roles
with IT companies Actuate, Haht Commerce, Genasys Inc. and
Computer Power.
Appointed 1 February 2012
Mr. Ian Kew
B.Econ, FAICD
Non-Executive Director
Chairman, Audit and Risk Management Committee
Member, Nomination and Remuneration Committee
Ian Kew is the Chief Executive Officer for Airport Development
Group Pty Ltd which has interests in Darwin International,
Alice Springs and Tennant Creek Airports.
He graduated with an Economics Degree from Monash University
and joined Exxon for two years and was then employed with
Shell Australia for twenty years prior to joining Northern Territory
Airports in 2001.
At Shell Australia, Ian worked in a variety of oil marketing,
operations, change management, strategy and special project
positions in Hobart, Sydney, Brisbane, Darwin and Melbourne.
Previously, Ian has been on the Board of the Automobile
Association of the Northern Territory (AANT), was Chair of
the Darwin Symphony Orchestra and the Charles Darwin
University Foundation.
He is also a Director of the Australian Airports Association (AAA),
a member of the Executive Committee of Tourism Top End
and on the Board of the Museum and Art Galley of the Northern
Territory (MAGNT).
Ian is a National Councillor of Creative Partnerships Australia and
a Fellow of the Australian Institute of Company Directors.
Appointed 1 March 2007
Mr. Philip Bullock
BA, Dip Ed, MBA, AICD
Non-Executive Director
Chairman, Nomination and Remuneration Committee
Member, Audit and Risk Management Committee
Philip is currently the Chair of the Australian Workforce
and Productivity Agency, a Non-Executive Director of
Perpetual Limited, and Chairman of the National Vocational
Education and Training Equity Advisory Council.
Prior to this, he had an extensive career with IBM, which saw him
become the CEO and Managing Director of IBM Australia and
New Zealand and immediately prior to retirement, the Vice
President of IBM’s Systems and Technology Group for Asia
Pacific, based in Shanghai. He has previously also been a Non-
Executive Director of Healthscope Limited, a leading provider
of hospitals and pathology in Australia.
Appointed 1 August 2009
12
agreed to a contracted role as the Group General Manger for
Print Australia on a full time basis. Following the restructure of the
Print Australia business and the sale of the Technology division.
Philip resigned both his management and board positions.
Appointed 16 February 2007
Resigned 26 July 2012
2 Company Secretary
Jillian Bannan
B.Comm/LLB, Grad Dip Legal Practice
Company Secretary and General Counsel
Jillian Bannan has worked as a solicitor for 15 years, with the past
10 years in an in-house capacity. She joined CSG as Company
Secretary and General Counsel in January 2013 and has a history
in corporate law and company secretarial roles (for private and
public companies) in a number of different sectors. Jillian brings
the management of major projects and transactions, advice
on corporate legal activities and Board support to CSG. She is
a member of the Queensland Law Society and was admitted
as a Solicitor of the Supreme Court of Queensland in 1998.
Retired Members from the CSG Board during 2012–13
Mr. Josef Czyzewski
B.Comm, AICD
Non-Executive Director
Chairman, Nomination and Remuneration Committee
Member, Audit and Risk Management Committee
Joe Czyzewski was the Chairman of CSG’s Board. Prior to
retirement in July 2010, Joe held the position of Chief Financial
Officer of Healthscope Ltd, a position he held for 6 years.
Prior to joining Healthscope, Joe held a number of senior
accounting and finance roles, including Vice President Finance
and Group Treasurer with his employer of 32 years, BHP Ltd.
Appointed 16 February 2011
Appointed Chairman 24 March 2011
Resigned 15 August 2012
Mr. Philip Chambers
B.Sc
Non-Executive Director
Chairman, Nomination and Remuneration Committee
Member, Audit and Risk Management Committee
Philip Chambers was Managing Director of Fuji Xerox
Australia from 1998 until his retirement in 2006. Prior to this
Philip worked for Rank Xerox Australia from 1985 holding
management roles in Sydney and Auckland. Philip is a
former Director of a peak ITC industry body – the Australian
Information Industry Association (AIIA), as well as a former
Governor of the American Chamber of Commerce.
In December 2009, Philip commenced working part-time in
the print business in a mentoring role. On 30 January 2012 Philip
3 Directors’ Meetings
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each
of the directors of the Company during the financial year are:
Director Name
Current
Mr. Thomas Cowan
Mr. Philip Bullock
Mr. Ian Kew
Ms. Julie-Ann Kerin
Former
Mr. Philip Chambers (Resigned 26/07/2012)
Mr. Josef Czyzewski (Resigned 15/08/2012)
Board
Meeting
Audit
Committee
Nomination &
Remuneration Committee
Meetings
Held
Meetings
Attended
Meetings
Held
Meetings
Attended
Meetings
Held
Meetings
Attended
13
13
13
13
1
1
13
12
11
13
1
1
9
9
9
9
–
2
9
9
9
9
–
2
4
4
4
4
–
–
4
4
4
4
–
–
13
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
4 Principal Activities
The principal activities of the CSG Group during the
financial year were print related sales and service and
financing of office equipment.
There have been no other significant changes in the nature
of the activities of the CSG Group during the financial year.
5 Operating and Financial Review
CSG Limited is a leading provider in the sale and service
of multi-function devices and printers in Australia and
New Zealand. CSG also operates a leasing company across
both countries to facilitate the sale of printing devices along
with an integrated communications business that supplies
telephony equipment and service.
In the Australian marketplace CSG has established a recognised
brand for the supply and service of multi-function devices in the
small to medium enterprise sector as well as across state and
federal government. In the New Zealand market, CSG operates as
the Konica Minolta brand and is one of the largest suppliers
of sales and service to the corporate, government and
commercial marketplace.
Our core income is comprised of equipment sales revenue,
finance income and monthly service fees based on a metered
charge for each page printed or scanned on the printing device.
We also derive income from the provision of software solutions
that assist in the management of the print environment, digital
data and document storage for larger enterprise and government
customers. Our integrated communications business earns
its income from the sale of equipment and annual service and
equipment maintenance fees.
The key differentiator for CSG in both the Australian and
New Zealand market is the quality of service which is reflected in
the “More than you expect” tag line that accompanies the CSG
logo which was released in December 2012. Premium service
combined with efficient financing and high quality technical
advice is paramount to the CSG value proposition. As the only
publicly listed company of size and scale in Australia and New
Zealand that can provide sales, service and support across both
nations, CSG truly differentiates itself from the manufacturers
who operate with a host of indirect channel partners in various
forms of relationships.
CSG has a commitment to diversity and recognising and
rewarding our staff. We currently employ approximately 700 staff
across Australia and New Zealand with offices in 27 locations.
We strive to achieve above industry standard benchmarks for
the productivity of our workforce whilst delivering the highest
level of staff and customer satisfaction.
We sell and service the following brands of printers, multi-function devices and communications equipment.
AUSTRALIA
NEW ZEALAND
ENTERPRISE SOLUTIONS
14
6 Business Divisions
6.1 Business Solutions
This division sells and services, under long term contracts, a range
of multi- function devices (MFD) printers and telephone solutions
in Australia and New Zealand.
In Australia, we are the largest independent supplier of Canon
products. Canon is ranked 2 and 4 in printer, copier and MFD
shipments and end-user spending market share respectively.
Business Solutions Australia manages machines throughout
all of Australia and operates in all mainland capital cities with
approximately 220 staff. The division also sells Hewlett Packard
and Lexmark printing products along with a range of software
products. The chart below illustrates the machines in field (MIF)
by location.
Southern
Region
Central
Region
Machines In Field by Location
The division has 16 offices throughout the North and South
Islands in New Zealand and approximately 440 staff. The chart
below illustrates the machines in field (MIF) by location.
Machines In Field by Location
26%
20%
Bay of Plenty
Region
20%
34%
North
Region
Adelaide
Perth
Brisbane
Darwin
11%
5%
7%
23%
25%
Melbourne
Sydney
29%
Our Products and Service
Our core value proposition is built on “delighting” our customers.
Underpinning the successful operation of our customer case is
printing technology that is supported and serviced by CSG. This
is increasingly important as customers replace multiple printers
and low capacity MFDs with higher capacity MFDs.
Our sales team work with our customers to tailor the selection
of a printing device that is the best fit for their organisation with
a customised finance arrangement from our leasing company
to meet their business requirements. Our sales team consists
of Master Agents (who are commission only agents) and full
time employees.
Our customer base is distributed across Australia with a large
concentration on the eastern seaboard. Our current market
share is approximately 3 per cent of the laser printer market and
there is a substantial opportunity for the business to grow across
the small and medium enterprise customer base.
All of our customers are serviced by our technicians who repair
and replace parts as necessary. In many cases, our technicians
are industry veterans, expert in the diagnosis and repair of faults
or breaks in either the hardware or software managing
the devices.
In New Zealand, CSG Business Solutions is the exclusive
distributor of Konica Minolta multi-function devices and printers
and provides long-term maintenance service agreements. CSG
Business Solutions is positioned in the New Zealand market as
one of the largest participants in this sector.
CSG acquired the New Zealand business in February 2010.
The acquisition involved the purchase of 90 per cent of Konica
Minolta Business Solutions (KMBS) and 100 per cent of the
associated finance company, Leasing Solutions Limited (LSL).
The remaining 10 per cent of the print business is owned by
Konica Minolta Business Technologies Japan. KMBS has exclusive
rights to sell Konica Minolta MFDs in New Zealand. Under the
shareholder agreement CSG has management control for the
KMBS operations.
Core elements of the service organisation are the call centre,
second level service centre, that provides remote diagnosis
and call resolution, field technicians and the professional
services organisation.
The professional services organisation consults, recommends,
implements and supports a range of software solutions integral
to supporting the printing environment of our customer base.
Colour consulting and design are also key services delivered
by the professional services group.
15
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
6.2 Enterprise Solutions
• Service Management
A growing division within CSG is the Enterprise Solutions division.
This team provides managed print solutions to tier one and
government sectors. In December 2012 the business secured
the Standing Offer Arrangement for the Queensland Department
of Education, Training and Employment, as the sole provider
to all government schools, TAFEs, and education agencies.
It is an agreement that can be applied to other government
departments and agencies in the state of Queensland.
In 2011 the unit won two large managed print services (“MPS”)
contracts with major Australian universities and was also the
only Australian-owned company of a total of four companies
to be included on the Federal Government’s Major Office
Machines Panel which is mandatory for 105 Federal
Government Departments and may also be used for
another 86 government bodies.
The main objectives of our current Enterprise Solutions
offering are fourfold:
• Reduce the cost of printing to the organisation through
providing a rationalisation / consultancy service to each
site/department. The goal of the rationalisation service is
to reduce the number of print devices
• Implement control measures for an organisation for the
procurement of print devices, available from a standard
catalogue, to ensure the right device for the job is delivered.
Non-standard devices are available when a specific business
need is determined and approved
• Introduce a range of operational services relating to print
devices, including a dedicated print device helpdesk, proactive
consumables ordering and a dedicated onsite support team,
who are responsible for replenishing paper and toner, attending
service calls and providing training to our customer’s staff on
print services
• Continuously improve the service offering over time and deliver
services that meet the service levels agreed between CSG and
the customer
Service Scope
• Procurement of new equipment from a standard
device catalogue
• Provisioning, installation, configuration and training
for procured equipment
• Break / fix services (for both new and existing equipment
under management)
• Valet services (on site staff to replenish paper and toner,
clean device, provide quick response to break/fix calls and
provide training)
• Fleet Management
– Asset management
– Moves and changes
– Existing fleet management
– Service / Equipment disposal
– Reporting
– Incident/Problem management including escalation
– Service request management
– Billing management
– Dispute resolution
– Continuous improvement
• Rationalisation / Consultancy service
6.3 Finance Solutions
In New Zealand, the finance business is a mature, well managed
business with strong performance driven by bad debts of
less than 0.5 per cent and a strong return on equity of above
50 per cent.
In Australia, the Finance business launched in March 2013 and
provides a major growth opportunity for existing and new CSG
customers. Management are looking to replicate the size of the
New Zealand business in Australia over the next 3 to 5 years.
In a competitive Australian landscape, the new offering of CSG
Finance Solutions provides a fresh opportunity to engage and
re-engage with customers. The business has rapidly achieved
close alignment with the Business Solutions Australia sales force,
resulting in 95 per cent of new business written with Australian
customers being transacted through the facility.
Total lease receivables grew 16 per cent to $115.5m in the
12 months to 30 June 2013.
7 Our Leadership Team
Strong and well-credentialed management team
Managing Director, Julie-Ann Kerin was appointed to the role in
January 2012 after leading the Technology Solutions division as
Group General Manager since 2008. Julie-Ann has an impressive
track record with more than 20 years’ experience in software and
services companies spanning Australia, Asia, Europe and the US.
Her extensive background includes senior roles in both private
and public companies.
The Executive Management Team includes:
• Neil Lynch joined the Company in October 2011 as CFO
after spending 11 years at Virgin Blue Airlines in a variety
of senior financial roles
• Duncan Powell is the COO and has more than 20 years’
experience in senior executive operational roles for a number
of service delivery companies and joined CSG in April 2013
• Stephen Birrell is the Executive General Manager for the
Enterprise Solutions division and has more than 25 years’
experience as a business leader focusing predominantly in the
aerospace, information technology and government sectors
• Warwick Beban who heads up Business Solutions NZ joined CSG
as part of the acquisition of KMBS and has previously held senior
leadership roles within the document technology industry
• Declan Ramsay as the Executive General Manager of Business
Solutions Australia has a proven track record in the Print
Industry and has been with CSG since 2006
16
8
Industry Background and Trends
Our business strategy to achieve the vision is as follows:
The Printing Services sector is a mature industry selling and
servicing digital printing devices for the office and light production
printing applications. The major shift in this industry in recent
years has been the move from mono (black and white) printing
to colour. This shift has provided a major increase in the service
income per unit as the customer spend per colour print is
significantly higher than for a mono print. This trend is continuing
as all major providers convert their existing customer bases over
to colour technology.
As a mature industry the market place is highly competitive,
requiring the development of strong customer relationships and
added value business offerings to secure customer contracts.
The introduction of Enterprise Solutions is a successful method
in which to provide an added value offering to customers as an
alternative to price based competition. This expansion is a core
strategy for the future at CSG, both in New Zealand and Australia.
9 Strategy
The Board and management have built a three year plan for
the business to address the immediate challenges facing the
business along with the opportunities for growth.
The vision for the three core divisions of the business are:
• Business Solutions
To continue to grow the customer base by providing an end
to end service solution for small and medium customers. To
expand the share of the customer wallet on office products,
business systems and core IT platforms all supported by a
single CSG Finance Solution
• Enterprise Solutions
To introduce to the market a disruptive engagement
proposition that integrates the management of printing
devices with an organisations approach to managing their
core IT platforms. To work with our enterprise customers to
manage the transition of their environment from manufacturer/
purchasing driven to an agnostic relationship focused on
maximising the value of their existing devices whilst managing
their fleet along the same model as their IT infrastructure
• Finance Solutions
To migrate the Australian customer base to a relationship
with CSG Finance Solutions. This would result in the receivables
book in Australia being of equivalent size to the book in
New Zealand
Financial
• To deliver a sustainable dividend of 9 cents per share
to shareholders within 3–5 years
Market
• Grow MFD market share in Australia
• Become one of the Top 3 providers of Managed Print
Solutions in Australia
• Maintain No.1 market share across all office product levels in NZ
• Increase the size of the Professional Services business in
Australia and NZ
• Build product catalogue of new products and services
to be offered online via the customer portal
Customer
• More than 90 per cent customer retention
• Minimum of 90 per cent customers satisfied from annual
customer satisfaction survey
• Grow commercial customer base in NZ
• Grow tier 1 customer base in Australia
• Grow customer numbers per annum
Partner
• Partner of choice for all our vendors
• No.1 global partner for Konica Minolta Business Technologies
• No.1 local partner for Canon in Australia
• Partner of choice for Managed Print for other vendors
• Increase relationship with tier 1 IT vendors: IBM, Fujitsu,
Telstra etc
Capability
• Differentiated – agnostic provider of service
• Disruptive business model for managed print
• Increased value added business products and solutions
for small and medium enterprise customers
• Industry leading, online presence
• Exclusive cloud based solution relationships
• Innovative and efficient finance offering
People
• Industry defining employer
• Attract and retain excellent people
• Staff alignment with shareholder objectives
• Culture in line with customer imperatives and core values
System
• Efficient best of breed systems
• Integrated back office systems across Australia and
New Zealand
• Customer portal central to all customer interaction
• Highly efficient mobile solutions for customer facing staff
17
CSG ANNUAL REPORT 2012–13 Principal Risk Area: Key Suppliers
CSG’s key suppliers are Canon Australia and Konica Minolta
Business Technologies who supply the majority of inventory.
It is critical to maintain relationships.
Risk Management Approach:
These are long standing relationships managed by CSG’s
Executive Management Team and the Board through long term
contracts under commercial terms.
Principal Risk Area: Key Personnel
CSG’s continued success is highly dependent upon the efforts
of the Executive Management Team and other key employees
including sales professionals. The retention of these skilled
personnel is critical.
Risk Management Approach:
CSG has introduced a Long Term Incentive Plan for the Executive
Management Team and other key management and a share based
plan for all other employees across Australia and New Zealand.
Principal Risk Area: Competition
The Company’s business is susceptible to competition in
the markets in which the Company operates. Additionally,
competitive pricing strategies and demands from high value
clients seeking preferred supplier agreements, may impact
on the Company’s profit margins and profit share.
Risk Management Approach:
The risk is mitigated by a large diversified client base with
multi-year agreements in place reducing the impact of pricing
strategies and demands from any one customer.
Directors’ Report (Continued)
9.1 Risk Management
CSG has established the following at risk areas and
mitigating procedures:
Principal Risk Area: Innovation
Inability to optimise full value of innovation opportunities in
services, products, processes and commercial solutions to
support growth opportunities.
Risk Management Approach:
CSG has a proactive growth strategy that combines leadership,
partnerships and continual review.
Principal Risk Area: Foreign Exchange
Revenue from non-Australian operations is denominated
primarily in New Zealand Dollars (NZD) and equipment purchases
for New Zealand operations are primarily in US Dollars (USD).
Fluctuations in foreign currency exchange rates may result in
corresponding movements in revenues and earnings.
Risk Management Approach:
Currency hedging instruments, including foreign currency forward
contracts are used to mitigate this risk.
Principal Risk Area: Interest Rate
The CSG Group has both corporate and operational debt
facilities. Movements in interest rates could have an adverse
impact on cash flows and operating results.
Risk Management Approach:
To minimise interest rate risk between the fixed rate assets and
variable rate liabilities, management uses interest rate swaps to
broadly match fixed rate assets to floating rate liabilities.
Principal Risk Area: Availability of Debt
CSG’s finance divisions in Australia and New Zealand provide
rental and lease products. These businesses are sensitive to
credit cost and availability as well as market liquidity. Should
there be any disruptions in the credit markets or changes in
the procurement of credit there could be a reduction in the
availability of credit or an increase in the cost of sources
of funding.
Risk Management Approach:
Credit indicators and market conditions are monitored
on a regular basis by management.
18
10 Financial Review1
The Board was pleased that the business was able to
show significant growth in underlying EBITDA from the 2012
results. During the 2013 financial year, the new Executive
Management Team were able to deliver on many initiatives
that now positions the business for good growth in profitability
over the medium term.
Given the significant level of transition and restructuring in the
business during the financial year the Board measured the
performance of the business using Underlying Earnings before
Interest, Tax, Depreciation and Amortisation (EBITDA) after
taking into account all non–recurring or one off items. This is an
unaudited measure which is reconciled to the audited Net Profit
after Tax in the table below:
Reported NPAT
Add – Tax
Add – Depreciation and amortisation
Add – Interest expense/(income)
Reported EBITDA
Add – Non-recurring items
1 Restructuring expenses
2 Deferred consideration & legal expenses
3 Transaction related expenses
4 Leasing Australia start-up expenses
5 Other expenses
Total non-recurring expenses
Underlying EBITDA
1 Figures contained in the Financial Review are unaudited.
1H13
$m
5.5
2.1
3.2
(2.1)
8.7
0.2
0.4
0.2
–
–
0.8
9.5
2H13
$m
3.2
2.8
3.1
(0.4)
8.7
1.0
3.2
–
0.3
0.5
5.0
13.7
Note
8
8
FY13
$m
8.7
4.9
6.3
(2.5)
17.4
1.2
3.6
0.2
0.3
0.5
5.8
23.2
10.1 Revenue
10.2 Expenses
Revenue declined by 10 per cent to $184.6m during 2013.
This was driven by:
• Equipment revenue decline in Australia as the attention
of the sales force was changed to focus on quality over
quantity of revenue
• Service revenue in New Zealand has seen some print and
volume erosion in all of Government and tier 1 customers due
to increased competition. Penetration of colour printing as
a percentage of overall volumes continues to occur which is
offsetting a decline in service revenue
• The provision of managed print services by CSG Enterprise
Solutions should be a significant driver of growth in the medium
term, however it did not contribute a material amount of
revenue in 2013
Expense reduction was a major focus of the business during
2013 as part of the turnaround strategy. Management was able to
deliver an increase in underlying EBITDA margin from 6.5 per cent
to 12.6 per cent. The drivers of this result were:
• Cost of goods sold benefited from the relatively weak
US dollar in CSG Business Solutions and lower interest
rates in New Zealand for CSG Finance Solutions
• The first phase of the cost out program to achieve
$13m in annualised cost savings was delivered
It is also noted:
• A number of legacy legal matters were resolved during the
year with the settlement of Fuji Xerox Australia and Fuji Xerox
Finance legal dispute ($4.5m) and the NEC working capital
adjustment ($7.5m). Adjustments down in the carrying value of
post completion payments from two business acquisitions in
2008 have also been made due to a lack of activity at this time
• A number of the CSG Finance Solutions Australia start-up costs
which are included in the reported result would not expect to
be repeated
• Net interest expense decreased due to the repayment of the
corporate debt facility in July 2012
19
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
10.3 Assets
Total assets have decreased by $201.2m to $409.5m during
the financial year ended 30 June 2013 with notable movements
explained below.
Cash is split between both unrestricted and restricted types
of accounts. The restricted cash accounts are required under
the terms of the CSG Finance Solutions companies funding
vehicles (refer to note 6) with $21.2m of the total cash balance
in restricted accounts. It is noted that the NEC retention amount
of $11.4m was released on 3 July 2013.
Operating Cash (refer note 23 – Cash flow Information) has been
impacted by the following:
• Restructuring costs ($4.5m) following the sale of Technology
Solutions division
• Deferred consideration and legal costs ($5.4m) including
Fuji Xerox cases settlement payment
• Transaction and separation costs relating to the sale of the
Technology Solutions Division ($7.1m)
• Finance Solutions Australia start-up costs including equity
contribution to the portfolio ($8.6m)
• Tax payment relating to the sale of the Technology Solutions
division ($19.0m)
20.1
23.2
$m
30.0
20.0
10.0
0
-10.0
-20.0
-30.0
-25.9
Reported
Cash from
Operations
Restructuring Deferred
Transaction
Consideration
and Legal
Leasing
Australia
start-up
Other
Transaction
related Tax
Cash from
Operations -
Underlying
Net Tax and
Interest
Working
Capital
Underlying
EBITDA
Receivables have decreased by $229.0m primarily due to the
settlement of the sale of the Technology Solutions division
($227.5m) and the reclassification of the NEC working capital
adjustment to accrued expenses ($7.5m). The associated
cash has been used to:
Deferred consideration was reduced to nil due to the settlement
and write-back of various amounts listed below:
• Canon was paid $7.0m in July 2013 for the final settlement
of service contracts purchased in 2010
• A prior period earn-out dispute with Delexian was settled
• Repay the corporate debt facility ($91.1m)
in July 2012 for $2.8m
• Pay a fully franked dividend in September 2012 for $56.5m
• Other prior period earn-out disputes were written back due
• Participate in an on-market share buy-back in 1H13 for $2.1m
to the absence of any outstanding claims for $6.3m
• Pay corporate tax in February 2013 for $19.0m
• Pay a capital return in April 2013 for $25.0m
Leasing receivables increased by 16 per cent from the prior
year to $115.5m due to the establishment of the CSG Finance
Solutions business in Australia. Closing lease receivables in
the Australian CSG Finance Solutions division was $15.1m up
to 30 June 2013.
10.4 Liabilities
Total liabilities decreased by $127.8m to $151.2m during the year
ended 30 June 2013.
Short term borrowings have been reduced by $91.1m due to
the repayment of CSG Group debt out of the proceeds on sale
of the Technology Solutions division.
The tax payable balance in the prior year primarily represented
the capital gains tax payable on the proceeds from the sale of the
Technology Solutions division.
10.5 Equity
Equity has decreased by $73.4m due to the following items:
• Dividend distribution of $56.5m in September 2012
• On-market share buy-backs of $2.1m in November and
December 2012
• Capital return of $25.0m in April 2013
20
11 Remuneration Report
Message from the Chairman, Nomination and Remuneration Committee
Dear Shareholder,
On behalf of your Board, I am pleased to present CSG’s 2013 Remuneration Report which sets
out remuneration information for the Chief Executive Officer (CEO), the Executive Management
Team, Non-Executive Directors and the broader employee group.
Our underlying business performance is solid, as demonstrated in our results outlined over
the following pages. All key business metrics have been achieved in 2013, including:
• Underlying EBITDA of $23.2m
• Commencement of CSG Finance Solutions Australia in March 2013
• Growth in CSG Enterprise Solutions
• Underlying cash conversion tracking to expectations
• Revenue growth in 2nd half 2013 compared to 1st half 2013
• Final review of consolidated business functions and plan for additional savings of $4.0m
At the 2012 Annual General Meeting the shareholders approved the implementation of a new executive
Long Term Incentive Plan (“LTIP”). The focus of this plan is to better align executive remuneration with
business performance and the creation of shareholder value. Your Board recognised that this was
an important and necessary step to attract and retain key executive talent, recognise the individual
contributions of our people and to enhance employee engagement in the Company.
Two Staff Incentive Share Plans were also approved at the 2012 Annual General Meeting to assist the
Company to recruit, reward, retain and motivate its employees that are not part of the executive LTIP.
Thank you for taking the time to review the 2013 Remuneration Report. Your Board is confident that
CSG’s remuneration practices are well designed to help best drive outstanding employee and executive
performance. It is this performance that is required to execute our business strategy and create
sustainable shareholder value.
Yours sincerely
Philip Bullock
21
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
12 Key Management Personnel
14 Remuneration Consultant
This report covers the Key Management Personnel (KMP) of CSG.
KMP are employees with authority and responsibility for planning,
directing and controlling the activities of the Company, directly or
indirectly. For CSG, the KMP are defined to be the:
• Chief Executive Officer
• Members of the Executive Management Team (senior
executives, as listed below)
• Non-Executive Directors
PwC was engaged by the N&R Committee to provide
remuneration recommendations for the new LTIP and the
Staff Incentive Share Plans. PwC provided the services and
information to the N&R Committee for total fees of $142,200.
The engagement of PwC was undertaken by the N&R Committee,
independent of management, and was based on an agreed
set of protocols governing the manner in which remuneration
recommendations would be developed by PwC. These protocols
ensured that the following steps were taken:
For the year ended 30 June 2013, the Executive Management
Team comprised the following:
• PwC took instructions from the N&R Committee and was
accountable to the N&R Committee for all work
• During the course of any assignments, PwC sought input from
management, however recommendations were provided
directly to the N&R Committee
• Professional fee arrangements were agreed directly with the
Chairman of the Board
The Board undertook its own enquiries and review of the
processes and procedures and was satisfied that PwC’s
remuneration recommendations were made free from any
undue influence by the Executive Management Team to whom
recommendations were related.
15 Remuneration Objectives, Policy and Practice
Like many organisations, CSG relies on the leadership of its
Executive Management Team for the successful development
and execution of its strategies. The remuneration strategy aims to
attract, motivate and retain the best people in the business, align
executive rewards with the creation of shareholder value and
motivate executives to achieve challenging performance targets.
In order to deliver the remuneration strategy, CSG continues to
focus on an executive compensation framework which is made
up of both fixed and variable remuneration. This is comprised of
the following three elements:
Short Term
Incentive
Fixed Term
Remuneration
Long Term
Incentive
Total
Remuneration
Current
• Chief Financial Officer – Mr. Neil Lynch
• Chief Operating Officer – Mr. Duncan Powell (appointed
15 April 2013)
• Executive General Manager of CSG Business Solutions,
New Zealand – Mr. Warwick Beban (appointed 20 March 2013)
• Executive General Manager of CSG Business Solutions,
Australia – Mr. Declan Ramsay
Former
• Executive General Manager of CSG Finance Solutions –
Mr. Evan Johnson (resigned 3 May 2013)
13 Remuneration Governance
The policy for determining the nature and amount of
remuneration of Directors and Executive Management Team
is agreed by the Board. The Board has established a Nomination
and Remuneration Committee (“N&R Committee”), which
is responsible for the following:
• Reviewing and approving the appropriate remuneration
of the Chief Executive Officer, members of the Executive
Management Team and Non-Executive Directors
• Ensuring that remuneration levels take into account risks
involved, demands and time requirements of each role and
relevant industry and related benchmarks
• Developing and recommending to the Board remuneration
incentive programs such as bonus schemes and group share
schemes
• Developing, maintaining and monitoring appropriate
remuneration policies and procedures
• Ensuring that the structure of Non-Executive and Executive
Directors’ remuneration is clearly distinguished
• Ensuring that equity based Executive Management Team
remuneration is paid in accordance with thresholds set out in
plans as disclosed or approved by shareholders
• Reviewing and approving appropriate disclosures to be included
in the Company’s Annual Report regarding the N&R Committee,
its activities and performance
The Board obtains professional advice where necessary to
ensure that the Company attracts and retains talented and
motivated employees and Directors who can enhance company
performance through their contributions and leadership.
22
15.1 Fixed remuneration
• Fixed remuneration is made up of base remuneration and
superannuation. Base remuneration includes cash salary
and any salary sacrifice items e.g. motor vehicles
• The following factors are taken into account when setting fixed
remuneration levels:
– The individual’s skills and experience
– The requirements of their role
– Remuneration levels of companies in the Company’s
comparator group
– Relevant economic conditions
• CSG provides employer superannuation contributions at
Government legislated rates (2013: 9 per cent in Australia
and 3 per cent in New Zealand), capped at the relevant
concessional contribution limit unless part of a salary sacrifice
election by the employee
• The Board determines an appropriate level of fixed
remuneration for the CEO and Executive Management Team,
with recommendations from the N&R Committee
• Fixed remuneration is reviewed annually, following the end
of the 30 June performance year
15.2 Short term incentives (STI)
• The purpose of an STI is to provide direct alignment between
employee remuneration and the CSG strategy, objectives
and performance
• An STI is an annual incentive opportunity based on individual
and divisional performance and CSG’s overall performance
• The Executive Management Team of CSG are eligible to
participate in the STI Plan based on their responsibility
and impact on achievement of annual objectives
• The STI may be delivered as cash or shares (subject to any
shareholder approval requirements)
Performance measures are cascaded from the Company level
through to individuals. Company measures are approved by the
Board and individual measures are determined by the employee’s
position and responsibilities. The Board has regard primarily for
Company performance versus individual performance to align
reward outcomes with shareholder outcomes.
The introduction of a corporate scorecard will occur during
2014. This scorecard will be used to measure a component
of all STI entitlements.
For the 2013 financial year, the Board set one or more of the
following Company performance objectives for each of the
Executive Management Team under the STI plan:
Category
Financial
Type
Profit
Revenue
Examples
Achieve Group Underlying
EBITDA of $23m
Revenue growth second
half on first half
Cash flow
conversion
Conversion of EBITDA to
operating cash
Non–Financial
Operational
Roll out of the three year
Group Strategic Plan
Staff
engagement
Customer
Improve employee
satisfaction score
Improve customer
satisfaction score
From time to time, other fees in addition to the STI may be
provided to the Executive Management Team to reward
performance that is considered exceptional in terms of
shareholder return or Company performance. These fees are
approved at the discretion of the N&R Committee.
During 2013, other fees were paid to Non-Executive Directors
as detailed below. These amounts were paid to compensate the
Non-Executive Directors for the exceptional effort, additional
workload and support provided to the Executive Management
Team in relation to the sale of the Technology Solutions division
in July 2012.
15.3 Long Term Incentives (LTI)
• While STI reward past performance, the Board considers it
essential that the Executive Management Team and other
management have reward incentives linked to longer-term
Company performance and to value creation for shareholders
• In June 2013, the CEO and Executive Management Team were
issued with performance rights under the CSG LTIP (LTIP Issue
5, 6 & LTIP Issue 7). Each performance right represents an
option to receive one ordinary share in the Company, subject
to the satisfaction of the relevant vesting conditions
• The final stage of the current LTIP will expire in November
2017 and has been implemented to provide a reward to key
personnel during the Company’s turnaround phase. The Board
will consider the long term plan beyond the current LTIP at a
time in the future
• The performance hurdle for the grants made is growth in
Total Shareholder Return (TSR) and the Company share price
• TSR was chosen as a performance hurdle as it is an indicator
of shareholder wealth creation
• The Company share price was chosen in order to align with
shareholder wealth objectives
23
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
15.4 LTIP Issue 5 – CEO – Julie-Ann Kerin
Eligibility – On 28 June 2013, Performance Rights were issued to
the Chief Executive Officer (CEO).
Consideration – No consideration is payable for the grant of the
Performance Rights. Furthermore, there is no consideration to
be paid on the vesting of the Performance Rights.
Performance Hurdle – The performance hurdles for the grants
is growth in TSR and share price for the period June 2013 to
June 2018 and is based on the following vesting schedule:
Share
Price (1)
TSR
CAGR (2)
Vesting
Date (3)
Expiry
Date
LTI Stage 1
LTI Stage 2
LTI Stage 3
>$0.75
>$1.05
>$1.50
31.5%
33.6%
35.4%
30/11/14
30/11/15
30/11/15
30/11/16
30/11/16
30/11/17
(1) Share price means the volume weighted average price of the Company’s ordinary shares on
the ASX for a period of 4 weeks plus any cash dividends paid or capital return from February
2013 onwards minus $0.13.
(2) Calculation used at the time of 2012 Annual General Meeting vote by shareholders using
measure against the share price on 16 October 2012.
(3) The structure of the LTIP was formulated in January 2012 upon appointment of the CEO.
The structure of the LTIP was subsequently approved by the shareholders at the Annual
General Meeting in November 2012. The Performance Rights will have 2, 3 and 4 year vesting
periods with vesting dates on the second, third and fourth anniversaries of the offer date.
15.5 LTIP Issue 6 – CEO Retention Award
Expiry Date – All unvested Performance Rights will automatically
lapse between 3 and 5 years from the grant date of the
Performance Right, unless an earlier lapsing date applies
(as set out below).
Termination/forfeiture – A Performance Right may also lapse
where, in the opinion of the Board, a participant has acted
fraudulently, acted dishonestly or willfully breached his/her
duties to the Company, or if the participant becomes insolvent.
On cessation of employment:
(a) If a participant is a “bad leaver” (as defined in the rules
of the LTIP ), any Performance Rights will (unless otherwise
determined by the Board) automatically lapse; and
(b) If a participant is a “good leaver” (as defined in the rules of the
LTIP), the participant will retain the Performance Rights which
have met the vesting conditions.
Change of Control – If a change of control event occurs, the
Board may in its discretion determine the manner in which any
or all of a participant’s Performance Rights will be dealt with.
Number of
Performance
Rights
Vesting Conditions
Multiple of
share price
TSR
Vesting Date
Expiry Date
Retention
Award
606,061
Remains employed by the
Company until 1 August 2015
N/A
N/A
1/8/15
1/12/15
15.6 LTIP Issue 7 – Executive Management Team
Eligibility – On 28 June 2013, Performance Rights were issued
to the Executive Management Team and other key employees,
as determined by the Board.
Consideration – No consideration is payable for the grant of the
Performance Rights. Furthermore, there is no consideration to
be paid on the vesting of the Performance Rights.
Performance Hurdle – The performance hurdles for the grants
is growth in TSR and share price for the period June 2013 to
June 2018 and is based on the following vesting schedule:
Share
Price (1)
TSR
CAGR (2)
Vesting
Date (3)
Expiry
Date
LTI Stage 1
LTI Stage 2
LTI Stage 3
>$0.75
>$1.05
>$1.50
31.5%
33.6%
35.4%
30/11/14
30/11/15
30/11/15
30/11/16
30/11/16
30/11/17
(1) Share price means the volume weighted average price of the Company’s ordinary shares on
the ASX for a period of 4 weeks plus any cash dividends paid or capital return from February
2013 onwards minus $0.13.
(2) Calculation used at the time of 2012 Annual General Meeting vote by shareholders using
measure against the share price on 16 October 2012.
(3) The structure of the LTIP was formulated in January 2012 upon appointment of the CEO.
The structure of the LTIP was subsequently approved by the shareholders at the Annual
General Meeting in November 2012. The Performance Rights will have 2, 3 and 4 year vesting
periods with vesting dates on the second, third and fourth anniversaries of the offer date.
24
Expiry Date – All unvested Performance Rights will automatically
lapse between 3 and 5 years from the grant date of the
Performance Right, unless an earlier lapsing date applies
(as set out below).
Termination/forfeiture – A Performance Right may also lapse
where, in the opinion of the Board, a participant has acted
fraudulently, acted dishonestly or willfully breached his/her
duties to the Company, or if the participant becomes insolvent.
On cessation of employment:
(a) If a participant is a “bad leaver” (as defined in the rules of
the LTIP ), any Performance Rights will (unless otherwise
determined by the Board) automatically lapse; and
(b) If a participant is a “good leaver” (as defined in the rules of
the LTIP), the participant will retain the Performance Rights
which have met the vesting conditions.
Change of Control – If a change of control event occurs, the
Board may in its discretion determine the manner in which any
or all of a participant’s Performance Rights will be dealt with.
15.7 Previous Long Term Incentive Plans
Plan LTIP 4
Options
Certain senior executives were granted options in the 2011 and
2012 financial year, as per the details listed in the tables below
(refer also to Options Note 21):
Details
Certain senior executives (including the current CEO, in a former
role) were granted zero rated performance rights in the 2012
financial year under LTIP 4. The terms of the grant were:
Plan
Options
LTIP 1
LTIP 2
LTIP 3
Number Remaining
• Issued on 9 September 2011, the performance period covers
200,000
820,000
750,000
the three years from 1 July 2011 to 30 June 2014
• The vesting outcome at the end of the performance period
is to be based on the following schedule:
EPS Growth by Year
Entitlement
Performance Rights
LTIP 4
10%
229,213
Between 5 –10%
100% of entitlement
50% of entitlement on a linear
scale
The numbers listed above are net of adjustments due to
forfeiture as a result of termination of employment.
Less than 5%
Nil entitlement
Plan LTIP 1
Details
The CEO (in a former role) was granted options in the 2011
financial year under LTIP 1. The terms of the grant were:
• Issued on 4 May 2011, vesting equally over three years
• Subject to Board discretion, the participant must be employed
by the CSG Group throughout the vesting period
• LTIP 1 has an exercise price of $1.09
• The expiry date for exercise of vested options is 1 January 2014
Plan LTIP 2
• Subject to Board discretion, the participant must also be
employed by the CSG Group throughout the performance
period
• The expiry date for the exercise of vested rights is 30 June 2014
15.8 Staff Incentive Share Plans
There are two Staff Incentive Share Plans that were approved
at the 2012 Annual General Meeting to assist the Company to
recruit, reward, retain and to generate increased engagement in
its employees that are not part of the CSG Executive LTIP. Both
plans are currently in the process of being implemented and are
listed below:
Details
Certain senior executives (excluding the CEO) were granted
options in the 2011 financial year under LTIP 2. The terms of the
grant were:
1. The CSG Tax Exempt Share Plan (Australia)
(“AUS Tax Exempt Plan”)
2. The CSG Tax Exempt Share Plan (New Zealand)
(“NZ Tax Exempt Plan”)
• Issued on 4 May 2011, vesting equally over three years
The terms of the plans are as follows:
• Subject to board discretion, the participants must be employed
by the CSG Group throughout the vesting period
AUS Tax Exempt Plan
• LTIP 2 has an exercise price of $1.14
• The expiry date for exercise of vested options is 1 January 2014
Plan LTIP 3
Details
The former CFO was granted options in the 2012 financial year
under LTIP 3 to support the business during an on-market
takeover bid that was made after he had submitted his resignation
to ensure that he supported the Company during this period.
The terms of the grant were:
Description
• Eligible Australian employees may be offered up to $AUD1,000
worth of ordinary shares in the Company on a tax free basis
(“Participants”)
• The Participants who will be invited to participate will include
at least 75 per cent of permanent employees of the Company
and its subsidiaries with at least three years’ service
• The shares are held in a trust and are subject to a three
year holding lock
• The Board will invite Participants to participate from time
• Issued on 15 September 2011, vesting equally over two years
to time
• There are no performance conditions attached to these
• No consideration is payable by Participants for the grant
options and the participant does not need to be employed
by the CSG Group
• LTIP 3 has an exercise price of $0.75
• The expiry date for exercise of vested options
is 15 September 2014
of ordinary shares
• There will be no additional vesting conditions or forfeiture
conditions in respect of the plan other than that required by law
25
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
NZ Tax Exempt Plan
Description
• Eligible New Zealand employees may be offered up to
$AUD1,000 worth of ordinary shares in the Company on a tax
free basis (“Participants”)
• The Participants who will be invited to participate will include
all of the permanent New Zealand based employees of the
Company
• The shares are held in a trust and subject to a three year
holding lock
• The Board will invite Participants to participate from time to time
• Nominal consideration ($NZD 1) will be payable by Participants
for the grant of ordinary shares
• There will be no additional vesting conditions or forfeiture
conditions in respect of the plan other than that required by law.
16 Non-Executive Director Remuneration
The available remuneration pool for Non-Executive Directors
as approved at the 2011 Annual General Meeting is $465,000
(all inclusive). Non-Executive Directors’ fees are determined by
the Board and are based on market comparison or remuneration
paid to Non-Executive Directors in a comparable group of
similar sized companies. Non-Executive Directors fees were
last increased in 2011.
The table below summarises the rates for the various roles,
inclusive of superannuation. Key points to note are:
• The Chairman is paid an all-inclusive fee regardless of
Committee positions
• Board members are paid a base fee plus additional fees for
each Committee Chair role (as per 2011 AGM notice – Audit
Committee Chairman ($20,000) and Remuneration Committee
Chairman ($15,000) per annum)
• Superannuation is paid on all fees at the statutory rates
(increased to 9.25 per cent for the 2014 financial year)
• The New Zealand Finance Company position is a requirement
under one of the finance facilities for an independent New
Zealand director. The position is currently filled by Martin
Goldfinch of Auckland
2013
Chairman
Member
NZ Finance
Company
Board
$127,500
$65,000
$24,000
Audit and Risk
Management
Committee
Nomination &
Remuneration
Committee
$20,000
$15,000
Nil
N/A
Nil
N/A
Given the size of the Board and the significant workload,
especially for the Chairman, the Board has resolved to increase
the total remuneration to $150,000 per annum (inclusive of
superannuation) and adjust the structure and amounts of
Committee fees from 1 July 2013 onwards as set out below.
2013
Chairman
Member
NZ Finance
Company
Audit and Risk
Management
Committee
Nomination &
Remuneration
Committee
$20,000
$3,000
$15,000
$3,000
Board
$127,500
$65,000
$24,000
N/A
N/A
Total remuneration will be within current approved pool fee, and
therefore there is no intention to seek an increase at the AGM.
The Directors receive no other benefits from the Company in
addition to the amounts listed above.
17 Link to 2013 Financial Year Performance
17.1 Company Performance
The table below provides summary information on the Company’s earnings and shareholder wealth
for the current year and prior year:
Revenue ($m)
Net profit/(loss) after tax ($m)
Share price ($)
Change in share price ($)
Dividends paid ($)#
Total Shareholder Return (TSR)
Earnings per Share (cents)
2013
184.6
8.7
0.94
0.15
0.29
56%
3.1
2012
202.8
(22.2)
0.79
(0.21)
0.055
(16%)
(7.9)
2011(1)
388.6
40.4
1.00
(0.84)
0.055
(43%)
15.6
2010(1)
277.8
32.1
1.84
1.00
0.05
125%
15.8
2009(1)
197.3
23.2
0.84
(0.14)
0.04
(10%)
13.3
#
Includes 9.0 cents per share return of capital paid in April 2013 (1) Results include Technology Solutions division, sold in 2012
(1) Results include Technology Solutions division, sold in 2012
26
17.2 STI Outcomes
17.3 LTI Outcomes
Due to the significant changes to the business following the sale
of the Technology Solutions division in 2012, the 2013 financial
year has been a transition year for the CSG Group. A balanced
scorecard will be introduced for the Executive Management
Team in the 2014 financial year with the following allocations:
Scorecard Measure
Financial targets
Cash flow conversion
Operational targets
Staff engagement
Customer satisfaction
Scorecard Weighting
35%
25%
20%
10%
10%
The movement in options issued and performance rights
under previous LTI plans during the year ended 30 June 2013
is summarised below:
LTIP
Issue 1
Opening
200,000
Cancelled (i)
Lapsed (ii)
Closing
–
–
200,000
Issue 2
3,559,500
749,500
1,990,000
820,000
Issue 3
Issue 4
Total
750,000
229,213
–
–
–
–
750,000
229,213
4,738,713
749,500 1,990,000
1,999,213
(i) Options were cancelled due to the sale of Technology Solutions division in July 2012.
(ii) Options were 100 per cent vested but lapsed due to non-exercise.
During the current year, the Executive Management Team had
performance score cards based on their respective positions
which incorporated the scorecard measures relevant to the
particular positions. STI payments were made based on these
measures and paid in cash.
18 Remuneration Tables and Disclosures
18.1 Directors’ Remuneration
Cash,
Salary
and Fees
STI and
Other fees
Termination
Payments
Post-
employment
super
LTI
Total
Performance
related %
2013
Non-Executive Directors
Mr. Thomas Cowan
Mr. Philip Bullock
Mr. Ian Kew
Mr. Josef Czyzewski (i)
Total
Executive Directors
Ms. Julie –Ann Kerin
Mr. Philip Chambers (ii)
Total
125,351
73,398
78,398
14,599
291,746
30,000
–
–
30,000
60,000
591,116
200,000
–
–
591,116
200,000
(i) Resigned 15 August 2012 (ii) Resigned 26 July 2012
2012
Non-Executive Directors
Mr. Thomas Cowan
Mr. Philip Bullock
Mr. Ian Kew
Mr. Josef Czyzewski (i)
Total
Executive Director
Ms. Julie-Ann Kerin
Mr. Denis Mackenzie (ii)
Mr. Philip Chambers (iii)
24,011
67,357
70,342
81,596
243,306
464,583
470,860
304,326
–
–
–
–
–
749,987
–
–
–
–
–
–
26,129
26,129
–
–
–
–
–
–
–
247,470
50,000
–
Total
1,239,769
799,987
247,470
(i) Resigned 15 August 2012 (ii) Resigned 31 January 2012 (iii) Resigned 26 July, 2012
4,995
6,606
7,056
4,014
22,671
25,000
–
–
–
–
–
–
160,346
80,004
85,454
48,613
374,417
6,196
–
822,312
26,129
25,000
6,196
848,441
2,161
6,062
6,330
35,200
49,753
22,916
11,831
30,753
65,500
–
–
–
–
–
–
–
–
–
26,172
73,419
76,672
116,796
293,059
1,237,486
730,161
385,079
2,352,726
–
–
–
–
–
24%
–
24%
–
–
–
–
–
61%
–
13%
34%
27
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
18.2 Group Executive Remuneration
Total Remuneration
Cash,
Salary
and Fees
Termination
Payments
STI
Post-
employment
super
LTI
Total
Performance
related %
2013
Mr. Neil Lynch
Mr. Duncan Powell (i)
Mr. Warwick Beban (ii)
Mr. Evan Johnson (iii)
Mr. Declan Ramsay
Total
(i) Appointed 15 April 2013
(ii) Appointed 20 March 2013
323,876
120,000
72,877
254,525
249,533
316,085
1,216,896
–
80,228
513,888
100,000
814,116
–
–
–
602,066
–
602,066
16,470
–
8,705
–
17,724
42,899
2,478
2,478
1,239
462,824
75,355
344,697
–
1,365,487
1,239
7,434
435,048
2,683,411
(iii) Resigned 3 May 2013, cash bonus was paid as part of a retention scheme related to the acquisition of the New Zealand business.
2012
Mr. Neil Lynch (i)
Mr. David Ward (ii)
Mr. Evan Johnson
Mr. Kevin McLaine (iii)
Total
(i) Appointed 10 October 2011
(ii) Resigned 27 January 2012
(iii) Resigned 30 September 2011
228,845
432,500
150,000
–
239,700
500,000
100,000
–
1,001,045
650,000
–
–
–
–
–
11,831
–
–
–
–
–
–
390,676
432,500
739,700
71,287
171,287
11,831
71,287
1,734,163
26%
–
23%
38%
23%
30%
38%
0%
65%
4%
37%
28
18.3 LTIP Issue 5, 6 & 7 – Performance Rights
All Performance Rights refer to rights over ordinary shares of CSG Limited, which are exercisable on a one-for-one basis under various
plans. Performance rights are provided at no cost to the recipients. Non-Executive Directors are not entitled to participate in LTI plans.
Date
Granted
Balance at
beginning
of year
Granted
in year
Vested
Forfeited
in year
Lapsed
in year
Balance at
end of year
28/6/2013
28/6/2013
28/6/2013
28/6/2013
28/6/2013
136,612
92,601
–
–
–
5,177,489
1,828,571
1,828,571
914,286
914,286
229,213
10,663,203
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,314,101
1,921,172
1,828,571
914,286
914,286
10,892,416
Fair
value
per right
at grant
date
$
Exercise
price
per right
$
% Vested
in year
(a)
%
% Lapsed
in year
(a)
%
Value of
rights
granted
in year
(b)
$
Value of
rights
forfeited
in year
(c)
Value of
rights
lapsed
in year
(c)
Financial
years in
which
grant
vests
Expiry
Date
0.6649
0.5451
0.4646
–
0.6649
0.5451
0.4646
–
0.6649
0.5451
0.4646
–
0.6649
0.5451
0.4646
–
0.6649
0.5451
0.4646
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,159
2,528
1,508
6,195
864
1,011
603
2,478
864
1,011
603
2,478
432
506
302
1,240
432
506
302
1,240
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2015 30/11/2015
2016 30/11/2016
2017 30/11/2017
2015 30/11/2015
2016 30/11/2016
2017 30/11/2017
2015 30/11/2015
2016 30/11/2016
2017 30/11/2017
2015 30/11/2015
2016 30/11/2016
2017 30/11/2017
2015 30/11/2015
2016 30/11/2016
2017 30/11/2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2013
Ms. Julie-Ann Kerin
Mr. Neil Lynch
Mr. Duncan Powell
Mr. Warwick Beban
Mr. Declan Ramsay
Total
2013
Ms. Julie-Ann Kerin*
Total
Mr. Neil Lynch
Total
Mr. Duncan Powell
Total
Mr. Warwick Beban
Total
Mr. Declan Ramsay
Total
* Excluding retention rights
Details of the performance criteria attached to each of the performance rights are included in the LTI discussion above and in note 21 to the financial statements. No performance rights have been
granted since the end of the financial year.
(a) The percent forfeited and lapsed in the year represents the reduction from the maximum number of options available to vest due to the performance or conditions not being achieved.
(b) Fair value is independently determined utilising assumptions underlying the Black-Scholes methodology to produce a Monte Carlo simulation model which allows for the incorporation of
performance hurdles that must be met before the performance right vests. The valuation is undertaken in a risk-neutral framework whilst allowing for variables such as volatility, dividends, the risk
free rate, the withdrawal rate and performance hurdles along with constants such as the strike price, term and vesting periods.
(c) The value of options that lapsed or were forfeited during the year represents the benefit foregone and was calculated as the number of options at the date the options lapsed or were forfeited,
multiplied by the fair value of the options calculated independently at the date the options lapsed or were forfeited but assuming the vesting conditions were satisfied.
29
CSG ANNUAL REPORT 2012–13 Directors’ Report (Continued)
18.4 Previous Long Term Incentive Plans – Options
Total Remuneration
Plan
Issue
Date
Granted
Balance at
beginning
of year
Granted
in year
Vested
Forfeited
in year
Lapsed
in year
Balance
2013
Ms. Julie-Ann Kerin
1
4/5/2011
133,333
–
66,667
–
–
66,667
Fair
value
per right
at grant
date
Exercise
price
per right
%
Vested
in year
(a)
%
Lapsed
in year
(c)
$
$
2013
Ms. Julie-Ann Kerin
0.05
1.09
(i) Options vest equally in 2011, 2012 and 2013
%
33
%
–
Value of
rights
granted
in year
(b)
Value of
rights
forfeited
in year
(c)
Value of
rights
lapsed
in year
(c)
Financial years
in which grant
vests (i)
Expiry
Date
–
–
–
2011, 2012, 2013
1/1/2014
19 Service Agreements
Executive Director
Ms. Julie-Ann Kerin
Executive Management Team
Mr. Neil Lynch
Mr. Duncan Powell (i)
Mr. Warwick Beban (ii)
Mr. Evan Johnson (iii)
Mr. Declan Ramsay
Expiry
Termination Notice
Termination Payment
31 January 2015
6 months
N/A
N/A
N/A
N/A
N/A
6 months
3 months
1 month
9 months
1 month (iv)
6 months
6 months
3 months
1 month
9 months
1 month
(i) Appointed 15 April 2013 (ii) Appointed 20 March 2013 (iii) Resigned 3 May 2013 (iv) Effective 1 July 2013
30
20 Environmental Regulation
The CSG Group’s operations are not subject to any significant
environmental Commonwealth or State regulations or laws.
21 Proceedings on Behalf of the Consolidated Entity
No person has applied for leave of Court to bring proceedings
on behalf of the consolidated entity.
22 State of Affairs
There have been no significant changes in the CSG Group’s
state of affairs during the financial year.
23 Dividends
The dividends paid or declared since the start of the year
are as follows:
Consolidated entity
2013
$’000
2012
$’000
–
7,064
Dividends paid during the year:
Current year interim: Franked
dividends nil (2.5 cents per share)
Previous year final: Franked dividends
(20 cents per share) paid out of
the proceeds from the sale of the
Technology Solutions division.
24 Directors’ Interests
27 Indemnification and Insurance
of Directors and Officers
During the financial year, the consolidated entity has paid a
premium amounting to $282,523 insuring all the directors and
the officers against judgments, settlements, investigative costs,
defence costs and costs to appear at inquiries or investigations.
28 Non-Audit Services
Non-audit services are approved by resolution of the Audit
and Risk Management Committee and approval is provided
in writing to the Board. Non-audit services provided by the
auditors of Group during the year, KPMG, are detailed below.
The Directors are satisfied that the provision of the non-audit
services during the year by the auditor is compatible with the
general standard of independence for auditors imposed by the
Corporations Act 2001.
Amounts paid or payable to an auditor
for non-audit services provided
during the year by the auditor to by
any entity that is part
of the consolidated entity for:
Other assurance services
Other advice – Overseas subsidiaries
2013
$’000
2012
$’000
12
–
72
9
56,513
8,477
29 Auditor’s Independence Declaration
The lead auditor’s independence declaration in relation to the
audit for the financial year is set out on page 32 of this report.
Directors’ relevant interests in shares of the Company or options
over shares in the Company are detailed below.
Thomas Cowan
Ian Kew
Philip Bullock
Julie-Ann Kerin
Ordinary
shares
of CSG
19,924,622
69,730
37,927
–
20,032,279
Options over
shares in CSG
–
–
–
5,380,768
5,380,768
25 Directors’ Interests in Contracts
Directors’ interests in contracts are disclosed in Note 25 to the
financial statements.
26 Share Options
Options issued by the Company during the year are detailed
in Note 21 in the attached financial report. Details of options
granted to Directors and the Executive Management Team are
included in the Remuneration Report.
No option holder has any right under the options to participate
in any other share issue of the Company.
The options issued are governed by the terms of the Employee
Share Option Plan with each series having a unique expiry date.
During the year no shares were issued on the exercise of options.
30 Events Subsequent to Reporting Date
There have been no other significant events between the year end
and the date of approval of these accounts which would require a
change to or disclosure in the accounts (refer to Note 32).
31 Likely Developments
The CSG Group will continue to pursue its policy of increasing the
profitability and market share of its business units during the next
financial year. Refer to the Operational and Financial Review for
further details.
32 Rounding of Amounts
The CSG Group is of a kind referred to in ASIC Class Order 98/100
dated 10 July 1998 and in accordance with that Class Order,
amounts in the consolidated financial statements and directors’
report have been rounded off to the nearest thousand dollars,
unless otherwise stated.
Signed in accordance with a resolution of the Directors.
Ms. Julie-Ann Kerin
Director
Sydney , 20 August 2013
31
CSG ANNUAL REPORT 2012–13 Auditors’ Independence
Statement
32
CSG Limited
Financial
Statements
2012–13
33
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
for the year ended 30 June 2013
Revenue from continuing operations
Interest income
Other income
Changes in inventories of finished goods
Marketing expenses
Occupancy expenses
Administration expenses
Deferred consideration and legal expenses
Employee benefits expenses
Consulting expenses
Other expenses
Depreciation and amortisation
Finance costs
Profit/(loss) before income tax
Income tax (expense)/recovery
Profit/(loss) from continuing operations
Discontinued operations
Profit from discontinued operations (net of tax)
Profit for year
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations, net of tax
Share based transactions
Other comprehensive income for the year
Total comprehensive income for the year
Notes
7
7
8
8
8
8
8
9
29
22
22
Consolidated entity
2012
$’000
2013
$’000
172,639
3,370
8,630
198,373
75
4,357
184,639
202,805
96,034
2,201
5,575
17,052
3,580
36,390
1,233
1,779
6,275
920
122,730
5,420
6,598
18,966
9,312
44,132
1,542
11,092
5,597
10,853
171,039
236,242
13,600
(4,883)
8,717
(33,437)
11,203
(22,234)
–
8,717
73,912
51,678
3,443
–
3,443
12,160
(62)
71
9
51,687
Earnings per share for profit from continuing operations attributable to equity holders of the parent entity:
Basic earnings/(loss) per share
Basic earnings/(loss) per share for continuing operations (cents)
Diluted earnings/(loss) per share for continuing operations (cents)
The accompanying notes form part of these financial statements
27
27
27
3.1
3.1
3.1
18.3
(7.9)
(7.9)
34
Consolidated Statement of Financial Position
as at 30 June 2013
Current Assets
Cash and cash equivalents
Receivables
Lease receivables
Inventories
Other
Total Current Assets
Non Current Assets
Lease receivables
Other financial assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Total Non Current Assets
Total Assets
Current Liabilities
Payables
Deferred consideration
Deferred income
Short term borrowings
Current tax payable
Provisions
Debt associated with lease receivables
Total Current Liabilities
Non Current Liabilities
Long term borrowings
Provisions
Debt associated with lease receivables
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Retained earnings
Equity attributable to owners of CSG Limited
Non-Controlling interest
Total Equity
The accompanying notes form part of these financial statements
Consolidated entity
2012
$’000
2013
$’000
Notes
11
12
12
13
14
12
15
9
16
17
18
28
19
9
20
19
19
20
19
21
22
22
40,017
19,292
39,465
35,266
3,473
25,881
248,308
35,573
31,597
1,727
137,513
343,086
76,060
–
2,122
5,077
188,771
63,872
125
4,907
7,163
191,614
272,030
267,681
409,543
610,767
45,846
–
862
675
1,613
2,762
35,172
51,738
16,133
1,071
91,137
22,270
5,349
7,825
86,930
195,523
31
1,831
62,370
64,232
94
357
83,028
83,479
151,162
279,002
258,381
331,765
172,250
200,724
3,135
71,402
(308)
120,351
246,787
320,767
11,594
10,998
258,381
331,765
35
CSG ANNUAL REPORT 2012–13 Consolidated Statement of Changes in Equity
for the year ended 30 June 2013
Retained
earnings
$’000
84,682
51,211
Non-
controlling
interest
$’000
10,531
467
Total Equity
$’000
295,632
51,678
–
–
51,211
–
–
(15,541)
120,351
120,351
8,121
–
(557)
7,564
–
(56,513)
–
–
71,402
–
–
467
–
–
–
10,998
10,998
596
–
–
596
–
–
–
–
11,594
(61)
71
51,687
(17)
5
(15,541)
331,765
331,765
8,717
3,443
(557)
11,603
(25,000)
(56,513)
(2,141)
(1,333)
258,381
Contributed
equity
$’000
200,736
–
–
–
–
(17)
5
–
Consolidated entity
Balance as at 1 July 2011
Profit for the year
Exchange differences on translation of
foreign operations, net of tax
Share based transactions
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Capital raising cost
Capital raising costs deferred tax asset
Dividends paid
Balance as at 30 June 2012
Balance as at 1 July 2012
Profit for the year
Exchange differences on translation of
foreign operations, net of tax
Share based transactions
Total comprehensive income for the year
200,724
200,724
–
–
–
–
Transactions with owners in their capacity as owners:
Capital distribution
Dividends paid
Share buy – back
Capital raising costs deferred tax asset
(25,000)
–
(2,141)
(1,333)
Reserves
$’000
(317)
–
(61)
71
9
–
–
–
(308)
(308)
–
3,443
–
3,443
–
–
–
–
Balance as at 30 June 2013
172,250
3,135
36
Consolidated Statement of Cash Flows
for the year ended 30 June 2013
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers, employees and others
Interest income
Interest expense
Income tax paid
Net cash (used in) operating activities
Cash Flows From Investing Activities
Payment for intangibles
Payments for investments
Payments for property, plant and equipment
Proceeds from the sale of property, plant and equipment
Proceeds from sale of Technology business
Payments for businesses
Net cash from/(used in) investing activities
Cash Flows From Financing Activities
Proceeds from borrowings
Repayment of borrowings
Payment of capital service costs
Transfers from discontinued operations
On-market share buy-backs
Capital distributions
Dividend distributions
Net cash flows provided by/(used in) financing activities
Net increase in cash held
Cash at the beginning of the financial year
Foreign exchange difference on cash holdings
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements
Consolidated entity
2012
$’000
2013
$’000
Notes
190,962
(195,934)
3,370
(920)
(23,413)
(25,935)
(1,883)
–
(2,175)
136
227,500
(9,800)
205,571
(207,110)
119
(10,853)
9,595
(2,678)
(305)
(125)
(2,877)
136
–
(21,086)
213,778
(24,257)
4,500
(95,658)
–
–
(2,141)
(25,000)
(56,513)
(174,812)
13,031
25,881
1,105
40,017
22,633
(9,254)
(17)
34,609
–
–
(15,541)
32,429
5,494
20,090
297
25,881
8
9(c)
23(a)
29
21
21
10
23(b)
37
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 1: Reporting Entity
CSG Limited (the “Company”) is a company limited by shares,
incorporated and domiciled in Australia. The address of the
Company’s registered office is 252 Montague Road West
End, Brisbane, QLD, Australia 4101. The consolidated financial
statements of the Company as at and for the year ended 30 June
2013 comprise the Company and its controlled entities (together
referred to as the “Group” and individually as (“Group entities”).
The Group is a for-profit entity and primarily involved in print
related sales and service and financing of office equipment.
Note 2: Basis Of Preparation
Statement of Compliance
This financial report is a general purpose financial report that
has been prepared in accordance with Australian Accounting
Standards and other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations Act
2001. The consolidated financial statements of the Company also
comply with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
The financial report was authorised for issue by the Directors
on 20 August 2013.
(a) Basis of measurement
The financial report has been prepared under the historical cost
convention, as modified by revaluations to fair value for certain
material items in the statement of financial position and as
described in the accounting policies.
(b) Functional and presentation currency
The financial report is presented in Australian dollars which is the
Company’s functional currency.
The company is of a kind referred to in ASIC Class Order 98/0100
and in accordance with that Class Order, amounts in the financial
statements have been rounded off to the nearest thousand
dollars, or in certain cases, to the nearest dollar.
(c) Use of estimates and judgments
The preparation of the financial report in conformity with
IFRS requires management to make judgments, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimates are revised and in any future
periods affected.
Estimates and assumptions based on future events have a
significant inherent risk, and where future events are not as
anticipated there could be a material impact on the carrying
amounts of the assets and liabilities discussed below:
(d) Assessing impairment of goodwill
Goodwill is allocated to cash generating units (CGUs) according
to applicable business operations. The CGUs are aligned at
the segment level. The recoverable amount of a CGU is based
on value-in-use calculations. These calculations are based on
projected financial forecasts and projected cash flows approved
by management covering a period not exceeding five years.
Management’s determination of cash flow projections are based
on past performance and its expectation for the future. The
present value of future cash flows has been calculated using a
post-tax discount rate of 11.6 per cent for the Australia CGU and
9.4 per cent for the NZ CGU to determine value-in-use.
(e) Income taxes
Income tax benefits are based on the assumption that no
adverse change will occur in the income tax legislation and
the anticipation that the company will derive sufficient future
assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by the law.
(f) Employment benefits
Calculation of long term employment benefits requires
estimation of the retention of staff, future remuneration levels
and timing of the settlement of the benefits. The estimates are
based on historical trends.
(g) Share-based payments
Calculation of share based payments requires estimation of the
timing of the exercise of the underlying instrument. The estimates
are based on historical trends.
(h) Inventory – consumables at customer premises
Inventory balances include consumables owned by the Group
but located at customer premises. The value of consumables
recorded as inventory is based on management’s estimate
resultant from information held in customer servicing systems
and a sample of customer holdings.
(i) Inventory – obsolescence
Inventory balances relate to items subject to technological
obsolescence and unknown usage levels. Obsolete and
slow-moving inventory is estimated based on the age of the
inventory items, historical usage and likely future usage, and
likely recoverable values.
Note 3: Summary of Significant
Accounting Policies
The accounting policies set out below have been applied
consistently to all periods presented in this financial report,
and have been applied consistently by Group entities.
(a) Basis of Consolidation
i. Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to
govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, the
Group takes into consideration potential voting rights that
currently are exercisable.
38
The Group measures goodwill at the acquisition date as:
• The fair value of the consideration transferred; plus
• The recognised amount of any non-controlling interests in the
acquiree; plus
• If the business combination is achieved in stages, the fair value
of the existing equity interest in the acquiree; less
• The net recognized amount (generally fair value) of the
identifiable assets acquired and liabilities assumed
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Transaction costs, other than those associated with the issue of
debt or equity securities, that the Group incurs in connection with
a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value
at acquisition date. If the contingent consideration is classified
as equity, it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value
of the contingent consideration are recognised in profit or loss.
When share-based payment awards (replacement awards)
are required to be exchanged for awards held by the acquiree’s
employees (acquiree’s awards) and relate to past services, then
all or a portion of the amount of the acquirer’s replacement
awards is included in measuring the consideration transferred
in the business combination. This determination is based on the
market-based value of the replacement awards compared with
the market-based value of the acquiree’s awards and the extent to
which the replacement awards relate to past and/or future service.
ii. Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences
until the date that control ceases.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into line
any dissimilar accounting policies, which may exist.
iii. Non-controlling interests
Non-controlling interests in the results of subsidiaries are shown
separately in the consolidated statement of profit and loss and
other comprehensive income and consolidated statement of
financial position respectively.
iv. Loss of control
Upon the loss of control, the Group derecognises the assets
and liabilities of the subsidiary, any non-controlling interests
and other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognised in
profit or loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value at the
date that control is lost. Subsequently, it is accounted for as an
equity-accounted investee or as an available-for-sale financial
asset depending on the level of influence retained.
v. Transactions eliminated on consolidation
All inter company balances and transactions, including
any unrealised profits or losses have been eliminated
on consolidation.
(b) Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies of entities within the Group
are translated into functional currency at the rate of exchange
ruling at the date of the transaction. Foreign currency monetary
items that are outstanding at the reporting date (other than
monetary items arising under foreign currency contracts where
the exchange rate for that monetary item is fixed in the contract)
are translated using the spot rate at the end of the financial
year. All resulting exchange differences arising on settlement
or restatement are recognised as revenues and expenses for
the financial year.
ii. Foreign operations
Entities that have a functional currency different to the
presentation currency are translated as follows:
• Assets and liabilities are translated at year-end exchange rates
prevailing at that reporting date
• Income and expenses are translated at actual exchange rates
or average exchange rates for the period, where appropriate
• All resulting exchange differences are recognised as a separate
component of equity
(c) Financial instruments
i. Non-derivative financial assets
The Group initially recognises loans and receivables on the date
that they are originated. All other financial assets (including assets
designated at fair value through profit or loss) are recognised
initially on the trade date at which the Group becomes a party
to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual
rights to the cash flow from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred. Any interest
in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position only when the
Group has a legal right to offset the amounts and intends either
to settle on a net basis or to realise the asset and settle the
liability simultaneously.
The Group has the following non-derivative financial assets:
financial assets at fair value through profit or loss and loans
and receivables.
39
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 3: Summary of Significant Accounting
Policies (Continued)
Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or loss
if it is classified as held for trading or is designated as such upon
initial recognition. Financial assets are designated at fair value
through profit or loss if the Group manages such investments
and makes purchase and sale decisions based on their fair value
in accordance with the Group’s documented risk management
or investment strategy. Attributable transaction costs are
recognised in profit or loss when incurred. Financial assets at their
fair value through profit or loss are remeasured at fair value, and
changes therein are recognised in profit or loss.
Investments in listed securities are carried at fair value through
profit and loss. They are measured at their fair value at each
reporting date and any increment or decrement in fair value from
the prior period is recognised in the profit and loss of the current
period. The fair value of listed investments is based on closing bid
prices at balance date.
Non-listed investments, for which fair value cannot be reliably
measured, are carried at cost and tested for impairment.
Loans and receivables
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted on an active market.
Loans and receivables are measured at fair value at inception and
subsequently at amortised cost using the effective interest rate
method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents and,
trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks,
including restricted cash and a group multi-function bank
overdraft facility. Bank overdrafts are shown within long-term
borrowings in non-current liabilities on the balance sheet.
ii. Non-derivative financial liabilities
Financial liabilities (including liabilities designated at fair value
through profit or loss) are recognised initially on the trade
date, which is the date that the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual
obligations are discharged or cancelled or expire.
The Group classifies non-derivative financial liabilities into the
other financial liabilities category. Such financial liabilities are
recognised initially at fair value less any directly attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost using the
effective interest rate method.
Other financial liabilities comprise trade payables, other creditors
and loans from third parties including inter company balances
and loans from or other amounts due to Director related entities.
iii. Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares or for
the acquisition of a business are included in the cost of the
acquisition as part of the purchase consideration.
iv. Derivative financial instruments, including hedge accounting
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks arising from financing activities
and foreign exchange risk in respect of inventory purchases. In
accordance with treasury policy, the Company does not hold
or issue derivative financial instruments for trading purposes.
However, derivatives that are not designated hedges are
accounted for as held for trading instruments.
On initial designation of the derivative as the hedging instrument,
the Group formally documents the relationship between the
hedging instrument and the hedged item, including the risk
management objectives and strategy in undertaking the hedge
transaction and the hedged risk, together with the methods
that will be used to assess the effectiveness of the hedging
relationship. The Group makes an assessment, both at the
inception of the hedge relationship as well as on an ongoing
basis, whether the hedging instruments are expected to be highly
effective in offsetting the changes in the fair value or cash flows
of the respective hedged items attributable to hedged risk, and
whether the actual results of each hedge are within a range of
80 – 125 per cent. For a cash flow hedge of a forecast transaction,
the transaction should be highly probable to occur and should
present an exposure to variations in cash flows that could
ultimately affect reported profit or loss.
Derivative financial instruments are recognised initially at
fair value and transaction costs are expensed immediately.
Subsequent to initial recognition, derivative financial instruments
are stated at fair value and subject to the nature of the hedging
instrument the gain or loss on re-measurement to fair value is
recognised immediately in the statement of comprehensive
income or as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a
hedge of the variability in cash flows attributable to a particular
risk associated with a recognised asset or liability or a highly
probable forecast transaction that could affect profit or loss,
the effective portion of changes in the fair value of the derivative
is recognised in other comprehensive income and presented in
the hedging reserve in equity. The ineffective portion of changes
in the fair value of the derivative is recognised immediately in
profit or loss.
When the hedged item is a non-financial asset, the amount
recognised in equity is included in the carrying amount of the
asset when the asset is recognised. In other cases the amount
accumulated in equity is reclassified to profit or loss in the same
period that the hedged item affects profit or loss. If the hedging
instrument no longer meets the criteria for hedge accounting,
40
expires or is sold, terminated or exercised, or the designation is
revoked, the hedge accounting is discontinued prospectively.
If the forecast transaction is no longer expected to occur, then
the balance in equity is reclassified to profit or loss.
(d) Revenue Recognition
Sale of Goods
Revenue is measured at the fair value of the consideration
received or receivable.
Revenue from the sale of goods and disposal of other assets is
recognised when significant risks and rewards of ownership of the
goods have passed to the buyer and the costs incurred or to be
incurred in respect of the transaction can be reliably measured.
Rendering of Services
Revenue from a contract to provide services is recognised
by reference to the stage of completion of the contract. The
revenue recognised from rendering of services combines:
(i) invoicing from the provision of the Group’s services inclusive
of the amounts due and payable under the terms of the long
term service contracts; and
(ii) revenue not yet invoiced but earned on work completed in
servicing long term service contracts which, while owing to the
Group under the terms of those contracts, will not become
payable until future years.
The long term service contracts specifically detail both services
to be performed and the invoicing components for each year
of the contracts. The Group’s contract administration system
enables the stage of completion of each contract to be reliably
determined.
Interest Income
Interest on loans and receivables from finance leases is
recognised on an effective interest rate basis. Minimum lease
payments received under finance leases are apportioned
between the finance income and the reduction of the
outstanding asset. The finance income is allocated to each
period during the lease term so as to produce a constant period
rate of interest on the remaining balance of the asset. An accrual
basis is used to record interest income.
Operating Lease Revenue
Rental income from operating leases of equipment is recognised
on an accrual basis with income recognised on a straight line
basis over the term of the lease. Lease incentives granted are
recognised as an integral part of the total rental income, over the
term of the lease.
Equipment Sales under Financing Arrangement
Equipment which is subject to rental agreements with customers
may be sold to a finance company prior to the commencement
of the rental agreement. Rental payments are collected by the
relevant Group entity and passed on to the finance company.
A sale is recognised when goods have been dispatched to a
customer pursuant to a rental agreement and a sales invoice has
been issued to the finance company. Under these arrangements
the risks of ownership of the equipment passes to the customer
upon delivery of the equipment to the customer and the
credit risk in relation to the rental stream passes to the finance
company. In these circumstances the Group entity guarantees to
buy back the equipment for a nominal amount at the end of the
rental agreement (or upon termination of the agreement) based
on the term of the agreement.
Other Income
Dividend revenue is recognised when the right to receive
a dividend has been established.
(e) Receivables
All trade receivables are recognised initially at fair value,
and subsequently at amortised cost, less impairment.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off.
An impairment loss is raised when there is objective evidence
that the company will not be able to collect all amounts due
according to the original terms of the receivables. The amount
of the impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect
of discounting is not material. The amount of the impairment is
recognised in the statement of comprehensive income.
(f) Inventories
Inventories are valued at the lower of cost and net realisable
value. The cost of inventories is based on the first-in first-out
principle, and includes expenditure incurred in acquiring the
inventories and other costs incurred in bringing them to their
existing location and condition.
Net realisable value represents the estimated selling price
in the ordinary course of business less the estimated costs
of completion.
(g) Property, plant and equipment
Property, plant and equipment is recorded at cost less
accumulated depreciation and accumulated impairment
charges. Cost includes expenditure that is directly attributable
to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the
item will flow to the Company and the cost of the item can be
measured reliably. All repairs and maintenance are charged to
the income statement during the financial period in which they
are incurred.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
statement of profit and loss and other comprehensive income.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
41
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 3: Summary of Significant Accounting
Policies (Continued)
(i) Impairment
i. Non-derivative financial assets
Where the Company leases assets as a lessor on an operating
lease, the Company retains substantially all the risks and
rewards of ownership. The assets are stated at historical
cost less accumulated depreciation and impairment losses
(where applicable).
Depreciation of property, plant and equipment is calculated
on a straight line and diminishing value basis to allocate their
cost or revalued amounts, net of their residual values, over
their estimated useful lives to the Company.
The following rates used in the calculation of depreciation
are as follows:
Method
Diminishing value
and straight line
Diminishing value
and straight line
Diminishing value
and straight line
Diminishing value
and straight line
Diminishing value
and straight line
Straight-line
Assets
Leasehold
improvements
Plant and
equipment
Rate
2.5%–20%
5%–50%
Motor vehicles
8.75%–25%
Office computer
equipment
Furniture and
fittings
15%–50%
5%–37.5%
Leased plant and
equipment
20%
(h) Intangible Assets
i. Goodwill
Goodwill represents the excess of the cost of the acquisition
over the fair value of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill on acquisition of
subsidiaries is included in intangible assets. Goodwill acquired in
a business combination is allocated into the specific components
acquired as part of the business combination.
All goodwill is tested for impairment annually or more frequently
if events or circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
ii. Licenses and other Intangible Assets
Licenses and other intangible assets have a finite useful life
and are recorded at cost less accumulated amortisation and
impairment losses. Amortisation is calculated using the straight-
line method to allocate the cost of the licenses over their
estimated useful life. Software developed for resale is amortised
over five years. Customer contracts/relationships acquired in a
business combination have been assigned a finite life of 14 years
and are amortised on a straight line basis over this period.
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired
if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the
asset, and that the loss event(s) had an impact on the estimated
future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured
at amortised costs is calculated as the difference between its
carrying amount and the present value of the estimated future
cash flows discounted at the asset’s original effective interest
rate. Losses are recognised in profit or loss and reflected in
an allowance account against loans and receivables. Interest
on the impaired asset continues to be recognised. When an
event occurring after the impairment was recognised causes
the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
ii. Non-financial assets
The carrying amounts of the Group’s non-financial assets are
reviewed at each reporting date to determine whether there
is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. Goodwill and
indefinite life intangible assets are tested annually for impairment.
An impairment loss is recognised if the carrying amount of an
asset or its related cash-generating unit (CGU) exceeds its
recoverable amount.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to the
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset or CGU. For the purpose of impairment
testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the
cash inflows of other assets or CGUs. Subject to an operating
segment ceiling test, CGUs to which goodwill has been allocated
are aggregated so that the level at which impairment testing is
performed reflects the lowest level at which goodwill is monitored
for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to reduce
the carrying amount of goodwill allocated to the CGU (group of
CGUs), and then to reduce the carrying amounts of the other
assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For
other assets, an impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
42
iii. Trade and other Payables
i. Restructuring
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year,
which are unpaid.
( j) Borrowings
Borrowings are initially recognised at fair value. Borrowings are
subsequently measured at amortised cost. Any differences
between the proceeds (net of transaction costs) and the
redemption amount is recognised in the statement of
comprehensive income over the period of the borrowings using
the effective interest method. Fees paid on the establishment
of loan facilities, which are not incremental costs relating to the
actual draw down of the facility, are recognised as transaction
costs and amortised on a straight-line basis over the term of
the facility.
Borrowings are classified as current liabilities unless the Company
has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Borrowing costs are recognised as expenses in the period in
which they are incurred.
(k) Employee benefits
Liabilities arising in respect of wages and salaries, annual leave
and any other employee benefits expected to be settled
within twelve months of the reporting date are measured at
their nominal amounts based on remuneration rates which
are expected to be paid when the liability is settled. All other
employee benefit liabilities are measured at the present value
of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date
i. Share-based Payments
The Group operates an employee share option plan. The bonus
element over the exercise price for the grant of options is
recognised as an expense in the statement of comprehensive
income in the period(s) when the benefit is earned.
The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options at grant
date. The fair value of options at grant date is determined using
the Monte Carlo pricing model, and is recognised as an employee
expense over the period during which the employees become
entitled to the option.
(l) Provisions
A provision is recognised when a legal or constructive obligation
exists as a result of a past event and it is probable that an outflow
of economic benefits will be required to settle the obligation; and
the amount of the provision can be measured reliably. Provisions
are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the liability.
The unwinding of the discount is recognised as a finance cost.
A provision for restructuring is recognised when the Group
has approved a detailed and formal restructuring plan, and the
restructuring either has commenced or has been announced
publicly. Future operating losses are not provided for.
ii. Onerous contracts
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group from a contract are
lower than the unavoidable cost of meeting its obligations under
the contract. The provision is measured at the present value of
the lower of the expected cost of terminating the contract and
the expected net cost of continuing with the contract. Before a
provision is established, the Group recognises any impairment
loss on the assets associated with the contract.
(m) Leases
Leases are classified at their inception as either operating
or finance leases based on the economic substance of the
agreement so as to reflect the risks and benefits incidental
to ownership
i. Finance Leases
Assets held under finance leases are initially recognised at their
fair value or, if lower, at amounts equal to the present value of the
minimum lease payments, each determined at the inception of
the lease. The corresponding liability to the lessor is included in
the balance sheet as a finance lease obligation. Leased assets are
depreciated over the shorter of the estimated useful life of the
assets and the lease term.
Lease payments are apportioned between finance charges and
reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance
charges are charged directly against income.
ii. Operating Lease
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
(n) Finance income and finance costs
Finance income comprises interest income on funds invested,
dividend income, fair value gains on financial assets at fair
value through profit or loss, gains on the remeasurement to
fair value of any pre-existing interest in an acquiree, gains on
hedging instruments that are recognised in profit or loss and
reclassifications of amounts previously recognised in other
comprehensive income. Interest income is recognised as it
accrues in profit or loss, using the effective interest method.
Dividend income is recognised in profit or loss on the date
that the Group’s right to receive payment is established.
43
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 3: Summary of Significant Accounting
Policies (Continued)
Finance costs comprise interest expense on borrowings,
unwinding of the discount on provisions and contingent
consideration, fair value losses on financials assets at fair
value through profit or loss, impairment losses recognised
on financial assets (other than trade receivables), losses on
hedging instruments that are recognised in profit or loss and
reclassifications of amounts previously recognised in other
comprehensive income.
Borrowing costs that are not directly attributable to the
acquisition of a qualifying asset are recognised in profit or loss
using the effective interest method.
Foreign currency gains and losses are reported on a net basis
as either finance income or finance cost depending on whether
foreign currency movements are in a net gain or net loss position.
(o) Income Tax
Tax expense comprises current and deferred tax. Current tax and
deferred tax is recognised in profit or loss except to the extent
that it relates to a business combination, or items recognised
directly in equity or in other comprehensive income.
Current income tax expense or revenue is the tax payable on the
current year’s taxable income based on the applicable income
tax rate adjusted by changes in deferred tax assets and liabilities
and any adjustment to tax payable in respect of previous years.
Current tax payable also includes any tax liability arising from the
declaration of dividends.
A balance sheet approach is adopted under which deferred tax
assets and liabilities are recognised for temporary differences
between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. No deferred tax asset or
liability is recognised in relation to temporary differences arising
from the initial recognition of an asset or a liability if they arose
in a transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profit or
taxable profit or loss.
Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax the
Group takes into account the impact of uncertain tax positions
and whether additional taxes and interest may be due. The
Group believes that its accruals for tax liabilities are adequate
for all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience.
This assessment relies on estimates and assumptions and
may involve a series of judgements about future events. New
information may become available that causes the Group to
change its judgement regarding the adequacy of existing tax
liabilities; such changes to tax liabilities will impact tax expense
in the period that such a determination is made.
44
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority
on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or
their tax assets and liabilities will be realised simultaneously.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only when it is probable that
future taxable amounts will be available to utilise those temporary
differences and losses.
Additional income tax expenses that arise from the distribution of
cash dividends are recognised at the same time that the liability
to pay the related dividend is recognised. The Group does not
distribute non-cash assets as dividends to its shareholders.
i. Tax Consolidation
CSG Limited and its Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation
legislation on 1 July 2007. The parent entity is responsible for
recognising the current tax liabilities and deferred tax assets
arising in respect of tax losses, for the tax consolidated group.
The tax consolidated group has also entered a tax funding
agreement whereby each company in the group contributes
to the income tax payable in proportion to their contribution
to the net profit before tax of the tax consolidated group.
(p) Research & Development
Research & Development expenditure is recognised as an
expense as incurred. Concessional tax benefits receivable
in respect of eligible expenditure are recognised as income.
Income is recognised with respect to concessional benefits upon
confirmation and registration of eligible projects with evaluation
and registration of eligible projects typically completed in the
following financial year. Costs incurred on development projects
are recognised as intangible assets when it is probable that
the project will, after considering its commercial and technical
feasibility, be completed and generate future economic benefits
and its costs can be measured reliably.
(q) Discontinued operations
Classification as a discontinued operation occurs upon the
disposal or when the operation meets the criteria to be classified
as held for sale or distribution, if earlier.
(r) Segment reporting
Segment results that are reported to the CEO include items
directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise
mainly corporate assets (primarily the Company’s headquarters),
head office expenses, and income tax assets and liabilities
Note 4: New Accounting Standards
and Interpretations
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning
after 1 July 2013, and have not been applied in preparing these
consolidated financial statements.
1 AASB 9 Financial Instruments (December 2010)
(includes financial assets and financial liability requirements)
(effective 1 January 2015, previously 1 January 2013).
In December 2010, the AASB added requirements for the
classification and measurement of financial liabilities that
are generally consistent with the equivalent requirements in
AASB 139 except in respect of the fair value option; and certain
derivatives linked to unquoted equity instruments. The Group
does not expect the new standard to have a significant effect
on existing financial assets and financial liabilities.
2 AASB 10 Consolidated Financial Statements
(effective 1 January 2013)
AASB 10 replaces all of the guidance on control and
consolidation in AASB 127 Consolidated and Separate Financial
Statements, and Interpretation 12 Consolidation – Special
Purpose Entities. The Group does not expect the new standard
to have a significant effect on disclosures.
3 AASB 12 Disclosures of Interests in Other Entities
(effective 1 January 2013)
AASB 12 contains the disclosure requirements for entities that
have interest in subsidiaries, joint arrangements, associates
and/or unconsolidated structured entities. The Group does
not expect the new standard to have a significant effect on
disclosures.
4 AASB 13 Fair Value Measurement (effective 1 January 2013)
AASB 13 provides a single source of guidance on how to
measure fair value and aims to enhance fair value disclosures
and expands the disclosure requirements for all assets or
liabilities carried at fair value. The Group does not expect the
new standard to have a significant effect on disclosures.
5 AASB 119 Employee Benefits (effective 1 January 2013)
AASB 119, amended September 2011, changes the definition
of short-term and other long-term employee benefits to
clarify the distinction between the two. The standard also
makes changes to defined benefit plans and subtle changes
to termination benefits. The Group does not have any defined
benefit plans. Therefore, these amendments will not have a
significant impact.
Note 5: Determination of Fair Values
A number of the Group’s accounting policies and disclosures
require the determination of fair value, for both financial and non-
financial assets and liabilities. Fair values have been determined
for measurement and/or disclosure purposes based on the
following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in
the notes specific to that asset or liability.
(a) Equity and debt securities
The fair value of equity and debt securities is determined by
reference to their quoted closing bid price at the reporting date,
or if unquoted determined using a valuation technique. Valuation
techniques employed include market multiples and discounted
cash flow analysis using expected future cash flows and a
market-related discount rate. The fair value of held-to-maturity
investments is determined for disclosure purposes only.
(b) Trade and other receivables
The fair value of trade and other receivables are estimated as
the present value of future cash flows, discounted at the market
rate of interest. Where this fair value is determined for disclosure
purposes the market rate of interest is that at the reporting date.
Where this fair value is determined when acquired in a business
combination, the market rate of interest is that at the date of
acquisition.
(c) Forward exchange contracts and interest rate swaps
The fair value of forward exchange contracts is based on their
quoted price, if available. If a quoted price is not available, then
the fair value is estimated by discounting the difference between
the contractual forward price and the current forward price for
the residual maturity of the contract using a credit-adjusted risk-
free interest rate (based on government bonds).
The fair value of interest rate swaps is based on broker quotes.
These quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturity
of each contract and using the market interest rates for a similar
instrument at the measurement date. Fair values reflect the
credit risk of the instrument and include adjustments to take
account of the credit risk of the Group entity and counterparty
when appropriate.
(d) Other non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest
at the reporting date. For finance leases the market rate of
interest is referenced to the contract.
45
CSG ANNUAL REPORT 2012–13
During the year the Group entered into a new Senior Debt Facility
Agreement with the Commonwealth Bank of Australia (“CBA”) for
a maximum facility amount of $25m (2012:$nil) with a maturity
date of 4 July 2016. This Facility is primarily to be used for working
capital and general corporate purposes but also provides for a
business card facility and a lease finance facility. At balance date
there are no amounts outstanding under this Facility. Interest on
the Facility is charged at a floating rate plus a margin.
The Group’s Commonwealth Bank of Australia New Zealand
funding facility (“NZ CBA”), securitised by finance lease
receivables, (“Securitisation Facility”) matures on 8 July 2014.
The maximum funding limit under this facility is $84.2m
(NZ$100m) (2012: $78.3m ($NZ100m)). Interest on the
Securitisation Facility is charged at a floating rate plus a margin,
and re-prices on a monthly basis. As the finance lease receivables
are predominantly fixed rate in nature, the Group enters into
interest rate swaps to fix these floating rate exposures.
In addition to the NZ CBA facility above the Group has funded
leasing activities in New Zealand by way of finance leases with
CBA through a Cash Advance Facility, also secured by finance
lease receivables (previously funded by Equigroup Finance
Limited). The facility limit is $23.2m (NZ$27.5m) (2012:$21.5m
(NZ$27.5m)). Interest on the facility is charged at a floating rate
plus a margin and re-prices at specified short-term intervals.
During March 2013, CSG Finance Australia Pty Ltd was
established to provide leasing products to Australian customers.
The operations are funded by a new facility with the CBA and are
provided to its subsidiary CSG Group Receivables Pty Ltd. The
facility limit is $25m (2012:$nil) and the debt is secured by the
finance lease receivables. This facility matures on 20 June 2016.
Interest on the facility is charged at a floating rate plus a margin
and re-prices at specified short-term intervals.
Financial instruments are subject to the risk that market values
may change subsequent to their acquisition. In the case of
interest rates, market changes will affect the cash flows of
interest income and interest expense for the Company and
Group. The management of the Group’s exposure to interest
rates is carried out through regular monitoring of the interest
re-pricing profile for both assets and liabilities of the Group. In
terms of the securitisation facility interest rate swaps are taken
out by the Company’s wholly owned subsidiary Solutions Group
Receivables Limited to hedge 100 per cent of the future cash flow
equivalent to the portfolio designated “securitised” leases.
Notes to the Financial Statements 30 June 2013
Note 5: Determination of Fair Values
(Continued)
(e) Share-based payment transactions
The fair value of the Performance Rights under the Long Term
Incentive Plan is measured using Monte Carlo sampling. The
fair value of the employee share options currently under issue
is measured using the Black-Scholes formula. Measurement
inputs include the share price on the measurement date, the
exercise price of the instrument, expected volatility (based on
an evaluation of the historic volatility of the Company’s share
price, particularly over the historical period commensurate with
the expected term), expected term of the instruments (based
on historical experience and general option holder behaviour),
expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market performance
conditions attached to the transactions are not taken into
account in determining fair value.
(f) Contingent consideration
The fair value of contingent consideration is calculated using the
income approach based on the expected payment amounts and
their associated probabilities. When appropriate, it is discounted
to present value.
Note 6: Financial Risk Management
The major financial instruments entered into by the Group
comprise short term trade receivables and payables, loans and
receivables, loans and borrowings and long term borrowings. The
Group does not have any significant financial risks in respect of
trade receivables and payables. The main area of financial risk
arises in respect of interest rate risk on long-term borrowings.
Certain aspects of financial risk management are considered
further as detailed below:
The Group is exposed to a variety of financial risks comprising:
• interest rate risk
• credit risk
• liquidity risk
• foreign exchange risk
• fair values
The Board of Directors has overall responsibility for identifying
and managing operational and financial risks.
(a) Interest rate risk
The Group’s exposure to interest rate risks and the effective
interest rates of financial assets and financial liabilities, both
recognised and unrecognised at the balance date, are detailed
in the table provided below.
46
Interest Rate Sensitivity Analysis
Interest Rates:
100 bps increase:
Cash flow sensitivity:
Impact on interest income on bank balances
Impact on management fee charges
Impact on interest expense on loans
Impact on cash flows from derivative
Impact on interest expense on finance leases
Fair value sensitivity:
Impact on derivative fair value at balance date
Total impact
Interest Rates:
100 bps decrease:
Cash flow sensitivity:
Impact on interest income on bank balances
Impact on management fee charges
Impact on interest expense on loans
Impact on cash flows from derivative
Impact on interest expense on finance leases
Fair value sensitivity:
Impact on derivative fair value at balance date
Total impact
2013
$000’s
Impact on
Equity
Increase/
(decrease)
on equity
Impact on
Income
Statement
Increase/
(decrease)
on profit
2012
$000’s
Impact on
Equity
Increase/
(decrease)
on equity
Impact on
Income
Statement
Increase/
(decrease)
on profit
262
3
(825)
799
(1)
1,109
1,347
(262)
(3)
825
(799)
1
(1,139)
(1,377)
262
3
(825)
799
(1)
1,109
1,347
(262)
(3)
825
(799)
1
(1,139)
(1,377)
213
3
(731)
806
(30)
1,188
1,449
(213)
(3)
731
(806)
30
(1,222)
(1,483)
213
3
(731)
806
(30)
1,188
1,449
(213)
(3)
731
(806)
30
(1,222)
(1,483)
47
CSG ANNUAL REPORT 2012–13
Notes to the Financial Statements 30 June 2013
Note 6: Financial Risk Management (Continued)
(b) Credit Risk Exposures
Credit risk is the risk that a loss will be incurred if a counterparty
to a transaction does not fulfill its financial obligations.
Management is responsible for sanctioning large credit exposures
to all customers arising from lending activities. Financial
instruments that potentially subject the Group to concentrations
of credit risk consist principally of cash and bank balances,
finance leases receivables, trade receivables and prepayments.
The Group has a credit policy that is used to manage its exposure
to credit risk. As part of this policy, limits on exposures have been
set, lease agreements are subject to defined criteria, and leases
are monitored on a regular basis. Maximum exposures are net
of any recognised provisions. The maximum credit risk is the
contract value of the leases. To control the level of credit risk
taken, management evaluates each customer’s credit risk on a
case by case basis. Credit risk is mitigated by the large number
of clients and relatively small size of individual credit exposures.
For finance and operating leases the collateral taken on the
provision of a financial facility is by way of a registered security
interest over the leased asset. In some cases a personal
guarantee is obtained. Loan and lease agreements provide
that, if an event of default occurs, collateral will be repossessed
and/or the personal guarantee invoked. The repossessed
collateral is either held until overdue payments have been
received or sold in the secondary market.
In addition the Company has contingent liabilities relating to
buy back guarantees on certain finance contracts for the lease
of copiers and multi-function devices by customers. The
Company undertakes a credit approval process to determine
whether it is prepared to buy back the loan on default. When
a circumstance arises where the Company is required to buy
back the loan, the equipment financed becomes the property
of the Company. To date, there has been one instance where
the Company has been required to buy back a loan.
i. Concentrations of Credit Risk
The Group minimises concentrations of credit risk in relation
to trade receivables by undertaking transactions with a large
number of customers. The print businesses have a broad
range of clients across all sectors of the economy, and spread
throughout all regions of Australia and New Zealand. The leasing
business has a wide spread of clients across all economic
sectors and regions of New Zealand. The Group does not have
any material credit risk exposure to any single debtor or group
of debtors under financial instruments entered into by the
consolidated entity.
(c) Liquidity Risk
The Group produces positive cash flows from operating activities
on a regular basis. Refer to Note 23 (c) for details on the unused
banking facility.
Financial Instruments
(i) Financial Assets
Cash and Cash Equivalents
Trade Receivables
Finance Lease Receivables
Sundry Debtors
Income Tax Receivable
Other financial assets
Total Financial Assets
(ii) Financial Liabilities
Trade Payables
Other Payables and deferred income
Finance Lease & Hire Purchase Liability
Debt Associated with Finance Leases
Derivatives – interest rate swaps
Current Tax Liability
Deferred Consideration
Term Debt/Bills Payable
Total Financial Liabilities
48
Floating Interest Rate
Fixed Interest Rate Maturing in :
2013
$’000
2012
$’000
40,002
25,864
–
–
–
–
–
–
–
–
–
–
1 year or less
2013
$’000
2012
$’000
1 – 5 years
2012
$’000
2013
$’000
–
–
–
–
–
–
–
–
39,465
35,573
76,060
63,872
–
–
–
–
–
–
–
–
–
–
–
–
40,002
25,864
39,465
35,573
76,060
63,872
19,307
241,779
174,834
367,089
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,000
43,943
50,943
–
–
70
33,860
1,312
–
–
605
35,847
–
–
70
5,683
2,142
–
–
47,124
55,019
–
–
31
–
–
94
61,711
614
81,879
1,149
–
–
–
–
–
–
62,356
83,122
> 5 years
Non-Interest bearing
2013
$’000
2012
$’000
2013
$’000
2012
$’000
Total carrying amount
as per Balance Sheet
Weighted Average
Effective Interest Rate
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45
45
17,498
18,586
1,794
223,051
17
–
–
125
22,301
24,407
18,044
27,138
15
–
–
–
–
–
–
–
–
1,613
–
–
–
–
22,270
9,132
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2013
$’000
40,017
17,498
115,525
1,794
–
–
22,301
24,407
101
95,571
1,971
1,613
–
605
2012
$’000
25,881
18,586
99,446
223,051
–
125
18,044
27,138
164
87,562
3,291
22,270
16,133
91,067
2013
%
2012
%
2.88%
2.08%
11.33%
13.58%
–
–
–
–
–
–
–
–
–
–
11.85%
4.05%
4.88%
4.31%
–
–
–
–
–
–
–
–
–
10.53%
4.78%
5.44%
8.48%
7.25%
48,321
76,584
146,569
265,665
As part of the arrangements regarding the Facilities in New
Zealand (NZ CBA Securitisation Facility and the Cash Advance
Facility), the Group is required to contribute towards credit
protection reserves. The credit protection reserve of the NZ
CBA Securitisation Facility has to be maintained at a minimum
calculated percentage of the net pool balance of securitised
finance leases. The minimum calculated percentage is based
on historical bad debt and charge off rates. At 30 June 2013 the
required percentage was 9.40 per cent (2012: 9.40 per cent).
The cash reserve has to be maintained at 2 per cent of the lease
book value (2012: 2 per cent). The credit protection reserve of
the Cash Advance Facility is a cash reserve maintained at 10 per
cent of the lease book value (2012:10 per cent).
The credit protection reserve for the leasing facility in Australia
has to be maintained at the greater of $4.6m or a minimum
calculated percentage which is based on historical arrears rates.
The cash reserve has to be maintained at the greater of 2 per
cent loan book value or $0.4m. At 30 June 2013 the cash reserve
provided is $0.4m (2012: $nil) and the credit protection provided
is $4.6m which is invested in leased assets.
The Company was in full compliance with these covenants
at balance date.
Cash reserve accounts and enhancement deposit accounts are
restricted under the securitisation arrangements. The funds will
be repaid to the Group on request if the Company has paid more
than required for the Credit Protection. Once a month funds paid
into the bank accounts, by the lessees, which do not relate to
repayment of principal balances, will be returned to the Group.
(d) Foreign Exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the New Zealand dollar and US dollar.
Foreign exchange risk arises from future commercial
transactions, recognised assets and liabilities and net
investments in foreign operations.
The Company’s subsidiary, Konica Minolta Business Solutions
New Zealand Limited, settles purchases of equipment
predominantly in US dollars. All purchases are fully hedged
with forward cover taken out to protect from exchange rate
movements between the shipping date and settlement.
(e) Fair values
The fair value of financial assets and financial liabilities
approximates their carrying amounts as disclosed in the
Statement of Financial Position and Notes to the financial
statements.
> 5 years
Non-Interest bearing
Total carrying amount
as per Balance Sheet
Weighted Average
Effective Interest Rate
2013
$’000
2012
$’000
–
–
–
–
–
–
–
–
–
–
–
45
–
–
–
45
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2013
$’000
15
17,498
–
1,794
–
–
2012
$’000
17
18,586
–
223,051
–
125
2013
$’000
40,017
17,498
115,525
1,794
–
–
2012
$’000
25,881
18,586
99,446
223,051
–
125
19,307
241,779
174,834
367,089
22,301
24,407
18,044
27,138
–
–
–
1,613
–
–
–
–
–
22,270
9,132
–
22,301
24,407
101
95,571
1,971
1,613
–
605
18,044
27,138
164
87,562
3,291
22,270
16,133
91,067
48,321
76,584
146,569
265,665
2013
%
2.88%
–
11.33%
–
–
–
–
–
–
11.85%
4.05%
4.88%
–
–
4.31%
–
2012
%
2.08%
–
13.58%
–
–
–
–
–
–
10.53%
4.78%
5.44%
–
8.48%
7.25%
–
49
Financial Instruments
(i) Financial Assets
Cash and Cash Equivalents
Trade Receivables
Finance Lease Receivables
Sundry Debtors
Income Tax Receivable
Other financial assets
Total Financial Assets
(ii) Financial Liabilities
Trade Payables
Other Payables and deferred income
Finance Lease & Hire Purchase Liability
Debt Associated with Finance Leases
Derivatives – interest rate swaps
Current Tax Liability
Deferred Consideration
Term Debt/Bills Payable
Total Financial Liabilities
Floating Interest Rate
Fixed Interest Rate Maturing in :
40,002
25,864
39,465
35,573
76,060
63,872
2013
$’000
2012
$’000
40,002
25,864
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,000
43,943
50,943
1 year or less
2013
$’000
2012
$’000
1 – 5 years
2012
$’000
2013
$’000
39,465
35,573
76,060
63,872
–
–
–
–
–
–
–
70
–
–
33,860
1,312
605
35,847
–
–
–
–
–
–
–
70
–
–
5,683
2,142
47,124
55,019
–
–
–
–
–
–
–
31
–
–
–
–
–
–
–
–
–
–
94
–
–
–
61,711
614
81,879
1,149
62,356
83,122
CSG ANNUAL REPORT 2012–13
Notes to the Financial Statements 30 June 2013
Note 7: Revenue
Revenues from Continuing Operations
Sales revenue
Revenue from sales of goods
Revenue from services
Interest Income
Other Income
Sundry
Interest rate swap income
Gain on foreign exchange
Profit on sale of fixed assets
Consolidated entity
2012
$’000
2013
$’000
71,242
85,655
15,742
172,639
6,958
1,478
126
68
8,630
86,075
96,185
16,113
198,373
3,030
960
(7)
374
4,357
Note 8: Profit From Continuing Operations
Profit from continuing operations before income tax has been determined after the following specific expenses:
Changes in Inventories of Finished Goods
Cost of goods
Cost of sales – service
Cost of sales service (employee benefits)
Finance lease interest expense
Total changes in inventories of finished goods
Deferred Consideration And Legal Expenses
Deferred consideration
Litigation settlements (1)
Working capital adjustment (2)
Associated legal and advisor costs
Total deferred consideration and legal expenses
Other Expenses
Bad debts expense
Acquisition costs expensed
Impairment of non-listed investments
Restructuring and impairment
Other
Total other expenses
Depreciation and Amortisation
Plant and equipment
Leased property, plant and equipment
Leasehold improvements
Amortisation of customer contracts/relationships
Amortisation of intangible assets
Total depreciation and amortisation
Finance Costs
Interest and charges
Total finance costs
1 Settlement relates to the Fuji Xerox Australia and Fuji Xerox Finance litigation
2 Amount relates to a working capital adjustment that arose as part of the sale of the Technology Solutions division
50
Consolidated entity
2012
$’000
2013
$’000
40,527
32,831
15,552
7,124
96,034
(4,000)
4,500
1,900
1,180
3,580
525
–
–
1,211
43
1,779
2,856
523
508
2,266
122
6,275
920
920
51,673
42,559
20,044
8,454
122,730
2,800
–
5,600
912
9,312
1,913
711
1,112
6,717
639
11,092
2,830
–
312
2,266
189
5,597
10,853
10,853
Note 9: Income Tax
(a) Components of tax expense:
Current tax expense in respect of the current year:
Deferred tax expense recognised in the current year
Adjustments recognised in the current year in relation to the prior year
Tax expense/(income) excluding sale from continuing operations
Tax expense from continuing operations
Tax expense from discontinued operations
Tax on gain on sale of discontinued operations
Total tax expense
(b) Prima facie tax payable
The prima facie tax payable on profit before income tax is reconciled
to the income tax expense as follows:
Profit/loss before tax from continuing operations
Prima facie income tax payable on profit before income tax at 30.0% (2012: 30.0%)
Add tax effect of:
• other non-allowable items
• effect of different tax rates in other jurisdictions (i)
• under provision for income tax in prior years
Less tax effect of:
share-based payments
other non-assessable items
deferred tax asset not previously brought to account
recognition of deductible expense – cost based adjustment
Income tax expense attributable to profit
(c) Current tax
Current tax relates to the following:
Current tax liabilities / (assets)
Opening balance
Income tax
Tax refunds/(payments)
Under / (over) provisions
Exchange rate impact
Other
Current tax liabilities (assets)
Consolidated entity
2012
$’000
2013
$’000
3,015
2,415
(547)
4,883
4,883
–
4,883
–
4,883
(10,714)
622
–
(10,092)
(11,203)
1,111
(10,092)
27,998
17,906
13,600
4,080
(33,437)
(10,031)
722
(182)
430
5050
–
(167)
–
–
970
4,883
22,270
3,015
(23,413)
(736)
(29)
506
1,613
829
7
523
(8,671)
(21)
3
–
(1,403)
(8,671)
(10,092)
(4,455)
17,284
9,595
–
(195)
41
22,270
(i) The corporate tax rate in New Zealand was changed from 30 per cent to 28 per cent with effect from 1 July 2011. The current tax liability for the current income year reflects the revised rate. The
impact of the change in tax rate has been taken into account in the measurement of deferred taxes at the end of the reporting period.
51
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 9: Income Tax (Continued)
(d) Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Inventories
Investments
Doubtful debts
Property, plant and equipment
Accrued expenses
Provision for annual and long service leave
Other provisions
Other
Blackhole deductions
Total deferred tax assets
Deferred tax liabilities
The balance comprises:
Accrued revenue
Property, plant and equipment
Capital raising costs
Other
Total deferred tax liabilities
Net Deferred tax assets
(e) Deferred income tax (revenue)/expense included in income tax expense comprises
Decrease / (increase) in deferred tax assets
(Decrease) / increase in deferred tax liabilities
Total
(Decrease) / increase in DTA for discontinued operations
(f) Deferred income tax related to items charged or credited directly to equity
Blackhole deductions
Total
Note 10: Dividends on Ordinary Shares
Consolidated entity
2012
$’000
2013
$’000
493
–
445
243
399
878
384
42
824
3,708
(1,508)
–
–
(78)
(1,586)
2,122
738
1,677
2,415
–
360
360
546
334
474
–
2,627
1,024
904
401
75
5,933
–
(500)
(526)
–
(1,026)
4,907
1,648
(1,026)
622
(2,478)
–
–
Consolidated entity
2012
$’000
2013
$’000
(a) Dividends paid during the year
(i) Current Year Interim
Franked dividends ($nil cents per share) (2012: 2.5 cents per share)
–
7,064
(ii) Prior Year Final
Franked dividends (20 cents per share) (2012: 3 cents per share) paid out of the proceeds from the sale
of the Technology business.
(b) Dividends proposed and not recognised as a liability
Franked dividends ($nil cents per share) (2012: 20 cents per share)
(c) Franking credit balance
Balance of franking account at year end adjusted for franking credits arising from payment of provision
for income tax and deducting franking credits to be used in payment of proposed dividends:
Impact of the franking account of dividends recommended by the directors since the year end but not
recognised as a liability at year end
56,513
56,513
8,477
15,541
–
–
788
–
788
23,512
(24,219)
(707)
52
Note 11: Cash And Cash Equivalents
Cash at bank
Restricted cash (i)
Cash on hand
(i) Cash amounts provided as part of credit protection reserve – refer note 6.
Note 12: Receivables
Current
Trade receivables
Impairment
Staff and sundry loans
Receivable for sale of discontinued operation
Sundry debtors
Finance Lease receivables
Current
Non –current
Note 13: Inventories
Finished goods
Consumables
Toner in Field
Consolidated entity
2012
$’000
20,143
2013
$’000
18,803
21,199
15
5,721
17
40,017
25,881
Consolidated entity
2012
$’000
2013
$’000
17,835
(337)
–
–
1,794
19,823
(166)
29
227,500
1,122
19,292
248,308
39,465
76,060
115,525
35,573
63,872
99,445
Consolidated entity
2012
$’000
9,967
2013
$’000
11,672
9,453
14,141
35,266
8,854
12,776
31,597
Finished goods comprises of multi-function devices, printers and related accessories.
Toner in field comprises of unutilized toner held at customer premises.
During the year ended 30 June 2013, consumables valued at $0.9m were written down to zero to account for consumables related to
certain machine models that are no longer sold and not considered recoverable by the Group.
Note 14: Other Current Assets
Prepayments
Other
Consolidated entity
2012
$’000
770
2013
$’000
1,453
2,020
3,473
957
1,727
53
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 15: Other Financial Assets
Financial assets at fair value through profit and loss
Shares in listed corporations
Note 16: Property, Plant And Equipment
Consolidated entity
2012
$’000
2013
$’000
Note
–
–
125
125
Consolidated entity
2012
$’000
2013
$’000
Note
Leasehold improvements
At Cost
Accumulated depreciation
Plant and equipment
At Cost
Accumulated depreciation
Furniture and fittings
At Cost
Accumulated depreciation
Office computer equipment
At Cost
Accumulated depreciation
Motor vehicles
At Cost
Accumulated depreciation
Leased plant & equipment
At Cost
Accumulated depreciation
Total written down value
16(a)
16(a)
16(a)
16(a)
16(a)
16(a)
(a) Reconciliation of the carrying amount of property, plant and equipment at the beginning of the year
Leasehold improvements
Carrying amount
Transfer between classes
Disposals
Additions for continued operations
Disposals for discontinued operation
Foreign currency translation
Depreciation expense
54
3,096
(2,403)
693
992
(564)
428
3,572
(2,575)
997
10,112
(8,398)
1,714
1,296
(620)
676
1,348
(779)
569
5,077
870
88
–
258
–
(15)
(508)
693
2,675
(1,805)
870
5,849
(3,726)
2,123
4,537
(2,989)
1,549
8,587
(6,846)
1,741
1,375
(495)
880
–
–
–
7,163
2,772
–
(326)
183
(1,453)
6
(312)
870
Note 16: Property, Plant And Equipment (Continued)
Consolidated entity
2012
$’000
2013
$’000
Note
Plant & equipment
Carrying amount
Transfer between classes
Disposals
Additions for continued operations
Disposals for discontinued operation
Foreign currency translation
Depreciation expense
Furniture & fittings
Carrying amount
Transfer between classes
Disposals
Additions for continued operations
Disposals for discontinued operation
Foreign currency translation
Depreciation expense
Office computer equipment
Carrying amount
Transfer between classes
Disposals
Additions for discontinued operation
Additions for continued operations
Disposals for discontinued operation
Depreciation expense
Foreign currency translation
Motor Vehicles
Carrying amount
Transfer between classes
Disposals
Additions for continued operations
Disposals for discontinued operation
Depreciation expense
Leased plant & equipment
Carrying amount
Transfer between classes
Disposals
Additions for continued operations
Disposals for discontinued operation
Depreciation expense
Foreign currency translation
2,123
(1,018)
–
35
–
–
(712)
428
1,549
(294)
(152)
330
–
(25)
(411)
997
1,741
558
(168)
–
1,199
–
(1,568)
(48)
1,714
880
–
(44)
–
–
(160)
676
–
793
(15)
353
–
(523)
(39)
569
10,918
–
(840)
1,102
(8,485)
117
(689)
2,123
3,056
–
(535)
472
(620)
18
(842)
1,549
3,011
–
–
188
815
(1,223)
(1,066)
16
1,741
1,291
–
(184)
96
(90)
(233)
880
–
–
–
–
–
–
–
–
55
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 16: Property, Plant And Equipment (Continued)
Change in estimates
During the year, the Group conducted a review of assets which resulted in changes in the expected usage of certain items. Certain
office computer equipment, leasehold improvements and furniture and fittings are now considered no longer in use and as a result,
the expected useful life of these assets has decreased. The effect of these changes on actual and expected depreciation expense in
current and future years is as follows:
2013
$’000s
512
230
23
765
2014
$’000s
(184)
(6)
(4)
(194)
2015
$’000s
(174)
(6)
(4)
(184)
2016
$’000s
(92)
(6)
(4)
(102)
Later
$’000s
(62)
(213)
(10)
(285)
Office Computer Equipment
Leasehold Improvements
Furniture and Fittings
Total
Note 17: Intangibles
Goodwill
Goodwill on consolidation
Goodwill at cost
Net carrying amount
Opening net book amount
Adjustment to prior period acquisitions1
Disposals for discontinued operation
Closing net book value
Customer Contracts\Relationships
Customer Contracts\Relationships on consolidation
Accumulated amortisation
Net carrying amount
Opening net book amount
Amortisation expense
Closing net book value
Licenses and other intangibles assets
Licenses and other intangibles at cost
Accumulated amortisation
Net carrying amount
Opening net book amount
Additions for continued operations
Disposals for discontinued operation
Disposals
Amortisation expense
Closing net book value
Total
1 Related to pre 1 July 2009 acquisition
56
Consolidated entity
2012
$’000
2013
$’000
111,794
50,663
162,457
164,790
(2,333)
–
162,457
114,127
50,663
164,790
237,035
–
(72,245)
164,790
31,727
(7,467)
24,260
26,526
(2,266)
24,260
2,511
(457)
2,054
299
1,882
–
–
(127)
2,054
188,771
31,727
(5,201)
26,526
28,792
(2,266)
26,526
660
(361)
299
25,892
305
(1,072)
(24,637)
(189)
299
191,614
Note 17: Intangibles (Continued)
For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions. The aggregate carrying amounts of
goodwill allocated to each CGU are as follows:
Business Solutions Australia
Business Solutions New Zealand
Consolidated entity
2012
$’000
70,816
93,974
164,790
2013
$’000
68,483
93,974
162,457
The recoverable amounts of the CGUs are based on their value in use, determined by discounting the future cash flows
covering a five year period, based on financial budgets approved by the Board.
Key assumptions used in the calculation of value in use were discount rate and the EBITDA growth rate, which are listed
in the table below.
Business Solutions Australia
Business Solutions New Zealand
Terminal Growth Rate
Discount Rate
2013
2.5%
2.5%
2012
2.5%
2.5%
2013
11.6%
9.4%
2012
10.5%
10.5%
The discount rate applied was a pre-tax measure based on the risk-free rate obtained from the yield on 10–year bonds issued by
the government in the relevant market and in the same currency as the cash flows adjusted for a risk premium to reflect both the
increased risk of investing in equities generally and the systemic risk of the specific CGU.
The Board has determined there are no reasonably possible changes that could occur in the two key assumptions that would cause
the carrying amount of these CGUs to exceed their recoverable amount.
Note 18: Payables
Current
Trade payables
Other payables
Consolidated entity
2012
$’000
2013
$’000
22,301
23,545
45,846
18,044
33,694
51,738
57
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 19: Borrowings
Current
Secured
Term Debt
Lease and hire purchase liabilities (i)
Other
Non Current
Secured
Lease and hire purchase liabilities (i)
(i) Lease and hire purchase liabilities are secured by assets leased or under hire purchase.
Debt Asscociated With Finance Lease Receivables
Current
Loans and borrowings
Derivatives – Interest rate swaps
Non-Current
Loans and borrowings
Derivatives – Interest rate swaps
Information about interest rate risk is detailed in Note 6.
Note 20: Provisions
Current
Employee Benefits
Other
Non Current
Employee Benefits
Other
58
Consolidated entity
2012
$’000
2013
$’000
Note
24
24
–
70
605
675
31
31
33,860
1,312
35,172
61,711
659
62,370
91,067
70
–
91,137
94
94
5,683
2,142
7,825
81,879
1,149
83,028
Consolidated entity
2012
$’000
2013
$’000
Note
2,503
259
2,762
683
1,148
1,831
3,334
2,015
5,349
357
–
357
Note 21: Contributed Equity
(a) Issued and paid up capital
Ordinary shares fully paid
Consolidated entity
2012
$’000
2013
$’000
Note
172,250
172,250
200,724
200,724
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. The holders
of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of
the Company.
(b) Movement in shares on issue
Beginning of the financial year
On-market share buy-backs
Capital distribution
Capital raising cost
Capital raising costs deferred tax asset
2013
No. of shares
282,567,499
(4,412,022)
–
–
–
Balance at the end of the year
278,155,477
$’000
200,724
(2,141)
(25,000)
–
(1,333)
172,250
2012
No. of shares
282,567,499
–
–
–
–
$’000
200,736
–
–
(17)
5
282,567,499
200,724
(c) Employee Share Scheme
The company, in accordance with its Executive Remuneration
Framework, continued to offer employee participation in
short-term and long-term incentive schemes as part of the
remuneration packages for the employees of the companies.
(d) Options
The options are issued for $nil consideration and the strike price
and vesting period are set by the Nomination and Remuneration
Committee. The options are exercisable in two or three tranches
and have an expiry period of up to three years. The total amount
of issued options cannot exceed 5 per cent of share capital. The
options are not listed on the ASX and any Director issued options
are approved at the Annual General Meeting.
All employees, including Directors, may be issued options at the
discretion of the Nomination and Remuneration Committee.
During the 2013 financial year there were no additional options
granted to employees or Directors.
Options on issue 30 June 2013:
Issued date
Expiry date
Exercise
price
Opening
01/07/2012
ESOP Various
31/08/2012
$0.68 – $1.76
1,154,500
ESOP Various
31/08/2012
ESOP Various
31/08/2012
$1.98
$1.16
1,000,000
100,000
LTIP Issue 1
and 2
01/01/2014
$1.09 – $1.14
1,505,000
LTIP Issue 3
15/09/2014
$0.75
750,000
4,509,500
Issued
Exercised
Lapsed
–
–
–
–
–
–
–
–
–
–
–
–
Closing
30/06/2013
–
–
–
(1,154,500)
(1,000,000)
(100,000)
(485,000)
1,020,000
–
750,000
(2,739,500)
1,770,000
59
CSG ANNUAL REPORT 2012–13
Notes to the Financial Statements 30 June 2013
Note 21: Contributed Equity (Continued)
Options on issue 30 June 2012:
Issued date
Expiry date
Exercise
price
Opening
01/07/2011
ESOP Various
31/08/2012
$0.68 – $1.76
2,663,500
ESOP Various
31/08/2012
ESOP Various
31/08/2012
$1.98
$1.16
1,000,000
100,000
LTIP Issue 1
and 2
01/01/2014
$1.18 – $1.23
1,825,000
LTIP Issue 3
15/09/2014
$0.84
–
Total
–
5,588,500
750,000
750,000
Issued
Exercised
Lapsed
Closing
30/06/2012
–
–
–
–
–
–
–
–
–
–
(1,509,000)
1,154,500
–
–
1,000,000
100,000
(320,000)
1,505,000
–
750,000
(1,829,000)
4,509,500
(e) Performance Rights
On 28 June 2013 the Group granted 15,166,053 performance rights to the Executive Management Team and key management
personnel (Refer to the Remuneration Report, LTIP Issue 5, 6 and 7). Each performance right represents an option to receive one
ordinary share subject to the satisfaction or waiver of the relevant vesting conditions. No consideration is payable by the participants
for the grant of the performance rights and no consideration is to be paid on the exercise of the performance rights.
Performance rights on issue at 30 June 2013:
Performance
Hurdle Date
Opening
01/07/2012
01/07/2016
01/07/2017
01/07/2018
01/12/2015
01/07/2014
–
–
–
–
229,213
229,213
Opening
01/07/2011
–
–
–
Issued
4,600,327
5,859,333
4,100,332
606,061
–
15,166,053
Lapsed
–
–
–
–
–
–
Issued
40,000
417,094
457,094
Lapsed
(40,000)
(187,881)
(227,881)
Closing
30/06/2013
4,600,327
5,859,333
4,100,332
606,061
229,213
15,395,266
Closing
30/06/2012
–
229,213
229,213
Issued Date
LTIP Issue 5 & 7
LTIP Issue 5 & 7
LTIP Issue 5 & 7
LTIP Issue 6
LTIP Issue 4
Total
Performance rights on issue at 30 June 2012:
Issued Date
Various 2012
LTIP Issue 4
Total
Performance
Hurdle Date
01/07/2013
01/07/2014
60
Note 22: Reserves and Retained Earnings
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
(a) Share-based payment reserve
(i) Nature and purpose of reserve
Note
22(a)
22(b)
Consolidated entity
2012
$’000
654
2013
$’000
654
2,481
3,135
(961)
(308)
22(c)
71,402
120,351
This reserve is used to record the value of equity benefit provided to employee and Directors as part of their remuneration.
(ii) Movements in reserve
Balance at beginning of year
Share based payments
Balance at end of year
(b) Foreign currency translation reserve
(i) Nature and purpose of reserve
This reserve is used to record the exchange differences arising on translation of a foreign entity.
(ii) Movements in reserve
Balance at beginning of year
Exchange differences on translation of foreign operations
Balance at end of year
(c) Retained Earnings
Balance at beginning of year
Net profit attributable to members
Share based payments
Total available for appropriation
Dividends paid
Balance at end of year
8
654
–
654
583
71
654
(961)
3,442
2,481
(900)
(61)
(961)
120,351
8,121
(557)
127,915
(56,513)
84,682
51,211
–
135,893
(15,541)
71,402
120,351
10
61
CSG ANNUAL REPORT 2012–13
Notes to the Financial Statements 30 June 2013
Note 23: Cashflow Information
(a) Reconciliation of cash flow from operations with profit after income tax
Profit/(loss) from ordinary activities after income tax
(Profit)/loss from discontinued operation
Profit/(loss) from continued operations after income tax
Non-cash items
Profit/(loss) on sales of assets
Amortisation of intangibles
Depreciation of property, plant and equipment
Share based payments
Loan forgiveness
(Increase)/decrease in assets
Receivables
Prepayments
Inventories
Deferred tax assets
Lease receivables
Increase/(decrease) in liabilities
Payables
Provisions
Debt associated with lease receivables
Tax provision
Tax (paid)/received
Interest paid/(received)
Net cash flow from operating activities
(b) Reconciliation of cash
Cash balance comprises:
Cash at bank
Closing cash balance
(c) Credit stand-by arrangements and loan facilities
Facilities
Multi-function facility (i)
Securitisation and lease finance facilities – NZ (ii) (iii)
Securitisation and lease finance facilities – Australia (iv)
Facilities Used
Multi-function facility
Securitisation and lease finance facility – NZ
Securitisation and lease finance facilities – Australia
Facilities Unused
Multi-function facility
Securitisation and lease finance facility – NZ
Securitisation and lease finance facilities – Australia
Consolidated entity
2012
$’000
2013
$’000
8,717
–
8,717
(68)
2,388
3,887
–
–
6,207
(1,516)
(1,621)
(3,669)
2,785
(16,079)
(8,128)
(1,113)
6,689
2,756
(23,413)
2,450
(25,935)
51,678
(73,912)
(22,234)
(374)
2,455
3,142
71
(17,004)
(11,710)
9,202
2,390
4,897
165
8,568
(6,991)
1,360
2,963
9,970
9,595
(10,853)
(2,678)
40,017
40,017
25,881
25,881
25,000
107,405
25,000
157,405
1,963
91,290
5,408
98,661
23,037
16,115
19,592
58,744
121,602
99,836
–
221,438
91,151
87,562
–
178,713
18,663
12,273
–
30,936
(i) The Company has a multi-function facility with the Commonwealth Bank (Australian Senior Debt Facility). Debt facilities include bank bills, business loans, overdraft, equipment finance and
contingent liabilities and are available to all members of the consolidated group including the parent. The multi-function facility includes an amount of $1.3m in relation to various guarantees
and security deposits provided by the bank on behalf of the Company.
(ii) The Group’s Commonwealth Bank of Australia New Zealand funding facility (“NZ CBA”), securitised by finance lease receivables, (“Securitisation Facility”) matures on 8 July 2014.
(iii) In January 2013 the Group refinanced the debt with Commonwealth Bank of Australia Asset Finance (NZ) Ltd (“Equigroup”) and established a new Cash Advance Facility with Commonwealth Bank,
secured by finance lease receivables, which matures on 24 January 2015.
(iv) During March 2013, CSG Finance Australia Pty Ltd was established to provide leasing products to Australian customers. The operations are funded by a new facility with the Commonwealth Bank of
Australia and are provided to its subsidiary CSG Group Receivables Pty Ltd. This facility matures on 20 June 2016.
62
Note 24: Lease Commitments
Lease expenditure commitments
(a) Operating Leases (non-cancellable)
Consolidated entity
2012
$’000
2013
$’000
Note
(i) Operating leases relate to the lease of land, buildings and office computer equipment.
(ii) Minimum lease payments.
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
No later than one year
Later than one year but not later than five years
Later than five years
(b) Finance leases
5,280
10,717
1,205
17,202
4,919
11,496
1,604
18,019
(i) Finance leases relates to computer equipment, motor vehicles, furniture, and other office equipment. Lease terms vary from two
to five years. Various lease arrangements in place have the option to purchase the assets for a nominal amount at the conclusion
of the lease agreement.
(ii) Future minimum lease payment and present value of the net minimum lease payment.
Not later than one year
Later than one year but not later than five years
Total minimum lease payments
Future finance charges
Present value of minimum lease payments
Included in financial statements as:
Current liability
Non current liability
Finance lease receivable
(c) Finance leases
77
33
110
(9)
101
70
31
101
81
103
184
(20)
164
70
94
164
19
19
Finance lease receivable relates to assets held under finance leases recognised at their fair value or, if lower, at amounts equal to the
present value of the minimum lease payments.
No later than one year
Later than one year but not later than five years
12
12
39,465
76,060
115,525
35,573
63,872
99,445
Note 25: Related Party Disclosures
(a) Key Management Personnel Compensation
The key management personnel compensation comprised:
Short-term employee benefits
Post-employment benefits
Termination benefits
Other long-term benefits
Consolidated entity
2012
$’000
3,934,107
131,723
247,470
71,287
4,384,587
2013
$’000
3,173,874
90,570
628,195
13,631
3,906,270
63
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 25: Related Party Disclosures (Continued)
(b) Individual Directors and executives compensation disclosures
Information regarding individual Directors and executive’s compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors Report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year end.
(c) Loans to related parties
The following table provides the total amount of transactions that were entered into with related parties for the relevant year.
Loans made by CSG Limited to controlled entities under normal terms and conditions.
The aggregate amounts receivable/(payable) from controlled entities by the parent
entity at the end of the reporting period were :
Consolidated entity
2012
$’000
2013
$’000
67,244,429 47,705,000
(d) Movements in Shares
The number of ordinary shares in the Company held directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows:
Held at 1
July 2012
Purchases
Received on
exercise of
options
Sales
Ceased as
a KMP
Held at 30
June 2013
Directors
Mr. Thomas Cowan
19,924,622
Mr. Philip Bullock
Mr. Ian Kew
Mr. Philip Chambers
Mr. Josef Czyzewski
37,927
69,730
206,788
68,334
20,307,401
Directors
Mr. Thomas Cowan
Mr. Philip Bullock
Mr. Ian Kew
Mr. Philip Chambers
Mr. Denis Mackenzie
Mr. Josef Czyzewski
Executives
Mr. Kevin McLaine
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(206,788)
(68,334)
(275,122)
19,924,622
37,927
69,730
–
–
20,032,279
Held at 1
July 2011
Purchases
Received on
exercise of
options
Sales
Held at 30
June 2012
19,924,622
37,927
69,730
206,788
57,891,495
33,334
78,163,896
1,157,240
1,157,240
–
–
–
–
–
35,000
35,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,924,622
37,927
69,730
206,788
57,891,495
68,334
78,198,896
(665,000)
(665,000)
492,240
492,240
64
(e) Group Entities
The consolidated financial statements include the financial statements of CSG Limited and its controlled entities listed below:
Ownership interest
Country of
Incorporation
2013
%
2012
%
Parent Entity
CSG Limited (i)
Subsidiaries of CSG Limited
CSG Communications Pty Ltd
CSG Finance Pty Ltd
CSG Print Services NZ Limited (ii)
Anadex Pty Ltd ATF Anadex Trust
Bexton Professional Pty Ltd
Change Corporation Pty Ltd
CSG Enterprise Print Services Pty Ltd
A.C.N. 126 840 542 Pty Ltd
CSG Education Pty Ltd
Delexian Pty Ltd
Aaromba Technologies Pty Ltd
Aaromba Technologies WA Pty Ltd
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
CSG Management Services NZ Limited (ii)
New Zealand
Subsidiaries of CSG Communications Pty Ltd
Connected Solutions Group Pty Ltd
CSG Print Services Pty Ltd
Sunshine Coast Office Equipment Pty Ltd
Haloid Holdings Pty Ltd
Seeakay Pty Ltd
Subsidiaries of CSG Finance Pty Ltd
Leasing Solutions Limited (iii)
CSG Finance Australia Pty Ltd (iv)
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Subsidiaries of CSG Finance Australia Pty Ltd
CSG Finance Group Receivables Pty Ltd (iv)
Australia
Subsidiaries of CSG Print Services NZ Limited
Konica Minolta Business Solutions New Zealand Limited
Ubix Business Solutions Limited (iii)
Subsidiaries of Leasing Solutions Limited
Onesource Finance Limited
Solutions Group Receivables Limited
New Zealand
New Zealand
New Zealand
New Zealand
(i) CSG Limited and its Australian subsidiaries are part of a tax consolidated group.
(ii) CSG Print Services NZ and CSG Management Services NZ Limited are part of a tax consolidated group in New Zealand.
(iii) Leasing Solutions Limited and its subsidiaries and UBIX Business Solutions are part of a tax consolidated group in New Zealand.
(iv) Registered on November 14, 2012
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
90
100
100
100
65
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 26: Deed Of Cross Guarantee
CSG Limited and its Australian wholly owned subsidiaries as
detailed in Note 25(e) are parties to a Deed of Cross Guarantee
under which each company guarantees the debts of others.
By entering into the Deed, the participating wholly owned entities
have been relieved of the requirements to prepare financial
reports and Director’s Report under the Class Order 98/1418 (as
amended by Class Orders 98/2017, 00/0321 and 01/1087) issued
by the Australian Securities and Investment Commission.
The above companies represent a ’Closed Group’ for the purpose
of the Class Order, and there are no other parties to the Deed of
Cross Guarantee that are controlled by CSG Limited, that also
represent the ’Extended Closed Group’. Those wholly owned
subsidiaries which are included in the Deed of Cross Guarantee
are exempt from preparing a financial report and Director’s
Report under the terms of ASIC Class Order 98/1418 and the
Corporation Act 2001.
A consolidated Income Statement, consolidated Statement of
Comprehensive Income and consolidated Statement of Financial
Position, comprising the Company and controlled entities which
are a party to the Deed, after eliminating all transactions between
parties to the Deed of Cross Guarantee is set out as follows:
Income Statement
Revenue and income1
Operating expenses
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Net profit/(loss)
Profit/(loss) from discontinued operations
Net profit/(loss)
Statement of Other Comprehensive Income and Retained Earnings
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Retained profits at the beginning of the year
Dividends distributed
Retained profits at the end of the year
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivables
Other current assets
Total current assets
Non-current assets
Other financial assets
Lease receivables
Property, plant and equipment
Deferred tax assets
Intangible assets
Goodwill
Investment in subsidiaries
Total non-current assets
Total assets
66
2013
$’000
2012
$’000
97,338
160,881
(80,725)
16,613
(2,736)
13,877
–
13,877
(168,696)
(7,815)
15,482
7,667
73,912
81,579
13,877
–
13,877
111,109
(56,513)
68,473
81,579
71
81,650
45,000
(15,541)
111,109
18,481
9,710
19,992
4,357
1,596
54,136
–
10,785
2,161
2,436
26,314
68,521
116,638
226,855
280,991
11,815
234,921
14,837
–
53
261,626
125
–
3,918
3,425
26,824
70,853
116,638
221,783
483,409
Note 26: Deed Of Cross Guarantee (Continued)
Current liabilities
Trade and other payables
Deferred consideration
Deferred income
Borrowings
Debt associated with lease receivables
Provisions
Total current liabilities
Non-current liabilities
Debt associated with lease receivables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity
(1) Income includes intercompany dividends distributed from subsidiaries outside the Class Order Group.
Note 27: Earnings Per Share
The following reflects the income and share data used in the calculations of basic and diluted
earnings per share:
Profit/(loss) from continuing operations:
Weighted average number of ordinary shares used in calculating basic earnings per share
Effect of dilutive securities:
2013
$’000
28,566
–
863
605
1,002
1,450
32,486
4,406
3,279
7,685
40,171
240,820
172,250
97
68,473
240,820
2012
$’000
39,405
16,133
1,070
91,067
–
22,719
170,394
–
358
358
170,752
312,657
200,724
824
111,109
312,657
Consolidated entity
2012
2013
$’000
$’000
8,717
8,717
280,367,532
(22,234)
(22,234)
282,567,499
Effect of performance rights issued
Weighted average number of ordinary shares and potential ordinary shares used as the denominator
in calculating diluted earnings per share
124,653
–
280,492,185
282,567,499
67
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 28: Business Combination
(a) Changes in composition of the entity during the 2013 year:
There were no changes in composition of the Company during the year ended 30 June 2013.
(b) Changes in composition of the entity during the 2012 year:
As discussed in Note 29, the Company sold its Technology Solutions division in July 2012.
No other transactions affecting business combinations took place during the year.
(c) Deferred Consideration
2013
2012
Current
Liability
$’000
Non-Current
Liability
$’000
Total Liability
$’000
Current
Liability
$’000
Non-Current
Liability
$’000
Total Liability
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,000
2,800
2,333
4,000
16,133
–
–
–
–
–
7,000
2,800
2,333
4,000
16,133
Business
Canon (i)
Delexian (i)
ATI (ii)
Cinglevue (ii)
Total
(i) The balance outstanding was paid in July 2012 with no further payments or settlements required.
(ii) There are no current legal claims or outstanding amounts due related to the purchase of this previously acquired business and therefore it is not considered necessary to provide for any amount in
the financial statements. Refer note 34 on contingent liabilities.
Note 29: Discontinued Operation
Results of discontinued operation
Revenue
Expenses
Results from operating activities
Tax
Results from operating activities, net of tax
Gain on sale of discontinued operation
Tax on sale of discontinued operation
Profit for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
The profit from the discontinued operations is attributable entirely to the owners of the Company.
Cash flows from (used in) discontinued operation
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flows for the year
Cash flows from financing activities included transfers to the Parent Entity of $34.6m.
68
Note
2013
$’000
2012
$’000
9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182,567
(171,711)
10,856
(1,111)
9,745
92,165
(27,998)
73,912
26.2
26.2
35,208
(9,870)
(34,626)
(9,288)
Note 29: Discontinued Operation (Continued)
Effect of disposal on financial position of the Group
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Goodwill
Intangible assets
Trade and other payables
Provisions
Net assets and liabilities
Total consideration receivable
Less: working capital adjustments and other transaction costs
Net consideration receivable
Note 30: Auditors Remuneration
Auditors remuneration parent entity
Amount received or due and receivable to KPMG (2012: Pitcher Partners):
Statutory audits and reviews (excluding disbursements)
Other services (excl. disbursements)
Auditors remuneration overseas subsidiaries
Amount received or due and receivable to KPMG:
Statutory audits and reviews (excluding disbursements)
Other services (excl. disbursements)
2012
$’000
1,605
41,653
399
11,872
72,245
24,367
(24,756)
(5,909)
121,475
227,500
(13,860)
213,640
Consolidated
2012
$’000
2013
$’000
145,000
12,000
157,000
404,000
72,000
476,000
124,000
–
124,000
142,000
9,000
151,000
Note 31: Segment Information
(a) Description of Segments
Management has determined the operating segment based on
reports reviewed by the Chief Executive Officer and Executive
Management Team (comprising the Chief Financial Officer
and Group General Managers) for making strategic decisions.
The Chief Executive Officer and Executive Management Team
monitor the business based on product/service factors and have
identified the following reportable segment:
Print Services
The Print Services segment derives its revenue through the
aggregation of three specialist service offerings:
• Print Service business centres providing integration
and convergence of voice, print and data
• Managed Print Services delivering and implementing holistic
managed print solutions and document output solutions
• Finance solutions for print services equipment
The remaining business operations/activities (including
corporate office activities) are classified as ’Other’ to facilitate
reconciliation to Group results.
Management has determined that the Australian and
New Zealand businesses are separate operating segments but
due to their similarity in terms of product and service offerings
in addition to the methods used to distribute products across
both geographies these business units will be aggregated for the
purposes of segment reporting.
69
CSG ANNUAL REPORT 2012–13 Notes to the Financial Statements 30 June 2013
Note 31: Segment Information (Continued)
(b) Segment Information
2013
Segment revenue
External segment revenue
Inter – segment revenue
Total
Segment result
Interest revenue
Interest expense
Depreciation & amortisation
Total segment Profit/(loss)
before income tax
Total Segment Assets (i)
Total Segment Liabilities (i)
2012
Segment revenue
External segment revenue
Inter-segment revenue
Total
Segment result
Interest revenue
Interest expense
Depreciation & amortisation
Total segment Profit/(loss)
before income tax
Total Segment Assets (i)
Total Segment Liabilities (i)
Consolidated
Technology
Solutions
(discontinued)
$’000
Print Services
$’000
Other Segments
$’000
Eliminations
$’000
–
–
–
–
–
–
–
–
–
180,788
180,788
–
791
4,038
17,742
395,351
140,324
3,851
11,917
15,768
3,370
129
2,237
(4,142)
14,192
10,838
–
(11,917)
(11,917)
–
–
–
–
–
–
Total
$’000
184,639
–
184,639
3,370
920
6,275
13,600
409,543
151,162
Consolidated
Technology Solutions
(discontinued)
$’000
Print Services
$’000
Other Segments
$’000
Total
$’000
281,103
–
281,103
–
–
1,856
103,021
152,142
30,665
202,805
22,354
225,159
–
–
1,714
(3,618)
360,977
133,061
–
483,908
(22,354)
(22,354)
75
10,853
2,027
(29,819)
242,162
138,314
–
483,908
75
10,853
5,597
69,584
755,281
302,040
(i) Excludes loans to and from CSG Group entities (related parties)
c) Geographical Information
The Print Services segments are managed on a worldwide basis, but operate sales offices in Australia and New Zealand.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers
and segment assets are based on the geographical location of the assets.
2013
Australia
$’000
85,493
409,750
Print Services
New Zealand
Other Segments
$’000
99,146
351,959
–
(352,166)
Total
$’000
184,639
409,543
Revenue
Assets
70
Note 31: Segment Information (Continued)
2012
Revenue
Assets
Australia
$’000
102,284
646,746
Print Services
New Zealand
Other Segments
$’000
100,521
332,527
–
(368,506)
Total
$’000
202,805
610,767
Note 32: Subsequent Events
Subsequent to 30 June 2013, settlement of the working capital adjustment with NEC was finalised and an amount of $7.5m
was paid to NEC. There are no further payments due or receivable on the sale of the Technology Solutions division.
This amount was provided for in full at 30 June 2013.
Note 33: Parent Entity Disclosures
As at, and throughout the financial year ended 30 June 2013 the parent company of the consolidated entity was CSG Limited.
A summary of the financial performance and financial position of the parent entity is detailed below:
Result of the parent entity
Profit for the year 1
Total profit and other comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current Liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Reserves
Retained earnings
Total equity
1 Profit for the year includes intercompany dividend distributions.
Parent Entity
2013
$’000
9,049
9,049
2012
$’000
114,512
114,512
77,682
256,341
301,534
471,758
19,342
19,512
158,413
158,433
172,250
97
64,482
236,829
200,724
654
111,946
313,325
71
CSG ANNUAL REPORT 2012–13
Notes to the Financial Statements 30 June 2013
Note 34: Contingent Liabilities
During the year the Company has received correspondence
regarding earn out payments under two historical purchase
agreements. The agreements relate to the purchase of the
Cinglevue and ATI businesses in 2008 and the maximum
payments are capped at $5.6m and $2.3m respectively.
In relation to the ATI matter, there is currently no known
or threatened claim against the Company and therefore
no provision has been made.
In relation to the Cinglevue matter, the Company has complied
with its order for inspection of documents. At this stage, the
Company does not have clarity in relation to the nature of the
potential claim and therefore no provision has been made.
There is a risk that the vendors may commence legal proceedings
against the Company seeking the post completion payments.
72
Directors’ Declaration
CSG Limited and Controlled Entities
Directors’ Declaration
The Directors declare that the financial statements and notes set out on pages 34 to 72 in accordance
with the Corporations Act 2001:
(a) comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory
professional reporting requirements; and
(b) give a true and fair view of the financial position of the consolidated entity as at 30 June 2013 and of their
performance as represented by the results of their operations, changes in equity and their cash flows,
for the year ended on that date.
In the Directors’ opinion there are reasonable grounds to believe that CSG Limited will be able to pay its debts
as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made by the Chief Executive
Officer and Chief Financial Officer to the Directors in accordance with sections 295A of the Corporations Act
2001 for the financial year ending 30 June 2013.
This declaration is made in accordance with a resolution of the directors.
Ms Julie-Ann Kerin
Director
Sydney, 20 August 2013
73
CSG ANNUAL REPORT 2012–13
Independent Auditors’ Report
74
75
CSG ANNUAL REPORT 2012–13 Shareholding Information
as at 13 September 2013
In accordance with Listing Rule 4.10 of the Australian Stock Exchange Limited, the Directors provide the following shareholding
information as at 13 September 2013.
Substantial Shareholders
Name
Caledonia (Private) Investments Pty Limited & its associates
Lynden Investments (NT) Pty Ltd in its own capacity and in its
capacity as trustee of the Mackenzie Family Trust
TDM Asset Management Pty Limited & its associates
Paradice Investment Management Pty Ltd
Voting Rights
Fully paid ordinary shares in the Company carry voting rights of one vote per share.
Distribution of Shareholding
Range
1 – 1,000
1,001– 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Total
holders
432
740
410
607
103
2,292
Number
of Shares
60,914,624
30,117,937
19,924,622
19,092,972
Number of
Shares
136,517
2,269,711
3,244,132
18,784,290
254,438,425
278,873,075
Less than Marketable Parcels
306 shareholders hold less than a marketable parcel of shares, being market value of less than $500.
On-market Buy-back
As at the date of this report, there is no current on-market buy-back being undertaken by the Company.
Twenty Largest Shareholders
Name
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Lynden Investments Nt Pty Ltd
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