2015
2016
ANNUAL REPORT
2
Contents
09
OVERVIEW
Message from the Chairman
Managing Director’s Report
Our Board
Our Executive Team
18
FINANCIAL REPORT
Corporate Governance Statement
Investor Relations
Directors’ Report
Auditor’s Independence Declaration
46
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
Shareholding Information
Corporate Directory
9
10
12
14
18
25
26
45
48
49
50
51
52
86
87
90
91
CSG PRODUCT SUITE
One Partner.
One Bill. One Cloud.
Business Solutions
Everything as a Service underpinned by a single billing, service and finance relationship
Print as a Service
Print as a service solutions
that include equipment, parts,
consumables and service for a
single monthly operating expense.
CSG Total Office
Complete end-user technology
bundle including desktop computer,
cloud telephony, storage and
support for a fixed monthly price.
Communications
as a Service
CSG’s cloud telephony solution
powered by 8x8.
Desktop as a Service
Desktop computer, storage and
support solutions.
Boardroom as a Service
Full boardroom package combining
Samsung digital display technology
with cloud conferencing.
Display as a Service
Large format, cloud displays and
desktop monitors.
4
Enterprise Solutions
Industry centric, cloud-first Managed IT solutions
Private Cloud Platform
Secure, Australian data centre services
and on-demand infrastructure for
critical business applications.
CSG Marketplace
Simplifying procurement. One place
to subscribe, track, manage and view
all of your technology services.
Managed Print
Cloud delivered Enterprise Print and
Document Management.
End-User Computing
The office that moves with you.
Continuous communications and
services.
Display Solutions
Intelligent display solutions
to improve customer/client
engagement.
Cloud Communications
Unlocking your business potential
with integrated Cloud Contact Centre
and Business Phone Solutions.
CSG 15|16 ANNUAL REPORT 5
CSG PRODUCT SUITE
CSG PRODUCT SUITE
Customer Case Study
Brexit Case Study
OFX had a 50% increase in calls in the
week leading up to Brexit and an 80%
increase in calls on the day of Brexit
Handled the huge volume of calls with a
slight decrease in abandonment rate by 1%
Due to the flexibility of Virtual Contact
Centre Solution and uptime the customer
was able to deal with this huge volume of
calls with no service interruption
Call volumes remained about 25% to 35%
higher for the following two weeks, with
no increase in abandoned calls
“With offices and customers
all over the world, we needed a
communications partner that
could scale with our rapid growth
and ‘follow the sun service model’
without incurring expensive call
charges and maintenance fees.”
Adam Smith, Chief Operating Officer, OFX
Global Contact Centre
Implementation
Solutions
Global Contact Centre implementation
in 6 countries
6 call centres mirrored across
countries using Virtual Contact Centre
and Virtual Office
London, Sydney, San Francisco, Toronto,
Hong Kong and Auckland
24x7 availability with no downtime
between time zones
Implemented in 7 weeks with no
interruption to service
Meets stringent security requirements
of financial services business
Benefits to OFX
Ability to link multiple call centres in global
locations to create a single virtual call centre
24x7 availability and ability to answer
calls from anywhere in any time zone
99.99% uptime
Cost savings
Decreased call waiting times and
increased customer satisfaction
More transactions per agent taken per day
6
New Partnerships
CSG is proud to be working with
some new and exciting partners
OneView Healthcare
CodyLive
CSG and OneView will work together to
provide innovative technology solutions to the
healthcare sector in Australia and New Zealand.
Together we will deliver world leading patient engagement
and clinical workflow technology solutions that will make
healthcare facilities in Australia and New Zealand more
efficient and revolutionise the patient experience.
Oneview Healthcare’s innovative Patient Engagement
and Clinical Workflow Solution seamlessly integrates
a hospital’s IT system onto one high performance
technology platform. It provides point-of-care access
to those systems across all end user devices, including
bedside terminal, TV, tablet and smart phone.
Through its services and applications, which include
treatment education for patients, entertainment and
interactive patient care services, OneView enables hospitals
to optimise patient engagement, clinical outcomes and
workflow efficiencies - revolutionising the patient experience.
The partnership bolsters CSG’s capability in the
healthcare segment in line with our strategy to expand our
portfolio of non-print products and services.
CSG and CodyLive are partnering with
outdoor digital interactive displays to
provide the ultimate onsite real estate
marketing solutions.
Our Display as a Service business is a major component
of our new technology offering and we are delighted to be
working with Cody Live in this space.
Cody Live is revolutionising the way real estate is
marketed onsite. Cody Live digital boards replace
traditional printed real estate signage and enable
interactive content and stylish high resolution images and
video to present properties in the best possible light.
The display units are stylish, state of the art and provide
agents and vendors with a flexible and professional way to
market properties
CSG 15|16 ANNUAL REPORT 7
CSG OVERVIEW
8
Message from
the Chairman
our low market share and unique
product & service delivery model
allowed us to win new business,
despite it being a mature and
competitive marketplace. CSG
will continue to look to disrupt the
traditional sales model in this sector.
From a capital management
perspective, in the past year, we
again delivered on our objective
to return a minimum of $25 million
per annum to shareholders, by
way of dividend payments totalling
9 cents per share. The Board has
announced its intention to maintain
capital return at this level by way of
dividend and or buy back of shares
over the next year.
In FY2016, we raised $40.2 million of
new equity through an institutional
placement and a Share Purchase
Plan eligible to all shareholders.
The funds raised have been partly
used to fund two acquisitions that
were completed during FY2016:
CodeBlue, a New Zealand-based
Managed Services business
acquired by CSG in September 2015;
and PrintSync, a Western Australian-
based print solutions business
acquired in May 2016.
Over the past year we spent
considerable time implementing
a new Long Term Incentive Plan
(‘LTIP’). This is an equity-based
incentive compensation plan
that aligns financial incentives for
our CEO, Group Executives and
key Senior Management with a
pragmatic proxy of future changes
to shareholder value. Performance
hurdles for the new plan include
both Total Shareholder Return and
Earnings Per Share targets as at
August 2017 and each successive
year through to August 2020. The
new LTIP will be instrumental in
aligning, motivating and rewarding
CSG staff to deliver on our growth
objectives and they will be extremely
well rewarded assuming outstanding
long-term performance levels. For
100% of the LTIP to be achieved,
management need to grow Earnings
per Share at 20% per annum and
Total Shareholder Return at 25% per
annum. Thank you for your support
of this program: shareholders
overwhelmingly approved the
plan at our annual meeting of
shareholders in November 2015,
with shareholders in attendance
voting 98.6% in favour of the plan.
We would like to thank you for
your loyalty and ongoing support
as shareholders. I would also like
to thank our Managing Director &
Chief Executive Officer, Julie-Ann
Kerin, my fellow Board members
and the entire CSG team for their
entrepreneurial drive, initiative,
effort and commitment to CSG
being a growing provider of
technology services in Australia and
New Zealand.
I am confident that under the
leadership of Julie-Ann and her
executive management team, CSG
will execute against its ambitious
growth plan and deliver earnings
growth in FY2017 and beyond.
Thank you for joining us on this
exciting journey.
Stephen Anstice
CSG 14|15 ANNUAL REPORT 9
CSG 15|16 ANNUAL REPORT 9
Dear Fellow Shareholders
On behalf of the Directors of CSG
Limited, it is with great pleasure that
I present CSG’s Annual Report for
the year ended 30 June 2016.
The highlight for the year was CSG’s
successful launch of its full suite of
global best-of-breed Technology
as a Service solutions and our
‘One Partner. One Bill. One Cloud’
proposition for Small to Medium
Enterprises (SMEs).
We are excited at the initial
reaction to the SME technology
solutions. Our confidence in the
value proposition led us to launch
a complimentary channel of direct
sales people across Melbourne,
Sydney and Brisbane. This sales
channel will sell Technology as
a Service only to new, non-CSG
SME customers. As the restraint
following the sale of our technology
solutions business to NEC expired,
FY2016 represented the first year
that CSG re-entered the enterprise
IT Services sector in Australia. We
saw particularly strong momentum
in cloud communications solutions
where we have partnered with 8x8
Inc. In our traditional print business,
CSG OVERVIEW
Managing
Director’s Report
Dear Shareholders
OPERATIONAL PERFORMANCE
The 2016 financial year has been
a successful year for CSG and I
am delighted with the progress
we have made against our
strategic objectives. We achieved
solid financial performance,
improved profitability, continued
to successfully implement key
strategic initiatives and laid a strong
foundation for our future.
This financial year has been a
transition year for CSG and our
business continues to successfully
evolve into a Technology as a
Service provider across both our
Business Solutions and Enterprise
Solutions divisions. As the restraint
following the sale of our technology
solutions business to NEC expired
in July 2015, we began to prove
our execution capability in the
technology sector and established
good references to further grow our
sales in FY17 and beyond.
The financial results were pleasing
with all business divisions achieving
growth, with particularly strong
performance in technology sales
across Business Solutions and
Enterprise Solutions. Key highlights
from the results include a 10%
increase in revenue to $246.6
million, 14% growth in underlying
EBITDA to $38.1 million and 20%
growth in underlying NPAT to $25.6
million. We also reported a 24%
growth in our lease receivables
book to $261 million.
This year, we successfully executed
our strategy to transform CSG into
a Technology as a Service provider,
with 34% of equipment revenue
in Business Solutions Australia
derived from technology sales.
Across the group, technology
equipment revenue grew to 20%
of total equipment revenue. We
continued to sell technology
products and services to our
existing customer base, adding 307
new customers with an average
equipment deal size of $62,000.
A key highlight of our success
in technology sales for the year
was the growth in our Display as
a Service offering. This drove
large transactions across retail,
health care and the real estate
vertical markets and has led to us
establishing a dedicated sales team
for this sector. The notable success
we have had in technology sales in
Business Solutions demonstrates
the capability of our Master
Agent channel to successfully
sell a diversified product suite to
the Small to Medium Enterprise
customer. Encouraged by this
success, in FY17 we will launch a
complementary, direct technology-
only sales force in Australia to
increase our market penetration,
accelerate the sale of our
technology bundles and capitalise
on our unique value proposition
and first mover advantage in our
Technology as a Service model.
10
FY2016 was the first year that CSG
re-entered the enterprise managed
IT services space. The Enterprise
Solutions division in Australia
achieved revenue growth of 30%
(pcp) through the addition of new
Managed Print customers, including
a major University and further
growth in Queensland education.
Enterprise Solutions won its first
Communications as a Service
contract in Australia with a global
financial services company with
a Total Contract Value (“TCV”) of
$2.5m over 5 years. This division
is also conducting three large pilot
solutions for a major retailer, major
infrastructure provider and a global
mining services business, with a total
opportunity of more than 10,000
seats across these customers.
Enterprise Solutions also had success
selling our Display as a Service
offering, partnering with OneView
Healthcare for display solutions at a
major Australian hospital.
In September 2015, we completed
the acquisition of CodeBlue, a
New Zealand-based Managed
Services business. In May 2016,
we acquired PrintSync, a Western
Australian-based Canon print
solutions business with five
offices in the region. The PrintSync
acquisition will add approximately
1,200 customers to our Western
Australian business and will allow
us to sell the compelling range of
CSG technology products into
this customer base. In line with
our previously stated strategy, we
will continue to look for bolt-on
acquisitions which add either a
complimentary customer base or
capability to our business.
PRODUCTS AND PARTNERSHIPS
In FY2016, our full suite of
Technology as a Service products
were released providing customers
with an integrated desktop and
communication solution including
cloud storage, core applications
and technical support from CSG.
We believe the value proposition
for Small to Medium Enterprises
is compelling – our customers
can source multiple products and
solutions from one partner, with one
simple monthly bill and access to
the latest, best-in-class technology
with no capital outlay.
Momentum in our newly launched
partnership with 8x8, Inc. has built
throughout the half and CSG has
now implemented over 1,000 8x8
virtual office seats. 8x8 is one of the
fastest growing, leading providers of
cloud based unified communications
based out of the US. We are pleased
with the early success we have had
with 8x8 in the Australian market
and we look forward to leveraging
our relationship with 8x8 and adding
value to our customers with their
products and solutions.
PEOPLE
We recognise that our people and
their diversity are critical to our
success. As a growing technology
business, employing and retaining
the best talent is a key priority and
we will continue to invest in the
knowledge and skills of our people as
our portfolio of solutions expand. I
am excited by CSG offering increased
career opportunities to our staff as
the business continues to grow.
Once again in FY2016, we issued
$1,000 worth of shares to every
employee participating in the Staff
Share Incentive Plan. We are pleased
with the uptake in the Staff Share
Incentive Plan, which is seen to be a
key driver in aligning staff performance
to the business objectives.
This year, I am pleased to share
that we welcome Andrew Eastick to
the CSG Executive Team as Chief
Operations Executive. Andrew has
an extensive background in the
express freight & logistics industry.
He has held a variety of senior
operational & general management
roles and worked at three of the
leading organisations in the sector
including Mayne Nickless, TNT
Express and Toll Group. More
recently, Andrew has spent the last
six years at Toll IPEC as the General
Manager of Network Strategy.
We have made significant progress
this year and I am energised by the
year ahead. There is still some way to
go but my leadership team and I are
committed to delivering significant
growth over the medium to long term.
I would like to take this opportunity
to thank my fellow Board members
at CSG. The commitment to
working with management to
achieve our objectives for all
stakeholders is unwavering.
I am grateful to you, our
shareholders, for your steadfast
support and I am looking forward to
sharing in this exciting journey.
Julie-Ann Kerin
CSG 15|16 ANNUAL REPORT 11
CSG OVERVIEW
Our Board
Mr. Stephen Anstice
BA (Economics), Grad. Dip. (SAI)
Mr. Thomas Cowan
B.Com (Hons)
Non-Executive Chairman
Member, Audit and Risk Committee
Member, Nomination and
Remuneration Committee
Stephen Anstice has over 20 years’
experience in the communications
industry. Until June 2013, Mr. Anstice
was CEO of IPMG Pty Ltd (“IPMG”),
a print, digital and marketing
communications business Mr. Anstice
also has an extensive background in
investment banking. He is currently
a Non-Executive Director of IPMG,
Audant Investments Limited and The
Song Company Limited.
Mr. Anstice has a Bachelor of Arts
(Economics) from Macquarie
University and a Graduate Diploma
from the Securities Institute of
Australia.
Appointed 20 August 2014
Appointed Chairman 15 February 2016
Non-Executive Director
Former Non-Executive Chairman
Member, Audit and Risk Committee
Chairman, Nomination and
Remuneration Committee
Tom Cowan is a partner of TDM
Asset Management, a Sydney based
private investment firm. TDM Asset
Management invests in public and
private companies globally. Mr.
Cowan has over 15 years of financial
markets experience, including roles
in corporate finance and investment
banking at Investec Wentworth and
KPMG Australia. He has a Bachelor of
Commerce (Honours – Class 1) from
the University of Sydney.
Mr. Cowan is currently a Non-Executive
Director of Baby Bunting Group Limited.
Appointed 8 February 2012
Appointed Chairman 15 August 2012
Ceased Chairman 15 February 2016
Appointed Chairman of
Nomination and Remuneration
Committee 15 February 2016
Ms. Julie-Ann Kerin
AICD
Managing Director
Since Julie-Ann Kerin was appointed as
Chief Executive Officer and Managing
Director of CSG in 2012, she has
established a proven track record of
delivering strong growth and significant
return to shareholders.
Under Ms. Kerin’s leadership, CSG
successfully completed the transaction
of the sale of the former Technology
Solutions Division to NEC Australia in
2012, for $227.5 million and subsequently
returned $130 million to shareholders
over the following three years.
Prior to Ms. Kerin’s appointment as CEO,
she was the Group-General Manager of
the former Technology Solutions division
for five years, and achieved revenue
growth from $9m to $183m.
She has more than 20 years’
experience as a senior executive
managing both private and public
companies across the information
technology sector. Prior to joining
CSG, Ms. Kerin was responsible for the
global management of operations and
staff across Asia, the United States,
Australia and Europe for a number
of organisations. She has also held
roles with IT companies Actuate, Haht
Commerce, Genasys Inc and Computer
Power. Ms. Kerin is a member of
the Australian Institute of
Company Directors.
Appointed 1 February 2012
12
Ms. Robin Low
B.Com, FCA, GAICD
Mr. Mark Phillips
B. Com (Hons), M. Com, FAICD
Non-Executive Director
Chairman, Audit and Risk Committee
Robin Low was formerly a partner at
PricewaterhouseCoopers for over
17 years and has extensive experience
in assurance and risk management,
particularly in the financial services
area.
She is currently a Non-Executive
Director of AUB Group Limited, IPH
Limited and Appen Limited. Ms. Low
is also a member of the Audit and
Assurance Standards Board and on
the board of a number of not-for-profit
organisations including Sydney Medical
School Foundation, Public Education
Foundation and Primary Ethics.
Ms. Low has a Bachelor of Commerce
from The University of New South
Wales, is a Fellow of the Institute of
Chartered Accountants in Australia and
is a Graduate Member of the Australian
Institute of Company Directors
Appointed 20 August 2014
Non-Executive Director
Member, Audit and Risk Committee
Member, Nomination and
Remuneration Committee
Mark Phillips has substantial experience
in banking and asset leasing. Mr. Phillips
worked at the Commonwealth Bank of
Australia for 20 years in various roles
involving asset finance, securities and
trading markets, property lending and
government finance.
Mr. Phillips was formerly Managing
Director of Record Investments Limited
(Record) and Keybridge Capital Ltd.
While Managing Director at Record,
the market capitalisation grew from
approximately $100 million to over
$1.5 billion.
Mr. Phillips is currently a Non-Executive
Director of General Reinsurance
Australia Limited and General
Reinsurance Life Australia Limited
(a Berkshire Hathaway company) and
a Chairman of Cancer Council (NSW).
Mr. Phillips was formerly a
Non-Executive Director of Interlink
Roads Ltd and ASB Bank Limited in
New Zealand.
Mr. Phillips has a Bachelor of Commerce
and a Masters of Commerce from the
University of New South Wales and is
a Fellow of the Australian Institute of
Company Directors.
Appointed 20 August 2014
CSG 15|16 ANNUAL REPORT 13
CSG OVERVIEW
Our Executive Team
Neil Lynch
Stephen Birrell
Declan Ramsay
Chief Financial Officer
Chief Enterprise Solutions Executive
Chief Business Solutions Executive
Neil Lynch was appointed Chief
Financial Officer of CSG in 2012. In the
role, Mr. Lynch has been responsible for
the merging of CSG Finance in Australia
and New Zealand.
Mr. Lynch came to CSG after an 11
year career at Virgin Blue Airlines. 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, Mr. Lynch 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.
Stephen Birrell is a proven business
leader with over 25 years’ experience in
the Information Technology, aerospace
and Government sectors. His career
has included senior executive roles with
leading organisations in Australia, the
United States, Asia and Europe, including
The Boeing Company, BAE Systems and
Honeywell Space and Aviation.
Prior to joining CSG in June 2013, Mr.
Birrell 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.
Mr. Birrell is a former Officer in the Royal
Australian Air Force.
Declan Ramsay has more than 25 years’
experience within the print sector.
He has been with CSG since 2006,
when he managed and controlled the
Xerox Business Centre key accounts
as the Major Account Manager before
becoming the Brisbane Sales Manager in
July 2007, followed by the Queensland
General Manager position. In February
2012, Declan was appointed to the
role of Regional General Manager for
Northern Territory and Queensland. In
July 2012, Mr. Ramsay was appointed
as the Executive General Manager
of CSG Business Solutions Australia.
Mr. Ramsay has a strong background
in sales and management of highly
professional and motivated teams
covering all facets of Small to Medium
Enterprises including sales, service,
financing and marketing.
14
Warwick Beban
Mark Thomas
Country Manager, New Zealand
Chief People Executive
Andrew Eastick
Chief Operations Executive
Warwick Beban has been the Executive
General Manager of CSG Business
Solutions in New Zealand since 2007.
With over 15 years’ experience in the
Document Technology business,
Mr. Beban started working with Ubix
Document Technology in 1991. During
his 10-year career with Ubix he was
ultimately promoted to Southern
Regional Manager, responsible for the
company’s operation in the lower North
Island and South Island. After five years
with Telecom New Zealand as Head of
Business and Corporate for Telecom
Mobile, Mr. Beban re-joined Konica
Minolta as General Manager.
Warwick has a Bachelor of Science
Degree and Masters of Science with
First Class Honours from Massey
University.
Mark Thomas joined CSG in September
2015 and has over 30 years’ experience
in commercially focused human
resource roles. Mr. Thomas has worked
in blue chip and private companies
across financial, professional and
business services as well as the oil
industry. Prior to joining CSG, Mark was
the Global Human Capital Leader for
Aurecon, responsible for a workforce
of 7,500 people across 20 countries.
His significant international experience
includes seven years based in London
leading a global HR function. Mark
holds a Bachelor of Business.
Andrew is the most recent addition to
the Executive Team having joined CSG
in October 2016, following 35 years’
experience in the Express Freight &
Logistics Industry.
Mr. Eastick has held a variety of senior
operational & general management roles
and worked his way up through three of
the leading organisations in the sector
– Mayne Nickless, TNT Express and the
Toll Group. After completing 22 years of
service with TNT Express, culminating in
holding the position of Southern Regional
Director from 2005 until 2009, Andrew
has spent the last six years at Toll IPEC
as the General Manager of Network
Strategy. The principal responsibilities
of that role included the design and
execution of operational processes,
control of the fleet & materials handling
assets, supplier management &
procurement, a property portfolio of
60 facilities and the successful design,
development & commissioning of two
world class freight sorting facilities in
Sydney and Melbourne.
Andrew has also served as a Member of
the Executive Council at the Victorian
Transport Association since 2001.
CSG 15|16 ANNUAL REPORT 15
I5|I6
Financial Report
CORPORATE GOVERNANCE STATEMENT
Corporate Governance
Statement
The Board of CSG Limited (CSG,
Board or Company) is committed to
protecting shareholders’ interests
and keeping investors fully informed
about the performance of the
Company. In doing so, it seeks to
ensure the future sustainability of the
organisation and create long term value
for its shareholders. The Board have
established the following processes
to protect the interests and assets
of shareholders and to ensure high
standards of integrity and governance.
In undertaking these responsibilities,
the Board has adopted a formal:
•
•
•
•
Board Charter
Audit and Risk Management
Committee Charter
Nomination and Remuneration
Committee Charter
Code of Conduct for Directors
and Officers
Further, the Board has also adopted or
issued revised policies with respect to:
•
•
•
Independence and Conflicts of
Interest
Risk Management
Board Performance Evaluation
• CEO Performance Evaluation
•
•
•
Continuous Disclosure and
External Communications
Share Trading
Remuneration
• Diversity
Copies of these charters and policies
are available to shareholders on the
Company’s website (www.csg.com.
au/investors) or on request. These
documents are not intended to be
an exhaustive list of all corporate
governance practices in place at CSG.
This Corporate Governance Statement
outlines the Company’s practices
for the year-ended 30 June 2016 and
as at the date of this Annual Report.
It is referenced against the latest
Corporate Governance Principles
and Recommendations (3rd Edition)
issued by the ASX Corporate
Governance Council, which took
effect from 1 July 2014 (Principles and
Recommendations). There are eight
principles prescribed by the Council and
these are reported against below.
Principal 1:
Lay solid
foundations for
management
and oversight
1.1 The Board
The Directors of the Company are
accountable to shareholders and
other stakeholders for the proper
management of the business and
affairs of the Company. The Board fulfils
these obligations by delegating certain
business development responsibilities
to the Chief Executive Officer (CEO),
but retains the following responsibilities
as set out in the Board Charter:
•
•
•
•
•
•
agreeing with the CEO 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;
•
developing key Company policy; and
•
monitoring and evaluating 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,
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 CEO. The Company
has adopted a Delegated Authorities
Policy which establishes delegations
and approval levels throughout the
business. The CEO is responsible for
executing the delegations contained
in the policy, but must consult the
Board on matters that are noted as
requiring specific Board approval or
are of a sensitive, extraordinary or
strategic nature.
The Board has also adopted a CEO
Evaluation Policy and a Remuneration
Policy to govern the process for
evaluating the employees of the
Company, including the performance
of the CEO and the Executive
Management Team.
For the 2016 financial year, the Board
measured the CEO and Executive
Management Team against an approved
corporate scorecard and, where
applicable, divisional scorecards. The
outcomes of this process are set out in
the Remuneration Report.
1.2 Appointment of Directors
In accordance with recommended
practice, the Company undertakes
a series of character, security and
financial checks prior to appointing a
candidate to the Board.
The Company also ensures
shareholders are provided with all
material information in its possession
relevant to a decision on whether
to elect or re-elect a Director. This
is provided by a variety of means,
including Director information
contained in this Annual Report, the
Company website and in the Notice of
18
Meeting relating to the election or re-
election of a Director.
During the financial year, one (1)
Director resigned, resulting in a Board
of five (5), consisting of four (4) Non-
Executive Directors and the CEO.
1.3 Appointment Terms
Each Director and all members of the
Executive Management Team have in
place written agreements specifying the
terms of their engagement, including
their roles and responsibilities. Any
variations to their initial appointment
agreements are also appropriately
documented.
Employment agreements for the CEO
and Executive Management Team
are for unlimited periods but may be
terminated by written notice by either
party. Details of notice periods relating
to these agreements are outlined in the
Remuneration Report.
A procedure is also in place for each
Director to have the right to seek
independent professional advice, at the
Company’s expense, subject to prior
approval from the Chairman.
1.4 Company Secretary
The Company Secretary is accountable
directly to the Board, through the
Chairman, on all matters to do with the
proper functioning of the Board and its
Committees.
The qualifications and experience of
the Company Secretary is set out in the
Directors’ Report.
1.5 Diversity
The Company embraces 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 an inclusive
work environment by taking action
against inappropriate workplace
and business behaviour (including
discrimination, harassment, bullying,
victimisation and vilification);
fostering a diverse workforce
by developing an environment
of mutual respect, dignity and
openness to others;
Key
Indicators
Percentage
of women in
the Executive
Management Team
and other senior
management(i)
Percentage of
women employed
by CSG
Complete a
diversity audit by
30 June each year
Outcome
2016
23% are female
25% are female
Completed
(i)
Under the Diversity Policy, the definition of senior
executive positions includes all Executives at CEO
level (Level 5), the Executive Management Team
(Level 4) and Senior Management (Level 3) as set
out in the Company’s Remuneration Policy.
The company assessment of gender
diversity objectives under the policy are
reviewed annually. Below is a summary
of the Company’s key diversity
indicators and gender composition as at
May 2016:
Company’s business practices,
systems and processes do not
prevent people from diverse
backgrounds having equality of
opportunity within the Company;
developing 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;
attracting and retaining a Board
whose composition reflects a
diversity of backgrounds, knowledge,
experience and abilities; and
improving the quality of decision-
making, productivity and teamwork
to meet the relevant requirements
of local legislation and the Board
and shareholders.
•
•
•
•
The Company captures a range of
indicators for purposes of assessing
progress against its policy and for
government reporting purposes. At a
high level these include:
•
•
•
•
composition of the Board by gender
(currently 40% are female);
composition of the workforce
between full time and part time;
salary comparisons based on
gender; and
policy development and
implementation
Gender Composition of the Workforce (Women):
Australia
New Zealand
100%
CEO
0%
Key management personnel
Other executives/
general managers
Senior
managers
Other
managers
Non-
managers
0%
0%
27%
24%
24%
0%
33%
11%
17%
30%
Gender Composition of Manager level and above:
20.8% are female and 79.2% are male
Gender Composition of of Manager level and above:
18.6% are female and 81.4% are male
•
seeking to ensure that the
Gender Composition of workforce overall: 27.9% are
female and 72.1% are male.
Gender Composition of workforce overall: 23.7% are
female and 76.3% are male.
CSG 15|16 ANNUAL REPORT 19
CORPORATE GOVERNANCE STATEMENT
Compliance:
2014/15 Benchmark 1.1: Gender Composition of the Workforce (Women – Australia)
The Company is a ‘relevant employer’
for the purposes of the Australia
Workplace Gender Equality Act. Our
latest report was lodged in May 2016
with the Workplace Gender Equality
Agency and can be viewed on their
website at www.wgea.gov.au.
This Agency complies industry based
data for comparison purposes in the
form of Gender Equality Indicators.
One such indicator used to measure
performance is a gender comparison
within the Computer System Design and
Related Services Industry. This graphic,
based on 2014/2015 data, provided
the following comparison:
The Company’s Diversity Policy and
Code of Conduct can be found at
www.csg.com.au/investors.
1.6
Non-Executive
Director Evaluation
The Board has adopted a policy in
relation to its performance evaluation.
The Board carried out a performance
evaluation during the 2015 financial year
using a self-evaluation questionnaire.
The Chairman communicates
regularly with Directors individually
and collectively on the functioning
of the Board and seeks feedback on
his own performance as part of these
discussions. 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.
The next formal evaluation process will
be conducted in the first half of the 2017
financial year. The evaluation will focus on:
•
•
•
•
the role of the Board within the
business;
Board composition, skills and
application;
Board procedures and practices; and
Board culture and behaviour.
1.7 CEO and Executive Evaluations
The Remuneration and Nomination
Committee undertakes the process
of performance reviews for the CEO
and the Executive Management Team
as provided under the Remuneration
Policy. These reviews are assessed
against KPIs set at the start of the
financial year and which are both
financial and non-financial in nature.
Further details of these assessments,
including outcomes, can be found in the
Remuneration Report
Australia
New Zealand
100%
CEO (or equivalent)
0%
20%
Key management personnel
23.4%
27.3%
0.0%
20.0%
32.0%
Other executives/
general managers
Senior
managers
Other
managers
Non-
managers
27.4%
24.7%
27.1%
28.7%
The 2015/16 comparison group benchmark will be released in November 2016.
Principle 2:
Structure the
Board to add
value
2.1 Nomination and Remuneration
Committee
Following Mr Philip Bullock’s resignation
during the financial year, the Nomination
and Remuneration Committee is
chaired by Non-Executive Director, Mr
Thomas Cowan. Mr Cowan would not
be considered independent due to his
partnership in a fund manager which
is a substantial security holder in the
Company. The Board believe that Mr
Cowan’s experience as a Non-Executive
Director of the Company together with
his qualifications and close alignment
with security holders make him the
most appropriate Director to be Chair
of the Nomination and Remuneration
Committee. The Board also has an
Independence and Conflicts of Interest
Policy to manage any potential conflicts
arising from the shareholding.
The Nomination and Remuneration
Committee operates under a formal
charter that clearly sets out its role,
responsibilities, composition, structure,
membership requirements and the
procedures for inviting non-Committee
members to attend meetings.
The names of the members of this
Committee and their attendance at
Committee meetings is set out in the
Directors’ Report.
The role of this Committee is to support
the Board in fulfilling its statutory and
fiduciary responsibilities, including
ensuring that there are appropriate
processes for items such as Board
renewal and succession, assessment
of performance and new Director
induction and identifying appropriate
industry and education programs.
The Nomination and Remuneration
Committee Charter is available at www.
csg.com.au/investors.
2.2 Board Skills Matrix
The Board has ultimate responsibility
for the oversight and review of
the management, administration
and governance of the Company.
Accordingly, the Board has identified
the following matrix which it believes
captures the key skills and diversity
attributes which the Board, as a whole,
requires to deliver against its objectives.
The Board regularly reviews these
attributes and believes it presently
possesses this blend of skills and
diversity attributes:
• Governance
•
Strategy
• Mergers and Acquisitions
•
•
•
Accounting and Financial
Banking and finance leasing
Technology industry experience
and expertise
• Customer Service and Delivery
•
•
Risk Management
Capital Management and Investor
Relations
The Directors therefore believe the
Board collectively has the necessary
skill set to ensure an appropriate
and diverse mix of backgrounds,
20
expertise, experience and qualifications
to effectively advise and set the
Company’s strategic direction and
govern on behalf of shareholders.
2.3 Composition of the Board
At the commencement of the 2016
financial year, the Board consisted of
six (6) Directors. Mr Philip Bullock, an
independent Non-Executive Director,
resigned during the year.
The Board currently consists of five
(5) Directors, including three (3)
independent Non-Executive Directors,
one (1) Non-Executive Director and
one (1) Executive Director, being the
Managing Director and CEO. As a result,
the Board consists of a majority of
independent Non-Executive Directors.
During the financial year, Mr Stephen
Anstice, an independent Non-Executive
Director, was appointed as Chairman,
replacing Mr Thomas Cowan in that role.
The skills, experience and appointment
date of each Director are set out in the
Directors’ Report.
2.4 Director Independence
Based on the applicable Principles and
Recommendations guidelines, to be
independent a Director should be a Non
Executive and:
•
•
•
•
•
•
not be a substantial security holder
of the Company or an officer of,
or otherwise associated with, a
substantial security holder of the
Company;
not have, within the last three
(3) 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 partner, principal or senior
employee of a provider of material
professional services to a company
in the Group;
not been within the last three
(3) years, in a material business
relationship (e.g. as a supplier or
customer) to a company within the
Group, or an officer of, or otherwise
associated with, someone with such
a relationship;
not have a material contractual
relationship with the Company or
another Group company other than
as a Director;
not have close family ties with any
person who falls within any of the
categories described above; or
•
not been a Director of the Company
for such period that his or her
independence may have been
compromised.
During the 2016 financial year, Messrs
Stephen Anstice and Mark Phillips and
Ms Robin Low were considered by
the Board to be independent Non-
Executive Directors. As previously
noted, Mr Thomas Cowan is not
considered independent. The CEO is an
Executive Director.
2.5 Chairman Independence
The Chairman, Mr Stephen Anstice, is an
independent Non-Executive Director.
2.6 Director Induction and
Professional Development
The Nomination and Remuneration
Committee has responsibility under
its charter for the oversight of the
induction of new Directors and on-
going professional development. The
Committee work with management
to introduce a Director to CSG,
including its policies and procedures.
A program is specifically developed
based on the individual Non-Executive
Director’s role within the Board. The
Board skills and previous experiences
are considered in developing an
appropriate induction program.
Board members are encouraged and
assisted to visit CSG work sites, and
Board meetings are rotated to various
locations as part of this program.
Where appropriate, expert advisers,
in conjunction with internal expertise,
undertake presentations at Board
meetings addressing specific elements
of the Company’s business.
Principle 3:
Act Ethically
and
Responsibly
The Company has developed a Code
of Conduct to guide, in particular, the
Directors, the CEO, Chief Financial
Officer (CFO) and other members of the
Executive Management Team in respect
of ethical behaviour. The 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 addresses such
areas as:
•
•
•
•
•
•
•
•
standard of behaviour;
interests of legitimate stakeholders;
conflicts of interest;
use of information or position;
use of Company property;
confidentiality;
fair trading;
compliance with the law;
• whistle blowing; and
•
political contributions and activities.
The Company’s Code of Conduct
can be found at www.csg.com.au/
investors
Principle 4:
Safeguard
Integrity in
Corporate
Reporting
4.1
Board Audit and Risk
Management Committee
The Board has established an Audit
and Risk Management Committee
which is chaired by independent Non-
Executive Director, Ms Robin Low, and
operates under a formal charter that
clearly sets out the Committee’s 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 and Risk Management
Committee or the full Board.
The names of the members of the Audit
and Risk Management Committee and
their attendance at Committee meetings
are set out in the Directors’ Report.
During the 2016 financial year, the Audit
and Risk Management Committee:
•
•
•
consisted only of Non-Executive
Directors;
had a majority of independent
Directors;
was chaired by an independent
chair, who is not the Chairman of the
Board; and
•
had at least three (3) members.
CSG 15|16 ANNUAL REPORT 21
CORPORATE GOVERNANCE STATEMENT
The Audit and Risk Management
Committee provide an independent
review of:
•
•
•
•
•
•
•
•
the effectiveness of the accounting
and internal control systems and
management reporting, which are
designed to safeguard Company
assets;
the integrity and reliability of
information prepared for use by the
Board, including financial information;
the accounting policies adopted by
the Company;
the quality of the external audit
function;
external auditor’s performance
and independence as well as
considering such matters as
replacing the external auditor where
and when necessary;
risk profile and mitigation plans;
the Company’s exposure to
significant risks, strategic and
operational improvements in
risk management planning and
implementation; and
the insurance renewal process,
including the appointment of an
insurance broker and review of
policies.
The charter for the Audit and Risk
Management Committee can be found
at www.csg.com.au/investors.
4.2 Assurances
The Board receives assurances from
the CEO and CFO that the annual
declaration provided in accordance
with section 295A of the Corporations
Act 2001 (Cth) is founded on a sound
system of risk management and internal
control, and that the system is operating
effectively in all material respects in
relation to financial reporting risks.
The Board has received these
assurances for the 2016 financial year.
4.3 External Auditor
The external Auditor attends the
Annual General Meeting and is available
to answer shareholders’ questions
raised at the Annual General Meeting
concerning the conduct of the audit, the
preparation and content of the Auditor’s
Report, the accounting policies adopted
and auditor independence.
22
Principle 5:
Make timely
and balanced
disclosure
Principle 6:
Respect
the rights of
shareholders
The Board recognises that the
Company, as a publicly listed entity,
has an obligation to make timely and
balanced disclosure in accordance with
the requirements of the ASX Listing
Rules and the Corporations Act 2001
(Cth). The Board is also 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.
Amongst other matters, this policy
requires the immediate notification to
the 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/investors.
6.1 Communication with
Shareholders
The Board recognises that
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.
In accordance with its communication
strategy, the Company’s website (www.
csg.com.au) is considered to be the
primary means to provide information
to all stakeholders. The website enables
information regarding CSG to be
accessed in a clear and readable manner,
including under the Investors tab:
•
•
•
•
•
•
•
•
biographies of Directors and the
Executive Management Team;
corporate governance charters and
policies;
all announcements and releases to
the ASX;
copies of presentations to
shareholders, institutional
investors, brokers and analysts;
any media or other releases;
all notices of meetings and
explanatory material;
current and prior Annual Reports
and similar documents; and
any other relevant information
concerning non-confidential
activities of the Company including
new business developments.
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. In
accordance with the Company’s
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; and
assisting shareholders participation
in general meetings.
7.3 Internal Audit Function
The Company has not formally adopted
an internal audit function at this time.
Processes as identified under the Risk
Management Policy are undertaken by
management and the outcomes of the
process are reported to the Audit and
Risk Management Committee, capturing
key changes, movements and trends
since the last report.
7.4 Economic, Environmental and
Social Sustainability Risk
The Board, in their Directors’ Report,
has identified key risks that require
management and adoption of mitigation
strategies, where it assesses the
inherent risks to be unacceptable.
From an environmental perspective,
the Company does not require any
specific licences to operate the
business. Nevertheless, the Company
takes a proactive approach in
minimising its environmental footprint
and seeks to operate its businesses in a
sustainable way.
In terms of its social obligations, CSG
employs approximately 700 people
across its operations in Australia and
New Zealand. It monitors the health and
well-being of its employees and reports
to the Board any serious matters of
concern. Under the direction of its
People and Culture team, the Company
has conducted staff surveys and seeks
opportunities to support and assist its
employees. An employee assistance
program is available to all employees
which provides a means by which
employees can obtain confidential and
independent advice through access to
qualified counsellors on a range of work-
related or personal issues.
All shareholders are entitled to receive
a hard copy of the Company’s annual
reports upon request. All relevant
announcements made to the market
are made available on the Company’s
website after they have been released
to the ASX.
6.2 Investor Relations Program
In addition to the Company website,
there is a dedicated Investor Relations
page contained within the Annual Report
which provides shareholders with
Company contact details and key dates.
Shareholders can contact the Company
by mail at Level 1, 357 Collins Street,
Melbourne Victoria 3000 or by email at
investor@csg.com.au.
6.3 Participation in Meetings
The Board is committed to assisting
shareholders participation in meetings.
In particular, the Company requests
that a representative of the Company’s
external auditor be present at all Annual
General Meetings and that shareholders
have adequate opportunity to ask
questions of the auditor at that meeting
concerning the audit, preparation and
content of the auditor’s report.
The next Annual General Meeting of the
Company is scheduled for 17 November
2016 in Sydney.
Results of the meeting and any
presentations given will be released to
the ASX and subsequently available on
the Company’s website.
6.4 Electronic Communications
The Company has a dedicated investor
enquiry email address (investor@
csg.com.au). This provides a means
by which shareholders and other
interested parties can contact the
Company and seek information or raise
specific questions.
The Company also encourages
shareholders to register their email
addresses at any time with its Share
Registry, Computershare Investor
Services Pty Limited, to benefit from the
range of communications and services
they can provide electronically.
In addition, as a listed company,
shareholders can also visit the ASX
website (www.asx.com.au) and obtain
information, including the current share
price, under the ASX code “csv”.
Principle 7:
Recognise and
manage risk
7.1
Responsibility for Risk
The Company is committed to
managing its risks in a consistent
and practical manner. Effective risk
management is directly focussed on
the achievement of organisational
objectives and helps ensure the
business delivers on its strategic goals in
alliance with its vision and values.
The Board carries overall responsibility
to all stakeholders for the identification,
assessment, management and
monitoring of the risks faced by the
Company and is assisted in this process
by the Audit and Risk Management
Committee.
7.2 Review Risk Management
Framework
The Company has adopted a formal
Risk Management Policy which aims
to ensure that the Board implements
appropriate risk management policies
and procedures in order to protect
the assets and undertakings of the
Company. The approach to risk
management and the effectiveness
of its implementation is based on,
as a minimum, the Australian and
New Zealand Standards AS/NZS
31000:2009.
The Board has previously adopted
a risk management guideline which
is designed to provide a high level
overview of key steps within the
Company’s risk management
process and to provide the tools to
facilitate risk management across the
organisation. The framework enables
the identification and documentation
of risk across the business by requiring
management to:
1.
identify the risk;
2. assign the risk to a category;
3. assess the likelihood of a risk;
4. assess the consequences of a risk;
5. apply the risk to the risk matrix; and
6.
monitor, review, communicate and
consult on the risk.
The Company’s risk management
process was reviewed in November 2015.
CSG 15|16 ANNUAL REPORT 23
CORPORATE GOVERNANCE STATEMENT
Principal 8:
Remunerate
fairly and
responsibly
8.1 Nomination and Remuneration
Committee
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
an established Nomination and
Remuneration Committee that:
•
•
consists of a majority of
independent Directors; and
has three (3) members.
As previously noted, whilst Mr Thomas
Cowan, the Chair of the Nomination
and Remuneration Committee, is not
considered independent (as defined in
the Principles and Recommendations),
the Board believes that his experience,
qualifications and close alignment
with security holders make him an
appropriate Chairman of the Committee.
Please refer to the Directors’ Report for
membership and attendance details.
The Committee is responsible for the
following, amongst other matters:
•
•
•
•
nominating, as required, candidates
for the Board to consider for Board
membership;
nominating, as required, candidates
for the role of CEO and setting
criteria for their appointment and
termination;
setting criteria for Board
membership, skill requirements
and, subject to the Company’s
constitution, number of Directors
comprising the Board;
the provision of a Directors’
induction and education
programme;
•
reviewing and making
recommendations to the Board
on appropriate remuneration for
the Directors, the CEO and the
Executive Management Team;
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; and
developing, maintaining
and monitoring appropriate
remuneration policies and
procedures.
•
•
•
8.2 Remuneration Policy
The Company has adopted a
Remuneration Policy, the objective
of which is to ensure the reward for
performance is competitive and
appropriate for the results delivered.
The Remuneration Policy details a
framework for remuneration to be paid
across the Company, from employees
to senior executives, including Non-
Executive Directors. The Nomination
and Remuneration Committee is
responsible for developing, maintaining
and monitoring the policy.
A copy of the policy is available at www.
csg.com.au/investors.
Remuneration paid to Non-Executive
Directors is clearly distinguished
from that of Executive Directors and
senior executives. Please refer to the
Remuneration Report for details of
remuneration for all Directors and Key
Management Personnel.
Whilst it is not mandatory for Non-
Executive Directors to hold CSG shares,
all current Directors do so and their
shareholdings are disclosed via the ASX
and the Remuneration Report.
8.3 Equity Based Remuneration
As detailed in the Remuneration Policy,
the Company believes equity based
remuneration is a critical component
in achieving the long term objectives of
the Company. To this end it offers a Long
Term Incentive Plan (LTIP) to the CEO
and certain members of the Executive
Management and senior management
teams. Details of this LTIP are provided in
the Remuneration Report.
In addition, the Company utilises Tax
Exempt Share Plans to motivate and
encourage performance across the
Company generally. Under these plans,
eligible employees can be offered the
24
opportunity to apply for an allocation of
$1,000 worth of CSG shares, subject to
the rules that apply under these plans.
To govern these equity opportunities
and holdings, the Company has a Share
Trading Policy which contains processes
to be followed and guides Directors, the
CEO, the Executive Management Team
and employees on any equities they
hold or wish to hold in the Company. A
summary of this policy being:
Share Trading Policy
The Company has adopted a formal
Share Trading Policy, which applies to
Directors, the Company Secretary, all
senior executives, Key Management
Personnel and employees of the
Company and their associates (Officers).
An Officer may not deal in any of the
Company’s securities at any time if they
have Inside Information.
Subject to this restriction, an Officer may
trade in securities at any time apart from
certain blackout periods, namely:
•
•
•
•
in the period between the close of a
financial period and the business day
after the announcement of results
for that period;
in the five (5) business days prior to
and the business day following the
Annual General Meeting;
throughout any price setting period
for the dividend reinvestment plan if
operable; or
at any other time the Company
nominates.
If they do wish to trade, employees of a
senior level must obtain clearance under
the policy prior to trading.
All Officers must advise the Company
Secretary in writing of the details of
completed transactions within specified
timeframes following each transaction.
Under this policy, participants in equity
based plans offered by the Company are
not permitted to utilise mechanisms to
limit the risk associated with that plan.
The Company Secretary must maintain a
register of securities transactions.
The Company must comply with its
obligations to notify the ASX in writing of
any changes in the holdings of securities
or interest in securities by Directors.
INVESTOR RELATIONS
Investor Relations
ASX Listing
CSG Limited is listed on the Australian Securities Exchange
(ASX) under the trading code “CSV”. Find us on the ASX
website (asx.com.au) under “CSV”.
Shareholder Communications
We are committed to delivering a high level of service to
all security holders. Our contact details are:
Annual General Meetings
We hold Annual General Meetings where security holders
are able to vote on a range of matters including Non-
Executive Director elections, the Remuneration Report
and CSG’s Financial Report. These meetings also provide
security holders with the opportunity to meet the Board
and key members of the Executive Management Team.
Our next Annual General Meeting is currently scheduled
to be held on Thursday, 17 November 2016 at 1:00pm
(AEDT) at The Westin Sydney, 1 Martin Place, Sydney
NSW 2000.
CSG Limited
Investor Relations
Level 1, 357 Collins Street
Melbourne VIC 3000
Phone: +61 7 3840 1234
+61 7 3840 1222
Fax:
Investor@csg.com.au
www.csg.com.au
Share Registry
If you have queries relating to your security holding or
wish to update your personal or payment details, please
contact the Share Registry.
CSG Limited
C/- Computershare Investor Services Pty Limited
GPO Box 2975
Melbourne VIC 3001
Phone: +61 1300 850 505
Fax:
www.computershare.com
+61 3 9473 2500
Key Dates
Our current key dates are:
Annual General Meeting
Thursday, 17 November 2016
1HY17 Results
Monday, 20 February 2017*
FY17 Results
Friday, 18 August 2017*
*These dates are subject to change without notice.
CSG 15|16 ANNUAL REPORT 25
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 2016 and
Auditor’s report thereon. This financial
report has been prepared in accordance
with Australian Accounting Standards.
26
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. Stephen Anstice
BA (Economics), Grad. Dip. (SAI)
Non-Executive Chairman
Member, Audit and Risk Committee
Member, Nomination and
Remuneration Committee
Stephen Anstice has over 20 years’
experience in the communications
industry. Until June 2013, Mr. Anstice was
CEO of IPMG Pty Ltd (“IPMG”), a print,
digital and marketing communications
business Mr. Anstice also has an
extensive background in investment
banking. He is currently a Non-Executive
Director of IPMG, Audant Investments
Limited and The Song Company Limited.
Mr. Anstice has a Bachelor of Arts
(Economics) from Macquarie University
and a Graduate Diploma from the
Securities Institute of Australia
Appointed 20 August 2014
Appointed Chairman 15 February 2016
Mr. Thomas Cowan
B.Com (Hons)
Non-Executive Director
Former Non-Executive Chairman
Member, Audit and Risk Committee
Chairman, Nomination and
Remuneration Committee
Tom Cowan is a partner of TDM
Asset Management, a Sydney based
private investment firm. TDM Asset
Management invests in public and private
companies globally. Mr. Cowan has over
15 years of financial markets experience,
including roles in corporate finance
and investment banking at Investec
Wentworth and KPMG Australia. He has a
Bachelor of Commerce (Honours – Class
1) from the University of Sydney.
Mr. Cowan is currently a Non-Executive
Director of Baby Bunting Group Limited.
Appointed 8 February 2012
Appointed Chairman 15 August 2012
Ceased Chairman 15 February 2016
Appointed Chairman of
Nomination and Remuneration
Committee 15 February 2016
Ms. Julie-Ann Kerin
AICD
Managing Director
Since Julie-Ann Kerin was appointed as
Chief Executive Officer and Managing
Director of CSG in 2012, she has
established a proven track record of
delivering strong growth and significant
return to shareholders.
Under Ms. Kerin’s leadership, CSG
successfully completed the transaction
of the sale of the former Technology
Solutions Division to NEC Australia in
2012, for $227.5 million and subsequently
returned $130 million to shareholders
over the following three years.
Prior to Ms. Kerin’s appointment as CEO,
she was the Group-General Manager of
the former Technology Solutions division
for five years, and achieved revenue
growth from $9m to $183m.
She has more than 20 years’ experience
as a senior executive managing both
private and public companies across the
information technology sector. Prior to
joining CSG, Ms. Kerin was responsible
for the global management of operations
and staff across Asia, the United States,
Australia and Europe for a number of
organisations. She has also held roles with
IT companies Actuate, Haht Commerce,
Genasys Inc and Computer Power. Ms.
Kerin is a member of the Australian
Institute of Company Directors.
Appointed 1 February 2012
Ms. Robin Low
B.Com, FCA, GAICD
Non-Executive Director
Chairman, Audit and Risk Committee
Robin Low was formerly a partner at
PricewaterhouseCoopers for over 17
years and has extensive experience
in assurance and risk management,
particularly in the financial services area.
She is currently a Non-Executive Director
of AUB Group Limited, IPH Limited and
Appen Limited. Ms. Low is also a member
of the Audit and Assurance Standards
Board and on the board of a number of
not-for-profit organisations including
Sydney Medical School Foundation, Public
Education Foundation and Primary Ethics.
Ms. Low has a Bachelor of Commerce
from The University of New South
Wales, is a Fellow of the Institute of
Chartered Accountants in Australia and
is a Graduate Member of the Australian
Institute of Company Directors.
Appointed 20 August 2014
2. Company Secretary
Nicole Allder
LLB
Company Secretary
Nicole Allder has an extensive background in company secretariat, corporate
governance and corporate restructuring for both private and ASX listed public groups.
Ms. Allder joined CSG in December 2015, having previously held positions as Deputy
Company Secretary and Legal Counsel at the Virgin Australia Group. Prior to that,
Ms. Allder held the role of Legal Counsel at BHP Billiton.
Ms. Allder is a member of the Governance Institute of Australia and holds a Bachelor
of Laws from Queensland University of Technology.
Appointed 1 December 2015
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:
Board Meeting
Audit & Risk
Committee
Nomination &
Remuneration
Committee
s
g
n
i
t
e
e
M
)
i
(
l
d
e
H
s
g
n
i
t
e
e
M
d
e
d
n
e
t
t
A
s
g
n
i
t
e
e
M
)
i
(
l
d
e
H
s
g
n
i
t
e
e
M
d
e
d
n
e
t
t
A
s
g
n
i
t
e
e
M
)
i
(
l
d
e
H
s
g
n
i
t
e
e
M
d
e
d
n
e
t
t
A
17
17
17
17
17
7
17
17
17
17
17
7
5
5
5
5
5
3
5(ii)
5
5
5
5(iv)
3
5
5
5
-
5
3
5
5
5(iii)
-
5(iv)
3
Director Name
Current
Mr. Stephen Anstice
Mr. Thomas Cowan
Mr. Mark Phillips
Ms. Robin Low
Ms. Julie-Ann Kerin
Former
Mr. Philip Bullock
(i) Number of meetings held during the time the Director held office or was a member of the relevant committee
during the financial year.
(ii) Mr. Stephen Anstice attended three (3) meetings by invitation and two (2) meetings as a member.
(iii) Mr. Mark Phillips attended three (3) meetings by invitation and two (2) meetings as a member.
(iv) Ms. Julie-Ann Kerin attended by invitation.
In addition to the above meetings, the Directors’ held two (2) meetings by circular resolution.
In addition to the above meetings, a committee of the Board comprising of Mr. Thomas Cowan, Ms. Robin Low and
Ms. Julie-Ann Kerin met on two (2) occasions for the purposes of approving the 2015 Full Year Financial Statements
and the 2016 Half Year Financial Statements.
Mr. Mark Phillips
B. Com (Hons), M. Com, FAICD
Non-Executive Director
Member, Audit and Risk Committee
Member, Nomination and
Remuneration Committee
Mark Phillips has substantial experience
in banking and asset leasing. Mr. Phillips
worked at the Commonwealth Bank of
Australia for 20 years in various roles
involving asset finance, securities and
trading markets, property lending and
government finance.
Mr. Phillips was formerly Managing
Director of Record Investments Limited
(Record) and Keybridge Capital Ltd. While
Managing Director at Record, the market
capitalisation grew from approximately
$100 million to over $1.5 billion.
Mr. Phillips is currently a Non-Executive
Director of General Reinsurance Australia
Limited and General Reinsurance Life
Australia Limited (a Berkshire Hathaway
company) and a Non-Executive Director
of Cancer Council (NSW).
Mr. Phillips was formerly a Non-
Executive Director of Interlink Roads Ltd
and ASB Bank Limited in New Zealand.
Mr. Phillips has a Bachelor of Commerce
and a Masters of Commerce from the
University of New South Wales and is
a Fellow of the Australian Institute of
Company Directors.
Appointed 20 August 2014
Mr. Philip Bullock
BA, Dip Ed, MBA, GAICD
Non-Executive Director
Former Chairman, Nomination and
Remuneration Committee
Member, Audit and Risk Committee
Appointed a Director of CSG in August
2009, Mr. Bullock was formerly Vice
President, Systems and Technology
Group, IBM Asia Pacific, Shanghai, China.
Prior to that position he was Managing
Director of IBM Australia and New
Zealand. His IBM career spanned
almost 30 years in the Asia Pacific region.
Mr. Bullock is a Non-Executive Director of
Perpetual Limited and Hills Limited, and
was previously a Non-Executive Director
of Healthscope Limited. Over the years
he has served on a number of Federal
Government bodies, most notably as the
Chair of Skills Australia.
Appointed 1 August 2009
Ceased 19 November 2015
CSG 15|16 ANNUAL REPORT 27
DIRECTORS’ REPORT
4.
Principal
Activities
The principal activities of the CSG
Group during the financial year were
print and business technology solutions
in Australia and New Zealand supported
by in-house equipment financing.
There have been no significant changes
in the nature of the activities of the CSG
Group during the financial year.
5.
Operating and
Financial Review
1. Operations overview
CSG is a leading Technology as a Service
provider in Australia and New Zealand,
supported by an in-house equipment
financing business.
CSG is the largest non-manufacturer of
print and business technology solutions
in the Australia and New Zealand
market, and has a national sales and
service footprint in both countries. CSG
services more than 20,000 customers
ranging from Small-to-Medium
Enterprises (‘SMEs’), through to large
corporate, government and commercial
customers. CSG has developed a
unique product suite to deliver a single
source technology solution to of all its
customers, regardless of size.
In the Australian and New Zealand
markets, CSG works closely with a
number of major business partners
(including Canon, Konica Minolta,
Samsung, HP, 8x8 and FaceMe) to
deliver a brand agnostic, end-to-end
product and service offering which
is unique. In New Zealand CSG is one
of the largest suppliers of print and
technology sales and services to SMEs,
corporate and government customers
following the acquisition of CodeBlue in
FY2016.
A key differentiator for CSG is the
breadth and quality of the service it
provides to its customers in addition
to a single monthly subscription
billing relationship. Premium service
combined with efficient financing
and high quality technical advice
is paramount to the CSG value
proposition. As the only listed company
of size and scale that can provide
sales, service and support access
in Australia and New Zealand, CSG
truly differentiates itself from the
manufacturers, office supply and
technology retailers, integrators,
equipment finance providers and
independent dealers, with whom it
competes.
CSG currently employs approximately
700 staff in 38 locations across
Australia and New Zealand. CSG
has a commitment to diversity and
recognising & rewarding its staff. CSG
strives to achieve above industry
standard benchmarks for workforce
productivity, whilst delivering the
highest level of staff satisfaction.
2. Review of Group Operations
CSG expanded its product and
service offering in FY2016 to better
meet the evolving needs of its
customers. Increasing reliance on
technology has resulted in SMEs
and larger organisations alike to look
for technology providers capable of
delivering a single point of contact for
their entire office technology needs.
CSG’s full-spectrum product offering
delivers this, and gives a clear value
proposition to its broad customer base.
The Company creates genuine value for
its customers by providing a one-stop
total business solutions offering, saving
the customer their most valued assets:
time and money.
Key operational achievements for CSG
in FY2016 included:
•
First implementations of Total
Office bundle (on a 60-month
term) in Business Solutions, proving
execution capability;
• Won a number of Communications
as a Service contracts (8x8), sold in
Australia and delivered globally;
•
Significant success selling
Display as a Service across retail,
healthcare and real-estate vertical
markets;
•
First transaction in health vertical
with Oneview Healthcare for Display
solutions at a major Australian
hospital;
• Commenced the roll-out of
innovative, cloud-based Print
as a Service contract at Monash
University;
1
2
Net promoter score is a method of measuring customers’ loyalty. To calculate NPS, customers are categorised
as “Promoters”, “Passives” or “Detractors” based on how likely they would be to recommend CSG to a friend or
colleague. The percentage of Detractors is then subtracted from the percentage of Promoters.
Figures contained in the “Review of Group Financial Performance” are unaudited.
28
•
•
Technology sales represented
34% of equipment sales in Business
Solutions Australia and 20% of total
group equipment sales in FY2016;
and
Achieved in the field Net Promoter
Score1 (NPS) score of 48.8
3.
Review of Group Financial
Performance2
The Board was pleased that the business
again achieved solid growth in underlying
EBITDA during the 2016 financial year.
During the year, CSG delivered on a
number of key initiatives that have now
positioned CSG for continued revenue
growth, as well as improved profitability
over the medium term.
Key highlights from the results include:
• Total revenue increased by 10%
to $246.6m;
• Underlying EBITDA increased by 14%
to $38.1m;
• Reported NPAT increased by 27%
to $18.2m;
• Underlying NPAT before customer
contract amortisation increased by
20% to $25.6m; and
• Solid conversion of underlying
EBITDA to operating cash flow
(excluding the investment in lease
receivables and non-recurring items)
with conversion of greater than 100%
in the second half and 70% over the
year.
Operating Performance
The Board measures the performance
of the business using Underlying 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
(“NPAT”) in the table opposite.
a. Revenue
Group revenue grew by 10% to $246.6m
during FY2016. This was driven by:
• New customer sales growth
in Australia and New Zealand.
Revenue from newly acquired
customers as a proportion of total
revenue in Business Solutions was
24% across both regions;
• Strong uptake in technology
products with technology sales
representing 34% of total
equipment sales in Business
Solutions Australia in FY2016
(7% in FY2015);
EBITDA (underlying)
15.4
18.1
33.5
17.3
20.8
38.1
1H15
2H15
FY15
1H16
2H16
FY16
(19.1)
(0.2)
(19.3)
(25.0)
(7.4)
(32.4)
Revenue from continuing
operations
NPAT
Add Tax
Add Depreciation and
Amortisation
Add Interest expense/
(income)
FY16
$m
246.6
18.2
7.1
6.1
1.5
Operating cash flow
(reported)
+ tax paid
+ net interest paid
+ non-recurring cash items
+ change in lease receivables
Ungeared pre-tax cash flow
3.0
0.6
0.2
27.1
11.8
1.8
0.9
1.0
14.7
18.2
4.8
1.5
1.2
41.8
30.0
90%
1.8
0.7
2.2
26.1
5.8
1.6
0.8
1.7
24.1
20.8
34%
100%
3.4
1.5
3.9
50.2
26.6
70%
EBITDA
32.9
Profit to cash conversion
77%
102%
Add Non-recurring items
1. LTIP/Employee Share Plan
2. Deferred consideration
& legal
3. Stamp Duty on
Acquisition
4. Transaction advisory
costs
1.9
1.1
1.2
1.0
Underlying EBITDA
38.1
• Addition of new Managed Print and
Communications as a Service
contracts in Enterprise Solutions;
and
• Finance Solutions revenue growth
driven by growth of Lease
Receivables by 24% to $260.8m.
b. Expenses
Management has sustained tight
controls over expenditures to deliver
a slight increase in Underlying EBITDA
margin from 14.9% to 15.5%. Key drivers
of this improvement were:
• Total expenses (excluding
depreciation and amortisation) grew
by 9% year on year compared to a
10% increase in revenue;
• Non-COGS related costs (excluding
share based payments) increased
by 7% year on year compared to 10%
growth in group revenue; and
Figures contained in the “Review of
Group Financial Performance” are
unaudited.
• Borrowing costs in Finance Solutions
continues to benefit from the low
interest rate environment in
delivering 50% gross margin.
Customer contract amortisation has
increased from $2.3m in FY2015 to
$3.1m due to acquisitions completed
during the year.
4. Review of Group Financial Position
CSG has a closing cash balance of
$14.5m, after dividend distributions
of $27.0m were made during the year.
Included in closing cash balance is an
amount of $6.5m held in restricted cash
accounts under the terms of the CSG
Finance Solutions debt facilities (refer
note 6).
Lease receivables in the Finance
Solutions business have grown to
$260.8m ($210.0m in FY2015) with
84% funded by associated debt (89% in
FY2015). The majority of this growth has
been due to the continued expansion of
the Australian operations.
In the four years since the
commencement of the Restructuring
Plan in July 2012, total capital returned
to Shareholders including the current
final dividend is now $177m (56 cents
per share).
5. Divisional Review
a.
Business Solutions
CSG Business Solutions provides the
sales, support, service and financing
of print and business technology
equipment to more than 20,000 SME
customers across Australia and New
Zealand. CSG’s scale, national presence
and significant brand partnerships gives
it the flexibility to service businesses
of any size and in any location across
Australia and New Zealand.
SMEs have traditionally relied on up
to 15 separate suppliers for a variety
of business and print equipment
requirements, each with separate billing,
leasing and service relationships.
CSG Business Solutions delivers
significant time savings and improved
cash flow management to customers
through the provision of centralised
ordering for all business technology
through a single billing system and
finance relationship. This offering
is currently unique to the market in
Australia and New Zealand. The CSG
“Technology as a Service” product suite
is currently comprised of the following
offerings:
• Print as a Service – Print solutions
that include equipment, parts,
consumables and service for a single
monthly operating expense
• CSG Total Office – Complete
end-user technology bundle
including desktop computer, cloud
telephony, storage and support for a
fixed monthly price
• Communications as a Service
– CSG’s cloud telephony solution
powered by 8x8
• Desktop as a Service – Desktop
computer, storage and support
solutions
• Boardroom as a Service – Full
boardroom package combining
Samsung digital display technology
with cloud conferencing
• Display as a Service – Large format,
cloud displays and desktop monitors
Through the CSG Marketplace, CSG
customers are able to subscribe to
technology services and manage
their IT requirements on a single
platform. The Marketplace provides
self-service access for customers
to browse, request and approve
new CSG services (conferencing,
communications, business applications,
data management) and technology
equipment (desktop, laptop, tablets,
boardroom display).
Together, the CSG customer
Marketplace and product suite provides
a number of significant benefits to CSG
Business Solutions customers:
• Multiple vendors replaced with one
invoice;
• Predictable cash flow through
monthly subscription payments;
CSG 15|16 ANNUAL REPORT 29
DIRECTORS’ REPORT
• No large capital outlay – equipment
fully financed by CSG;
• Proven best of breed technology;
• Easily scalable in line with
customers’ needs; and
• Single point of technical support
(Level 1 / 2).
It is anticipated that earnings growth in
FY2017 will be driven by a number of key
initiatives, including:
• Further penetration of existing
print customer base with technology
products and services;
•
Increased sales leads by improving
online presence and marketing CSG
Business Solutions as a full service IT
organisation;
• Growth in Monthly Recurring
Revenue through selling subscription
based Technology bundles;
• Building on our success in display
business by launching a dedicated
display sales team;
• Launching a direct sales channel
in Australia to target new, non-
CSG customers and hence grow the
customer base;
• Growing print market share by using
technology products to penetrate
other print vendors’ customer bases;
• Leveraging the internal IT platform
to deliver improved customer
service, increased productivity in
service and operations and focused
marketing initiatives; and
• Leveraging the relationship and high
quality profile and reputation of
leading, global business partners
including Canon, Konica Minolta,
Samsung, 8x8 and HP.
b. Enterprise Solutions
CSG Enterprise Solutions provides
managed services based print and
technology solutions to enterprise,
education and government customers
in Australia and New Zealand. In
Australia, CSG is the only national, brand
agnostic provider of print solutions in
the market, and in New Zealand, the
Group operates a well-established
and market leading business through
its partnership with Konica Minolta.
Following the sale of the Technology
Solutions business to NEC in July 2012,
the Enterprise Solutions business had
been restrained from competing in the
IT sector. That restraint ended on 3 July
2015 in Australia and FY2016 was the
first year of operations in the IT Services
sector in Australia for Enterprise
Solutions.
The same product suite that is the
platform for the delivery of “Technology
as a Service” in the Business Solutions
business delivers a robust and scalable
platform in enterprise for IT managed
services. The Enterprise Solutions
product suite is currently comprised of
the following offerings:
• Private Cloud Platform – Secure,
Australian data centre services
& on-demand infrastructure for
critical business applications
• CSG Marketplace – Simplified
procurement solution with one place
to subscribe, track, manage and view
all of your technology services
• Managed Print – Cloud delivered
enterprise print & document
management
•
•
•
End-User Computing – Desktop
solutions that deliver mobile
communications and end-user
computing
Display Solutions – Intelligent display
solutions to improve customer/
client engagement
Cloud Communications – Integrated
cloud contact centre & business
phone solutions
During FY2016, CSG successfully
leveraged a number of competitive
advantages to grow the division in
Australia and New Zealand. These
include:
•
Being the only print and business
technology provider with a national
service and sales team in Australia
and New Zealand;
• Providing a level of assurance to
government customers by being ASX
listed and therefore compliant to
ASX reporting and regulatory
standards;
•
•
Leveraging the expertise of an
internal financing capability to
develop innovative and flexible
solutions for Enterprise customers;
Possessing the ability to sell, install,
service and repair all major multi-
function device brands in Australia,
and leverage Konica Minolta’s strong
support and presence in the New
Zealand market; and
•
Having the scale to be able to service
customers of all sizes.
Enterprise Solutions made good
progress in FY2016, adding a number
of new Managed Print customers,
including a major University and further
growth in Queensland education. CSG
also signed a partnership with Oneview
Healthcare and installed solutions at a
major Australian hospital. The Company
also launched a Cloud Communications
business and successfully deployed for
several major customers.
It is anticipated that earnings growth will
be driven in FY2017 by a number of key
initiatives, including:
•
•
•
•
•
•
Building on existing Enterprise
Managed Print customer base to add
additional managed services;
Continuing focus on growing the
cloud communications business
including converting three pilots to
long term agreements;
Continuing to build Enterprise IT
business pipeline with vertical
market approach;
Developing new channels and
partnerships for Cloud Marketplace
via a private label model;
Developing deep vertical market
opportunities around display
solutions and cloud software
platform; and
Leveraging growth from government
panels.
c. Finance Solutions
CSG Finance Solutions is a specialist
service provider of lease and rental
products for print and business
technology assets sold and serviced by
CSG in both Australia and New Zealand.
The book is driven by 95% conversion
of customers, including government,
corporate and commercial businesses
across both regions.
CSG’s finance business is well managed
with strong performance, driven by
bad debts of less than 0.5% and strong
returns on equity of 46% in 1H FY2016
and 44% in 2H FY2016. Overall, Leasing
Receivables grew 24% to $260.8m in
FY2016.
30
CSG Finance is a critical element
in enabling the Business Solutions
business to be able to deliver bundled
“Technology as a Service” offerings and
also to be able to finance the equipment
component of large enterprise
contracts. Growth targets for this
division include:
•
•
•
Continuing to support the current
print business in both the existing
customer and the targeting of
new customers;
Increasing penetration into
Enterprise Solutions customer
base; and
Supporting the growth of the
“Technology as a Service”
product suite.
6. Market sizing
a. Print
The current market size for sales and
service of multifunction devices in
Australia and New Zealand is estimated
at $2.5 billion. CSG currently captures
8% of that market in Australia and New
Zealand.
b. Technology
The business-to-business technology
products and service market is valued
at $10.5 billion . Management believe
that, given the size of these markets,
CSG is well positioned to capitalise on
its growth strategies to establish itself
as the market leading, end-to-end
business technology provider.
3%
$1.8b
35%
$7.6bn
$1.1b
Computers and software
Software as a Service
Unified communications technology
62%
Dealer sales
Direct sales
Distributor sales
8%
92%
CSG
Rest of market
1.
2.
Sources: IBISWorld Industry Report Computer and Software Retailing in Australia; Constellation Research Unified
Communication Trends; Forrester Software-as-a-service in ANZ; IBISWorld Industry Report Stationary Goods Retail-
ing; IDC
Sources: : IBISWorld Industry Report Computer and Software Retailing in Australia; Constellation Research Unified
Communication Trends; Forrester Software-as-a-service in ANZ; IBISWorld Industry Report Stationary Goods Retail-
ing; IDC
CSG 15|16 ANNUAL REPORT 31
DIRECTORS’ REPORT
7. Risk Management
Corporate Governance
The Board of CSG Limited believes
that a strong corporate governance
framework will underpin our growth in a
company. CSG’s corporate governance
policies and practices are set out in the
Corporate Governance Statement.
CSG has identified 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 risk is hedged in accordance
with treasury risk policy. The treasury
risk policy aims to manage the
impact of short-term fluctuations in
CSG’s earnings. Derivative financial
instruments (forward exchange
contracts and options) are used to
hedge exposure to fluctuations in
foreign exchange rates. Over the longer
term, permanent changes in market
rates will have an impact on earnings.
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 to customers. These
businesses are sensitive to credit cost
and 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. CSG has also recently
completed the refinancing of the
majority of facilities to extend their
term. Refinement of the funding
structure is an ongoing process.
External expert advice is also sought to
keep abreast of market developments.
Principal Risk Area –
Key Suppliers
CSG’s key suppliers are Canon, Konica
Minolta, Samsung, 8x8 and HP who
supply the majority of inventory. It is
critical to maintain relationships
Risk Management Approach
CSG has maintained a long term
relationship with a majority of these
suppliers. These relationships are
managed carefully by CSG’s executive
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 team and other
key employees including sales
professionals. The retention of these
skilled personnel is critical.
Risk Management Approach
CSG has in place a Long Term Incentive
Plan for executive personnel and other
key management, including the key sales
team, a key criterion for eligibility being
continued employment.
There is 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.
32
DIRECTORS’ REPORT
6. Remuneration Report
Dear Shareholder
On behalf of your Board, I am
pleased to present CSG’s 2016
Remuneration Report which sets
out remuneration information
for the Chief Executive Officer
(“CEO”), the Group Executive,
Non-Executive Directors and the
broader employee group.
The Board recognises that the
performance of CSG depends on
the quality and motivation of its
people, including both the Group
Executives and the approximate
700 employees across Australia
and New Zealand. CSG’s
remuneration strategy seeks to
appropriately reward, incentivise
and retain high performing
employees at all levels.
Core to CSG’s remuneration
philosophy is a continued focus
on creating a culture where
executive, senior management and
other employees’ contributions
are all aligned to the interests of
shareholders. For Group Executives
and Senior Management this is
achieved via an equity based
Long Term Incentive Plan and for
general employees a Tax Exempt
Share Plan. Both plans are linked to
Company performance.
At the November 2012 Annual
General Meeting, the shareholders
approved a three stage multi-year
Long Term Incentive Plan (“LTIP”)
for 2013-2015 for our key executives
with hurdles based upon growth in
the share price and vesting to occur
on the second, third and fourth
anniversary of the offer date. Given
the continued strong performance
of the Company over the life of this
plan we were pleased to advise that
these executives exceeded the
hurdles for Stage 2 (which vested
on 30/11/15). Share price hurdles
have also been achieved for Stage 3
(which vests on 30/11/16 subject to
scheme rules). Since the inception
of this Executive LTIP, shareholders
have seen strong Total Shareholder
Returns as outlined in Section 10.1.
Based upon the success of the
2013-2015 LTIP, shareholders
approved a new LTIP for 2016-2020
at the Annual General Meeting in
November 2015 to apply to the
CEO, Group Executives and key
Senior Management. Performance
hurdles for the new plan include
both Total Shareholder Return and
Earnings Per Share targets as at
August 2017 and each successive
year through to August 2020. The
vesting points are 2018, 2019 and
2020 respectively.
In 2012, the Board also introduced
a Staff Incentive Share Plan for all
employees, which offered eligible
employees in Australia and New
Zealand AUD $1,000 worth of CSG
shares on a tax free basis. These
shares have been subsequently
issued annually (subject to the
satisfactory performance of the
Company and Board approval). To
date, we have issued approximately
1,113,000 shares to our employees
and we are pleased to report that
in FY 2016 over 95% of eligible
employees participated in this plan.
The CEO and Group Executive,
made the decision to forfeit all
STI’s for FY2016 given internal
financial targets were not met. The
Nominations and Remuneration
Committee commends the
Executive for their decision and
demonstrating their commitment
to aligning their personal interests
with those of shareholders.
Thank you for reviewing the 2016
Remuneration Report. The 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
Tom Cowan
Chairman, Nomination and
Remuneration Committee
CSG 15|16 ANNUAL REPORT 33
DIRECTORS’ REPORT
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 large
business units that can materially affect
the performance of the CSG Group. As
such the KMP as at 30 June 2016 are:
•
•
•
•
•
•
•
all persons who have held the
position of Director of CSG Limited
during the financial year;
Julie-Ann Kerin, CEO/Managing
Director;
Neil Lynch, Chief Financial Officer
(“CFO”);
Stephen Birrell, Chief Enterprise
Solutions Executive;
Declan Ramsay, Chief Business
Solutions Executive;
Warwick Beban, Country Manager,
New Zealand; and
Mark Thomas, Chief People
Executive.
34
7.
Remuneration
Governance
The policy for determining the nature and
amount of remuneration of Directors
and Group Executives 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 recommending
to the Board the appropriate
remuneration of the CEO, members
of the Group Executive 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 Group
Executive remuneration is paid in
accordance with thresholds set out
in plans as disclosed or approved by
shareholders; and
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 Non-
Executive Directors who can enhance
company performance through their
contributions and leadership.
8.
Remuneration
Objectives,
Policy and
Practice
The Board, with assistance from the N&R
Committee, is ultimately responsible for
ensuring that CSG’s Remuneration Policy
is consistent with the business strategy
and performance, supporting increased
shareholder wealth over the long term.
The objective of the Remuneration Policy
is to ensure the reward for performance
is competitive and appropriate for the
results delivered.
The Remuneration Policy details a
framework for remuneration to be paid
across the Company, from employees
to Group Executives, including Non-
Executive Directors, which includes a mix
of fixed and variable remuneration, and
short-term and long-term performance
based indicators.
Fixed remuneration
•
•
•
•
Fixed remuneration is determined
according to industry standards,
relevant laws and regulations,
labour market conditions and the
profitability of the CSG business. It
consists of base remuneration and
superannuation. Base remuneration
includes cash salary and any salary
sacrifice items (e.g. motor vehicles).
CSG provides employer
superannuation contributions at
Government legislated rates (2016:
9.5% in Australia and 3% 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 Group Executives, with
recommendations from the N&R
Committee.
Fixed remuneration for the CEO and
Group Executives effective 1 July
2016 has been has been capped
for the period FY2016-FY2020 in
recognition of their participation in
the 2016-2020 LTI Plan.
Short-Term Incentives
For 2016 the Corporate Scorecard was based on the following targets:
Category
Financial (60%)
Target
Achieve EBITDA Targets
Achieve revenue growth within target
Ensure cash targets are achieved
Non-Financial (40%)
Successful integration of all acquisitions
Improve Net Promoter scoring for customer engagement
Implementation of Customer Hub across Australia & NZ
Achievement of NZ objectives
Board reporting
Weighting
25%
10%
25%
15%
7.5%
7.5%
5%
5%
To encourage and reward Management
for extraordinary performance there
is an overachievement attached to
the EBITDA target that will result in
that component being paid at the
percentage of the overachievement
multiplied by the KPI weighting.
Divisional Scorecards are established
for Group Executives and Senior
Managers which are linked to business
performance, for which they are directly
responsible. The STI payment is based
on the following percentage framework:
CEO/MD & CFO:
100% Corporate Scorecard
Executive General Managers:
50% Corporate Scorecard/ 50%
Divisional Scorecard
Senior Managers:
30% Corporate Scorecard/ 70%
Divisional Scorecard.
From time to time, other entitlements
in addition to the STI may be provided
to Group Executives to reward
performance that is considered
exceptional in terms of shareholder
return or Company performance.
These entitlements are approved at the
discretion of the N&R Committee.
Long-Term Incentives
•
•
While STI rewards past
performance, the Board considers
it essential that the Group Executive
and other Management (together
the “Senior Executives”) have
reward incentives linked to longer-
term Company performance and to
value creation for shareholders.
Following approval by the
Shareholders at the 2012 Annual
General Meeting, the CEO and
Senior Executives were issued with
performance rights under the 2013-
2015 Executive LTIP (LTIP Issues 5,
•
6, 7 & 8). Each performance right
represents an option to receive
one ordinary share in the Company,
subject to the satisfaction of the
relevant vesting conditions. The
share price hurdle for the final stage
of this Plan has been met and will
vest in November 2016 subject to
scheme rules.
At the 2015 Annual General
Meeting, Shareholders approved
a LTIP that is to apply to certain
employees, including the CEO and
Senior Executives. At that meeting,
Shareholders also approved
the issue of performance rights
to the CEO under the LTIP for
the period FY2016-2020. The
Board is currently reviewing the
specific details of the LTIP and
proposed allocations for the Senior
Executives for FY2016-2020. It is
expected that this review will be
finalised in early FY17, following
which the performance rights will
be offered to the CEO and Senior
Executives. It is intended that the
offers to the Senior Executives will
be in accordance with the approval
obtained from Shareholders for the
issue of performance rights to the
CEO, namely:
-
-
Participants to be allocated
performance rights that will
convert to ordinary shares
in the Company, subject to
achievement of performance
hurdles and vesting
conditions;
The performance
hurdles will be based on a
50/50 weighting of Total
Shareholder Return and
Earnings per Share, and will
be tested in August of 2017,
2018, 2019 and 2020; and
•
•
•
-
Subject to the rules of the
plan, the performance rights
will vest in August 2018,
August 2019 and August
2020.
As appropriate, where employees
are promoted or new Senior
Executives are appointed they are
offered participation in the LTIP
after 12 months satisfactory service
with the Company, consistent with
the existing plan and with the same
hurdles.
It is expected that participants
maintain a meaningful amount of
Company equity, further linking
the alignment of Executives to
shareholder goals.
During the 2015 year, the Company
issued performance rights to
certain Sales Agents. These
performance rights have a vesting
date of 1 July 2017, subject to
continued service. These Sales
Agents are a key component of
the Company’s sales force, and
their commitment and retention
is seen as critical to achieving the
Company’s future growth strategy.
Long Term Incentive Plans
Performance rights
Details regarding performance rights
on issue during the year are listed in the
table overleaf.
CSG 15|16 ANNUAL REPORT 35
DIRECTORS’ REPORT
LTIP
Issue 5
Issue 6
Issue 7
Issue 8
Total
Plan
LTIP 5
Opening
3,238,095
606,061
6,821,569
622,088
11,287,813
Issued
Lapsed
-
-
-
-
-
-
-
(204,000)
(466,333)
(670,333)
Exercised
(1,904,762)
(606,061)
(3,848,662)
-
(6,359,485)
Closing
1,333,333
-
2,768,907
155,755
4,257,995
Detail
The CEO was granted performance rights in the 2013 financial year under LTIP 5. The terms of the grant were:
Share Price (i)
TSR CAGR
Vesting Date
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
30/11/16
30/11/15
30/11/16
30/11/17
(i)
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.
The structure of the LTIP was formulated in early 2012 upon appointment of the CEO, and was subsequently
approved by the shareholders at the Annual General Meeting in November 2012. The Performance Rights have 2, 3
and 4 year vesting periods with vesting dates on the third and fourth anniversaries of the approval date remaining.
LTIP 5 has a zero exercise price.
LTIP 6
The CEO was granted performance rights in the 2013 financial year under LTIP 6 as part of a retention arrangement
following the sale of the Technology Solutions business. The terms of the grant were:
•
•
•
•
issued on 28 June 2013 and the rights vest on 1 August 2015;
the participant must be employed by the CSG Group throughout the retention period; and
the expiry date for exercise of vested rights is 1 December 2015
LTIP 6 has a zero exercise price.
These performance rights vested on 1 August 2015 and the CEO was subsequently issued with 606,061 ordinary
shares on 4 August 2015.
LTIP 7
Certain Group Executives and Senior Managers were granted performance rights in the 2013 financial year under
LTIP 7. The terms of the grant were:
Share Price (i)
TSR CAGR
Vesting Date
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
30/11/16
30/11/15
30/11/16
30/11/17
(i)
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.
The structure of the LTIP was formulated in early 2012 upon appointment of the CEO (together with LTIP 5 and
6), and was subsequently approved by the shareholders at the Annual General Meeting in November 2012. The
Performance Rights have 2, 3 and 4 year vesting periods with vesting dates on the third and fourth anniversaries of
the approval date remaining. LTIP 7 has a zero exercise price.
During the year further issues were made under the plan as employees were promoted or new executives were
appointed. These issues equated to the number that had lapsed during the year due to termination of employment.
LTIP 8
Certain Group Executives and Senior Managers were granted performance rights in the 2015 financial year under
LTIP 8. The terms of the grant were:
Share Price (i)
TSR CAGR
Vesting Date
Expiry Date
LTI Stage 2
LTI Stage 3
>$1.05
>$1.50
33.6%
35.4%
30/11/15
30/11/16
30/11/16
30/11/17
(i)
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.
The structure of the LTIP was based on that formulated in early 2012 upon appointment of the CEO, with some
variation, as appropriate, to the testing period to reflect the Group Executives and Senior Managers start date
or promotion.
36
9. Non-Executive Director
Remuneration
The available remuneration pool for Non-Executive Directors, as approved at the 2014
Annual General Meeting, is $600,000 (all inclusive). There is no intention to seek an
increase at this year’s Annual General Meeting.
The table below summarises the rates for the various roles. Key points to note are:
•
•
•
The Chairman is paid an all-inclusive fee regardless of Committee positions;
Board members are currently paid a base fee plus additional fees for each
Committee Chair (see table below for fee structure); and
Superannuation is paid as required on fees at the statutory rates (9.50% for the 2016
financial year).
Non-Executive Directors remuneration fees (inclusive of superannuation) effective from
1 July 2015 are set out below:
2015/16
Chairman
Member
Board
$140,000
$71,175
Audit and Risk
Committee
$19,163
-
Nomination &
Remuneration
Committee
$19,163
-
Staff Incentive Share Plans
There are two Staff Incentive Share Plans
that were approved at the 2012 and
2015 Annual General Meetings to assist
the Company to recruit, reward, retain
and to generate increased engagement
in its employees that are not part of
the Executive LTIP. Both have been
implemented and are listed below:
1.
2.
The CSG Tax Exempt Share Plan
(Australia) (“AUS Tax Exempt
Plan”) in which eligible employees
were offered up to AUD$1,000
worth of ordinary shares in the
Company on a tax free basis.
These shares are held in a trust and
are subject to a three year holding
lock. No consideration is payable
by participants for the grant of
ordinary shares and there are no
additional vesting conditions or
forfeiture conditions in respect of
the plan other than that required
by law.
The CSG Tax Exempt Share Plan
(New Zealand) (“NZ Tax Exempt
Plan”) in which eligible employees
were offered up to (AUD)$ 1,000
worth of ordinary shares in the
company on a tax free basis. These
shares are held in a trust and are
subject to a three year holding lock.
Nominal consideration ($NZD1.00)
was payable for the grant of
ordinary shares and there are no
additional vesting conditions or
forfeiture conditions in respect of
the plan other than that required
by law.
The Board approved a further issue
under the above Staff Incentive Share
Plans in FY2016 in accordance with
each Plan’s rules.
CSG 15|16 ANNUAL REPORT 37
DIRECTORS’ REPORT
10. Link to 2016 Financial Year Performance
10.1 Company Performance
The table below provides summary information on the Company’s earnings and shareholder wealth for the current year and prior years:
Revenue ($m)
Net profit/(loss) after tax ($m)
Share price ($)
Change in share price ($)
Dividends paid ($)
2016
246.6
18.2
1.49
(0.11)
0.09
Total Shareholder Return (TSR)
(1%)
Earnings per Share (cents)
5.8
2015
224.3
14.3
1.60
0.57
0.09
64%
5.1
2014
199.3
12.1
1.03
0.09
0.04
14%
4.3
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)
10.2 STI Outcomes
The CEO and Group Executive, made the decision to forfeit all STI’s for FY2016 given internal financial targets were not met.
The Nominations and Remuneration Committee commends the Executive for their decision and demonstrating their commitment
to aligning their personal interests with those of shareholders.
10.3 LTI Outcomes
The movement in performance rights under previous LTIP during the year ended 30 June 2016 is summarised below:
LTIP
Issue 5
Issue 6
Issue 7
Issue 8
Total
Opening
3,238,095
606,061
6,821,569
622,088
11,287,813
Issued
Lapsed
-
-
-
-
-
-
-
(204,000)
(466,333)
(670,333)
Exercised
(1,904,762)
(606,061)
(3,848,662)
-
(6,359,485)
Closing
1,333,333
-
2,768,907
155,755
4,257,995
38
11. Remuneration Tables and Disclosures
11.1 Directors’ Remuneration
Cash, Salary
and Fees
STI and
Other Fees
Termination
Payments
Post-employment
Super
LTI
TOTAL Performance
Related %
2016
Non-Executive Directors
Mr. Thomas Cowan(i)
Mr. Philip Bullock (ii)
Mr. Mark Phillips
Mr. Stephen
Anstice (iii)
Ms. Robin Low
Total
121,377
32,098
65,000
92,716
82,500
393,691
Executive Directors
Ms. Julie-Ann Kerin
615,545
Total
1,009,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,049
6,175
8,808
7,838
25,870
-
-
-
-
-
-
121,377
35,147
71,175
101,524
90,338
419,561
-
-
-
-
-
-
25,000
358,772
999,317
50,870
358,772
1,418,878
36%
25%
(i) Resigned as Chairman on 15 February 2016. Remained Non-Executive Director
(ii) Resigned 19 November 2015
(iii) Appointed as Chairman on 15 February 2016
Cash, Salary
and Fees
STI and
Other Fees
Termination
Payments
Post-employment
Super
LTI
TOTAL Performance
Related %
2015
Non-Executive Directors
Mr. Thomas Cowan(i)
Mr. Philip Bullock
Mr. Ian Kew
Mr. Mark Phillips
Mr. Stephen Anstice
Ms. Robin Low
Total
Executive Directors
149,946
80,500
27,926
52,278
52,278
69,560
432,488
-
-
-
-
-
-
-
Ms. Julie-Ann Kerin
590,510
199,400
Total
1,022,998
199,400
(i) Note: salary is inclusive of all entitlements.
11.2 Executive Group Remuneration
-
-
-
-
-
-
-
-
-
-
7,647
2,653
4,966
4,966
6,608
26,840
-
-
-
-
-
-
-
149,946
88,147
30,579
57,244
57,244
76,168
459,328
-
-
-
-
-
-
-
25,000
867,893
1,682,803
51,840
867,893
2,142,131
63%
50%
Cash, Salary
and Fees
STI Termination
Payments
Post-employment
Super
LTI
Total
Performance
Related %
2016
Mr. Neil Lynch
Mr. Mark Thomas (i)
Mr. Warwick Beban
Mr. Declan Ramsay
Mr. Stephen Birrell
367,435
245,769
276,158
400,000
400,000
Mr. Shailendra Singh (ii)
51,054
Total
1,740,416
(i) Commenced employment 7 September 2015
(ii) Ceased employment on 12 August 2015.
-
-
-
-
-
-
-
-
-
-
-
-
97,514
97,514
19,177
138,825
525,437
16,454
-
262,223
-
69,412
345,570
19,177
19,177
2,820
120,853
540,030
138,825
558,002
-
151,388
76,805
467,915
2,382,650
26%
-
20%
22%
25%
-
20%
CSG 15|16 ANNUAL REPORT 39
DIRECTORS’ REPORT
Cash, Salary
and Fees
STI Termination
Payments
Post-employment
Super
LTI
Total
Performance
Related %
2015
Mr. Neil Lynch
314,225
149,550
-
Mr. Duncan Powell (i)
Mr. Warwick Beban
3,750
293,791
44,138
-
90,191
Mr. Declan Ramsay
296,538
164,850
Mr. Stephen Birrell
400,000
Mr. Shailendra Singh (ii)
200,026
89,025
37,387
-
-
-
18,780
4,696
347,157
829,712
-
98,637
-
173,579
511,508
18,783
18,783
11,583
217,491
697,662
347,157
854,965
99,691
348,687
Total
1,508,330
484,950
90,191
72,625
1,185,075
3,341,171
(i) Resigned 3 July 2014.
(ii) Commenced 10 December 2014. Ceased employment on 12 August 2015.
11.3 LTIP Issue 5, 6, 7 & 8 – Options & Performance Rights
60%
N/A
55%
54%
51%
39%
50%
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
Balance at End
of Year
2016
Ms. Julie-Ann Kerin
Mr. Neil Lynch
Mr. Warwick Beban
Mr. Declan Ramsay
28/6/2013
28/6/2013
28/6/2013
28/6/2013 &
30/12/2014
Mr. Stephen Birrell
28/6/2013
Mr. Shailendra Singh(i)
30/12/2014
3,844,156
1,295,238
647,619
744,762
1,295,238
433,000
(i) Ceased employment 12 August 2015.
Total
8,260,013
-
-
-
-
-
-
-
(2,510,823)
(761,905)
(380,952)
(438,095)
(761,905)
-
-
-
-
-
-
(433,000)
1,333,333
533,333
266,667
306,667
533,333
-
(4,853,680)
(433,000)
2,973,333
Date Granted
Balance at
Beginning of Year
Granted in Year
Vested
Forfeited in
Year
Balance at End
of Year
2015
Ms. Julie-Ann Kerin
Mr. Neil Lynch
Mr. Duncan Powell (i)
Mr. Warwick Beban
Mr. Declan Ramsay
28/6/2013
28/6/2013
28/6/2013
28/6/2013
28/6/2013 &
30/12/2014
5,177,489
1,828,571
1,828,571
914,286
914,286
(1,333,333)
(533,333)
-
-
(533,333)
(1,295,238)
-
-
-
-
(266,667)
97,143
(266,667)
3,844,156
1,295,238
-
647,619
744,762
1,295,238
433,000
-
-
-
-
Mr. Stephen Birrell
28/6/2013
1,828,571
-
(533,333)
Mr. Shailendra Singh(i)
30/12/2014
-
433,000
-
(i) Commenced 10 December 2014. Ceased employment 12 August 2015.
Total
12,491,774
530,143
(3,466,666)
(1,295,238)
8,260,013
40
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
Held in
Year (b)
Value of
Rights
Vested in
Year (c)
Value of
Rights
Lapsed
in Year
(c)
$
$
%
%
$
$
$
$
Financial
Years in
which
Grant
Vests
Expiry
Date
2016
Ms. Julie-Ann Kerin(i) 0.6649
0.5451
0.4646
1.700
1.685
-
Total
Mr. Neil Lynch
0.5451
1.685
0.4646
-
Total
Mr. Warwick Beban
0.5451
1.685
0.4646
-
Total
Mr. Declan Ramsay
0.5451
1.685
0.4646
1.11
0.88
-
1.685
-
100
100
-
100
-
100
-
100
-
100
-
Total
Mr. Stephen Birrell
0.5451
1.685
100
0.4646
-
Total
Mr. Shailendra Singh
0.88
1.595
-
-
Total
(i) Excluding retention rights.
-
-
-
-
-
-
-
-
-
-
-
-
-
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,030,304
177,821
3,209,524
180,951
-
358,772
4,239,828
71,129
1,283,810
67,696
-
138,825
1,283,810
35,564
641,904
33,848
-
69,412
641,904
35,564
641,904
33,848
28,726
22,714
-
96,286
-
120,852
738,190
71,129
1,283,810
67,696
-
138,825
1,283,810
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
30/11/2015
2016
30/11/2016
2017
30/11/2017
2016
30/11/2016
2017
30/11/2017
2016
30/11/2016
2017
30/11/2017
2016
30/11/2016
2017
30/11/2017
2016
30/11/2016
2017
30/11/2017
2016
30/11/2016
2017
30/11/2017
-
-
690,635
2017
30/11/2017
690,635
Details of the performance criteria attached to each of the performance rights are included in the LTI discussion above and in Note 23 to
the financial statements. No performance rights have been granted since the end of the financial year.
a.
b.
c.
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.
Fair value is independently determined utilising 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.
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.
CSG 15|16 ANNUAL REPORT 41
DIRECTORS’ REPORT
12. Service Agreements
Executive Director
Ms. Julie-Ann Kerin
Group Executive
Mr. Neil Lynch
Mr. Warwick Beban
Mr. Declan Ramsay
Mr. Stephen Birrell
Mr. Mark Thomas
Expiry
Termination
Notice
Termination
Payment
N/A
N/A
N/A
N/A
N/A
N/A
6 months
6 months
6 months
3 months
3 months
3 months
3 months
6 months
3 months
3 months
6 months
3 months
13. Key Management Personnel’s Interests
The KMP’s relevant interests in ordinary shares of the Company as at 30 June 2016 and as at reporting date are detailed below. .
Opening
Balance
Purchases Received on Exercise
of Performance
Rights
Sales
Ceased as
KMP/ Director
Ordinary
shares of CSG
Mr. Thomas Cowan (i)
19,924,622
Mr. Phillip Bullock
Mr. Stephen Anstice
Mr. Mark Phillips
Ms. Robin Low
Ms. Julie-Ann Kerin
Mr. Neil Lynch
Mr. Mark Thomas
60,000
140,000
60,000
46,362
133,333
33,333
-
Mr. Warwick Beban
266,667
Mr. Declan Ramsay
Mr. Stephen Birrell
-
33,333
-
10,563
10,563
15,563
21,213
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,510,823
(1,644,156)
761,905
(500,000)
-
-
380,952
(300,000)
438,095
(438,095)
761,905
(380,000)
-
19,924,622
(70,563)
-
-
-
-
-
-
-
-
-
-
150,563
75,563
67,575
1,000,000
295,238
-
347,619
-
415,238
20,697,650
57,902
4,853,680
(3,262,251)
(70,563)
22,276,418
(i) Mr. Thomas Cowan is a partner in TDM Asset Management (TDM). TDM has a direct interest in the shares held by its clients by virtue of the control it exercises in relation to the shares
under its investment management arrangements with clients. TDM and its clients hold in aggregate 19,924,622 shares at 30 June 2016.
42
14.
Transactions
with Key
Management
Personnel
The Group used the corporate advisory
services of TDM Asset Management,
a firm which Mr. Thomas Cowan is a
partner of, during the year for the total
amount of $120,000. Amounts were
billed based on normal market rates for
such services and were due and payable
under normal payment terms.
During the financial year, the
companies in the Group entered into
agreements in respect of the purchase
of print and technology products and
services on normal commercial terms
and conditions with related entities of
the Directors
15.
Environmental
Regulation
The CSG Group’s operations
are not subject to any significant
environmental Commonwealth or
State regulations or laws.
16.
Proceedings on
Behalf of the
Consolidated
Entity
No person has applied for leave of Court
to bring proceedings on behalf of the
consolidated entity.
17.
State of Affairs
There have been no significant changes
in the CSG Group’s state of affairs
during the financial year.
18.
Dividends
The dividends paid or declared since
the start of the year are as follows:
Total Dividends
Consolidated entity
2016
$’000
2015
$’000
12,763
11, 365
Current year
interim:
Unfranked
dividends of
4 cents per
share paid
9 March 2016
14,238
14,238
Current year
final: Dividends
declared* at
5 cents per share
(2015: Unfranked
dividends of
5 cents per
share paid 8
September 2015)
Total Dividends
27,001 25,603
*
Unfranked dividends of 5 cents per share was
declared and approved on 15 August 2016 for
a payment date of 7 September 2016, refer to
item 23.
19.
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.
20.
Indemnification
and Insurance
of Directors and
Officers
During the financial year, the
consolidated entity has paid a premium
amounting to $174,750 insuring all
the directors and the officers against
judgments, settlements, investigative
costs, defence costs and costs to
appear at inquiries or investigations.
CSG 15|16 ANNUAL REPORT 43
DIRECTORS’ REPORT
21.
Directors’
Interests in
Contracts
Directors’ interests in contracts are
disclosed in Note 28 to the financial
statements.
22.
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 the 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.
2016
$
2015
$
431,615
98,659
Other Services
Other assurance,
taxation and
due diligence
services
23.
Events
Subsequent to
Reporting Date
Unfranked dividends of 5 cents per
share were declared and approved by
the Directors on 15 August 2016 for a
payment date of 7 September 2016.
24.
Auditor’s
Independence
Declaration
The lead auditor’s independence
declaration in relation to the audit for
the financial year is set out on page 46
of this report.
25.
Rounding of
Amounts
The CSG Group is of a kind referred
to in ASIC Corporations (Rounding
in Financial/Directors’ Reports)
Instrument 2016/191 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
15 August 2016
44
Auditor’s
Independence
Declaration
AUDITOR’S INDEPENDENCE
DECLARATION
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act
2001
To: the directors of CSG Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Scott Guse
Partner
Sydney
15 August 2016
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
46
I5|I6
Financial
Statements
15|16 FINANCIAL STATEMENTS
Consolidated Statement of Profit and Loss and Other Comprehensive Income for the year ended 30 June 2016
Consolidated entity
Sales revenue
Finance lease interest income
Interest income
Other income
Changes in inventories of finished goods
Finance lease interest expense
Marketing expenses
Occupancy expenses
Administration expenses
Employee benefits expenses
Share based transactions
Acquisition and integration related expenses
Other expenses
Depreciation and amortization
Finance costs
Profit before income tax
Income tax (expense)
Profit from continuing operations
Profit is attributable to:
Members of the parent
Non-controlling interest
Profit after income tax expense
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations,
net of tax
Cash flow hedges:
Net gains / (losses) taken to equity
Other comprehensive income for the year
Total comprehensive income for the year
Total profit and loss and other comprehensive income is attributable to:
Members of the Parent
Non-controlling interest
Notes
7
7
8
8
8
8
9
24
24
2016
$’000
213,128
25,801
86
7,605
246,620
119,060
12,894
2,986
6,160
24,515
40,744
2,189
989
4,141
6,088
1,609
221,375
25,245
(7,083)
18,162
17,452
710
18,162
18,162
2015
$’000
193,161
23,636
111
7,382
224,290
105,899
11,697
2,360
5,571
23,073
41,936
3,804
540
685
4,518
1,599
201,682
22,608
(8,295)
14,313
13,572
741
14,313
14,313
3,285
(2,283)
(1,339)
1,946
20,108
19,398
710
20,108
(2,260)
(4,543)
9,770
9,029
741
9,770
5.1
4.8
Earnings per share for profit from continuing operations attributable to equity holders of the parent entity:
Basic earnings per share (cents)
Diluted earnings per share (cents)
The accompanying notes form part of these financial statements
30
30
5.8
5.7
48
Consolidated Statement of Financial Position as at 30 June 2016
Consolidated entity
CURRENT ASSETS
Cash and cash equivalents
Receivables
Lease receivables
Inventories
Other
Derivatives
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Lease receivables
Property, plant and equipment
Intangible assets
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Deferred income
Deferred consideration
Short term borrowings
Current tax payable
Provisions
Debt associated with lease receivables
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Provisions
Deferred consideration
Derivatives
Deferred Tax Liability
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
Notes
11
12
12
13
14
15
12
16
17
18
27
19
22
20
22
27
21
9
20
23
24
24
2016
$’000
14,455
34,739
82,295
50,077
7,928
-
189,494
178,479
2,582
222,977
404,038
593,532
47,809
604
608
8,620
111
3,686
-
61,438
645
9,383
4,655
9,397
219,260
243,340
304,778
288,754
207,623
5,905
61,219
274,747
14,007
288,754
2015
$’000
24,754
25,762
67,598
41,592
6,574
915
167,195
142,444
1,936
193,658
338,038
505,233
43,235
95
-
10,131
515
3,325
617
57,918
545
-
2,441
3,435
187,149
193,570
251,488
253,745
164,193
5,487
70,768
240,448
13,297
253,745
CSG 15|16 ANNUAL REPORT 49
15|16 FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity for the year ended 30 June 2016
Consolidated entity
Contributed
Equity
Reserves
Cashflow
Hedge
Reserve
Retained
Earnings
Non-
controlling
Interest
Total Equity
$’000
$’000
$’000
$’000
$’000
$’000
Balance as at 1 July 2014
160,838
8,878
-
(2,283)
213
-
-
-
(2,260)
82,527
13,572
12,556
741
265,012
14,313
-
-
-
-
(2,283)
(2,260)
(2,283)
(2,260)
13,572
741
9,770
-
-
-
-
Profit for the year
Exchange differences
on translation of foreign
operations, net of tax
Cash flow hedges
Total comprehensive
income for the year
Transactions with owners
in their capacity as
owners:
Equity settled transactions
Capital distribution
Capital raising costs net of
deferred tax
Balance as at 30 June 2015
Profit for the year
Exchange differences
on translation of foreign
operations, net of tax
Cash flow hedges:
Net gains / (losses) taken to
equity
Net gains / (losses) taken to
profit and loss
Total comprehensive
income for the year
Transactions with owners
in their capacity as
owners:
-
-
-
-
-
Balance as at 1 July 2015
164,193
7,534
(2,047)
3,463
-
(108)
164,193
939
-
-
-
-
-
-
(25,331)
-
-
-
-
4,402
(25,331)
(108)
7,534
(2,047)
70,768
13,297
253,745
-
3,285
-
-
-
-
(1,339)
247
70,768
17,452
13,297
710
253,745
18,162
-
-
-
-
-
-
3,285
(1,339)
247
3,285
(1,092)
17,452
710
20,355
Equity settled transactions
44,202
(1,775)
Dividends paid
Capital raising costs net of
deferred tax
-
(772)
-
-
-
-
-
-
(27,001)
-
-
-
-
42,427
(27,001)
(772)
Balance as at 30 June 2016
207,623
9,044
(3,139)
61,219
14,007
288,754
The accompanying notes form part of these financial statements
50
Consolidated Statement of Cash Flows for the year ended 30 June 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers, employees and others
Movement in lease receivables
Interest income
Interest expense
Income tax paid
Consolidated entity
2016
$’000
2015
$’000
Notes
262,527
243,086
(241,457)
(214,447)
(48,586)
(41,774)
86
(1,608)
(3,407)
111
(1,454)
(4,773)
Net cash from/(used in) operating activities
25(a)
(32,445)
(19,251)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for intangibles
Payments for property, plant and equipment
Proceeds from the sale of property, plant and equipment
Payments for businesses
Net cash from/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings associated with lease receivables
Options exercised
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of share of share capital
Dividend distributions
Net cash flows provided by/(used in) financing activities
Net increase/(decrease) 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
(4,427)
(507)
-
(3,946)
(1,117)
-
(16,971)
(11,506)
(21,905)
(16,569)
32,041
-
-
(1,400)
39,127
(27,001)
42,767
(11,583)
24,754
1,284
14,455
49,436
320
9,400
-
-
(25,331)
33,825
(1,995)
27,268
(519)
24,754
10
25(b)
CSG 15|16 ANNUAL REPORT 51
52
Notes to the
Financial
Statements
30 June 2016
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
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 Level 1, 357 Collins
Street, Melbourne, VIC, Australia, 3000.
The consolidated financial statements
of the Company as at and for the year
ended 30 June 2016 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 15 August 2016.
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
Australia dollars which is the Company’s
functional currency. The Company is of
a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’
Reports) Instrument 2016/191 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..
54
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:
i. Assessing impairment of goodwill
Goodwill is allocated to cash generating
units (“CGUs”) according to applicable
business operations. 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
rates listed in Note 17 to determine
value-in-use.
ii.
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.
iii. 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.
iv. Share-based payments
Calculation of shared based payments
requires estimation of the timing
of the exercise of the underlying
instrument. The estimates are based
on historical trends.
v.
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.
vi. Inventory - obsolescence
Inventory balances relate to items
subject to technological obsolescence
and 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.
The Group controls an entity when it
is exposed to, or has rights to, variable
returns from its involvement with the
entity and has the ability to affect those
returns through its power over the entity.
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 consolidated 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 re statement 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; and
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.
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.
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 net
of transaction costs 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.
ii.
Non-derivative financial liabilities
CSG 15|16 ANNUAL REPORT 55
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 3: Summary Of Significant Accounting Policies (cont.)
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. 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
Group 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%. 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.
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
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.
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, i.e. “legal
title”has 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
ii
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
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.
Derivative financial instruments are
recognised initially at fair value and
Revenue arrangements with multiple
deliverables.
56
Where two or more revenue-generating
activities or deliverables are sold under
a single arrangement, each deliverable
that is considered to be a separate
unit of accounting is accounted for
separately. When the deliverables in
a multiple element arrangement are
not considered to be separate units
of accounting, the arrangement is
accounted for as a single unit.
A separate unit of accounting exists
where the deliverable has value to the
customer on a stand-alone basis and
there is objective and reliable evidence
of the fair values.
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.
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 on the weighted
average cost basis at the lower of cost
and net realisable value.
Net realisable value represents the
estimated selling price in the ordinary
course of business less the estimated costs
of completion, including cost of sales.
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.
Where the Group leases assets as
a lessor on an operating lease, the
Group 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 Group.
The following rates used in the
calculation of depreciation are as follows:
h.
Intangible assets
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.
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. Other
intangible assets have been assigned
finite lives between 3-10 years. Software
developed for resale is amortised
over five years. Customer contracts/
relationships acquired in a business
combination have been assigned a finite
life of between 5 and 14 years and are
amortised on a straight line basis over
this period.
i.
Impairment
i. Non-derivative financial assets
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
Assets
Rate
Method
Leasehold improvements
2.5% - 33%
Diminishing value and straight line
Plant and equipment
2.5% - 40%
Diminishing value and straight line
Motor vehicles
13% - 19%
Diminishing value
Office computer equipment
10% - 50%
Diminishing value and straight line
Furniture and fittings
5% - 20%
Diminishing value and straight line
Leased plant and equipment
20%
Straight-line
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.
CSG 15|16 ANNUAL REPORT 57
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 3: Summary Of Significant Accounting Policies (cont.)
iii. Trade and other Payables
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 against the borrowings 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.
Share-based Payments
The consolidated entity operates an
employee share rights plan. The total
amount to be expensed over the vesting
period is determined by reference to
the fair value of the rights at grant date.
The fair value of rights 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 right.
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.
i.
Restructuring
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.
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.
Operating lease
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 re-measurement 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.
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 in other income
in Note 7 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.
Operating lease payments are
recognised as an expense on a straight-
line basis over the lease term, except
A balance sheet approach is adopted
under which deferred tax assets and
liabilities are recognised for temporary
58
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 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.
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.
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.
CSG 15|16 ANNUAL REPORT 59
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 4:
New Accounting
Standards And
Interpretations
ii.
AASB 15 Revenue from Contracts
with Customers
AASB 15 establishes a comprehensive
framework for determining whether,
how much, and when revenue is
recognized. AASB 15 is effective for
annual reporting periods beginning
on or after 1 January 2018, with early
adoption permitted.
iii.
AASB 16 Leases
AASB 16 removes the classification
of leases as either operating leases
or financial leases, with the lessee
effectively treating all leases as financial
leases. Short-term leases (less than
12 months) and leases of low-value
assets (such as personal computers)
are exempt from the lease accounting
requirements. There are also changes
in accounting over the life of the lease.
In particular, companies will now
recognise a front-loaded pattern of
expense for most leases, even when
they pay constant annual rentals. Lessor
accounting remains similar to current
practice – i.e. lessors continue to
classify leases as finance and operating
leases. Early adoption will be permitted
for entities that also adopt AASB 15
Revenue from Contracts
with Customers.
a. New standards adopted
There was no material impact on
the financial report as a result of
the adoption of new or amended
accounting standards and
interpretations effective for annual
reporting periods beginning on or after
1 July 2015.
b.
New standards and
interpretations not yet adopted
A number of new standards,
amendments to standards and
interpretations are available for
adoption for annual periods beginning
after 1 July 2015. The Group does not
plan to adopt these standards early
and the extent of the impact has not
been determined. The standards which
may be relevant to the Group as set out
below.
i.
AASB 9 Financial Instruments
(December 2014), AASB2014-
7 Amendments to Australian
Accounting Standards arising
from AASB 9 (December 2014),
AASB 2014-8 Amendments to
Australian Accounting Standards
arising from AASB 9 (December
2014) – Application of AASB 9
(December 2009) and AASB 9
(December 2010)
AASB 9 (2014) includes revised
guidance on the classification and
measurement of financial instruments,
a new expected credit loss model for
calculating impairment on financial
assets, and new general hedge
accounting requirements. AASB 9
(2014) is effective for annual reporting
periods beginning on or after 1 January
2018, with early adoption permitted.
60
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 value hierarchy
In valuing financial instruments, the
consolidated entity uses the following
fair value measurement hierarchy that
reflects the significance of the inputs
used in making the measurements:
Level 1: Quoted market price
(unadjusted) in an active market for an
identical instrument.
Level 2: Valuation techniques based on
observable inputs, either directly (i.e.
as prices) or indirectly (i.e. derived from
prices).
Level 3: Valuation techniques using
significant unobservable inputs. This
category includes all instruments where
the valuation technique includes inputs
not based on observable data and the
unobservable inputs have a significant
effect on the instrument’s valuation.
There are no material level 3 financial
instruments.
The fair value of financial assets and
financial liabilities, other than the fair
value of derivatives, approximates their
carrying amounts as disclosed in the
Statement of Financial Position and
Notes to the financial statements.
The fair values of the Group’s derivative
financial instruments, being interest rate
swaps and forward foreign exchange
contracts, are categorised as Level 2 in
the fair value hierarchy (2015: Level 2).
The fair values are based on the market
comparison technique, using broker or
counterparty quotes. Similar contracts
are traded in an active market and the
quotes reflect the actual transactions
in similar instruments. There are no
significant unobservable inputs used in
the valuations.
Fair value measurement
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. Forward exchange contracts and
d. Contingent consideration
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.
b. 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.
c. Share-based payment
transactions
The fair value of the Performance
Rights under the Long Term Incentive
Plan are 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.
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, short 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; and
fair values.
The Board of Directors has responsibility
for governance over the identification
and management of operational and
financial risks.
a.
Interest rate risk
Corporate debt facility
As at 30 June 2016, the Senior
Debt Facility Agreement with the
Commonwealth Bank of Australia
(“CBA”) has a limit of $45m which
reverts to $35m as at 31 August 2016.
The maturity date of this facility is 1
January 2017. Subsequent to balance
date on 10 August 2016, a new Senior
Debt Facility Agreement with a limit of
$60m and an expiry date of 10 August
2019 was entered into with CBA (refer
Note 25). This Facility is primarily to be
used for working capital and general
corporate purposes but also provides
for other sub-facilities including bank
guarantees, a business card facility and
a lease finance facility. Interest on the
Facility is charged at a floating rate plus
a margin.
CSG 15|16 ANNUAL REPORT 61
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 6: Financial Risk Management (cont.)
Lease financing facilities – New Zealand
Lease financing facilities – Australia
On 20 April 2016, the Group completed
the refinancing of the CBA Cash
Advance Facility into the CSG Finance
NZ Trust securitisation funding facility
provided by Westpac. In conjunction
with the refinancing, the funding
limit under the Westpac facility was
increased from NZ$95m to NZ$115m
and the availability period for writing
new business was extended 12 months
until 15 April 2018, with a final maturity
date of 15 April 2020. Interest on the
CSG Finance NZ Trust securitisation
funding 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.
On 20 April 2016, the Group completed
the refinancing of the CBA Senior
Facility into the CSG Finance Australia
Trust securitisation funding facility
provided by Westpac. In conjunction
with the refinancing, the funding
limit under the Westpac facility was
increased from $100m to $120m
and the availability period for writing
new business was extended until 20
April 2018, with a final maturity date
of 20 April 2020. Interest on the CSG
Finance Australia Trust securitisation
funding facility is charged at a floating
rate plus a margin, and re-prices
generally on a quarterly 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.
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 facilities
interest rate swaps are taken out by
the trust entities to hedge 100% of the
debt drawn to fund future cash flow
equivalent to the portfolio designated
“securitised” leases.
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.
Interest Rate Sensitivity Analysis
2016
$000’s
2015
$000’s
Impact on Income
Statement
Impact on Equity
Impact on Income
Statement
Impact on Equity
Increase/
(decrease) on profit
Increase/
(decrease) on equity
Increase/
(decrease) on profit
Increase/
(decrease) on equity
Interest Rates:
100 bps increase:
Cash flow sensitivity:
Impact on interest income on cash
Impact on interest expense on loans
Impact on cash flows from
derivative
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 cash
Impact on interest expense on loans
Impact on cash flows from
derivative
Fair value sensitivity:
Impact on derivative fair value at
balance date
Total impact
62
218
(2,192)
1,641
3,492
3,159
(218)
2,192
(1,641)
(3,492)
(3,159)
218
(2,192)
1,641
3,492
3,159
(218)
2,192
(1,641)
(3,492)
(3,159)
208
(1,774)
1,110
2,729
2,273
(208)
1,774
(1,110)
208
(1,774)
1,110
2,729
2,273
(208)
1,774
(1,110)
(2,729)
(2,729)
(2,273)
(2,273)
2,051
1,610
d. Foreign Exchange risk
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 Group has contingent
liabilities relating to buy back
guarantees on certain finance
contracts for the lease of copiers
and multi-function devices by
customers. The Group undertakes a
credit approval process to determine
whether it is prepared to buy back the
loan on default. When a circumstance
arises where the Group is required
to buy back the loan, the equipment
financed becomes the property of the
Group.
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 and technology
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 Australia and 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.
Impairment
At 30 June 2016, the ageing of the trade
and other receivables that were not
impaired was as follows::
Neither
past due or
impaired
Past due 1 – 30
days
Past due not
impaired 31 –
90 days
Past due not
impaired 91+
days
2016
2015
285,540
222,754
5,111
9,634
2,811
1,807
295,513 235,805
Management believes that the
unimpaired amounts that are past
due by more than 30 days are still
collectible in full, based on historic
payment behaviour and analysis of
individual customer credit risk.
c. Liquidity Risk
Liquidity risk is the risk that the Group
will encounter difficulty in meeting the
obligations associated with its financial
liabilities that are settled by delivering
cash or other financial assets. The
Group’s approach to managing liquidity
is to ensure, as far as possible, that it
will have sufficient liquidity to meet
its liabilities when they are due, under
both normal and stressed conditions.
The level of expected cash inflows from
trade and lease receivables are closely
monitored against the predicted
outflows arising from operations.
The Group has access to various
financing facilities to support its lease
receivables financing activities, and to
provide funding for working capital and
general corporate purposes. Refer to
Note 25 (c) for details on the unused
banking facilities.
As part of the arrangements regarding
the Cash Advances Facility and the
Senior Facility (both refinanced in
April 2016), the Group was required to
contribute towards credit protection
reserves. The credit protection reserve
of the Cash Advance Facility was a
cash reserve maintained at 10% of
the loan drawn to fund the lease book
value (2015: 10%) and for the Senior
Facility, a cash reserve of 15% of the
loan drawn to fund the lease book value
(2015: 15%). The Company was in full
compliance with these covenants up to
the date the facilities were refinanced
and repaid.
The securitisation financing facilities in
both Australia and New Zealand require
the Group to contribute to credit
enhancement. At 30 June 2016, this
comprised 8.1% of the net pool balance
of securitised leases for the New
Zealand facility ($8.8m (NZ$9.3m))
and 15.3% of the net pool balances of
securitised leases for the Australian
facility ($20.2m).
The Group operates internationally
and is exposed to foreign exchange
risk arising from various currency
exposures, primarily with respect to
the New Zealand dollar and US dollar.
Foreign exchange risk arises from
future commercial transactions,
recognised assets and liabilities and
net investments in foreign operations.
The Company’s subsidiary, Konica
Minolta Business Solutions New
Zealand Limited, settles purchases
of equipment predominantly in US
dollars. All committed purchases are
fully hedged using forward contracts
or option contracts to buy US$ / sell
NZ$ to protect from exchange rate
movements between the shipping
date and settlement. Forecast highly
probable but not yet committed
purchases may also be hedged using
forward contracts or option contracts.
Foreign exchange hedge contracts
generally have maturities of less than
one year and are designated as cash
flow hedges.
As at 30 June 2016, a total of US$12.9m
(2015: US$4.7m) of forward cover was
in place with an average NZ$/US$ rate
of 0.6654 (2015: 0.7217).
The Company has hedged it’s exposure
to income generated by the New
Zealand businesses using collar options.
As at 30 June 2016, a total of NZ$7.8m
(2015: NZ$17.7m) of forward cover was
in place at an average floor of 0.90 and
cap of 0.9438 (2015: floor of 0.93).
CSG 15|16 ANNUAL REPORT 63
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
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m
e
t
a
r
t
s
e
r
e
t
n
i
g
n
i
t
a
o
fl
e
g
d
e
h
o
t
t
u
o
n
e
k
a
t
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
i
o
t
e
u
d
d
e
x
fi
d
e
r
e
d
s
n
o
C
i
1
Note 7: Revenue and Income
Sales revenue
Revenue from sales of goods
Revenue from services
Other Income
Sundry
Interest rate swap income
Gain/(Loss) on foreign exchange
Consolidated entity
2015
$’000
103,621
89,540
193,161
6,637
833
(88)
7,382
2016
$’000
110,551
102,577
213,128
7,496
247
(138)
7,605
CSG 15|16 ANNUAL REPORT 65
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 8: Profit From Continuing Operations
Profit from continuing operations before income tax has been determined after the following specific expenses:
Consolidated entity
Changes in inventories of finished goods
Cost of goods
Cost of sales - service
Cost of sales service (employee benefits)
Total changes in inventories of finished goods
Other expenses
Bad debts expense
Other
Total other expenses
Depreciation and amortization
Plant and equipment
Leased property, plant and equipment
Leasehold improvements
Amortisation of customer contracts/relationships
Amortisation of intangible assets
Amortisation of borrowing costs
Total depreciation and amortisation
Finance costs
Interest
Bank fees
Total finance costs
2016
$’000
57,288
43,785
17,987
119,060
898
3,243
4,141
1,005
15
247
3,137
1,510
174
6,088
1,455
154
1,609
2015
$’000
52,148
34,925
18,826
105,899
811
(126)
685
1,027
105
243
2,266
682
195
4,518
1,454
145
1,599
66
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
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% (2015: 30%)
Add tax effect of:
-
-
-
-
other non-allowable items
effect of different tax rates in other jurisdictions (i)
share-based payments
over provision for income tax in prior years
Less tax effect of:
-
-
other non-assessable items
research and development benefit
Income tax expense attributable to profit
(i) The corporate tax rate in New Zealand is 28%.
c. Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Inventories
Doubtful debts
Property, plant and equipment
Accrued expenses
Provision for annual and long service leave
Other provisions
Research and development tax offsets
Tax losses carried forward
Share issue costs
Other
Total deferred tax assets
Consolidated entity
2015
$’000
2,096
6,573
(374)
8,295
22,608
6,782
1,002
(274)
1,141
(28)
1,841
(328)
-
(328)
8,295
335
280
565
1,107
841
624
2,348
6,928
131
100
13,259
2016
$’000
3,539
3,693
(149)
7,083
25,245
7,573
772
(217)
658
(149)
1,064
(1,097)
(457)
(1,554)
7,083
1,029
451
375
1,435
1,218
92
4,176
6,435
270
(62)
15,419
CSG 15|16 ANNUAL REPORT 67
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 9: Income Tax (cont.)
Deferred tax liabilities
The balance comprises:
Accrued revenue
Intangibles
Property, plant and equipment
Operating Leases
Other
Total deferred tax liabilities
Net Deferred tax (liabilities)/assets
d.
Deferred income tax related to items charged or credited directly to equity
Share issue costs
Derivative
Total
Note 10: Dividends On Ordinary Shares
Consolidated entity
2016
$’000
2015
$’000
(1,099)
(3,898)
(2,489)
(16,908)
(422)
(24,816)
(9,397)
263
558
821
(1,119)
-
(2,074)
(12,417)
(1,084)
(16,694)
(3,435)
108
-
108
Consolidated entity
2016
$’000
2015
$’000
a.
Dividends paid during the year
i. Current Year Interim
Unfranked dividends (4 cents per share)
(2015: 4 cents per share)
12,763
11,366
ii.
Prior Year Final
Unfranked dividends (5 cents per share)
(2015: 5 cents per share)
b. 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
c. Dividends proposed and not recognised as a liability
Unfranked dividends of 5 cents per share were declared and approved on 15 August
2016 for a payment date of 7 September 2016. Refer to Note 33.
14,238
27,001
13,965
25,331
1,140
819
68
Note 11: Cash And Cash Equivalents
Cash at bank
Restricted cash (i)
Cash on hand
(i) Restricted cash relates to cash the Group is required to have on hand under various financing arrangements – refer note 6.
Note 12: Receivables
Trade receivables
Impairment
Sundry debtors
Finance Lease receivables
Gross receivable
Less: Unearned finance income
Represented by:
Current net receivable
Non-current net receivable
Note 13: Inventories
Finished goods
Consumables
Toner in Field
Consolidated entity
2015
$’000
10,844
13,895
15
24,754
Consolidated entity
2015
$’000
23,978
(371)
2,155
25,762
252,906
(42,864)
210,042
67,598
142,444
Consolidated entity
2015
$’000
17,085
7,566
16,941
41,592
2016
$’000
7,940
6,499
16
14,455
2016
$’000
29, 192
(430)
5,977
34,739
308,246
(47,472)
260,774
82,295
178,479
2016
$’000
19,897
9,958
20,222
50,077
Finished goods comprises multi-function devices, printers and related accessories. Toner in field comprises unutilised toner held at customer premises
Note 14: Other Current Assets
Prepayments
Other
Consolidated entity
2015
$’000
2,237
4,337
6,574
2016
$’000
3,872
4,056
7,928
CSG 15|16 ANNUAL REPORT 69
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 15: Derivative Assets
Foreign currency options
Note 16: Property, Plant And Equipment
Consolidated entity
2015
$’000
915
915
2016
$’000
-
-
Consolidated entity
Leasehold
Improvements
Plant &
Equipment
Furniture &
Fittings
Office
Computer
Equipment
Leased Plant
& Equipment
$’000
$’000
$’000
$’000
$’000
3,093
(2,550)
543
543
-
(6)
216
-
(243)
510
3,102
(2,592)
510
510
196
16
38
(9)
(247)
504
3,383
(2,879)
504
902
(645)
257
257
53
-
70
-
(74)
306
791
(485)
306
306
700
(22)
119
(24)
(211)
868
2,530
(1,662)
868
3,685
(3,004)
681
681
-
(10)
51
-
(294)
428
3,532
(3,104)
428
428
33
53
19
-
(199)
334
3,890
(3,556)
334
9,145
(8,106)
1,039
1,039
(53)
(14)
355
(3)
(659)
665
8,524
(7,859)
665
665
439
36
331
-
(595)
876
10, 128
(9,252)
876
736
(589)
147
147
-
(3)
-
(12)
(105)
27
642
(615)
27
27
-
(12)
-
-
(15)
-
640
(640)
-
At 1 July 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Transfers between classes
Foreign exchange impact
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Acquisitions through
business combinations
Foreign exchange impact
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
Total
$’000
17,561
(14,894)
2,667
2,667
-
(33)
692
(15)
(1,375)
1,936
16,591
(14,655)
1,936
1,936
1,368
71
507
(33)
(1,267)
2,582
20,571
(17,989)
2,582
70
Note 17: Intangible Assets
Consolidated entity
At 1 July 2014
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Acquisitions
Amortisation for the year
Closing net book amount
At 30 June 2015
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2016
Opening net book amount
Acquisitions through business combinations
Acquisitions
Foreign exchange impact
Amortisation for the year
Closing net book amount
At 30 June 2016
Cost
Accumulated amortisation
Net book amount
Customer
Contracts/
Relationships
Licenses
and Other
Intangibles
$’000
$’000
Goodwill
$’000
162,888
-
162,888
31,727
(9,734)
21,993
162,888
21,993
1,429
-
164,317
-
(2,266)
19,727
164,317
31,727
-
(12,000)
164,317
19,727
164,317
14,907
-
-
-
179,224
179,224
-
179,224
19,727
12,445
-
374
(3,136)
29,410
44,566
(15,156)
29,430
Total
$’000
201,213
(10,212)
191,001
191,001
5,800
(3,143)
193,658
206,845
(13,187)
193,658
193,658
29,066
4,427
472
(4,646)
222,977
6,598
(478)
6,120
6,120
4,371
(877)
9,614
10,801
(1,187)
9,614
9,614
1,714
4,427
98
(1,510)
14,343
17,046
(2,703)
14,343
240,836
(17,859)
222,977
CSG 15|16 ANNUAL REPORT 71
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 17: Intangible Assets (cont.)
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
Enterprise Solutions Australia
Business Solutions New Zealand
Finance Solutions Australia
Finance Solutions New Zealand
CodeBlue
2016
$’000
62,287
3,406
70,019
9,120
24,385
10,007
179,224
2015
$’000
57,388
3,406
70,019
9,120
24,385
-
164,317
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, using observable market data where available, based on financial budgets approved by the Board, plus a terminal growth rate.
Key assumptions used in the calculation of value in use were discount rate and the terminal EBITDA growth rate, which are listed in the
table below.
Business Solutions Australia
Enterprise Solutions Australia
Business Solutions New Zealand
Finance Solutions Australia
Finance Solutions New Zealand
CodeBlue
Terminal EBITDA Growth Rate
Discount Rate
2016
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
2015
2.5%
2.5%
2.5%
2.5%
2.5%
-
2016
9.0%
9.5%
9.9%
9.0%
8.5%
9.9%
2015
10.2%
10.7%
10.4%
11.3%
10.3%
-
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.
72
Note 18: Payables
CURRENT
Trade payables
Other payables
Note 19: Short Term Borrowings
CURRENT
Secured
Loans and Borrowings
Other
Consolidated entity
2015
$’000
15,561
27,674
43,235
Consolidated entity
2015
$’000
9,400
731
10,131
2016
$’000
20,019
27,790
47,809
2016
$’000
8,000
620
8,620
Note 20: Debt Associated With Lease Receivables
CURRENT
Loans and borrowings
NON - CURRENT
Loans and borrowings
Consolidated entity
2015
$’000
617
617
187,149
187,149
2016
$’000
-
-
219,260
219,260
CSG 15|16 ANNUAL REPORT 73
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 21: Derivatives Liabilities
NON - CURRENT
Interest rate swaps
Foreign currency options
Information about interest rate risk is detailed in Note 6
Note 22: Provisions
CURRENT
Employee Benefits
Other
NON - CURRENT
Employee Benefits
Other
Note 23: Contributed Equity
a.
Issued and paid up capital
Ordinary shares fully paid
Consolidated entity
2015
$’000
2,441
-
2,441
Consolidated entity
2015
$’000
2,584
741
3,325
545
-
545
2016
$’000
3,625
1,030
4,655
2016
$’000
3,586
100
3,686
560
85
645
Consolidated entity
2015
$’000
164,193
164,193
2016
$’000
207,623
207,623
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
Share buy-backs
Issued shares
Tax exempt share plan
Capital distribution
Capital raising costs net of deferred
tax asset
No. of shares
284,148,839
-
34,690,174
237,658
-
-
Balance at the end of the year
319,076,671
2016
$’000
164,193
-
43,818
384
-
(772)
207,623
No. of shares
278,840,492
-
4,950,328
358,019
-
-
284,148,839
2015
$’000
160,838
-
3,313
150
-
(108)
164,193
74
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
All employees, including Directors, may be issued options at the discretion of the Nomination and Remuneration Committee.
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% of share capital. The options are not listed on the ASX and any Director issued options are approved at
the Annual General Meeting.
During the 2016 financial year there were no additional options granted to employees or Directors.
Options on issue 30 June 2015:
Issued date
Expiry date
Exercise
price
Opening
01/07/2014
LTIP Issue 3
15/09/2014
$0.71
450,000
450,000
Issued
Exercised
Lapsed
-
-
(450,000)
(450,000)
-
-
Closing
30/06/2015
-
-
e. Performance Rights
Each performance right represents a right 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 2016:
Issued Date
Performance
Hurdle Date
Share Price at
Vesting Date
Opening
01/07/2015
Issued
Lapsed
Vested
Closing
30/06/2016
LTIP Issue 5 & 7
30/11/2015
1.685
5,780,281
LTIP Issue 5 & 7
30/11/2016
LTIP Issue 6
LTIP Issue 8
LTIP Issue 8
MAIP
Total
01/08/2015
30/11/2015
30/11/2016
1/07/2017
1.70
1.685
4,279,383
606,061
57,143
564,945
1,779,731
13,067,544
-
-
-
-
-
-
-
(84,000)
(5,696,281)
-
(303,999)
-
3,975,384
-
-
(606,061)
(57,143)
-
-
(433,000)
-
-
-
131,945
1,779,731
(820,999)
(6,359,485)
5,887,060
Performance rights on issue at 30 June 2015:
Performance
Hurdle Date
Share Price at
Vesting Date
Opening
01/07/2014
Issued
Lapsed
Vested
Closing
30/06/2015
4,600,327
-
(99,999)
(4,500,328)
-
5,859,333
857,329
(936,381)
LTIP Issue 5 & 7
30/11/2016
4,100,332
843,717
(664,666)
606,061
-
-
-
-
57,143
564,945
1,779,731
-
-
-
-
-
-
-
-
-
-
5,780,281
4,279,383
606,061
57,143
564,945
1,779,731
15,166,053
4,102,865
(1,701,046)
(4,500,328)
13,067,544
Issued Date
LTIP Issue 5 & 7
LTIP Issue 5 & 7
30/11/2014
30/11/2015
LTIP Issue 6
LTIP Issue 8
LTIP Issue 8
MAIP
Total
01/08/2015
30/11/2015
30/11/2016
1/07/2017
The performance rights listed above are on the same terms as is disclosed in section 8 of the Director’s Report.
f.
Issue of ordinary shares
In August 2015, the Company issued 21 million ordinary shares via an institutional placement at $1.42 per share raising $30 million.
In September 2015, the Company issued 7.1 million ordinary shares via a Share Purchase Plan (SPP) raising approximately $10.2m.
CSG 15|16 ANNUAL REPORT 75
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 24: Reserves And Retained Earnings
Consolidated entity
Share-based payment reserve
Foreign currency translation reserve
Cash flow hedge reserve
Retained earnings
a. Share-based payment reserve
i. Nature and purpose of reserve
Notes
24(a)
24(b)
24(c)
24(d)
2016
$’000
2,630
6,414
(3,139)
5,905
61,219
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
Equity settled transactions
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. Cash flow hedge reserve
i. Nature and purpose of reserve
This reserve is used to record the effective portion of changes in the value of hedging derivatives.
ii. Movements in reserve
Balance at beginning of year
Net gains/(losses) taken to equity
Net gains/(losses) transferred to profit and loss
Balance at end of year
d. Retained Earnings
Balance at beginning of year
Net profit attributable to members
Total available for appropriation
Dividends paid
Balance at end of year
10
4,405
(1,775)
2,630
3,129
3,285
6,414
(2,047)
(1,339)
247
(3,139)
70,768
17,452
88,220
(27,001)
61,219
2015
$’000
4,405
3,129
(2,047)
5,487
70,768
3,466
939
4,405
5,412
(2,283)
3,129
213
(2,260)
-
(2,047)
82,527
13,572
96,099
(25,331)
70,768
76
Note 25: Cashflow Information
a. Reconciliation of cash flow from operations with profit after income tax
Profit from ordinary activities after income tax
Non-cash items
Profit/(loss) on sales of assets
Amortisation of intangibles
Depreciation of property, plant and equipment
Share based transactions
Cash flow hedge
(Increase)/decrease in assets
Receivables
Prepayments
Inventories
Deferred tax assets
Lease receivables
Increase/(decrease) in liabilities
Payables
Provisions
Deferred tax liabilities
Tax provisions
2016
$’000
18,162
-
4,646
1,267
2,189
2,106
10,208
(5,165)
(1,505)
(7,869)
(1,886)
(50,205)
243
14
5,962
(404)
Consolidated entity
2015
$’000
14,313
(15)
3,143
1,375
3,804
(745)
7,562
(2,691)
(28)
(631)
1,182
(41,774)
801
(610)
3,435
(810)
Net cash flow from operating activities
(32,445)
(19,251)
b. Reconciliation of cash
Cash balance comprises:
Cash at bank
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), (v)
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
14,455
24,754
45,000
109,641
120,000
274,641
8,000
101,856
117,405
227,261
37,000
7,785
2,595
47,380
45,000
115,105
125,000
285,105
9,400
93,994
93,771
197,165
35,600
21,111
31,229
87,940
(i) The Company has a multi-option facility with the CBA (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 $1.5m in relation
to various guarantees and security deposits provided by the bank on behalf of the
Company. This facility matures on 1 January 2017. On 10 August 2016, a new three year
multi-option facility with a limit of $60m was finalized with CBA.
(ii) The Group’s Westpac Banking Corporation New Zealand funding facility, securitised
by finance lease receivables (“New Zealand Securitisation Facility”), matures on 15
April 2020. The facility limit is NZ$115m.
(iii) The Group’s CBA New Zealand Cash Advances Facility, secured by finance lease
receivables, was refinanced and repaid on 20 April 2016. The facility limit was
NZ$35m.
(iv) The Group’s Westpac Banking Corporation Australia funding facility securitised by
finance lease receivables (“Australian Securitisation Facility”), matures on 20 April
2020. The facility limit is $120m.
(v) The Group’s CBA Senior Facility, secured by finance lease receivables, was refinanced
and repaid on 20 April 2016. The facility limit was $25m.
CSG 15|16 ANNUAL REPORT 77
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 26: Lease Commitments
Lease expenditure commitments
Operating Leases (non-cancellable)
i.
Operating leases relate to the lease of land, buildings,
vehicles 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
Notes
Consolidated entity
2016
$’000
2015
$’000
6,283
14,969
3,264
24,516
5,176
9,496
4
14,676
Note 27: Business Combinations
During the 2015 financial year the Group purchased from Capital Finance Limited a business comprising lease receivables for total
purchase consideration of $12,041,000. Payments were made of $11,506,000 in the prior year and a final payment of $535,000 in
July 2015.
During the 2016 financial year the Group entered into several business combinations agreements to further the growth strategy and
realise synergies within the Group’s existing businesses.
In September 2015, 100% of the shares were acquired in CodeBlue Limited, a technology service company based in New Zealand for a
total consideration of $16,225,000. Payments were made of $9,696,000 (net of cash acquired) in the current financial year and further
payments of $608,000 will be made in FY17 and an estimated $6,309,000 to be made in subsequent financial years if certain targets
met. CodeBlue contributed $17,377,000 in revenue and $1,168,000 in net profit for the current financial year. If CodeBlue was part of the
Group for the full financial year, revenue would be approximately $251,243,000 and net profit of $18,494,000.
In February 2016, the Group purchased the net assets of a traditional print business in the Northern Territory, A2Z, for total consideration
of $825,000 all paid during the FY2016 year.
In May 2016, the Group purchased 100% of the shares of a Western Australian print business, Printsync. Total consideration for this
business was $8,989,000 with $5,915,000 (net of cash acquired) paid in the current financial year with further amounts provided if
certain targets being met in future years. Given the transaction occurred in May 2016, provisional acquisition accounting has been used.
There is no expectation of deductibility of the calculated goodwill for any of these transactions.
The acquisitions had the following effect on the consolidated entity’s assets and liabilities:
Receivables
Customer contracts
Other assets
Total assets acquired
Payables
Other liabilities
Liabilities acquired
Net assets acquired
Goodwill on acquisition
Consideration paid, net of cash acquired
CFAL
CodeBlue
A2Z
Printsync
Total
10,508
803
437
11,748
-
559
559
11,189
852
12,041
$’000
2,273
6,352
2,727
11,352
2,661
2,473
5,134
6,218
10,007
16,225
-
-
81
81
-
55
55
26
799
825
1,393
5,290
1,411
8,094
1,908
1,875
3,783
4,311
4,678
8,989
14,174
12,445
4,656
31,275
4,569
4,962
9,531
21,744
16,336
38,080
The Group incurred acquisition related costs of $989,000 on legal fees, due diligence, and other combination expenses.
78
Note 28: 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
2016
$
2,749,652
127,675
97,514
826,687
3,801,528
Consolidated entity
2015
$
3,215,678
124,465
90,191
2,052,968
5,483,302
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. Transactions with Key Management Personnel
The Group used the corporate advisory services of TDM Asset Management, a firm which Mr. Thomas Cowan is a partner of, during the
year for the total amount of $120,000. Amounts were billed based on normal market rates for such services and were due and payable
under normal payment terms.
During the financial year, the companies in the Group entered into agreements in respect of the purchase of print and technology
products and services on normal commercial terms and conditions by related entities of the Directors.
d. Group Entities
The consolidated financial statements include the financial statements of CSG Ltd and its controlled entities listed below:
Former Name
Country of
Incorporation
Ownership
interest
2016
%
2015
%
Parent Entity
CSG Limited (i)
Subsidiaries of CSG Limited:
CSG Business Solutions (AUS) Pty Ltd (i)
CSG Communications Pty Ltd
CSG Finance Pty Ltd (i)
CSG Print Services NZ Limited (iii)
Anadex Pty Ltd ATF Anadex Trust (i),(ii)
Bexton Professional Pty Ltd (i), (ii)
Change Corporation Pty Ltd (i), (ii)
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
100
100
100
-
-
-
CSG Enterprise Solutions Pty Ltd (i)
CSG Enterprise Print Solutions Pty Ltd
Australia
100
A.C.N. 126 840 542 Pty Ltd (i), (ii)
CSG Education Pty Ltd (i), (ii)
Delexian Pty Ltd (i), (ii)
Aaromba Technologies Pty Ltd (i), (ii)
Subsidiary of Aaromba Technologies Pty Ltd:
Aaromba Technologies WA Pty Ltd (i) (ii)
Australia
Australia
Australia
Australia
Australia
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
CSG 15|16 ANNUAL REPORT 79
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 28: Related Party Disclosures (cont.)
Former Name
Country of
Incorporation
Ownership
interest
Parent Entity
Subsidiaries of CSG Business Solutions (AUS) Pty Ltd:
CSG Business Solutions (NT) Pty Ltd (i)
Connected Solutions Group Pty Ltd
CSG Print Services Pty Ltd (i)
CSG Business Solutions (Sunshine Coast) Pty Ltd (i)
Sunshine Coast Office
Equipment Pty Ltd
CSG Business Solutions (South Queensland) Pty Ltd (i)
Haloid Holdings Pty Ltd
CSG Business Solutions (North Queensland) Pty Ltd (i)
Seeakay Pty Ltd
CSG Business Solutions (WA) Pty Ltd (i)
Edgeview Enterprises Pty Ltd
Subsidiaries of CSG Enterprise Print Solutions Pty Ltd:
2016
%
2015
%
100
100
100
100
100
100
100
100
100
100
100
-
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
100
100
CSG Enterprise Solutions (Singapore) Pte. Ltd
Subsidiaries of CSG Finance Pty Ltd:
CSG Finance (NZ) Limited (iii)
CSG Finance Australia Pty Ltd (i)
Subsidiaries of CSG Finance Australia Pty Ltd:
CSG Finance Group Receivables Pty Ltd (i)
CSG Finance Australia Trust
Subsidiaries of CSG Print Services NZ Limited:
Leasing Solutions Limited
New Zealand
Australia
Australia
Australia
CSG Business Solutions Limited (iii)
CSG Management Services Limited
New Zealand
Konica Minolta Business Solutions New Zealand Limited
Ubix Business Solutions Limited (iii)
CodeBlue Limited
Subsidiaries of CodeBlue Limited:
CodeBlue Christchurch Limited
Work IT Solutions Limited
IT Synergy Limited
CodeBlue Wellington Limited
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Subsidiaries of CSG Finance (NZ) Limited:
Leasing Solutions Limited
CSG Finance (NZ Facility 2) Limited (iii)
Onesource Finance Limited
New Zealand
CSG Finance (NZ Warehouse) Limited (iii)
Solutions Group Receivables Limited
New Zealand
CSG Finance New Zealand Trust
New Zealand
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
-
-
-
-
-
100
100
100
(i) CSG Limited and its Australian subsidiaries are part of a tax consolidated group.
(ii) Dormant company which historically held assets and liabilities for the Technology Solutions Division which was sold in 2012. Member’s voluntary liquidation completed 28 August 2015.
(iii) Form part of a NZ tax consolidated group.
80
Note 29: Deed Of Cross Guarantee
CSG Limited and its Australian wholly
owned subsidiaries (excluding CSG Finance
Entities) 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 Corporations
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 income
Operating expenses
Profit/(loss) before income tax expense
Income tax expense
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 earnings at the beginning of the year
Dividends distributed
Retained earnings at the end of the year
2016
$’000
132,043
(103,916)
28,127
(1,915)
26,212
26,212
-
26,212
44,220
(27,001)
43,431
2015
$’000
102,331
(95,462)
6,869
(3,446)
3,423
3,423
-
3,423
66,128
(25,331)
44,220
CSG 15|16 ANNUAL REPORT 81
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 29: Deed Of Cross Guarantee (cont.)
Consolidated entity
2016
$’000
2015
$’000
Statement of Financial Position
Current assets
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Goodwill
Investment in subsidiaries
Total non-current assets
Total assets
Current liabilities
Bank overdraft
Trade and other payables
Deferred income
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liability
Deferred consideration
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
82
28,720
29,311
3,085
61,116
783
13,324
35,154
82,520
126,173
257,954
319,070
2,867
30,630
201
8,696
1,889
44,283
15,549
3,074
646
19,269
63,552
255,518
210,368
1,719
43,431
255,518
14,541
23,045
3,362
40,948
1,337
-
28,793
68,484
116,682
215,296
256,244
2,038
26,109
95
9,400
1,874
39,516
1,286
-
436
1,722
41,238
215,006
169,279
1,507
44,220
215,006
Note 30: Earnings Per Share
Consolidated entity
2016
$’000
2015
$’000
The following reflects the income and share data used in the calculations of basic and
diluted earnings per share:
Profit/(loss)
18,162
14,313
Weighted average number of ordinary shares used in calculating basic earnings per share
311,627,823
282,690,782
Calculated basic earnings per share
Effect of dilutive securities:
5.8
5.1
Effect of performance rights and options issued
8,625,612
13,205,393
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
Calculated diluted earnings per share
320,253,435
295,896,176
5.7
4.8
Note 31: Auditors Remuneration
Consolidated entity
2016
$’000
2015
$’000
Auditors remuneration parent entity
Auditors of the company - KPMG
Statutory audits and reviews (excluding disbursements)
406,570
348,797
Other services (excluding disbursements)
Auditors of the Company - KPMG
In relation to other assurance, taxation and due diligence services
431,615
98,659
Note 32: Segment Information
a. Description of Segments
Management has determined the
operating segment based on reports
reviewed by the Chief Executive Officer
and the Group Executive (comprising
the Chief Financial Officer and Group
General Managers) for making strategic
decisions. The Chief Executive Officer
and the Group Executive monitor
the business based on product/
service factors and have identified the
following reportable segments:
1. Business Solutions
CSG Business Solutions provides the
sale, support, service and financing
of print and business technology
equipment to customers across
Australia and New Zealand. CSG
Enterprise Solutions provides managed
service based print and technology
solutions for Tier 1 enterprise, education
and government customers also
in Australia and New Zealand. CSG
Enterprise Solutions has been identified
as a separate division within Business
Solutions. While this division is still in its
growth phase, the underlying platforms
and processes are very similar across
both divisions and are increasingly
converging. The CSG Marketplace is
used or is to be used by both customer
groups. As Enterprise Solutions business
evolves, the distinction between the
divisions will continue to be monitored in
terms of segment reporting. As its results
are not material under segment reporting
requirements it has been grouped with
Business Solutions
for the purpose of segment reporting.
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 .
2. Finance Solutions
CSG Finance Solutions is a specialist
service provider of lease and rental
products for business technology
assets sold and serviced by CSG in
both Australia and New Zealand.
3. Other
The remaining business operations/
activities (including corporate office
activities) are classified as ‘Other’ to
facilitate reconciliation to Group results.
CSG 15|16 ANNUAL REPORT 83
NOTES TO THE FINANCIAL
STATEMENTS 30 JUNE 2016
Note 32: Segment Information (cont.)
b. Segment Information
2016
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)
2015
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)
Business
Solutions
$’000
219,765
533
220,298
1,976
1,973
2,935
28,588
266,406
75,351
Business
Solutions
$’000
199,223
-
199,223
874
293
2,135
26,422
200,152
53,943
(i) Excludes loans to and from CSG Group entities (related parties).
c. Geographical Information
CSG’s reporting segments provide
sales, support, service and financing to
more than 20,000 customers across
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.
2016
Revenue
Assets
2015
Revenue
Assets
84
Finance
$’000
Other
$’000
Eliminations
$’000
Total
$’000
26,102
-
26,102
657
19
476
753
-
753
10
2,174
2,677
8,709
(11,824)
-
(533)
(533)
(2,557)
(2,557)
-
(228)
290,182
226,694
226,865
2,733
(189,921)
-
246,620
-
246,620
86
1,609
6,088
25,245
593,532
304,778
Finance
$’000
Other
$’000
Eliminations
$’000
Total
$’000
24,251
-
24,251
-
246
214
7,650
268,128
192,498
816
287
1,103
52
4,021
2,169
-
(287)
(287)
(815)
(2,961)
-
(10,989)
208,645
5,047
(475)
(171,692)
-
224,290
-
224,290
111
1,599
4,518
22,608
505,233
251,488
Australia
$’000
New Zealand
$’000
Eliminations
$’000
Total
$’000
124,131
554,021
123,022
229,432
(533)
(189,921)
246,620
593,532
110,359
114,218
(287)
400,932
275,993
(171,692)
224,290
505,233
Note 33: Subsequent Events
Unfranked dividends of 5 cents per share were declared and approved by the Directors on 15 August 2016 for a payment date of
7 September 2016.
The financial effect of these transactions have not been brought to account in the financial statements for the year ended 30 June 2016.
Note 34: Parent Entity Disclosures
As at, and throughout the financial year ended 30 June 2016, 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/(loss) for the year
Total profit/(loss) 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
Note 35: Contingent Liabilities
There were no contingent liabilities recorded at reporting date.
Parent Entity
2016
$’000
23,083
19,839
61,465
241,011
10,371
13,431
207,623
323
19,634
227,580
2015
$’000
(8,246)
(8,246)
26,008
206,000
10,425
14,688
166,533
1,228
23,552
191,313
CSG 15|16 ANNUAL REPORT 85
DIRECTORS’ DECLARATION
Directors’ Declaration
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 2016.
The Directors draw attention
to Note 2 to the Consolidated
Financial Statements, which
includes a statement of compliance
with International Financial
Reporting Standards.
This declaration is made in
accordance with a resolution
of the directors.
Ms Julie-Ann Kerin
Director
Sydney
15 August 2016
CSG LIMITED AND
CONTROLLED ENTITIES
The Directors declare that the
financial statements and notes
set out on pages 26 to 71 and the
Remuneration Report in sections
6 to 14 in the Directors’ Reports
are in accordance with the
Corporations Act 2001:
a.
b
comply with Accounting
Standards and the Corporations
Regulations 2001, and other
mandatory professional
reporting requirements; and
give a true and fair view of
the financial position of the
consolidated entity as at 30 June
2016 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.
There are reasonable grounds to
believe that the Company and
group entities identified in Note 29
will be able to meet any obligations
or liabilities to which they are or may
become subject to by virtue of the
Deed of Cross Guarantee between
the Company and those group
entities pursuant to ASIC Class
Order 98/1418.
86
Independent
Auditor’s Report
CSG 15|16 ANNUAL REPORT 87
INDEPENDENT
AUDITOR’S REPORT
ABCD
Independent auditor’s report to the members of CSG Limited
Report on the financial report
We have audited the accompanying financial report of CSG Limited (the Company), which
comprises the consolidated Statement of Financial Position as at 30 June 2016, and Consolidated
Statement of Profit and Loss and Other Comprehensive Income, Consolidated Statement of
Changes in Equity and Consolidated Statement of Cash Flows for the year ended on that date,
notes 1 to 35 comprising a summary of significant accounting policies and other explanatory
information and the directors’ declaration of the Group comprising the Company and the entities
it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether due
to fraud or error. In note 2, the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
88
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) The financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2016 and of
its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) The financial report also complies with International Financial Reporting Standards as
disclosed in note 2.
Report on the remuneration report
We have audited the Remuneration Report included in Sections 6 to 14 of the directors’ report
for the year ended 30 June 2016. The directors of the Company are responsible for the
preparation and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of CSG Limited for the year ended 30 June 2016,
complies with Section 300A of the Corporations Act 2001.
KPMG
Scott Guse
Partner
Sydney
15 August 2016
CSG 15|16 ANNUAL REPORT 89
SHAREHOLDING INFORMATION
Shareholding Information as at 6 September 2016
In accordance with Listing Rule 4.10 of the Australian Stock Exchange Limited, the Directors provide the following shareholding information
as at 6 September 2016.
Substantial Shareholders
Name
Caledonia (Private) Investments Pty Limited & its associates
Paradice Investment Management Pty Ltd
TDM Asset Management Pty Limited & its associates
Voting Rights
Fully paid ordinary shares in the Company carry voting rights of one vote per share.
Distribution of Shareholding
Number of
Ordinary Shares
% of
Ordinary Shares
84,520,574
28,466,135
24,990,579
26.49
8.92
7.91
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Rounding
Total
Total holders
Number of
Ordinary Shares
% of
Issued Capital
507
723
443
786
92
151,663
2,234,105
3,407,127
22,595,292
289,683,091
0.05
0.70
1.07
7.10
91.07
0.01
2,551
318,071,278
100.00
Less than Marketable Parcels
339 shareholders hold less than a marketable parcel of shares, being market value of less than $500.
Twenty Largest Shareholders
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
UBS NOMINEES PTY LTD
JP MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
MANDERRAH PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – GSCO ECA
BOLTEC PTY LTD
GAFFWICK PTY LTD
CSG LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
MIRRABOOKA INVESTMENTS LIMITED
CITICORP NOMINEES PTY LIMITED
AMCIL LIMITED
MS JULIE-ANN KERIN
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
TOTAL
On-Market Buy-Back
There is a current on-market buy-back.
90
Number of Shares
at 8 September 2015
% of
Issued Capital
77,583,477
49,989,107
45,890,442
31,705,599
13,532,331
7,984,346
7,637,205
6,352,055
5,545,847
4,585,751
4,417,486
4,003,912
2,500,000
2,294,015
2,183,281
1,290,668
1,181,430
1,142,302
1,000,000
903,770
271,723,024
24.39
15.72
14.43
9.97
4.25
2.51
2.40
2.00
1.74
1.44
1.39
1.26
0.79
0.72
0.69
0.41
0.37
0.36
0.31
0.28
85.43
CORPORATE DIRECTORY
Corporate Directory
CSG Limited ABN 64 123 989 631
Registered Office
Level 1
357 Collins Street
Melbourne VIC 3000
Phone +61 7 3840 1234
Fax
+61 7 3840 1222
www.csg.com.au
Directors
Stephen Anstice
Non-Executive Chairman
Julie-Ann Kerin
Managing Director
Tom Cowan
Non-Executive Director
Robin Low
Non-Executive Director
Mark Phillips
Non-Executive Director
Company Secretary
Nicole Adler
Share Registry
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Phone 1300 850 505
www.computershare.com
Auditor
KPMG
71 Eagle Street
Brisbane QLD 4000
CSG 15|16 ANNUAL REPORT 91
csg.com.au