Carriage Services
Annual Report 2018

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Annual Report 2 CSG Annual Report 2018 Contents OVERVIEW Message from the Chairman Managing Director’s Report Our Board Our Executive Team FINANCIAL REPORT Corporate Governance Statement Directors’ Report Auditor’s Independence Declaration 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 Investor Relations Corporate Directory 6 8 10 13 18 29 52 56 57 58 59 61 102 105 113 117 CSG Annual Report 2018 3 Case studies Seamless solutions A global brand on display The New Zealand franchise of The Body Shop® required an affordable, digital signage solution to help align its retail stores with the brand’s global fit-out designs. CSG recommended a combination of Samsung screens and software to work with the franchise’s existing cloud environment. After a successful pilot site, the solution was rolled out to all 28 stores. The digital signage now delivers a more engaging customer experience, helping The Body Shop® to continue to be an innovator within the retail space. Customer benefits: > > Improved customer experience in line with business strategy Integration with existing technology to centrally manage signage across all stores > Fixed subscription cost solution OFFICIAL SUPPLIER Gold all the way The Gold Coast 2018 Commonwealth Games was the largest sporting event to be staged in Australia in the last decade. GOLDOC organisers required managed print solutions – together with short term support staff – to service over 60 Games venues. CSG planned all aspects of this one-off project, including an extensive decommissioning plan, testing and deploying hundreds of devices. Over 80 of CSG’s staff worked onsite and behind the scenes to deliver a seamless printing experience, contributing to one of the most successful Commonwealth Games in history. 661 2m 97 Printers deployed Prints during games time Accredited staff members 4 CSG Annual Report 2018 Getting calls into shape Fernwood Fitness needed a better way to manage calls from prospective and existing members. Initially reliant on outdated telephone hardware, calls were going to individual clubs and being answered on an ad hoc basis. CSG designed and custom-fit a centralised call centre using the 8x8 cloud-based phone system. The 8x8 system includes an inbuilt CRM which enables Fernwood’s team to better engage with prospects. Fernwood has since made vast improvements to its customer service and engagement, all without  a huge initial investment. Customer benefits: > > > Centralised phone system now regulates customer enquiries Staff have achieved record sales since implementation Flat, monthly cost includes unlimited calls and technical support Scaling for success After an internal ICT strategy review, BUSY At Work realised they needed an external technology partner to help move forward. Legacy systems were outdated and restricted scalable growth. CSG was able to assist with a strategic IT roadmap, collaboration tools and business intelligence solutions. BUSY was transitioned to a private cloud model, reducing operational risks and allowing for faster scalability, which was crucial for new business needs. Collaboration and data analysis tools have also been integrated across the organisation to improve information sharing. Customer benefits: > > New cloud platform allows to quickly scale up or down Collaboration and data analysis tools enable faster decision-making > CSG has become the organisation’s ‘virtual CIO’ CSG Annual Report 2018 5 Message from the Executive Director & Chairman Dear Shareholders, On behalf of your Board of Directors, I present to you the 2018 Annual Report of CSG Limited, my first as Executive Director & Chairman since being appointed on 27 June 2018. FY2018 financial performance reflected challenging operating conditions with business changes made to return the company to growth from FY2019 The 2018 financial year was a challenging period for the Company. The Board and Executive Team have taken decisive action to address challenges in the enterprise technology segment and to return CSG to sustainable, long-term growth going forward. CSG’s business model has been simplified. Core to this simplification has been the re-alignment of the SME segment to a product-led, go-to-market model with three distinct operating businesses – Technology, Print & Display, and Finance – that reflect our natural strengths and a differentiated market offering. Core Technology business is growing and driving higher recurring revenues Pleasingly, CSG’s core Technology business continued to perform strongly with 42% growth in total revenue to $42.8 million, representing approximately 19% of Group revenue. A key driver for this growth was High Value technology subscription seats, which grew organically by approximately 40% to 22,326 seats and had an average Monthly Recurring Revenue of approximately $95 per seat per month. Mark Bayliss Executive Director & Chairman 6 CSG Annual Report 2018 The 2018 financial year was a challenging period for the Company. The Board and Executive Team have taken decisive action to address challenges in the enterprise technology segment and to return CSG to sustainable, long-term growth going forward. Fully underwritten equity raising strengthened the balance sheet and supported the Company’s reinvigorated Positioned for a return to growth In closing, on behalf of the Board I would like to thank our growth strategy recapitalise To the balance sheet and support CSG’s the business over the past 12 months. In particular, I thank the customers, suppliers and employees who have all contributed to reinvigorated growth strategy, on 21 August 2018 the Company Executive Team, led by Julie-Ann Kerin, for their hard work and announced an $18 million fully underwritten capital raising dedication in continuing to execute on our Technology as a through a 1 for 3.52 pro rata accelerated non-renounceable Subscription strategy. entitlement offer (Entitlement Offer) at an offer price $0.185 per new share. This Entitlement Offer was fully underwritten by I would also like to thank you, our shareholders, for your continued CSG’s two largest shareholders, together holding approximately support through a very difficult FY2018, as we progress into 36% of issued capital at the time of announcement – Caledonia FY2019 with a stronger balance sheet and focused strategy to (Private) Investments and TDM Asset Management. support the Company’s return to growth. The Institutional Entitlement Offer was completed on 23 August 2018 and raised $12.3 million. Eligible institutions took up approximately 94% of entitlements, with additional institutional support for the shortfall component which was oversubscribed. We were pleased with the very strong support shown by CSG’s shareholders and the new institutional participation in the equity raising. The Retail Entitlement Offer will raise an additional $5.3 million, providing eligible retail shareholders with the right to participate Mark Bayliss Executive Director & Chairman at the same offer price and offer ratio as the Institutional Entitlement Offer. CSG Annual Report 2018 7 Managing Director's Report Despite a challenging year, we were pleased with the performance within our Technology business, with High Value technology subscription seats growing by 40% year-on-year Julie-Ann Kerin Managing Director & Chief Executive Officer Dear Shareholders, FY2018 was a challenging year for CSG as we faced substantial headwinds in our attempts to establish an enterprise technology business. Responding to the disappointing financial performance, your Board and management reacted decisively and repositioned the business for a return to growth in FY2019. CSG’s core Technology business continued to be a stand-out performer in FY2018. High Value technology subscription seats were up approximately 40% to 22,326 and total Technology revenue now represents approximately 19% of Group revenue and is growing. FY2018 Financial performance CSG experienced a challenging operating environment in FY2018 with revenue down 8% to $225.7 million, primarily reflecting lower than expected print equipment sales within the enterprise segment in Australia and production print in New Zealand. The lower revenue and $6 million of added investment in the enterprise technology segment led to a 67% decline in Underlying EBITDA(i) to $10.0 million and 88% decline in underlying NPAT to $2.3 million . The statutory Net Loss After Tax of $150.1 million incurred for FY2018 included a non-cash one-off impairment charge of $116.1 million, provisions relating to the Enterprise Solutions business of $39.3 million, non-cash share-based expense of $0.4 million and non-recurring costs of $5.3 million relating to the corporate restructure. (i) 8 Underlying earnings reflect the performance of the business and exclude the non-cash impairment, provisions, non-cash LTIP and non-recurring costs. CSG Annual Report 2018 During FY2018, CSG continued to successfully execute on its Technology as a Subscription strategy in Australia and New Zealand, New experienced senior appointments On 25 June 2018, CSG appointed Mark Bayliss as Executive Director with total Technology revenue up 42% to $42.8 million. With a more & Chairman. Mark brings extensive leadership, as well as strategic, focused sales effort, increased marketing and improved digital operational, and financial management experience gained through targeting, High Value technology subscription seats grew by close various positions including Chairman, CEO, COO and CFO. Mark’s to 40% organically to 22,326 with an average Monthly Recurring appointment complements and builds upon the capabilities that Revenue of approximately $95 per seat. exist in our Executive Team and we are delighted to have someone of his experience join the Board Our Print & Display business had a challenging year with print equipment sales lower than expected, primarily within the In our New Zealand business, we have also appointed a new country enterprise segment in Australia and production print in New head, Chris Mackay, who will focus on driving sales and increasing Zealand, with revenue $8.5 million lower than FY2017. Print efficiencies in this region. As we restructured the business to a equipment sales in the SME segment were also lower than solution-focused sales force, we have appointed four experienced expected due to changes to CSG’s sales force and sales incentive sales business heads to run Print & Digital and Technology in both programs to accelerate growth in the Technology business. Australia and New Zealand. We also welcome Kerrie-Anne Hutchins Revenue was also impacted by lower display sales relative to as our new Company Secretary and General Counsel. FY2017 with revenue being recognised at the time of installation. CSG continued to deliver high quality customer service, evidenced Return to growth in FY2019 Looking forward, I am encouraged by the early results of by a strong in-field NPS (ii) score of 72 across the SME segment. FY2019, with the benefits from the major business Repositioned the business for sustainable long-term growth As announced to the market on 9 February 2018, the Board appointed Morgan Stanley to assist in reviewing strategic options to repositioning already starting to flow through, and July performing to plan with approximately 500 High Value technology subscription seats added. maximise value for our shareholders. As part of this process, CSG I would like to thank my fellow Board members at CSG for their reviewed the performance of its enterprise technology business ongoing support. I would also like to thank all of our staff, whose and decided to cease investment in this segment. hard work ensured we were able to achieve our revised guidance. To simplify CSG’s business model and to return the business to Lastly, I would like to thank you, our shareholders, for your growth, the Company is re-aligning the SME segment to a product- continued support through what was a challenging year for all of led, go-to-market model with three distinct operating businesses – us. I am looking forward to returning the business to solid Technology, Print & Display, and Finance. earnings and growth. The Technology business will have a clear focus on the SME segment, continuing to cross-sell Technology as a Subscription bundles to the Company’s existing customer base and target new SME customers. The key sales drivers within the Print & Display business will be the print-only sales force, incentivised to add new customers while maintaining the existing customer base and working with key partners to drive new customer acquisitions. Within Finance, the key focus will be on growing the lease book through new customers and equipment sales. In addition, a major restructure of the Australian and New Zealand businesses within sales, service and operations, is being undertaken, while we are also simplifying our operational structure and distribution costs, and realising cost synergies through the integration of recent acquisitions. Together, these restructure and cost-out initiatives will lead to $7.7 million of cost savings in FY2019, and $10.0 million in FY2020. Julie-Ann Kerin Managing Director & Chief Executive Officer (ii) Net Promoter Score (NPS) is a method of measuring customer 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. CSG Annual Report 2018 9 Our Board Mark Bayliss BSc (Econ), ACA, MAICD Executive Director & Chairman Julie-Ann Kerin Managing Director & Chief Executive Officer Mark Bayliss was most recently the Chief Executive Officer of Managing Director of CSG in 2012. Julie-Ann Kerin was appointed as Chief Executive Officer and Grays eCommerce Group Limited prior to its acquisition by Eclipx Group Limited in August 2017. Prior to Julie-Ann Kerin’s appointment as Chief Executive Officer and Managing Director, she was the Group-General Manager of Prior to that he was the Chief Executive Officer of Quick Service the former Technology Solutions division for five years. Prior to Restaurant Holdings (QSRH), a national fast food chain of 630 joining CSG, Julie-Ann Kerin was responsible for the global franchised restaurants. Before working for QSRH Mark spent management of operations and staff across Asia, the United four years as a Partner at Anchorage Capital, a Sydney based States, Australia and Europe for a number of organisations. She private equity fund specialising in the turnaround of has also held roles with IT companies Actuate, Haht Commerce, underperforming businesses. Mark has also performed roles as Genasys Inc and Computer Power. Executive Chairman of Burger King (NZ), Chief Financial Officer of Australian Discount Retail and Chief Financial Officer of Fairfax Appointed 1 February 2012 Media Limited. Mark is a member of the Institute of Chartered Accountants in England & Wales – ACA. Appointed 27 June 2018 10 CSG Annual Report 2018 Our Board Thomas Cowan B.Com (Hons) Non-Executive Director Bernie Campbell MAppFin Non-Executive Director Member, Audit and Risk Committee Member, Audit and Risk Committee Chairman, Nomination and Remuneration Committee Member, Nomination and Remuneration Committee Thomas Cowan is a partner of TDM Asset Management, a Sydney Bernie Campbell has been Managing Director for the Asset Finance based private investment firm. TDM Asset Management invests in Division of the Pepper Group since October 2014. He was previously public and private companies globally. Thomas Cowan has over Managing Director of Capital Finance Australia Limited (Capital 15 years of financial markets experience, including roles in Finance) and a member of the Executive Board for the Lloyds corporate finance and investment banking at Investec Wentworth Banking Group businesses in Australia for six years. and KPMG Australia. He has a Bachelor of Commerce (Honours – Class 1) from the in December 2013 Bernie led the St George Asset Finance University of Sydney. Thomas was previously Non-Executive Division, one of the largest specialist asset finance businesses in Director of Baby Bunting Group Limited from June 2009 to Australia with $18 billion in assets, 500,000 customers and $8 March 2017. billion of new lending annually. Following the acquisition of Capital Finance by St George Bank Appointed 8 February 2012 Appointed Chairman 15 August 2012 Ceased Chairman 15 February 2016 Appointed Chairman of Nomination and Remuneration Committee 15 February 2016 Bernie was a Non-Executive Director of publicly listed auction house, Grays eCommerce Group Limited until August 2017 when it became a wholly owned subsidiary of Eclipx Group Limited. Bernie has a Masters of Applied Finance from Macquarie University and has completed the Advanced Management Programme at INSEAD. Appointed 13 September 2017 Appointed Chairman 1 May 2018 Ceased Chairman 27 June 2018 CSG Annual Report 2018 11 Our Board Robin Low B.Com, FCA, GAICD Non-Executive Director Chairman, Audit and Risk Committee Member, Nomination and Remuneration Committee Robin Low was formerly a partner at PricewaterhouseCoopers for over 17 years and has extensive experience in assurance and risk management. She is currently a Non-Executive Director of AUB Group Limited, IPH Limited and Appen Limited. Robin 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. Robin 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 Appointed Chairman of Audit and Risk Committee 20 August 2014 12 CSG Annual Report 2018 Our Executive Team Gary Brown Chief Financial Officer Matthew Manton Chief Print & Display Solutions Executive, Australia Gary joined CSG in February 2017 following 20 years’ experience in Matthew joined CSG in 1999 and has over 20 years of experience mining, distribution, logistics, supply, manufacturing and sales. in the print and technology sector, with roles across sales and Gary has held several senior finance executive roles having recently major account management. Matthew has received the highest acted as the Head of Finance, Treasury & Risk at Viva Energy accolades of sales performance at Xerox Australia and CSG. Australia (formerly Shell) along with the role of CFO (Acting). In addition to these roles, Gary held several Board positions Solutions Officer in Australia. Prior to this role, Matthew was the including being a Director of Liberty Oil. Gary has extensive General Manager of CSG’s Queensland operations. In June 2017, Matthew was appointed to the role of Chief Business experience in leading and being responsible for large finance teams and functions having recently successfully led the Shell Australia finance function through its largest transformation project in its history. Prior to Viva Energy, Gary held several finance roles at BHP Billiton both locally and internationally as well as KPMG. CSG Annual Report 2018 13 Our Executive Team Gordon Tan Chief Technology Solutions Executive, Australia Chris Mackay Executive Manager, New Zealand As the Managing Director of R&G Technologies which was acquired Chris Mackay joined CSG in September 2015 through the acquisition by CSG in 2017, Gordon grew the business over 12 years to become of CodeBlue Limited. Chris was the CEO of CodeBlue and has one of Queensland’s largest privately owned Managed Service recently been appointed as the Executive Manager of CSG New providers. Zealand. Chris has over 35 years’ of experience in the technology industry, with over 16 of those years as CEO of various companies. Now as Chief Technology Solutions Officer, Gordon oversees all Prior to his role at CodeBlue, Chris was CEO of successful New aspects of CSG's Technology Business which currently has 40,000 Zealand IT services company ComputerLand (acquired by Telecom seats under management growing at 40% a year thanks to our award in 2004) and CEO of The Optima Corporation (acquired in April 2014 winning Managed IT and Cloud solutions. by Intermedix US). 14 CSG Annual Report 2018 Our Executive Team Vanessa Harford General Manager Marketing Mark Thomas Chief People Executive Vanessa joined CSG in September 2017 with over 20 years of Mark Thomas joined CSG in September 2015 and has over 30 experience in marketing including digital, data, communications, years’ experience in commercially focused human resource roles. product, partners, demand generation, events, sponsorships Mark has worked in blue chip and private companies across and public relations. Vanessa is a data-driven marketer and is financial, professional and business services as well as the oil responsible for aligning the marketing strategy to support CSG’s industry. Prior to joining CSG, Mark was the Global Human Capital sales activities with a technology focused approach. Leader for Aurecon, responsible for a workforce of 7,500 people Prior to joining CSG, Vanessa worked at MYOB's global includes seven years based in London leading a global HR headquarters and ExactTarget’s APAC region (now Salesforce function. Mark holds a Bachelor of Business. across 20 countries. His significant international experience Marketing Cloud) where she was responsible for growing their subscription based businesses via an integrated marketing approach. Vanessa has tertiary qualifications in Marketing, Accounting and Training. CSG Annual Report 2018 15 Directors’ Report Our Executive Team Kerrie-Anne Hutchins General Counsel & Company Secretary Kerrie-Anne Hutchins was appointed as General Counsel and Company Secretary on 17 August 2018. She joins CSG after eight years with Linfox Armaguard Pty Ltd, where she held the role of General Counsel. Prior to this, she held various roles in private legal practice in Melbourne since 2003. Kerrie-Anne has a Bachelor of Arts and a Bachelor of Laws from Monash University and has completed the Australian Institute of Company Directors course. 16 CSG Annual Report 2018 Financial Report 2017-2018 CSG Annual Report 2018 17 Corporate Governance Statement 18 CSG Annual Report 2018 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 has Principle 1 - Lay solid foundations for management and oversight The Board 1.1 The Directors of the Company are accountable to shareholders and established the following processes to protect the interests and other stakeholders for the proper management of the business and assets of shareholders and to ensure high standards of integrity affairs of the Company. The Board fulfils these obligations by and governance. delegating certain business development responsibilities to the Chief Executive Officer (CEO), but retains the following In undertaking these responsibilities, the Board has adopted a formal: responsibilities as set out in the Board Charter: — Board Charter — Audit and Risk Management Committee Charter — Nomination and Remuneration Committee Charter — Code of Conduct for Directors and Officers — 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; Further, the Board has also adopted or issued revised policies with — Ensuring that strategy development includes proper respect to: consideration by the Board and management of associated risks — 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 on the Company’s website (https://www.csg.com.au/investors/board- governance) 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 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 performance of the Executive Management Team. 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. practices for the year-ended 30 June 2018 and as at the date of The Board delegates responsibility for day-to-day management of this Annual Report. It is referenced against the latest Corporate the Company to the CEO. The Company has adopted a Delegated Governance Principles and Recommendations (3rd Edition) issued Authorities Policy which establishes delegations and approval by the ASX Corporate Governance Council, which took effect from levels throughout the business. The CEO is responsible for 1 July 2014 (Principles and Recommendations). There are eight executing the delegations contained in the policy, but must consult principles prescribed by the Council and these are reported the Board on matters that are noted as requiring specific Board against below. 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 2018 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. CSG Annual Report 2018 19 Appointment of Directors 1.2 In accordance with recommended practice, the Company ability, performance and potential; — Facilitating equal employment opportunities based on relative undertakes a series of character, security and financial checks prior to appointing a candidate to the Board. — Building and maintaining an inclusive work environment by taking action against inappropriate workplace and business behaviour (including discrimination, harassment, bullying, The Company also ensures shareholders are provided with all victimisation and vilification); material information in its possession relevant to a decision on — Fostering a diverse workforce by developing an environment of whether to elect or re-elect a Director. This is provided by a variety mutual respect, dignity and openness to others; of means, including Director information contained in this Annual Report, the Company website and in the Notice of Meeting relating — Seeking to ensure that the Company’s business practices, systems and processes do not prevent people from diverse to the election or re-election of a Director. During the financial year, two (2) Directors were appointed and one 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 (1) Director resigned, resulting in a Board of five (5), consisting of of business requirements; three (3) Non-Executive Directors and two (2) Executive Directors. Appointment terms 1.3 Each Director and all members of the Executive Management Team — 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 have in place written agreements specifying the terms of their engagement, including their roles and responsibilities. Any variations — Improving the quality of decision-making, productivity and teamwork to meet the relevant requirements of local legislation to their initial agreements are appropriately documented. and the Board and shareholders. Employment agreements for the CEO and Executive Management The Company captures a range of indicators for purposes of Team are for unlimited periods but may be terminated by written assessing progress against its policy and for government reporting notice by either party. Details of notice periods relating to these purposes. At a high level these include: agreements are outlined in the Remuneration Report. — Composition of the Board by gender (at 30 June 2018 40% of A procedure is also in place for each Director to have the right to directors were female); seek independent professional advice, at the Company’s expense, subject to prior approval from the Chairman. — Composition of the workforce between full time and part time; — Salary comparisons based on gender; and — Policy development and implementation. 1.4 Company Secretary The Company Secretary is accountable directly to the Board, The Company’s performance of gender diversity objectives under through the Chairman, on all matters to do with the proper the policy is reviewed annually. Below is a summary of the functioning of the Board and its Committees. The qualifications Company’s key diversity indicators and gender composition as at 31 and experience of the Company Secretary are set out in the March 2018: Directors’ Report. 1.5 Diversity The Company embraces a Diversity Policy which, consistent with its Key Indicators Outcome 2018 Percentage of women in the Executive Management Team and at management level and above(i) 33% 24% organisational values and strategic goals, focuses upon gender, Percentage of women employed by CSG ethnicity/culture, disability and flexibility as key levers linked to building a high performing and sustainable organisation. Key principles include: Complete a diversity audit by 30 June each year Completed (i) Definitions of ‘Executive Management’ and ‘management level and above’ coincide with WGEA occupational categories. 20 CSG Annual Report 2018 Corporate Governance Statement Gender composition of the workforce at 31 March 2018 (Women): CEO 100% KMP 0% CEO N/A KMP 0% Other Executives/GMs 17% Other Executives/GMs 0% Senior Managers 20% Other Managers 40% Non-Managers 36% AUSTRALIA Senior Managers 0% Other Managers 45% Non-Managers 21% NEW ZEALAND Gender composition of manager level and above in Australia: 27% female; and 73% male. Gender composition of manager level and above in New Zealand: 33% female; and 67% male. Gender composition of Australian workforce: 26% female; and 74% male. Gender composition of New Zealand workforce: 22% female; and 78 % male. Compliance The Company is a ‘relevant employer’ for the purposes of the Workplace Gender Equality Act 2012 (Cth). Our latest report was lodged in May 2018 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. The Company’s Diversity Policy and Code of Conduct can be found at https://www.csg.com.au/investors/board-governance. 1.6 Non-Executive Director evaluation The Board has adopted a policy in relation to its performance evaluation. A performance evaluation was not carried out during the 2018 financial year, however 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 2019 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. CSG Annual Report 2018 21 Corporate Governance Statement CEO and Executive Management Team evaluations 1.7 The Remuneration and Nomination Committee undertakes the Board skills matrix 2.2 The Board has ultimate responsibility for the oversight and review of process of performance reviews for the CEO and the Executive the management, administration and governance of the Company. Management Team as provided under the Remuneration Policy. Accordingly, the Board has identified the following matrix which it These reviews are assessed against KPIs set at the start of the believes captures the key skills and diversity attributes which the financial year and which are both financial and non-financial in Board, as a whole, requires to deliver against its objectives. The nature. Further details of these assessments, including outcomes, Board regularly reviews these attributes and believes it presently can be found in the Remuneration Report. possesses this blend of skills and diversity attributes: Principle 2 - Structure the Board to add value 2.1 Nomination and Remuneration Committee The Nomination and Remuneration Committee is chaired by Non- Executive Director, Mr Thomas Cowan. Mr Cowan is not considered to be independent due to his partnership in a fund manager which is a substantial security holder in the Company. However, the Board believes that Mr Cowan’s experience as a Non-Executive Director of the Company together with his qualifications and close alignment with security holders makes him the most appropriate Director to be — 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 Chairman of the Nomination and Remuneration Committee. The The Directors believe the Board collectively has the necessary skill Board also has an Independence and Conflicts of Interest Policy to set to ensure an appropriate and diverse mix of backgrounds, manage any potential conflicts arising from the shareholding. expertise, experience and qualifications to effectively advise and set the Company’s strategic direction and govern on behalf of The Nomination and Remuneration Committee operates under a shareholders. formal charter that clearly sets out its role, responsibilities, composition, structure, membership requirements and the procedures for inviting non-Committee members to attend meetings. 2.3 Composition of the Board At the commencement of the 2018 financial year, the Board consisted of four (4) Directors. During the year Mr Bernie Campbell The names of the members of the Nomination and Remuneration was appointed as an independent Non-Executive Director on 21 Committee and their attendance at Committee meetings during the September 2017. On 1 May 2018, Mr Stephen Anstice resigned as an financial year are set out in the Directors’ Report. independent Non-Executive Director and Chairman and Mr Bernie Campbell was appointed as interim Chairman. On 27 June 2018, Mr The role of this Committee is to support the Board in fulfilling its Bernie Campbell stepped down as interim Chairman and Mr Mark statutory and fiduciary responsibilities, including ensuring that there Bayliss was appointed as an Executive Director and Chairman. are appropriate processes for items such as Board renewal and succession, assessment of performance and new Director induction At 30 June 2018, the Board consisted of five (5) Directors, including and identifying appropriate industry and education programs. two (2) independent Non-Executive Directors (Mr Bernie Campbell The Nomination and Remuneration Committee Charter is available at https://www.csg.com.au/investors/board-governance. and Ms Robin Low), one (1) Non-Executive Director (Mr Thomas Cowan) and two (2) Executive Directors (the Managing Director and CEO, Ms Julie-Ann Kerin, and Chairman, Mr Mark Bayliss). The skills, experience and appointment date of each Director are set out in the Directors’ Report. 22 CSG Annual Report 2018 Corporate Governance Statement 2.4 Director independence Based on the applicable Principles and Recommendations Chairman independence 2.5 The Chairman, Mr Mark Bayliss, is an Executive Director. guidelines, to be independent a Director should be a Non-Executive and: Recommendation 2.5 of the Principles and Recommendations states that the Chairman of the Board should be an independent — Not be a substantial security holder of the Company or an officer of, or otherwise associated with, a substantial security holder of Director and, in particular, should not be the same person as the CEO. As an Executive Chairman Mr Bayliss is not an independent 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 Director. Mr Bayliss has assumed separate responsibilities to the CEO and the Board believes that he is well placed to act on behalf of shareholders and in their best interests as a whole. employment; — Not be a partner, principal or senior employee of a provider of 2.6 Director induction and professional development The Nomination and Remuneration Committee has responsibility material professional services to a company in the Group; under its charter for the oversight of the induction of new Directors — Not have been within the last three (3) years, in a material business relationship (e.g. as a supplier or customer) with a and ongoing professional development. The Committee works with management to introduce new Directors to CSG, including company within the Group, or an officer of, or otherwise familiarisation with its policies and procedures. A program is associated with, someone with such a relationship; specifically developed based on the individual Non-Executive — Not have a material contractual relationship with the Company or Director’s role within the Board. The Director’s skills and previous another Group company other than as a Director; experiences are considered in developing an appropriate induction — Not have close family ties with any person who falls within any of program. the categories described above; or — Not have been a Director of the Company for such period that his Board members are encouraged and assisted to visit CSG work or her independence may have been compromised. sites, and Board meetings are rotated to various locations as part of this program. Where appropriate, expert advisers, in conjunction During the 2018 financial year, Mr Bernie Campbell, Ms Robin Low with internal expertise, undertake presentations at Board meetings and, before his resignation, Mr Stephen Anstice were each addressing specific elements of the Company’s business. considered by the Board to be independent Non-Executive Directors. As previously noted, Mr Thomas Cowan is not considered to be independent. Mr Mark Bayliss and Ms Julie-Ann Kerin are Executive Directors. At the end of the 2018 financial year the Board did not consist of a majority of independent Directors. This does not follow Recommendation 2.4 of the Principles and Recommendations. The Directors have considered this and believe that the Board’s composition is appropriate in the circumstances of the Company. All Directors are required to, and do, bring an independent judgement to bear on Board decisions and act in accordance with the statutory duties of good faith and for proposer purpose, and in the interests of all shareholders. CSG Annual Report 2018 23 Corporate Governance Statement Principle 3 – Act ethically and responsibly The Audit and Risk Management Committee provides an independent review of: The Company has developed a Code of Conduct to guide the Directors and all employees, including the Executive Management Team, in respect of ethical behaviour. The Code of Conduct is — The effectiveness of the accounting and internal control systems and management reporting which are designed to safeguard designed to maintain confidence in the Company’s integrity and the Company assets; responsibility and accountability of all individuals within the — The integrity and reliability of information prepared for use by the Company for reporting unlawful and unethical practices. Board, including financial information; The Code of Conduct addresses such areas as: — Standards 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 https://www. csg.com.au/investors/board-governance. Principle 4 – Safeguard integrity in corporate reporting Board Audit and Risk Management Committee 4.1 The Board has established an Audit and Risk Management Committee which is chaired by independent Non-Executive — The accounting policies adopted by the Company; — The quality of the external audit function; — The 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 https://www.csg.com.au/investors/board-governance. Assurances 4.2 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. Director, Ms Robin Low. The Committee operates under a formal The Board has received these assurances for the 2018 charter that clearly sets out the Committee’s roles, responsibilities, financial year. composition, structure, membership requirements and the procedures for inviting non-Committee members to attend meetings. The Board has not established a separate risk External Auditor 4.3 The external Auditor attends the Annual General Meeting and is management committee, as it has determined that these matters available to answer shareholders’ questions concerning the conduct are appropriately addressed by the Audit and Risk Management of the audit, the preparation and content of the Auditor’s Report, the Committee or the full Board. accounting policies adopted and auditor independence. The names of the members of the Audit and Risk Management Committee and their attendance at Committee meetings during the Principle 5 - Make timely and balanced disclosure financial year are set out in the Directors’ Report. During the 2018 financial year, the Audit and Risk Management has an obligation to make timely and balanced disclosure in The Board recognises that the Company, as a publicly listed entity, Committee: accordance with the requirements of the ASX Listing Rules and the Corporations Act 2001 (Cth). The Board is also of the view that — Consisted only of Non-Executive Directors; — Had a majority of independent Directors; — Was chaired by an independent Non-Executive Director, who 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 was not the Chairman of the Board; and and the market have timely and balanced disclosure of matters — Had three (3) members. concerning the Company. 24 CSG Annual Report 2018 Corporate Governance Statement The Company has adopted a formal Continuous Disclosure and All shareholders are entitled to receive a hard copy of the External Communications Policy to ensure compliance with its Company’s annual report upon request. All relevant announcements continuous disclosure requirements and to allow the market to be made to the market are made available on the Company’s website appropriately informed of the Company’s strategy and performance. after they have been released to the ASX. Amongst other matters, this policy requires the immediate notification to the ASX of information concerning the Company Investor Relations program 6.2 In addition to the Company website, there is a dedicated Investor that a reasonable person would expect to have a material effect Relations page contained within the Annual Report which provides on the price or value of the Company’s securities as prescribed shareholders with Company contact details and key dates. under ASX Listing Rule 3.1, except where such information is not required to be disclosed in accordance with the exception Shareholders can contact the Company by mail at Level 1, provisions of the Listing Rules. 357 Collins Street, Melbourne Victoria 3000 or by email at A copy of the policy can be found at https://www.csg.com.au/ investors/board-governance. investor@csg.com.au. Participation in meetings 6.3 The Board is committed to assisting shareholders’ participation in Principle 6 - Respect the rights of shareholders meetings. In particular, the Company requests that a representative Communication with Shareholders 6.1 The Board recognises that shareholders are the beneficial owners 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, of the Company and respects their rights, and will continually seek preparation and content of the Auditor’s report. ways to assist shareholders in the exercise of those rights. The next Annual General Meeting of the Company is scheduled for In accordance with its communication strategy, the Company’s 20 November 2018 in Melbourne. website (www.csg.com.au) is considered to be the primary means to provide information to all stakeholders. The website enables Results of the meeting and any presentations given will be released information regarding CSG to be accessed in a clear and readable to the ASX and subsequently available on the Company’s website. 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. Electronic communications 6.4 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”. CSG Annual Report 2018 25 Corporate Governance Statement Principle 7 - Recognise and manage risk 7.4 Economic, environmental and social sustainability risk Responsibility for risk 7.1 The Company is committed to managing its risks in a consistent The Board, in the Directors’ Report, has identified key risks that require management and adoption of mitigation strategies, where it and practical manner. Effective risk management is directly assesses the inherent risks to be unacceptable. focussed on the achievement of organisational objectives and helps ensure the business delivers on its strategic goals in alliance From an environmental perspective, the Company does not require with its vision and values. any specific licences to operate the business. Nevertheless, the Company takes a proactive approach in minimising its environmental The Board oversees the identification, assessment, management footprint and seeks to operate its businesses in a sustainable way. and monitoring of the risks faced by the Company and is assisted in this process by the Audit and Risk Management Committee. Details In terms of its social obligations, CSG employed 695 people across of the composition and function of the Audit and Risk Management its operations in Australia and New Zealand as at 30 June 2018. It Committee are set out in section 4.1. The attendance of committee monitors the health and well-being of its employees and reports to members at meetings during the financial year are set out in the the Board any serious matters of concern. Under the direction of its Directors’ Report. Review Risk Management Framework 7.2 The Company has adopted a formal Risk Management Policy which 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 aims to ensure that the Board implements appropriate risk independent advice through access to qualified counsellors on a management policies and procedures in order to protect the assets range of work-related or personal issues. and undertakings of the Company. The approach to risk management and the effectiveness of its implementation is based Principle 8 - Remunerate fairly and responsibly on, as a minimum, the Australian and New Zealand Standards AS/ NZS 31000:2009. 8.1 Nomination and Remuneration Committee The Board's primary remuneration objectives are to motivate The Board has previously adopted a risk management guideline management to pursue the long-term growth and success of the which is designed to provide a high level overview of key steps Company within an appropriate control framework and to within the Company’s risk management process and to provide the demonstrate a clear relationship between Executive performance tools to facilitate risk management across the organisation. The and remuneration. The Board believes that it is in the interests of all framework enables the identification and documentation of risk stakeholders in the Company for there to be in place a Remuneration across the business by requiring management to: Policy that attracts and retains talented and motivated Executives, — Identify the risk; — Assign the risk to a category; — Assess the likelihood of a risk; — Assess the consequences of a risk; — Apply the risk to the risk matrix; and — Monitor, review, communicate and consult on the risk. managers and employees so as to encourage enhanced performance of the Company. The Board has an established Nomination and Remuneration Committee that: — Consists of a majority of independent Directors; and — Has three (3) members. The Company’s risk management process was last reviewed in March 2017. A review is scheduled to occur in the 2019 financial year. As previously noted, the Chairman of the Nomination and Internal audit function 7.3 The Company has not formally adopted an internal audit function at defined in the Principles and Recommendations), however the Board believes that Mr Cowan’s experience, qualifications and close this time. Processes as identified under the Risk Management Policy are undertaken by management and the outcomes of these alignment with security holders make him an appropriate Chairman of the Committee. Remuneration Committee is not considered to be independent (as processes are reported to the Audit and Risk Management Committee, capturing key changes, movements and trends since The names of the members of the Nomination and Remuneration the last report. Committee and their attendance at Committee meetings during the financial year are set out in the Directors’ Report. 26 CSG Annual Report 2018 Corporate Governance Statement The Committee is responsible for the following, amongst The Company has a Share Trading Policy which contains processes other matters: to be followed and guides Directors, the Executive Management Team and employees on any equities they hold or wish to hold in — Nominating, as required, candidates for the Board to consider for the Company. A summary of the Share Trading Policy is below. 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 Share Trading Policy The Company has adopted a formal Share Trading Policy, which applies to Directors, the Executive Management Team and senior managers of the Company and their associates (Officers). 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 An Officer may not deal in any of the Company's securities at any time if he or she has Inside Information. Executive Management Team; — Ensuring that remuneration levels take into account risks time apart from certain blackout periods, namely: Subject to this restriction, an Officer may trade in securities at any 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 — 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 schemes; and following the Annual General Meeting; — Developing, maintaining and monitoring appropriate — Throughout any price setting period for the dividend reinvestment remuneration policies and procedures. plan if operable; or — At any other time the Company nominates. Remuneration Policy 8.2 The Company has adopted a Remuneration Policy, the objective If a person to whom the Share Trading Policy applies wishes to of which is to ensure the reward for performance is competitive trade, he or she must obtain clearance from the Chairman of the and appropriate for the results delivered. The Remuneration Policy Board under the policy prior to trading. details a framework for remuneration to be paid across the Company, from employees to senior executives, including Non- All Officers must advise the Company Secretary in writing of the Executive Directors. The Nomination and Remuneration details of completed transactions within specified timeframes Committee is responsible for developing, maintaining and following each transaction. Under the Share Trading Policy, monitoring the policy. participants in equity based plans offered by the Company are not permitted to utilise mechanisms to limit the risk associated with A copy of the policy is available at https://www.csg.com.au/ that plan. investors/board-governance. Remuneration paid to Non-Executive Directors is clearly securities transactions. distinguished from that of Executive Directors and senior executives. Please refer to the Remuneration Report for details of remuneration The Company must comply with its obligations to notify the ASX in for the Company’s Key Management Personnel. writing of any changes in the holdings of securities or interest in The Company Secretary must maintain a register of Whilst it is not mandatory for Non-Executive Directors to hold CSG shares, Directors are encouraged to do so and their shareholdings are disclosed via the ASX and the Remuneration Report. A copy of the Share Trading Policy is available at https://www.csg. com.au/investors/board-governance. securities by Directors. Equity based remuneration 8.3 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 Executive Chairman, the CEO, the Executive Management Team and certain senior managers. Details of this LTIP are provided in the Remuneration Report. CSG Annual Report 2018 27 Corporate Governance Statement Directors’ Report 28 CSG Annual Report 2018 Directors' Report CSG Annual Report 2018 29 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 Thomas Cowan B.Com (Hons) Non-Executive Director ended 30 June 2018 and Auditor’s report thereon. This financial Member, Audit and Risk Committee report has been prepared in accordance with Australian Accounting Chairman, Nomination and Remuneration Committee Standards. 1.0 Directors The qualifications, experience and special responsibilities of each Thomas Cowan is a partner of TDM Asset Management, a Sydney based private investment firm. TDM Asset Management invests in public and private companies globally. Thomas Cowan has over person who has been a Director of the Company at any time during 15 years of financial markets experience, including roles in or since the end of the financial year is provided below, together corporate finance and investment banking at Investec Wentworth with details of the Company Secretary as at the year end. and KPMG Australia. He has a Bachelor of Commerce (Honours Mark Bayliss BSc (Econ), ACA, MAICD Executive Director & Chairman – Class 1) from the University of Sydney. Thomas was previously Non-Executive Director of Baby Bunting Group Limited from June 2009 to March 2017. Appointed 8 February 2012 Appointed Chairman 15 August 2012 Mark Bayliss was most recently the Chief Executive Officer of Grays Ceased Chairman 15 February 2016 eCommerce Group Limited prior to its acquisition by Eclipx Group Appointed Chairman of Nomination and Remuneration Limited in August 2017. Prior to that he was the Chief Executive Committee 15 February 2016 Officer of Quick Service Restaurant Holdings (QSRH), a national fast food chain of 630 franchised restaurants. Before working for QSRH Mark spent four years as a Partner at Anchorage Capital, a Sydney based private equity fund specialising in the turnaround of underperforming businesses. Mark has also performed roles as Bernie Campbell MAppFin Non-Executive Director Executive Chairman of Burger King (NZ), Chief Financial Officer of Member, Audit and Risk Committee Australian Discount Retail and Chief Financial Officer of Fairfax Member, Nomination and Remuneration Committee Media Limited. Mark is a member of the Institute of Chartered Accountants in England & Wales – ACA. Appointed 27 June 2018 Julie-Ann Kerin Managing Director & Chief Executive Officer Bernie Campbell has been Managing Director for the Asset Finance Division of the Pepper Group since October 2014. He was previously Managing Director of Capital Finance Australia Limited (Capital Finance) and a member of the Executive Board for the Lloyds Banking Group businesses in Australia for six years. Following the acquisition of Capital Finance by St George Bank in December 2013 Bernie led the St George Asset Finance Division, one of the largest specialist asset finance businesses in Australia with $18 Julie-Ann Kerin was appointed as Chief Executive Officer and billion in assets, 500,000 customers and $8 billion of new Managing Director of CSG in 2012. Prior to Julie-Ann Kerin’s lending annually. Bernie was a Non-Executive Director of publicly appointment as Chief Executive Officer and Managing Director, she listed auction house, Grays eCommerce Group Limited until was the Group-General Manager of the former Technology August 2017 when it became a wholly owned subsidiary of Eclipx Solutions division for five years. Prior to joining CSG, Julie-Ann Kerin Group Limited. Bernie has a Masters of Applied Finance from was responsible for the global management of operations and staff Macquarie University and has completed the Advanced across Asia, the United States, Australia and Europe for a number of Management Programme at INSEAD. organisations. She has also held roles with IT companies Actuate, Haht Commerce, Genasys Inc and Computer Power. Apointed 1 February 2012 Appointed 13 September 2017 Appointed Chairman 1 May 2018 Ceased Chairman 27 June 2018 30 CSG Annual Report 2018 Directors' Report Robin Low B.Com, FCA, GAICD Non-Executive Director 2.0 Company Secretary Chairman, Audit and Risk Committee Member, Nomination and Remuneration Committee Thomas Wilcox B.Com, LLB, LLM Robin Low was formerly a partner at PricewaterhouseCoopers for over Thomas Wilcox was appointed as General Counsel and 17 years and has extensive experience in assurance and risk Company Secretary in March 2017. He joined CSG after 8 years management. She is currently a Non-Executive Director of AUB Group with the Rio Tinto Group, during which he held a number of legal Limited, IPH Limited and Appen Limited. Robin is also a member of the and commercial roles based in London, Melbourne and Darwin. Audit and Assurance Standards Board and on the board of a number of His most recent role was General Counsel and Company not-for-profit organisations including Sydney Medical School Secretary of Rio Tinto’s ASX-listed subsidiary, Energy Resources Foundation, Public Education Foundation and Primary Ethics. Robin of Australia Limited. Prior to that he was employed in private has a Bachelor of Commerce from The University of New South Wales, legal practice in Melbourne and London since 2003. Thomas is a Fellow of the Institute of Chartered Accountants in Australia and is a Wilcox has a Bachelor of Laws, Bachelor of Commerce and Graduate Member of the Australian Institute of Company Directors. Master of Laws from The University of Melbourne. He is currently a director of AFLNT, the governing body of Australian Rules Appointed 20 August 2014 Football in the Northern Territory. Appointed Chairman of Audit and Risk Committee 20 August 2014 Appointed 27 March 2017 Resigned 17 August 2018 Stephen Anstice BA (Economics), Grad. Dip. (SAI) Stephen Anstice has over 23 years’ experience in the communications industry. Until June 2013, Stephen Anstice was CEO of IPMG Pty Ltd, a print, digital and marketing communications business. Stephen Kerrie-Anne Hutchins B.A., LLB MAICD Anstice also has an extensive background in investment banking. He has previously been a Non-Executive Director of PMP Limited and General Counsel and Company Secretary Audant Investments Pty Limited. Stephen Anstice has a Bachelor of Arts (Economics) from Macquarie Company Secretary on 17 August 2018. She joins CSG after eight University and a Graduate Diploma from the Securities Institute of years with Linfox Armaguard Pty Ltd, where she held the role of Kerrie-Anne Hutchins was appointed as General Counsel and Australia. Appointed 20 August 2014 Appointed Chairman 15 February 2016 Resigned 1 May 2018 General Counsel. Prior to this, she held various roles in private legal practice in Melbourne since 2003. Kerrie-Anne has a Bachelor of Arts and a Bachelor of Laws from Monash University and has completed the Australian Institute of Company Directors course. Appointed 17 August 2018 CSG Annual Report 2018 31 3.0 Directors’ Meetings The number of Directors’ meetings (including meetings of Committees of Directors) and number of meetings attended by each of the Directors of the Company during the financial year are: Director Name Current Mark Bayliss(ii) Bernie Campbell Thomas Cowan Robin Low Julie-Ann Kerin Former Stephen Anstice Board Meeting Audit & Risk Management Committee Nomination & Remuneration Committee Meetings Held(i) Meetings Attended Meetings Held(i) Meetings Attended Meetings Held(i) Meetings Attended - 23 27 27 26 22 - 23 27 27 26 22 - 3 5 5 4 4 - 3(iii) 5 5 4(v) 4 - 3 4 4 4 3 - 3(iii) 4 4(iv) 4 3 (i) (ii) (iii) (iv) (v) Number of meetings held during the time the Director held office or was a member of the relevant committee during the financial year. Mark Bayliss was appointed as a Director on 27 June 2018. Bernie Campbell attended two (2) meetings by invitation and one (1) meetings as a member. Robin Low attended three (3) meetings by invitation and one (1) meeting as a member. Julie-Ann Kerin attended by invitation. In addition to the above meetings, the following committees of the Board met during the financial year: — A committee comprising of Stephen Anstice, Thomas Cowan, Robin Low and Julie-Ann Kerin met for the purposes of approving the 2017 Full Year Financial Statements; — A committee comprising of Stephen Anstice, Thomas Cowan, Robin Low and Julie-Ann Kerin met for the purposes of approving a trading update in February 2018; and — A committee comprising of Stephen Anstice, Thomas Cowan, Robin Low and Julie-Ann Kerin met for the purposes of approving the 2018 Half Year Financial Statements. 4.0 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. 32 CSG Annual Report 2018 Directors' Report           5.0 Operating and Financial Review Operations Overview 5.1 CSG is a provider of print and business technology solutions in Review of FY2018 Group Financial Performance 5.2 The financial results for FY2018 were as follows: Australia and New Zealand, that is supported by an in-house equipment financing business. The Company has a national sales and service footprint in both countries concentrating on small-to- medium enterprise (SMEs) customers. — Total revenue and other income declined by 8% to $225.7 million; — Reported EBITDA loss of $151.0 million, reflecting a non-cash impairment of $116.1 million of intangible assets relating to goodwill and customer contracts, provisions relating to the CSG works closely with a number of major business partners Enterprise Solutions business of $39.3 million, non-cash LTIP of (including Canon, Konica Minolta, HP, Samsung, Zoom, Microsoft $0.4 million and non-recurring items of $5.3 million; and and 8x8) to deliver a brand agnostic, unique end-to-end bundled product and service offering. — Statutory Net Loss After Tax of $150.1 million, impacted by a non- cash impairment of $116.1 million of intangible assets relating to goodwill and customer contracts acquired within the New A key differentiator is that CSG customers can source all their Zealand print business and provisions relating to the Enterprise essential IT needs from one supplier with one simple monthly bill. Solutions business of $39.3 million. CSG solutions include print, display solutions, managed IT, desktop, cloud unified communications and contact centre The Board measures a number of items to assess the performance solutions, all offered ‘as a subscription’ and supported by a of the business, one of which is underlying EBITDA after taking into national service network. account all non–recurring or one off items. This is an unaudited measure which is reconciled to the audited Net Profit After Tax The Company’s Technology as a Subscription approach (“NPAT”) in the table below: differentiates CSG from its competitors and gives its customers access to the latest technologies with minimal capital outlay as well as providing an easily trackable and predictable IT spend. The increasing reliance on technology has resulted in SMEs looking 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 creates genuine value for its customers, saving them time and money. CSG currently employs approximately 700 staff in 24 locations across Australia and New Zealand. The Company has a commitment to diversity, together with recognising and rewarding its staff. CSG Revenue and other income NPAT Less Tax Add Depreciation and Amortisation Add Interest expense / (income) EBITDA also strives to achieve above industry-standard benchmarks for Add Non-recurring items staff productivity and satisfaction. LTIP / Employee Share Plan Display implementation overrun Acquisition and non-recurring legal costs Restructuring and related charges Enterprise Solutions provisions Impairment Underlying EBITDA FY2018 $m 225.7 (150.1) (11.4) 6.7 3.8 (151.0) 161.1 0.4 2.2 1.7 1.4 39.3 116.1 10.0 *Figures contained in the Performance” are unaudited. “Review of FY2018 Group Financial CSG Annual Report 2018 33 Directors' Report Revenue and other income a. Group revenue and other income declined by 8% to $225.7 million Review of FY2018 Group Operations 5.3 FY2018 was a challenging year for CSG within the Enterprise in FY2018 due to lower than expected print equipment sales, segment. CSG had lower print equipment sales than expected, primarily within the enterprise segment in Australia and production primarily within the enterprise segment in Australia and production print in New Zealand. print in New Zealand, with revenue approximately $8.5 million lower than FY2017. Print equipment sales in the SME sector were also Print equipment sales in the SME sector were lower also as a result lower than expected due to changes to CSG’s salesforce and sales to changes to CSG’s salesforce and sales incentive programs to incentive programs to accelerate growth in the Technology accelerate CSG’s high growth Technology business. business. Revenue was also impacted by lower display sales relative to FY2017 as revenue is being recognised at the time of installation. Revenue was also impacted by lower display sales relative to FY2017 as revenue is being recognised at the time of installation. During FY2018, the Company continued to successfully execute on While Print revenue reduced, we continued to see strong growth Zealand with total technology revenue up 42% to $42.8 million. High in the Technology division, with total technology revenue up 42% Value technology subscription seats grew by approximately 40% relative to FY2017 and in line with growth in Technology organically in FY2018 to 22,326 subscription seats, with an average its Technology as a Subscription strategy in Australia and New subscription seats. Expenses b. Expenses increased year-on-year with underlying EBITDA margin Monthly Recurring Revenue of approximately $95 per seat. The growth in High Value seats can be attributed to more focused sales effort, increased marketing and improved digital targeting. (pre significant items) declining from 12.4% in FY2017 to 4.5% in The Company also continued to deliver high quality customer FY2018. A key driver for the increased expenses was a significant investment in FY2018 of $6.0 million in the Enterprise business. Following a review of the performance of the Enterprise business, service, evidenced by a strong in-field NPS(i) score of 72 across the SME business. CSG has now ceased further investment in this segment. As announced to the market on 9 February 2018, the Board Total expenses (excluding depreciation and amortisation, and the maximise value for CSG’s shareholders. The key outcomes from the appointed Morgan Stanley to assist in reviewing strategic options to non-cash impairment charge) grew by 18% year on year primarily strategic review were as follows: due to investment in the Enterprise business during FY2018. Borrowing costs in Finance Solutions continue to benefit from the — CSG has ceased further investment in the Enterprise technology impacted FY2018 company earnings by segment (which low interest rate environment in delivering an approximately 57% approximately $6.0m, and had consumed considerable underlying return on equity, excluding the impact of provisions management time and focus); relating to the Enterprise Solutions business in FY2018. — Simplified and re-aligned the SME business to a product-led, go- to-market model with three distinct operating businesses – Customer contract amortisation of $3.8 million has remained flat Technology, Print & Display and Finance; and from FY2017. — Implementation of a major restructure of the Australian and New Zealand businesses within sales, service and operations, is being undertaken. The Company is also undertaking cost-out initiatives to simplify its operational structure and distribution costs, and continue realising cost synergies through the integration of recent acquisitions. (i) Net Promoter Score (NPS) is a method of measuring customer 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. 34 CSG Annual Report 2018 Directors' Report Together, the restructure and cost-out initiatives outlined above will result in one-off restructuring charges of approximately $2.5 million (a majority of which have been recognised in FY2018) and approximately $7.7 million of cost savings in FY2019 (annualised cost savings of approximately $10.0 million from FY20 onwards). Approximately $5.0 million of the identified cost savings in FY2019 have already been implemented. Given the challenges of FY2018, in addition to the above actions, the Company has undertaken the following initiatives to reposition the business for sustainable long-term growth: — Appointed Mark Bayliss as Executive Director & Chairman in June 2018. Mark has extensive senior executive experience in a variety of roles across both the listed and private landscape, and across a variety of industries including eCommerce, media, FMCG, retail and advertising industries globally; — Appointed a new country head in New Zealand whose focus will be on driving sales and increasing efficiencies in this region; — Appointed four experienced sales business heads to run Print & Digital and Technology in both Australia and New Zealand; and — Continued the development and rollout of next generation salesforce.com platform which automates the sales lead to delivery process. The Company expects a further reduction in inventory in FY2019 of approximately $10.0 million, driven by a reduction in equipment and toner-in-field. Review of Group Financial Position 5.4 CSG has a closing cash balance of $14.2 million, including an amount of $8.0 million held in restricted cash accounts under the terms of the CSG Finance Solutions debt facilities (refer note 6). CSG had nil cash conversion in FY2018 after excluding the impact of non-recurring items and cash released from Lease Receivables. ($m) EBITDA (underlying) Operating cash flow (reported) add tax paid add net interest paid add non-recurring cash items add change in lease receivables ungeared pre-tax cash flow Profit to cash conversion 1H FY2017 14.1 2.3 2.3 1.0 2.2 (1.1) 6.7 48% 2H FY2017 FY2017 1H FY2018 2H FY2018 16.2 (5.1) 1.7 1.1 4.4 6.5 8.6 53% 30.3 (2.8) 4.0 2.1 6.7 5.4 15.4 51% 4.6 3.1 0.1 1.4 2.5 (5.9) 1.2 27% 5.4 4.2 2.3 1.5 4.9 (14.1) (1.2) (22%) FY2018 10.0 7.3 2.4 2.9 7.4 (20.0) 0.0 0% Lease receivables in the Finance Solutions business have declined to $242.2 million ($266.3 million in FY2017) with $213.0 million funded by associated debt ($225.4 million in FY2017). The decline in the book is driven by lower than expected print equipment sales. On 21 August 2018, CSG announced a fully underwritten equity raising of approximately $18 million through a 1 for 3.52 pro rata non- renounceable entitlement offer. Net proceeds of approximately $17.0 million will be used to repay corporate debt ($10 million), pay acquisition earn-outs ($2.0 million), pay restructuring costs in relation to Enterprise Solutions business ($2.0 to $2.5 million) and provide for working capital ($3.0 million). Following completion of the capital raising, the pro forma corporate debt balance as at 30 June 2018 is $38.3 million and the pro forma cash balance is $21.2 million (of which $8.0 million is restricted), strengthening CSG’s financial and capital position. CSG Annual Report 2018 35 Directors' Report 5.5 Divisional Review On 25 June 2018, following a review of the performance of the The Print & Display business provides the following offerings to CSG Enterprise Solutions business, CSG announced that it would cease customers: investment in this business. For FY2019, the Company will re-align its SME business to a product-led, go-to-market model resulting in three clear operating divisions across Australia and New Zealand – — Print as a Subscription – Print solutions that include equipment, parts, consumables and service for a single monthly operating Print & Display, Technology and Finance. expense; and Technology a. CSG’s Technology business offers secure, global and reliable — Display as a Subscription – Large format and digital displays, video walls, cloud displays and business monitors. managed IT solutions to SME customers across Australia and New The Print & Display division has been repositioned to focus Zealand. With next generation technologies and a disruptive cloud exclusively on transactional print and display equipment and will no first approach, CSG challenges the traditional managed IT providers longer be accountable for sales of our annuity based technology to deliver better outcomes for its customers. offerings. By refocussing the sales force and increasing their selling time to transactional equipment we are aiming to return to market CSG’s Technology product suite is currently comprised of the share growth within the SME segment over time. following offerings: — CSG Total Office – Complete end-user technology bundle including desktop / laptop, enterprise grade cloud telephony, Finance c. CSG Finance is a specialist service provider of lease and rental products for print and business technology assets sold and serviced Microsoft Office 365 Business Premium, cloud storage, backup by CSG in both Australia and New Zealand. The book is driven by and full support for a fixed monthly per user price; 95% conversion of customers, including government, corporate and — Desktop as a Subscription – Desktop/laptop, cloud storage and commercial businesses across both regions. backup with full support; — Boardroom as a Subscription – Full boardroom package combining CSG’s finance business is well managed with strong performance, Samsung digital display technology with cloud conferencing; driven by bad debts of less than 0.5% and strong returns on equity — Private Cloud Platform – Secure, Australian data centre services and of 56% in 1H FY2018 and 59% in 2H FY2018. Overall, leasing on-demand infrastructure for critical business applications; and receivables declined by 9% to $242.2 million in FY2018 (excluding — CSG Marketplace – Simplified and centralised procurement solution where customers can subscribe to, track, manage and view all their technology services. Print & Display b. CSG’s Print & Display business provides the sales, support, service the impact of provisions relating to Enterprise Solutions). CSG Finance is a critical element in enabling the print and technology businesses to be able to deliver bundled Technology as a Subscription offerings. Growth targets for this division include: and financing of print equipment to SME customers across Australia — Continuing to support the current print business for both existing and New Zealand. CSG’s scale, national presence and significant customers and targeting of new customers; brand partnerships give it the flexibility to service businesses of any — Financing equipment sales for customers acquired through recent size and in any location across Australia and New Zealand. In acquisitions; and Australia, CSG is the only national, brand agnostic provider of print — Supporting the growth of the Technology as a Subscription solutions in the market. In New Zealand, the Group operates a well- product suite. established and market leading business through its partnerships with Konica Minolta and HP. 36 CSG Annual Report 2018 Directors' Report 5.6 Risk Management Corporate Governance The Board of CSG Limited believes that a strong corporate governance framework will underpin growth in the company. CSG’s corporate governance policies and practices are set out in the Corporate Governance Statement. The Corporate Governance Statement can be found on pages 18 to 27 of this annual report. In light of the challenging 2018 year, the board has requested a review of risk management practices in 2019. CSG has identified the following at risk areas and mitigating procedures: Principal Risk Area Innovation Foreign Exchange to optimise innovation Inability opportunities in services, products, processes and commercial solutions to support growth opportunities. full value of Risk Management Approach CSG has a proactive growth strategy that combines leadership, partnerships, and continual review. from operations Revenue is non-Australian 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. is hedged Currency risk in accordance with the treasury risk policy. The treasury risk policy aims to manage the impact of short-term fluctuations in CSG’s earnings. Derivative financial (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. instruments 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. Adequacy of Funding CSG has corporate and finance division debt funding, with obligations attached. Corporate debt obligations are sensitive to cashflows from operations and the levels set for dividends and share buy-backs. 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. 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. Credit indicators and market conditions are monitored on a regular basis by management. In the light of recent trading conditions, CSG has announced an equity raise to recapitalise the balance sheet and implement a revised covenant regime. Key Suppliers Key Personnel Competition CSG’s key suppliers are Canon, Konica Minolta, HP, Samsung, Microsoft, 8x8 and Zoom who supply the majority of to maintain It relationships. is critical inventory. 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. CSG’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. 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. CSG has incentive based remuneration structures in place and is looking to review these to align to the new business structure. 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. CSG Annual Report 2018 37 Directors' Report 6.0 Remuneration Report Dear Shareholder, On behalf of your Board, I am pleased to detail CSG’s 2018 With regard to our general employees, in FY2018 we replaced the Remuneration Report which sets out remuneration information for Staff Tax Exempt Share Plan that had been in place for the past 4 the Chief Executive Officer (“CEO”), the Group Executive, Directors years with a cash based Performance Bonus Scheme. This was on and the broader employee group. the back of feedback provided by our people. No payments, however, eventuated under this scheme as the pre-requisite The Board recognises that the performance of CSG depends on the EBITDA hurdle was not met. quality and motivation of its people, including Group Executives and approximately 700 employees across Australia and New Zealand. Significantly, in June 2018, we welcomed Mark Bayliss to CSG as CSG’s remuneration strategy aims to appropriately reward, Executive Chairman. Mark has a track record of successfully leading incentivize and retain talent necessary to achieve its operational and ‘turnarounds’ and we are confident that his direct involvement will strategic goals. have a positive impact upon the underlying performance of the business. Consistent with our general philosophy, Mark’s Core to our remuneration philosophy is a strong performance remuneration is heavily performance weighted and aligned to framework, where the contribution of all our employees is aligned delivering future shareholder value. to the interests of our shareholders. For Group Executives and Senior Management this is achieved via both a Short-Term Incentive Thank you for reviewing the 2018 Remuneration Report. While the Plan (“STIP”) focused on annual targets, and an equity based Long financial results of the Company have been below expectation, the Term Incentive Plan (“LTIP”). Board takes comfort that CSG’s remuneration practices are aligned to shareholder interests and appropriately reward our people The STIP targets are a mix of Corporate objectives the Company commensurate with the level of performance delivered. It is an must achieve and Divisional objectives for which individuals are improved level of performance in executing our business strategy accountable. To ensure alignment with shareholder interests, the that will result in increased returns for shareholders and increased achievement of the Corporate financial targets is a ‘gate’ that must rewards for both Executives and employees. be achieved before payment of any other components of the STIP. This gate was not met in FY2018 and consequently no STIP Yours sincerely payments have been made to Group Executives and Senior Management. Historically, our equity based Long Term Incentive Plan (LTIP) has been used as a mechanism to incentivize and focus Senior Executives on delivering increased shareholder value. In light of the recent underperformance of the business and the transformation required, the Board is further reviewing options to get the optimum balance between incentivization and delivering the results shareholders expect. Should any changes to the LTIP be proposed by the Board as a result of this review, and specifically if they impact the CEO, they will be put to shareholders at the Annual General meeting in November 2018. Thomas Cowan Chairman, Nomination and Remuneration Committee 38 CSG Annual Report 2018 Directors' Report 7.0 Remuneration Governance This report covers the Key Management Personnel (“KMP”) of CSG. The policy for determining the nature and amount of remuneration KMP are employees with authority and responsibility for planning, of Directors and Group Executives is agreed by the Board. The directing and controlling the activities of the CSG Group that can Board has established a Nomination and Remuneration Committee, materially affect its performance. As such, the KMP for the year which is responsible for the following: ending 30 June 2018 are: — All persons who have held the position of Director of CSG Limited during the financial year, including Julie-Ann Kerin, CEO/ — Reviewing and recommending to the board the appropriate remuneration of the ceo, members of the group executive and non-executive directors; Managing Director; — Ensuring that remuneration levels take into account risks — Gary Brown, Chief Financial Officer (“CFO”); involved, demands and time requirements of each role, experience and relevant industry and related benchmarks; On 1 July, 2018, due to a change in roles and responsibilities, Stephen Birrell, Warwick Beban, Declan Ramsay, and Mark Thomas — Developing and recommending to the board remuneration incentive programs such as bonus schemes and group share ceased being KMPs. 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 to or approved by shareholders; and — Reviewing and approving appropriate disclosures to be included in the Company’s annual report regarding the Nomination and Remuneration 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. CSG Annual Report 2018 39 Directors' Report 8.0 Remuneration Objectives, Policy and Practice The Board, with assistance from the Nomination and Remuneration 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 KMP, which includes a mix of fixed and variable remuneration, and short-term and long-term performance based indicators. Fixed remuneration 8.1 — Fixed remuneration is determined according to industry standards, relevant laws and regulations, labour market conditions, the profitability of the CSG business and individual experience. 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 (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 Nomination and Remuneration Committee. — Fixed remuneration for the CEO and Group Executives has been has been capped for the period FY2016 - FY 2020 in recognition of their participation in the LTI Plan. Short-term incentives 8.2 Short term incentives are assessed against a mix of Company key performance indicators (via a Corporate Scorecard), and individual key performance indicators for which managers are personally accountable (via a Divisional Scorecard). Key result areas include a mix of financial and non financial targets. For 2018, the Corporate Scorecard was based on the following targets: Category Financial (60%) Non-Financial (40%) Target Achieve EBITDA target Achieve revenue growth target Ensure cash targets are achieved Achieve technology seats target Rebranding of NZ business and acquisitions Achievement of Net Promoter Score target for customer engagement Service Desk integration and consolidation Implementation of business transformation & system platform in NZ Weighting 15% 15% 15% 15% 10% 10% 10% 10% 40 CSG Annual Report 2018 Directors' Report To encourage and reward Management for extraordinary performance there is an overachievement attached to the EBITDA target that will Key features of the LTIP are: — Annual grants of performance rights to align reward with result in that component being paid at the percentage of the individual contributions. overachievement multiplied by the KPI weighting. — Performance hurdles attached to the plan use an implied compound annual growth rate of total shareholder return (TSR) The financial measures in the Corporate Scorecard are a ‘gate’ that of approximately 35% must be achieved before the payment of any other Corporate and Divisional Scorecard components. — Stage 1, 2 & 3 Performance Rights aligned to performance periods from August 2017 to the trading day following the release of the financial results for FY20, FY2021 and FY22 The STIP payment is based on the following percentage framework: respectively. Vesting periods are aligned accordingly. CEO/MD: 100% Corporate Scorecard — Restrictions regarding the disposal of shares to ensure that Senior Executives continue to hold a meaningful amount of any CFO: 70% Corporate Scorecard / Company equity that vests. 30% Divisional Scorecard — New or promoted Senior Executives may be offered participation Group Executives: 50% Corporate Scorecard / 50% Divisional Scorecard Senior Managers: 30% Corporate Scorecard / 70% Divisional Scorecard in the LTIP after 12 months’ satisfactory service. During 2015, the Company also issued Performance Rights to key Sales Agents (MAIP) considered critical to the business at that time. These Performance Rights vested on 1 July 2017. Long-term incentives 8.3 While STIP recognises performance in any single year, the Board considers it essential that the Group Executive and other key Management (together the “Senior Executives”) have reward incentives linked to longer-term Company performance and value creation for shareholders. In the period since the 2016 LTIP was approved by shareholders, the financial performance of the Company has created a challenging environment in which to balance individual remuneration and Company performance. As a result, other than the CEO, no other Senior Executives were offered performance rights under the STIP in FY 17. Given the environment and business performance the CEO subsequently agreed to have these rights cancelled for no consideration. The Board has dedicated considerable energy to reviewing the performance hurdles. At the November 2017 Annual General Meeting shareholders approved the issue of Performance Rights along with changes to the LTIP hurdles for the CEO. These hurdles provided appropriate incentivisation whilst remaining sufficiently challenging to deliver shareholder value under the plan. During FY2018, Performance Rights were also issued to other Senior Executives with the same hurdles approved by shareholders for the CEO. CSG Annual Report 2018 41 Directors' Report Performance Rights Details regarding Performance Rights on issue during the year are listed in the table below. LTIP Issue 9 Issue 10 Issue 11 Total Plan LTIP 10 Opening Issued Lapsed Exercised Cancelled Closing 4,189,000 - - - - 9,602,925 (1,716,483) 5,000,000 - 4,189,000 14,602,925 (1,716,483) - - - - (4,189,000) - - - 7,886,442 5,000,000 (4,189,000) 12,886,442 Detail Executive and Senior Management were granted 9,602,925 Performance Rights in FY2018 under LTIP 10. The terms of the grant were: LTI Stage 1 LTI Stage 2 LTI Stage 3 Total Performance Rights Vesting Date Expiry Date $0.58 $0.93 $1.39 18/08/2020 28/09/2020 18/08/2021 28/09/2021 18/08/2022 28/09/2022 When calculating the TSR CAGR for a performance period, the CSG share price on the trading day following the release of the Company’s relevant financial results will be deemed to be the 30-day volume weighted average sale price on the ASX of CSG shares commencing on that trading day plus any cash dividend paid. If Stage 1 or Stage 2 performance rights do not vest at their initial testing date, they will not lapse and may vest if subsequent stages vests. If Stage 3 lapses due to failure to meet their TSR vesting condition, all unvested Stage 1 and Stage 2 rights will automatically lapse at the same time. Rights that vest are subject to disposal restrictions. 100% of shares resulting from vesting of Stage 1 rights must not be disposed of until the 2nd trading day after the Company’s FY2021 full-year results being released to the ASX. 50% of shares resulting from vesting and exercise from Stage 2 rights must not be disposed of until the 2nd trading day after the Company’s FY2022 full-year results being released to the ASX. 25% of shares resulting from vesting and exercise of Stage 1 rights must not be disposed of until the 2nd trading day after the Company’s FY2023 full-year results being released to the ASX. Since issue, employees holding 1,716,483 rights left the Group and these rights have lapsed. LTIPt 11 The Executive Chairman was granted 5,000,000 Performance Rights in FY2018 under LTIP 11. The terms of the grant were: LTI Stage 1 LTI Stage 2 LTI Stage 3 Share price hurdle Vesting Date Expiry Date $0.40 $0.45 $0.50 N/A(i) 30/06/2023 N/A(i) 30/06/2023 N/A(i) 30/06/2023 (i) The performance period for all performance rights under LTIP 11 is from 27 June 2018 to 30 June 2023. The rights vest on any day the vesting conditions are achieved within the performance period. If Stage 1 is completed prior to 30 June 2019, the shares issued remain in escrow until 30 June 2019. If Stage 2 is completed prior to 30 June 2020, the shares issued remain in escrow until 30 June 2020. If Stage 3 is completed prior to 30 June 2021, the shares issued remain in escrow until 30 June 2021. 42 CSG Annual Report 2018 Directors' Report       Employee Performance Bonus Scheme At the commencement of FY2018 a cash based Employee Performance Bonus Plan was introduced for employees that do not participate in the STIP, LTIP or who are not eligible to earn sales based incentives or commissions. Any benefit under this plan is subject to achieving a minimum EBITDA as determined by the Board. 9.0 Non-Executive Director Remuneration The available remuneration pool for Non-Executive Directors, as approved at the 2014 Annual General Meeting, is $600,000 (all inclusive). There is no intention to seek an increase at this year’s Annual General Meeting. The table below summarises the rates for the various roles. Key points to note are: — The Non-Executive Chairman was paid an all-inclusive fee regardless of Committee positions; — Board members are currently paid a base fee plus additional fees for each Committee Chair (see table below for fee structure); and — Superannuation is paid as required on fees at the statutory rates (9.50% for the 2017 financial year). Non-Executive Directors remuneration fees effective from 1 July 2016 onwards are set out below: 2017/18 Board Audit and Risk Management Committee Nomination & Remuneration Committee Non-Executive Chairman 140,000 19,163 Member 71,175 - 19,163 - CSG Annual Report 2018 43 Directors' Report 10.0 Link to FY2018 Performance 10.1 Company Performance The table below provides summary information on the Company’s earnings and shareholder wealth for the current year and prior years: Revenue and income ($m) Net profit/(loss) after tax ($m) Share price ($) Change in share price Dividends paid ($) Total Shareholder Return (TSR) Earnings per Share (cents) 2018 225.7 (150.1) 0.23 (0.52) - (69%) (45.5) 2017 244.5 (43.7) 0.75 (0.74) 0.05 (46%) (13.7) 2016 246.6 18.2 1.49 (0.11) 0.09 (1%) 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 10.2 STIP Outcomes Under the Remuneration Policy achievement of the Corporate financial KPI’s is a gate that must be achieved before performance against Divisional KPI components can be considered for the STIP. This requirement was not met and consequently no STIP payments were made in FY2018. 10.3 LTIP Outcomes The movement in Performance Rights under previous LTIP during the year ended 30 June 2018 is summarised below: LTIP Issue 9 Issue 10 Issue 11 Total Opening Issued Lapsed Exercised Cancelled Closing 4,189,000 - - - - 9,602,925 (1,716,483) 5,000,000 - 4,189,000 14,602,925 (1,716,483) - - - - (4,189,000) - - - 7,886,442 5,000,000 (4,189,000) 12,886,442 10.4 Employee Performance Bonus Scheme Under the Employee Performance Bonus Scheme there is an EBITDA gate, determined by the Board, which must be achieved before any payments are made. This requirement was not met for FY2018 and consequently no bonuses were paid to eligible employees under this scheme. 44 CSG Annual Report 2018 Directors' Report   11.0 Remuneration Tables and Disclosures 11.1 Directors’ Remuneration 2018 Non-Executive Directors Thomas Cowan Bernie Campbell(i) Stephen Anstice(ii) Robin Low Total Executive Directors Julie-Ann Kerin Mark Bayliss(iii) Total Total (i) (ii) (iii) (iv) 2017 Non-Executive Directors Thomas Cowan Mark Phillips(i) Stephen Anstice Robin Low Total Executive Directors Julie-Ann Kerin Total (i) (ii) Cash Salary and Fees(iv) STIP and Other Fees Termination Payments Post- Employment Super LTIP Total Performance Related % 90,338 66,819 106,708 82,500 346,365 675,000 3,000 678,000 1,024,365 - - - - - - - - - - - - - - - - -  5,279 10,137 7,838 23,254 - - - - 90,338 72,098 116,845 90,338 369,619 25,000 199,847 899,847 - 13,776 16,776 25,000 213,623 916,623 48,254 213,623 1,286,242 -  -  -  -  -  22% 82% 23% 17% Appointed 13 September 2017, appointed acting chairman 1 May 18, ceased as acting Chairman 27 June 2018, recommenced as Non-Executive Director 27 June 2018. Resigned 1 May 18. Appointed 27 June 2018 Salary is inclusive of all entitlements Cash Salary and Fees(ii) STIP and Other Fees Termination Payments Post- Employment Super LTIP Total Performance Related % 90,338 48,750 127,853 82,500 349,441 654,166 1,003,607 - - - - - - - - - - - - - - -  4,631 12,146 7,838 24,615 - - - - - 90,338 53,381 139,999 90,338 374,056 25,000 261,920 941,086 49,615 261,920 1,315,142 - -  -  -  - 28% 20% Resigned 16 March 2017. Salary is inclusive of all entitlements. CSG Annual Report 2018 45 Directors' Report                                                                                     11.0 Remuneration Tables and Disclosures (continued) 11.2 Group Executive Remuneration Cash Salary and Fees(ii) STIP and Other Fees Termination Payments Post- Employment Super LTIP Total Performance Related % 2018(i) Gary Brown Total 380,384 380,384 - - - - 20,048 20,048 37,291 37,291 437,724 437,724 9% 9% (i) (ii) Warwick Beban, Declan Ramsay, Stephen Birrell, Mark Thomas ceased as KMP on 1 July 2017. Salary is inclusive of all entitlements Cash Salary and Fees(iii) STIP and Other Fees Termination Payments Post- Employment Super LTIP Total Performance Related % 2017 Neil Lynch(i) Mark Thomas Warwick Beban Declan Ramsay Stephen Birrell Gary Brown(ii) Total 322,740 336,539 301,834 396,880 394,308 129,720 1,882,021 - - - - - - - 187,508 -  -  -  -  -  187,508 14,843 19,616 - 19,747 19,747 8,193 82,146 48,822 -  24,411 32,035 48,822 573,913 356,155 326,245 448,662 462,877 -  137,913 154,090 2,305,765 9% - 7% 7% 11% - 7% (i) (ii) (iii) Resigned 17 March 2017 Appointed 27 February 2017 Salary is inclusive of all entitlements 46 CSG Annual Report 2018 Directors' Report                                 11.0 Remuneration Tables and Disclosures (continued) 11.3 LTIP Issue 9, 10 & 11 – Options & Performance Rights All Performance Rights refer to rights over ordinary shares of CSG Limited, which are exercisable on a one-for-one basis under various plans. Performance Rights are provided at no cost to the recipients. Non-Executive Directors are not entitled to participate in the LTIP. 2018 Julie-Ann Kerin Julie-Ann Kerin Gary Brown Mark Bayliss  Total LTIP Date Granted Balance at the Beginning of Year Granted in Year Vested Forfeited in Year Balance at End of Year 9 10 10 11 16/11/2016 4,189,000 - 22/12/2017 22/12/2017 27/06/2018 - - - 2,475,000 1,237,488 5,000,000 4,189,000 8,712,488 - - - - - (4,189,000) - - - - 2,475,000 1,237,488 5,000,000 (4,189,000) 8,712,488 Warwick Beban, Declan Ramsay, Stephen Birrell, Mark Thomas ceased as KMP on 1 July 2017. Balance at the Beginning of Year Date Granted Granted in Year Vested Forfeited in Year Balance at End of Year 28/06/2013 1,333,333 4,189,000 (1,333,333) 28/06/2013 28/06/2013 28/06/2013 & 30/12/2014 533,333 266,667 306,667 28/06/2013 533,333 -  -  -  -  (533,333) (266,667) (306,667) (533,333) 2,973,333 4,189,000 (2,973,333) - - - - - - 4,189,000 - - - - 4,189,000 2017 Julie-Ann Kerin Neil Lynch(i) Warwick Beban Declan Ramsay Stephen Birrell  Total (i) Resigned 17 March 2017 CSG Annual Report 2018 47 Directors' Report                                     11.0 Remuneration Tables and Disclosures (continued) 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 Vest Expiry Date 2018 Julie-Ann Kerin 1.0100 1.0100 0.9700 0.9700 1.0900 1.0900 1.0300 0.9700 0.1900 0.1800 0.1400 0.1000 0.2100 0.1900 0.1500 0.1000 Julie-Ann Kerin 0.2200 0.2100 0.1800 0.1800 0.1600 Gary Brown 0.2200 0.2100 0.1800 0.1800 0.1600 0.2141 0.2063 0.1939 Mark Bayliss - -  -  -   -  - -  -  -  -  -  -  -  -  -  -  - -  -  -   - - -  -  -   - -   - -  - -  -  -   -  - -  -  -  -  -  -  -  -  -  -  - -  -  -   - - -  -  -   - -   - -  -  -  -  -   -  - -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -   -  - -  -  -  -  -  -  -  -  -  -  181,500 86,625 74,250 111,375  - 33,000 90,749 43,312 37,125 55,687 16,500 356,900 343,800 323,167 -  -  -   - -   - -  - -  -  -   -  - -  -  -  -  -  -  -  -  -  -  -  -  -   - -  -  -   - -   - -  - -  -  -   -  - -  -  -  -  -  -  -  -  -  -  - -  -  -   - - -  -  -   - -   - -  21,154 2019 30/09/2018 63,463 2019 30/09/2018 60,950 2020 30/09/2019 60,950 2021 30/09/2020 22,830 2019 30/09/2018 68,490 2019 30/09/2018 64,720 2020 30/09/2019 60,950 2021 30/09/2020 19,898 2019 30/09/2018 56,552 2019 30/09/2018 43,985 2020 30/09/2019 31,418 2021 30/09/2020 21,992 2019 30/09/2018 59,693 2019 30/09/2018 47,126 2020 30/09/2019 31,418 2021 30/09/2020 2021 18/08/2020 2022 18/08/2021 2022 18/08/2021 2023 18/08/2022 2023 18/08/2022 2021 18/08/2020 2022 18/08/2021 2022 18/08/2021 2023 18/08/2022 2023 18/08/2022 2019 30/06/2019 2020 30/06/2020 2021 30/06/2021 -  -  -   - -  -  -   - -   - -  Details of the performance criteria attached to each of the Performance Rights are included in the LTIP discussion above and in Note 23 to the financial statements. No Performance Rights have been granted since the end of the financial year. (a) The percent forfeited and lapsed in the year represents the reduction from the maximum number of options available to vest due to the performance or conditions not being achieved. 48 CSG Annual Report 2018 Directors' Report                                                                             (b) 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. (c) The value of options that lapsed or were forfeited during the year represents the benefit foregone and was calculated as the number of options at the date the options lapsed or were forfeited, multiplied by the fair value of the options calculated independently at the date the options lapsed or were forfeited but assuming the vesting conditions were satisfied. 12.0 Service Agreements Executive Directors Julie-Ann Kerin Mark Bayliss Group Executive Gary Brown Expiry Termination Notice Termination Payment N/A N/A 6 Months 6 Months 3 Months 3 Months N/A 6 Months 6 Months 13.0 Key Management Personnel Interests The KMP’s relevant interests in shares of the Company or options over shares in the Company are detailed below. Opening Balance Purchases Received on Exercise of Performance Rights Other Sales Thomas Cowan(i) 24,990,579 Stephen Anstice(ii) Robin Low Julie-Ann Kerin Bernie Campbell(iii) Mark Bayliss(iv) Warwick Beban(v) Declan Ramsay(v) Stephen Birrell(v) Gary Brown 290,563 122,375 2,333,333 - - 314,286 306,667 948,571 - - - 34,725 - - - - - - - 29,306,374 34,725 -  -  -  -  -  -  -  -  -  - - - - - - - 4,000,000 - - - - 4,000,000 - - - - - - - - - - - Ceased as Director / KMP Ordinary Shares of CSG - 24,990,579 (290,563) - - - - - 157,100 2,333,333 - 4,000,000 (314,286) (306,667) (948,571) - - - - - (1,860,087) 31,481,012 (i) (ii) (iii) (iv) (v) (vi) 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 24,990,579 shares at 30 June 2018 Resigned 1 May 2018 Appointed 13 September 2017, appointed acting chairman 1 May 2018, ceased as acting Chairman 27 June 2018, recommenced as Non- Executive Director 27 June 2018 Appointed 27 June 2018 Warwick Beban, Declan Ramsay, Stephen Birrell, Mark Thomas ceased as KMP on 1 July 2017 Mark Thomas ceased as KMP on 1 July 2017 at which time held no relevant interest in shares of the company. CSG Annual Report 2018 49 Directors' Report                   14.0 Transactions with Key Management 18.0 Dividends Personnel The dividends paid or declared since the start of the year are as During the financial year, the companies in the Group entered into follows: 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. During the financial year, the Group was a supplier to the Current year interim Commonwealth Games located at the Gold Coast, Queensland. Support staff were required to be located on-site at a time when accommodation was difficult to attain. Julie-Ann Kerin entered into an agreement with the Group, on an arm’s length basis, for the use of her property during this period. As such, $13,500 in rent was paid Prior year final (Unfranked dividends (5 cents per share paid 7 September 2016 ) Total Dividends to Ms Kerin. Consolidated Entity 2018 $’000 - - - 2017 $’000 - 15,904 15,904 15.0 Environmental Regulation 19.0 Directors’ Interests in Contracts Directors’ interests in contracts are disclosed in Note 27 to the The CSG Group’s operations are not subject to any significant financial statements. environmental Commonwealth or State regulations or laws. 16.0 Proceedings on Behalf of the Consolidated Entity 20.0 Indemnification and Insurance of Directors and Officers No person has applied for leave of Court to bring proceedings on amounting to $613,118 insuring all the directors and the officers behalf of the consolidated entity. against judgments, settlements, investigative costs, defense costs During the financial year, the consolidated entity has paid a premium and costs to appear at inquiries or investigations. 17.0 State of Affairs There have been no significant changes in the CSG Group’s state of affairs during the financial year. 50 CSG Annual Report 2018 Directors' Report     21.0 Non-Audit Services 24.0 Likely Developments Non-audit services are approved by resolution of the Audit and Risk The CSG Group will continue to pursue its strategy of increasing the Committee and approval is provided in writing to the Board. Non- profitability and market share of its business units during the next audit services provided by the auditors of the Group during the financial year. Refer to the Operational and Financial Review for year, KPMG, are detailed below. The Directors are satisfied that the further details. 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. 25.0 Rounding of Amounts Other Services Other assurance, taxation and due diligence services 2018 $ 2017 $ - 160,502 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 instrument, amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. 22.0 Auditor’s Independence Declaration Signed in accordance with a resolution of the Directors. The lead auditor’s independence declaration in relation to the audit for the financial year is set out on page 53 of this report. 23.0 Events Subsequent to Reporting Date On 21 August 2018, CSG announced a fully underwritten equity Julie-Ann Kerin Director raising of approximately $18 million through a 1 for 3.52 pro rata Sydney non-renounceable entitlement offer. Net proceeds of approximately 21 August 2018 $17.0 million will be used to repay corporate debt ($10 million), payment of acquisition earn-outs ($2.0 million), restructuring costs in relation to Enterprise Solutions business ($2.0 to $2.5 million) and working capital ($3.0 million). Assuming successful completion of the capital raising, the pro forma corporate debt balance as at 30 June 2018 is $38.3 million and the pro forma cash balance is $21.2 million (of which $8.0 million is restricted). Subsequent to year-end, the Group varied the corporate debt facility which will require the reduction and cancellation of $10m together with revised covenant arrangements. The Group’s forecast indicates that the Group will comply with all covenants of the new facility through to its maturity in October 2019. Details of the existing facility are in the Financial Statements Note 25 (i). The Group has commenced implementation of a major restructure of the Australian and New Zealand businesses within sales, service and operations, is being undertaken. The Company is also undertaking cost-out initiatives to simplify its operational structure and distribution costs, and continue realising cost synergies through the integration of recent acquisitions. No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the Consolidated Financial Statements which has a significant affect on the operation of the Group. CSG Annual Report 2018 51 Directors' Report Directors’ Report Auditors' Independence Declaration 52 CSG Annual Report 2018 Directors' Report CSG Annual Report 2018 53 Directors’ Report 54 CSG Annual Report 2018 Directors' Report Financial Statements 2017-2018 CSG Annual Report 2018 55 Directors' Report Consolidated Statement of Profit and Loss and Other Comprehensive Income for the Year Ended 30 June 2018 Consolidated entity 2018 $’000 2017 $’000 194,590 26,389 99 4,624 210,428 27,047 51 6,994 225,702 244,520 138,721 13,619 2,728 7,405 27,959 46,423 378 2,507 116,100 20,857 6,703 3,826 387,226 (161,524) 11,395 (150,129) 119,662 13,428 2,925 7,144 26,568 46,905 1,879 541 55,000 3,040 6,850 2,660 286,602 (42,082) (1,633) (43,715) (150,282) (44,413) 153 (150,129) (150,129) 699 (43,714) (43,714) (1,957) (170) 420 (406) (1,943) (33) 1,820 1,617 (152,072) (42,097) (152,225) (42,796) 153 699 (152,072) (42,097) (45.5) (45.5) (13.7) (13.7)  Note 7 7 8 16 8 8 8 9 24 24 24 29 29 Sales revenue Finance lease interest income Interest income Other income Cost of sales Finance lease interest expense Marketing expenses Occupancy expenses Administration expenses Employee benefits expenses Share based transactions Acquisition and integration related expenses Impairment of intangible assets Other expenses Depreciation and amortisation Finance costs Loss before income tax Income tax benefit/(expense) Loss from continuing operations Profit/(Loss) is attributable to: Members of the parent Non-controlling interest Loss 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: Reclassified to profit or loss, net of tax Net gains/(losses) taken to equity, net of tax Other comprehensive income/(losses) for the year Total comprehensive income/(losses) for the year Total profit and loss and other comprehensive income is attributable to: Members of the Parent Non-controlling interest 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 56 CSG Annual Report 2018                                                               Consolidated Statement of Financial Position as at 30 June 2018 Current Assets Cash and cash equivalents Receivables Lease receivables Inventories Other Total current assets Non-Current Assets Lease receivables Property, plant and equipment Intangible assets Deferred Tax Asset Total non-current assets Total assets Current Liabilities Payables Deferred income Deferred consideration Short term borrowings Current tax payable Provisions Total current liabilities Non-Current Liabilities Provisions Deferred consideration Long term borrowings 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  Note Consolidated entity 2018 $’000 2017 $’000 11 12 12 13 14 12 15 16 9 17 18 19 22 22 18 19 21 9 20 23 24 24 14,194 38,076 81,029 48,711 3,741 185,751 161,215 3,158 58,156 6,298 228,827 414,578 53,399 642 5,141 2,421 991 8,728 71,322 448 214 45,881 1,307 - 212,998 260,848 332,170 82,408 213,425 3,504 (149,380) 67,549 14,859 82,408 20,338 35,767 96,513 65,810 10,386 228,814 169,775 3,396 175,851 - 349,022 577,836 51,529 2,001 9,071 889 2,207 4,329 70,026 313 3,515 42,117 1,721 6,472 225,355 279,493 349,519 228,317 205,727 6,982 902 213,611 14,706 228,317 CSG Annual Report 2018 57                                                             Consolidated Statement of Changes in Equity for the Year Ended 30 June 2018 Contributed Equity Reserves Balance as at 1 July 2016 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: Equity settled transactions Dividends paid Balance as at 30 June 2017 Balance as at 1 July 2017 Profit/(loss) for the year on Exchange of foreign operations, net of tax differences translation Cash flow hedges: Net gains/(losses) taken to equity Net gains/(losses) taken to profit and loss Total comprehensive income for the year $’000 207,623 - - - - - (1,896) - 205,727 205,727 - - - - - $’000 9,044 - (170) (540) - 8,334 8,334 - (1,957) Cashflow Hedge Reserve $’000 (3,139) - - - - 1,820 (33) Retained Earnings $’000 61,219 (44,413) Non- controlling Interest $’000 Total Equity $’000 14,007 288,754 699 (43,714) - - - - - - (170) 1,820 (33) (170) 1,787 (44,413) 699 (42,099) - - - (15,904) - - (2,435) (15,904) (1,352) 902 14,706 228,319 (1,352) 902 14,706 228,319 - - (150,282) 153 (150,129) - - - - - - (1,957) - (406) 420 - - (406) 420 (1,957) 14 (150,282) 153 (152,072) Transactions with owners in their capacity as owners: Equity settled transactions Dividends paid Balance as at 30 June 2018 7,698 - 213,425 (1,535) - 4,842 The accompanying notes form part of these financial statements. - - - - - - - - 6,163 - (1,338) (149,380) 14,859 82,408 58 CSG Annual Report 2018           Net cash from/(used in) operating activities 25(a) Consolidated Statement of Cash Flows for the Year Ended 30 June 2018 Cash flows from/(used in) operating activities Receipts from customers Payments to suppliers, employees and others Movement in lease receivables Interest income Interest expense Income tax paid Cash flows from/(used in) investing activities Payment for intangibles Payments for property, plant and equipment Payments of deferred consideration Net cash from/(used in) investing activities Cash flows from/(used in) financing activities Borrowings associated with lease receivables Proceeds from borrowings Payments for borrowings Purchase of Hedge Instruments Share buy-backs Dividend distributions Net cash flows from/(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. Notes 2018 $’000 2017 $’000 239,590 256,840 (246,981) (248,140) 20,005 (5,398) 98 (3,028) (2,404) 7,280 (4,328) (1,093) (3,656) (9,077) (8,907) 59,606 (54,310) (264) - - (3,875) (5,672) 20,338 (472) 50 (2,191) (3,989) (2,828) (4,790) (1,752) (3,636) (10,178) 5,371 63,271 (28,653) - (5,183) (15,904) 18,902 5,896 14,455 (13) 10 25(b) 14,194 20,338 CSG Annual Report 2018 59                                                                                   Image reqd 60 CSG Annual Report 2018 Notes to the Financial Statements 2018 For year ended 30 June 2018 CSG Annual Report 2018 61 Note 1: Reporting Entity Use of estimates and judgments The preparation of the financial report in conformity with Australian CSG Limited (the “Company”) is a company limited by shares, Accounting Standards requires management to make judgments, incorporated and domiciled in Australia. The address of the estimates and assumptions that affect the application of Company’s registered office is Level 1, 357 Collins Street, accounting policies and the reported amounts of assets, liabilities, Melbourne, VIC, Australia, 3000. The consolidated financial income and expenses. Actual results may differ from these statements of the Company as at and for the year ended 30 June estimates. 2018 comprise the Company and its controlled entities (together referred to as the “Group” and individually as (“Group entities”). The Estimates and underlying assumptions are reviewed on an Group is a for-profit entity and primarily involved in print and ongoing basis. Revisions to accounting estimates are recognised technology related sales and service and financing of office in the period in which the estimates are revised and in any future equipment. periods affected. 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 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 Australian Accounting Standards Board and the Corporations Act to applicable business operations. The recoverable amount of a 2001. The consolidated financial statements of the Company also CGU is based on value-in-use calculations. These calculations are comply with International Financial Reporting Standards (IFRS) as based on projected financial forecasts and projected cash flows issued by the International Accounting Standards Board (IASB). approved by management covering a period not exceeding five years. Management’s determination of cash flow projections are The financial report was authorised for issue by the Directors on 21 based on past performance and its expectation for the future. The August 2018. present value of future cash flows has been calculated using a post-tax discount rates listed in Note 16 to determine value-in-use. Basis of measurement The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain (ii) Income taxes Income tax benefits are based on the assumption that no adverse material items in the statement of financial position and as change will occur in the income tax legislation and the anticipation described in the accounting policies. that the company will derive sufficient future assessable income Going concern basis of accounting The financial statements for the year ended 30 June 2018 have to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. been prepared on a going concern basis. Refer note 32 Subsequent Management conclude that there will be sufficient future taxable Events for steps taken to achieve capital and funding levels which profits to offset the tax losses which do not expire. the Directors consider to be appropriate to sustain the business. Functional and presentation currency The financial report is presented in Australia dollars which is the (iii) Employment benefits Calculation of long term employment benefits requires estimation of the retention of staff, future remuneration levels and timing of Company’s functional currency. The Company is of a kind referred the settlement of the benefits. The estimates are based on to in ASIC Corporations (Rounding in Financial/Directors’ Reports) historical trends. Instrument 2016/191 and in accordance with that instrument, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. (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. 62 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 (v) Inventory – consumables at customer premises Inventory balances include consumables owned by the group but located at customer premises. The value of consumables Note 3: Summary Of Significant Accounting Policies recorded as inventory is based on management’s estimate The accounting policies set out below have been applied resultant from information held in customer servicing systems and consistently to all periods presented in this financial report, and a sample of customer holdings. have been applied consistently by Group entities. (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, Basis of consolidation (i) Business combinations Business combinations are accounted for using the acquisition historical usage and likely future usage, and likely recoverable method as at the acquisition date, which is the date on which values. (vii) Revenue recognition Revenue from the sale of goods and disposal of other assets is recognised when significant risks and rewards of ownership of the 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. goods have passed. Revenue from a contract to provide services The Group measures goodwill at the acquisition date as: is recognised by reference to the stage of completion of the contract. Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable — the fair value of the consideration transferred; plus — the recognised amount of any non-controlling interests in the that is considered to be a separate unit of accounting is accounted acquiree; plus for separately. When the deliverables in a multiple element arrangement are not considered to be separate units of — if the business combination is achieved in stages, the fair value of less the net the existing equity in the acquiree; interest accounting, the arrangement is accounted for as a single unit. A recognised amount (generally fair value) of the identifiable assets separate unit of accounting exists where the deliverable has value acquired and liabilities assumed. to the customer on a stand-alone basis and there is objective and reliable evidence of the fair values. Interest on loans and When the excess is negative, a bargain purchase gain is receivables from finance leases is recognised on an effective recognised immediately in profit or loss. interest rate basis. Minimum lease payments received under finance leases are apportioned between the finance income and The consideration transferred does not include amounts related to the reduction of the outstanding asset. The finance income is the settlement of pre-existing relationships. Such amounts are allocated to each period during the lease term so as to produce a generally recognised in profit or loss. constant period rate of interest on the remaining balance of the asset. An accrual basis is used to record interest income. Transaction costs, other than those associated with the issue of (viii) Receivables All trade receivables are recognised initially at fair value, and debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. subsequently at amortised cost, less impairment. Collectability of Any contingent consideration payable is recognised at fair value at trade receivables is reviewed on an ongoing basis. Debts which acquisition date. If the contingent consideration is classified as are known to be uncollectible are written off. An impairment loss is equity, it is not remeasured and settlement is accounted for within raised when there is objective evidence that the company will not equity. Otherwise, subsequent changes to the fair value of the be able to collect all amounts due according to the original terms contingent consideration are recognised in profit or loss. 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. CSG Annual Report 2018 63 Notes to the Financial StatementsFor year ended 30 June 2018 Note 3: Summary Of Significant Accounting Policies (cont.) Foreign currency When share-based payment awards (replacement awards) are (i) Foreign currency transactions Transactions in foreign currencies of entities within the required to be exchanged for awards held by the acquiree’s consolidated group are translated into functional currency at the employees (acquiree’s awards) and relate to past services, then all rate of exchange ruling at the date of the transaction. Foreign or a portion of the amount of the acquirer’s replacement awards is currency monetary items that are outstanding at the reporting included in measuring the consideration transferred in the date (other than monetary items arising under foreign currency business combination. This determination is based on the market- contracts where the exchange rate for that monetary item is fixed based value of the replacement awards compared with the in the contract) are translated using the spot rate at the end of the market-based value of the acquiree’s awards and the extent to financial year. All resulting exchange differences arising on which the replacement awards relate to past and/or future service. settlement or re statement are recognised as income and expenses for the financial year. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated (ii) Foreign operations Entities that have a functional currency different to the presentation financial statements from the date that control commences until currency are translated as follows: the date that control ceases. The financial statements of subsidiaries are prepared for the same prevailing at that reporting date; reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. — 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 — assets and liabilities are translated at year-end exchange rates (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. component of equity. 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 (iv) Loss of control Upon the loss of control, the Group derecognises the assets and designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to liabilities of the subsidiary, any non-controlling interests and other the contractual provisions of the instrument. 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 derecognises a financial asset when the contractual the Group retains any interest in the previous subsidiary, then such rights to the cash flow from the asset expire, or it transfers the interest is measured at fair value at the date that control is lost. rights to receive the contractual cash flows on the financial asset Subsequently, it is accounted for as an equity-accounted investee in a transaction in which substantially all the risks and rewards of or as an available-for-sale financial asset depending on the level ownership of the financial asset are transferred. Any interest in of influence retained. transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. (v) Transactions eliminated on consolidation All inter company balances and transactions, including any Financial assets and liabilities are offset and the net amount unrealised profits or losses have been eliminated on consolidation. 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. 64 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 Financial assets at fair value through profit or loss A financial asset is classified as at fair value through profit or loss if derivative financial instruments for trading purposes. However, derivatives that are not designated hedges are accounted for as it is classified as held for trading or is designated as such upon held for trading instruments. initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and On initial designation of the derivative as the hedging instrument, makes purchase and sale decisions based on their fair value in the Group formally documents the relationship between the accordance with the Group’s documented risk management or hedging instrument and the hedged item, including the risk investment strategy. Attributable transaction costs are recognised management objectives and strategy in undertaking the hedge in profit or loss when incurred. Financial assets at their fair value transaction and the hedged risk, together with the methods that through profit or loss are remeasured at fair value, and changes will be used to assess the effectiveness of the hedging therein are recognised in profit or loss. relationship. The Group makes an assessment, both at the Loans and receivables Loans and receivables are financial assets with fixed or effective in offsetting the changes in the fair value or cash flows of inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be highly determinable payments that are not quoted on an active market. the respective hedged items attributable to hedged risk, and Loans and receivables are measured at fair value at inception net whether the actual results of each hedge are within a range of 80 of transaction costs and subsequently at amortised cost using the – 125%. For a cash flow hedge of a forecast transaction, the effective interest rate method, less any impairment losses. transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect Loans and receivables comprise cash and cash equivalents and, reported profit or loss. trade and other receivables. Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks, Derivative financial instruments are recognised initially at fair value and transaction costs are expensed immediately. Subsequent to initial recognition, derivative financial instruments are stated at fair value and including restricted cash and a group multi-function bank subject to the nature of the hedging instrument the gain or loss on re- overdraft facility. measurement to fair value is recognised as described below. (ii) Non-derivative financial liabilities Financial liabilities (including liabilities designated at fair value Cash flow hedges When a derivative is designated as the hedging instrument in a through profit or loss) are recognised initially on the trade date, hedge of the variability in cash flows attributable to a particular which is the date that the Group becomes a party to the risk associated with a recognised asset or liability or a highly contractual provisions of the instrument. probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is The Group derecognises a financial liability when its contractual recognised in other comprehensive income and presented in the obligations are discharged or cancelled or expire. hedging reserve in equity. The ineffective portion of changes in the fair value of the derivative is recognised immediately in profit The Group classifies non-derivative financial liabilities into the or loss. other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable When the hedged item is a non-financial asset, the amount transaction costs. Subsequent to initial recognition, these financial recognised in equity is included in the carrying amount of the liabilities are measured at amortised cost using the effective asset when the asset is recognised. In other cases, the amount interest rate method. accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging Other financial liabilities comprise trade payables, other creditors instrument no longer meets the criteria for hedge accounting, and loans from third parties including inter company balances and expires or is sold, terminated or exercised, or the designation is 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 revoked, the hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss. CSG Annual Report 2018 65 Notes to the Financial StatementsFor year ended 30 June 2018 Note 3: Summary Of Significant Accounting Policies (cont.) Revenue Recognition (i) Sale of Goods Revenue is measured at the fair value of the consideration received or receivable. 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. (v) 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 Revenue from the sale of goods and disposal of other assets is term of the lease. 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 (vi) Other income Dividend revenue is recognised when the right to receive a can be reliably measured. dividend has been established. (ii) Rendering of Services Revenue from a contract to provide services is recognised by Receivables All trade receivables are recognised initially at fair value, and reference to the stage of completion of the contract. The revenue subsequently at amortised cost, less impairment. recognised from rendering of services combines: — 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 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 Group under the terms of those contracts, will not become and the present value of estimated future cash flows, discounted payable until future years. at the original effective interest rate. Cash flows relating to short- term receivables are not discounted if the effect of discounting is The long term service contracts specifically detail both services to not material. The amount of the impairment is recognised in the be performed and the invoicing components for each year of the statement of comprehensive income. contracts. The Group’s contract administration system enables the stage of completion of each contract to be reliably determined. (iii) Revenue arrangements with multiple deliverables Where two or more revenue-generating activities or deliverables Inventories Inventories are valued on the weighted average cost basis at the lower of cost and net realisable value. are sold under a single arrangement, each deliverable that is Net realisable value represents the estimated selling price in the considered to be a separate unit of accounting is accounted for ordinary course of business less the estimated costs of separately. When the deliverables in a multiple element completion, including cost of sales. arrangement are not considered to be separate units of accounting, the arrangement is accounted for as a single unit. Property, Plant and Equipment is Property, plant and equipment recorded at cost less A separate unit of accounting exists where the deliverable has accumulated depreciation and accumulated impairment charges. value to the customer on a stand-alone basis and there is objective Cost includes expenditure that is directly attributable to the and reliable evidence of the fair values. acquisition of the items. (iv) Interest income Interest on loans and receivables from finance leases is recognised Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is on an effective interest rate basis. Minimum lease payments probable that future economic benefits associated with the item received under finance leases are apportioned between the will flow to the company and the cost of the item can be measured finance income and the reduction of the outstanding asset. The reliably. All repairs and maintenance are charged to the income finance income is allocated to each period during the lease term statement during the financial period in which they are incurred. 66 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 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: Assets Leasehold Improvements Plant and Equipment Motor Vehicles Office computer equipment Furniture and Fittings Leased Plant and equipment Rate 2.5%-33% 2.5%-40% 13%-19% 10% - 50% 5% - 20% 20% Method Diminishing value and straight line Diminishing value and straight line Diminishing value Diminishing value and straight line Diminishing value and straight line Straight Line Intangible assets Impairment (i) Goodwill Goodwill represents the excess of the cost of the acquisition over (i) Non-derivative financial assets A financial asset not carried at fair value through profit or loss is the fair value of the net identifiable assets of the acquired assessed at each reporting date to determine whether there is subsidiary at the date of acquisition. Goodwill acquired in a objective evidence that it is impaired. A financial asset is impaired business combination is allocated into the specific components if there is objective evidence of impairment as a result of one or acquired as part of the business combination. more events that occurred after the initial recognition of the asset, (ii) Licenses and other Intangible Assets Licenses and other intangible assets have a finite useful life and and that the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. are recorded at cost less accumulated amortisation and An impairment loss in respect of a financial asset measured at impairment losses. Amortisation is calculated using the straight- amortised costs is calculated as the difference between its line method to allocate the cost of the licenses over their carrying amount and the present value of the estimated future estimated useful life. Other intangible assets have been assigned cash flows discounted at the asset’s original effective interest rate. finite lives between 3-10 years. Software developed for resale is Losses are recognised in profit or loss and reflected in an amortised over five years. Customer contracts/relationships allowance account against loans and receivables. Interest on the acquired in a business combination have been assigned a finite impaired asset continues to be recognised. When an event life of between 5 and 14 years and are amortised on a straight line occurring after the impairment was recognised causes the amount basis over this period. of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. CSG Annual Report 2018 67 Notes to the Financial StatementsFor year ended 30 June 2018 Note 3: Summary Of Significant Accounting Policies (cont.) (ii) Non-financial assets The carrying amounts of the Group’s non-financial assets are 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 reviewed at each reporting date to determine whether there is any comprehensive income over the period of the borrowings using indication of impairment. If any such indication exists, then the the effective interest method. Fees paid on the establishment of asset’s recoverable amount is estimated. Goodwill and indefinite loan facilities, which are not incremental costs relating to the life intangible assets are tested annually for impairment. An actual draw down of the facility, are recognised against the impairment loss is recognised if the carrying amount of an asset or borrowings and amortised on a straight-line basis over the term of its related cash-generating unit (CGU) exceeds its recoverable the facility. amount. Borrowings are classified as current liabilities unless the company The recoverable amount of an asset or CGU is the greater of its has an unconditional right to defer settlement of the liability for at value in use and its fair value less costs to sell. In assessing value least 12 months after the balance sheet date. in use, the estimated future cash flows are discounted to the present value using a post-tax discount rate that reflects current Borrowing costs are recognised as expenses in the period in which market assessments of the time value of money and the risks they are incurred. 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 Employee benefits Liabilities arising in respect of wages and salaries, annual leave inflows from continuing use that are largely independent of the and any other employee benefits expected to be settled within cash inflows of other assets or CGUs. Subject to an operating twelve months of the reporting date are measured at their nominal segment ceiling test, CGUs to which goodwill has been allocated amounts based on remuneration rates which are expected to be are aggregated so that the level at which impairment testing is paid when the liability is settled. All other employee benefit performed reflects the lowest level at which goodwill is monitored liabilities are measured at the present value of the estimated for internal reporting purposes. Goodwill acquired in a business future cash outflow to be made in respect of services provided by combination is allocated to groups of CGUs that are expected to employees up to the reporting date. benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment Share-based Payments The consolidated entity operates an employee share rights plan. losses recognised in respect of CGUs are allocated first to reduce The total amount to be expensed over the vesting period is the carrying amount of goodwill allocated to the CGU (group of determined by reference to the fair value of the rights at grant CGUs), and then to reduce the carrying amounts of the other date. The fair value of rights at grant date is determined using the assets in the CGU (group of CGUs) on a pro rata basis. Monte Carlo pricing model, and is recognised as an employee expense over the period during which the employees become An impairment loss in respect of goodwill is not reversed. For entitled to the right. 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 Provisions A provision is recognised when a legal or constructive obligation amortisation, if no impairment loss had been recognised. exists as a result of a past event and it is probable that an outflow (iii) Trade and other Payables These amounts represent liabilities for goods and services 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 provided to the Group prior to the end of the financial year, which pre-tax rate that reflects current market assessments of the time are unpaid. value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. 68 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 (i) Restructuring A provision for restructuring is recognised when the Group has Finance income and finance costs Finance income comprises interest income on funds invested, approved a detailed and formal restructuring plan, and the dividend income, fair value gains on financial assets at fair value restructuring either has commenced or has been announced through profit or loss, gains on the re-measurement to fair value of publicly. Future operating losses are not provided for. any pre-existing interest in an acquiree, gains on hedging (ii) Onerous contracts A provision for onerous contracts is recognised when the expected instruments that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income. Interest income is recognised as it benefits to be derived by the Group from a contract are lower than accrues in profit or loss, using the effective interest method. the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the Finance costs comprise interest expense on borrowings, expected cost of terminating the contract and the expected net unwinding of the discount on provisions and contingent cost of continuing with the contract. Before a provision is consideration, fair value losses on financials assets at fair value established, the Group recognises any impairment loss on the through profit or loss, impairment losses recognised on financial assets associated with the contract. Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the 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. agreement so as to reflect the risks and benefits incidental to Borrowing costs that are not directly attributable to the acquisition ownership. of a qualifying asset are recognised in profit or loss using the effective interest method. (i) Finance leases Assets held under finance leases are initially recognised at their Foreign currency gains and losses are reported on a net basis in fair value or, if lower, at amounts equal to the present value of the other income in Note 7 depending on whether foreign currency minimum lease payments, each determined at the inception of movements are in a net gain or net loss position. 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. 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 Lease payments are apportioned between finance charges and equity or in other comprehensive income. reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance Current income tax expense or revenue is the tax payable on the charges are charged directly against income. current year’s taxable income based on the applicable income tax (ii) Operating leases Operating lease payments are recognised as an expense on a 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 straight-line basis over the lease term, except where another declaration of dividends. systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred tax asset or liability is recognised in relation to temporary differences arising from the initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. CSG Annual Report 2018 69 Notes to the Financial StatementsFor year ended 30 June 2018 Note 3: Summary Of Significant Accounting Policies (cont.) Research & Development Research expenditure is recognised as an expense as incurred. Concessional tax benefits receivable in respect of eligible Deferred tax is measured at the tax rates that are expected to be expenditure are recognised as income. Income is recognised with applied to temporary differences when they reverse, using tax respect to concessional benefits upon confirmation and rates enacted or substantively enacted at the reporting date. registration of eligible projects with evaluation and registration of eligible projects typically completed in the following financial year. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and Costs incurred on development projects are recognised as whether additional taxes and interest may be due. The Group intangible assets when it is probable that the project will, after believes that its accruals for tax liabilities are adequate for all open considering its commercial and technical feasibility, be completed tax years based on its assessment of many factors, including and generate future economic benefits and its costs can be interpretations of tax law and prior experience. This assessment measured reliably. 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 Discontinued operations Classification as a discontinued operation occurs upon the the adequacy of existing tax liabilities; such changes to tax disposal or when the operation meets the criteria to be classified liabilities will impact tax expense in the period that such a as held for sale or distribution, if earlier. determination is made. Deferred tax assets and liabilities are offset if there is a legally Segment reporting Segment results that are reported to the CEO include items enforceable right to offset current tax liabilities and assets, and directly attributable to a segment as well as those that can be they relate to income taxes levied by the same tax authority on the allocated on a reasonable basis. Unallocated items comprise same taxable entity, or on different tax entities, but they intend to mainly corporate assets (primarily the Company’s headquarters), settle current tax liabilities and assets on a net basis or their tax head office expenses, and income tax assets and liabilities. 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. Note 4: New Accounting Standards and Interpretations New standards adopted There was no material impact on the financial report as a result of Additional income tax expenses that arise from the distribution of the adoption of new or amended accounting standards and cash dividends are recognised at the same time that the liability to interpretations effective for annual reporting periods beginning on pay the related dividend is recognised. The Group does not or after 1 July 2017. distribute non-cash assets as dividends to its shareholders. 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 New standards and interpretations not yet adopted CSG have identified the following new standards which have been issued but not yet adopted by the Group: AASB 9 Financial Instruments AASB 9 addresses the classification, measurement and de- tax losses, for the tax consolidated group. The tax consolidated recognition of financial assets and financial liabilities, introduces group has also entered a tax funding agreement whereby each further disclosure and presentation requirements and a new company in the group contributes to the income tax payable in impairment model replacing AASB 139. The new hedging rules proportion to their contribution to the net profit before tax of the tax consolidated group. align with the Group's risk management practices. As a general rule it will be easier to apply hedge accounting going forward. Changes in own credit risk in respect of liabilities designated at fair value through profit and loss must now be presented in other comprehensive income. 70 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 (i) Financial assets AASB 9 contains an updated classification and determination AASB 15 Revenue from Contracts with Customers AASB15 Revenue from Contracts with Customers is effective for approach for financial assets. This method categorises the annual periods beginning on or after 1 January 2018. AASB 15 asset into three principal classifications; measured at amortised establishes a comprehensive framework for determining whether, cost, Fair Value Through Other Comprehensive Income, and how much and when revenue is recognised. Fair Value Through Profit and Loss eliminating previously used accounts such as held to maturity, loans and receivables, and available for sale. (i) Sales of goods For the sale of print and technology products, revenue is currently recognised when the significant risks and rewards of ownership of Based on the Group’s assessment, it does not believe that the new the goods have passed to the customer and the costs incurred or classification requirements will have a material impact on its to be incurred can be reliably measured. Under AASB15, revenue accounting for trade receivables or loans which are managed on a is recognised when a customer obtains control of the goods. One fair value basis. of the indicators of control having passed is where the customer has the significant risks and rewards of ownership, which is in line (ii) Impairment – Financial assets AASB 9 uses a forward looking model identified as the Expected with the current accounting standard. CSG have assessed there will be no change regarding the timing of revenue recognition for Credit Loss (ECL) model. This requires considerable management the sale of goods on application of AASB 15. judgment in determining which economic factors affect the Group’s financial assets and quantification of these. Under the ECL model, management determine the possibility and quantum of a (ii) Rendering of services Revenue from a contract to provide services is currently current default event (less than 12 months) and a lifetime loss recognised as the service is provided to the customer. For large based on likely losses from credit risk. Consideration was given to projects, revenue is recognised by reference to the stage of the types of lending product, method of payment, credit rating, completion of the contract and the right to invoice the customer. underlying asset, customer region and industry and other macro CSG currently tracks project milestones promised in customer economic factors to determine an ECL. This model has been contracts, and when achieved, recognises the revenue. Under applied to the Lease Receivables balance and any corresponding AASB 15, if a performance obligation is satisfied over time, an Trade Receviable balance. entity must measure progress towards satisfaction of that performance obligation. The output method of tracking progress Based on management’s assessment, impairment losses are towards milestones reached continues to be appropriate and in likely to increase and encounter greater volatility based on its compliance with AASB 15. Therefore, CSG does not expect the customers changing business environments. The estimated application of AASB 15 to result in significant differences in the losses from application of AASB 9 as at 30 June 2018 is as follows: timing of revenue recognition for these services. Estimated Additional Impairment/Adjustment Lease receivables Trade receiviables Retained earnings $1.5-2m $0.3-0.5m $1.8-2.5m (iii) Hedge Accounting AASB 9 continues to align hedge accounting relationships with (iii) Commissions Sales commissions paid to agents of the Group are currently either expensed up-front for customer contracts relating to the sales of goods, or capitalised and expensed over the period of the contract for customer contracts where performance is recognised on achievement of project milestones. Under AASB 15, the costs of obtaining a contract with a customer must be recognised as an asset, and amortised on a systematic basis consistent with the transfer of the goods and services to the customer where the the Group’s risk management strategy in assessing hedge costs will be recovered. CSG have assessed that the vast majority effectiveness. The Group currently uses forward foreign exchange of sales commissions paid relate to the consideration received for contracts (FECs) to hedge the variability in cash flows arising from the sale of equipment, and the costs are recovered up-front when movements in foreign exchange rates. This is in relation to balances for payables, receivables, sales and cost of goods sold. the performance obligations relating to sale are satisfied. CSG expects to realise the following amendments from adopting AASB 15 for commissions: CSG Annual Report 2018 71 Notes to the Financial StatementsFor year ended 30 June 2018 Note 4: New Accounting Standards and Interpretations (cont.) Estimated Additional Impairment/Adjustment Contract Assets Deferred Tax Liability Retained earnings $4.5-5.0m $1.5-1.7m $3.0-3.3m (iv) Transition CSG plans to adopt AASB 15 using the retrospective method which results in comparative figures being restated at the date of initial application which is 1 July 2018. AASB 16 Leases AASB 16 will change the way lessees account for leases by 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 (2017: 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 eliminating the current dual accounting model which distinguishes asset or liability. between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there will be a single, on-balance sheet accounting model that is similar to the current finance lease Forward exchange contracts and interest rate swaps The fair value of forward exchange contracts is based on their accounting. This new treatment will result in both a depreciation and quoted price, if available. If a quoted price is not available, then the interest charge in the Statement of Comprehensive Income. In fair value is estimated by discounting the difference between the contrast, lessor accounting will remain similar to current practice. contractual forward price and the current forward price for the The Group is evaluating the impact of the standard. residual maturity of the contract using a credit-adjusted risk-free Note 5: Determination of Fair Values 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 A number of the Group’s accounting policies and disclosures on the terms and maturity of each contract and using the market require the determination of fair value, for both financial and non- interest rates for a similar instrument at the measurement date. Fair 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: 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. 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 Level 1: Quoted market price (unadjusted) in an active market for an flows, discounted at the market rate of interest at the reporting date. identical instrument. For finance leases the market rate of interest is referenced to the Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). contract. Share-based payment transactions The fair value of the Performance Rights under the Long Term Level 3: Valuation techniques using significant unobservable inputs. Incentive Plan are measured using the Monte Carlo method. The This category includes all instruments where the valuation fair value of the employee share options currently under issue is technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s measured using the Black-Scholes formula. Measurement inputs include the share price on the measurement date, the exercise valuation. There are no material level 3 financial instruments. 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 72 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds and the financial (ii) Lease financing facilities – New Zealand The CSG Finance NZ Trust securitisation funding facility limit under performance of the group). Service and non-market performance the Westpac facility is currently NZ$110m. It was agreed with conditions attached to the transactions are not taken into account in Westpac for the facility to be extended a further 12 months with a determining fair value. Contingent consideration The fair value of contingent consideration is calculated using the reduction in the funding limit from NZ$115m to NZ$110m on 1 January 2018. The availability period for writing new business is until 15 April 2019, with a final maturity date of 15 April 2021. Interest on the CSG Finance NZ Trust securitisation funding facility is income approach based on the expected payment amounts and charged at a floating rate plus a margin, and re-prices on a their associated probabilities. When appropriate, it is discounted to monthly basis. As the finance lease receivables are predominantly present value. fixed rate in nature, the Group enters into interest rate swaps to fix these floating rate exposures. Note 6: Financial Risk Management The major financial instruments entered into by the Group comprise (iii) Lease financing facilities – Australia The availability period for writing new business was extended until short term trade receivables and payables, loans and receivables, 20 April 2019, with a final maturity date of 20 April 2021. CSG short and long-term borrowings. The Group does not have any Finance Australia Trust has agreed with Westpac for the facility limit significant financial risks in respect of trade receivables and under the Class A facility to be re-aligned relative to the size of the payables. The main area of financial risk arises in respect of interest Class AB facility limit, and was reduced from $180m to $135m on 6 rate risk on long-term borrowings. Certain aspects of financial risk June 2018. The funding limit under the Class AB facility is $30m. management are considered further as detailed below. The Group Interest on the CSG Finance Australia Trust securitisation funding is exposed to a variety of financial risks comprising: facility is charged at a floating rate plus a margin, and re-prices — Interest rate risk; — Credit risk; — Liquidity risk; — Foreign exchange risk; and — Fair values. 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 Board of Directors has overview for identifying and managing the Group’s exposure to interest rates is carried out through regular operational and financial risks. Interest rate risk 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 (i) Corporate debt facility As at 30 June 2018, the Senior Debt Facility Agreement with the designated “securitised” leases. Commonwealth Bank of Australia (“CBA”) has a total limit of $60m. The Group’s exposure to interest rate risks and the effective The maturity date of this facility is 10 October 2019 (refer Note 25). interest rates of financial assets and financial liabilities, both This Facility is primarily to be used for working capital and general recognised and unrecognised at the balance date, are detailed in corporate purposes but also provides for other sub-facilities the table provided below. including bank bills, business loans, overdraft, equipment finance and contingent liabilities. The multi-function facility is split between a Multi-Option Facility and an Amortising Term Cash Advance Facility and includes an amount of $1.5m in relation to various guarantees and security deposits provided by the bank on behalf of the Company. Interest on each of these facilities is charged at a floating rate plus a margin. CSG Annual Report 2018 73 Notes to the Financial StatementsFor year ended 30 June 2018 Note 6: Financial Risk Management (cont.) 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: 2018 $’000 2017 $’000 Impact on income statement Increase/ (decrease) on profit Impact on Equity Increase/ (decrease) on equity Impact on income statement Increase/ (decrease) on profit Impact on Equity Increase/ (decrease) on equity 229 (2,724) 2,134 229 (2,724) 2,134 198 (2,641) 2,124 198 (2,641) 2,124 Impact on derivative fair value at balance date 2,558 2,494 3,383 3,162 Total Impact 2,197 2,133 3,064 2,843 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: (229) 2,724 (2,134) (229) 2,724 (2,134) (198) 2,641 (2,124) (198) 2,641 (2,124) Impact on derivative fair value at balance date (2,558) (2,494) (3,383) (3,162) Total Impact (2,197) (2,133) (3,064) (2,843) Credit risk exposures Credit risk is the risk that a loss will be incurred if a counterparty to a maximum credit risk is the contract value of the leases. To control transaction does not fulfill its financial obligations. Management is the level of credit risk taken, management evaluates each responsible for sanctioning large credit exposures to all customers customer's credit risk on a case by case basis. Credit risk is mitigated arising from lending activities. Financial instruments that potentially by the large number of clients and relatively small size of individual subject the Group to concentrations of credit risk consist principally of cash and bank balances, finance leases receivables, trade credit exposures. For finance and operating leases the collateral taken on the provision of a financial facility is by way of a registered receivables and prepayments.The Group has a credit policy that is security interest over the leased asset. In some cases, a personal used to manage its exposure to credit risk. As part of this policy, guarantee is obtained. Loan and lease agreements provide that, if limits on exposures have been set, lease agreements are subject to an event of default occurs, collateral will be repossessed and/or defined criteria, and leases are monitored on a regular basis. the personal guarantee invoked. The repossessed collateral is either Maximum exposures are net of any recognised provisions. The held until overdue payments have been received or sold in the 74 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018                                                                                                                        secondary market. In addition, the Company has contingent liabilities relating to buy back guarantees on certain finance contracts for the lease of copiers and multi-function devices by customers. The Company undertakes a credit approval process to determine whether it is prepared to buy back the loan on default. When a circumstance arises where the Company is required to buy back the loan, the equipment financed becomes the property of the Company. 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 2018, the ageing of the trade, lease and other receivables that were not impaired was as follows: Neither past due nor impaired Past due 1 - 30 days Past due not impaired 31 - 90 days Past due not impaired 91+ days 2018 $’000 2017 $’000 264,633 290,046 8,308 3,388 3,991 6,929 2,173 2,908 280,320 302,056 Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historic Foreign exchange risk The Group operates internationally and is exposed to foreign payment behavior and analysis of individual customer credit risk. exchange risk arising from various currency exposures, primarily Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in with respect to the New Zealand dollar and US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign meeting the obligations associated with its financial liabilities that operations. are settled by delivering cash or other financial assets. The Group’s approach to managing liquidity is to ensure, as far as possible, that The Company’s subsidiary, CSG Technology Limited, settles it will have sufficient liquidity to meet its liabilities when they are purchases of equipment predominantly in US dollars. All committed due, under both normal and stressed conditions. The level of purchases are fully hedged using forward contracts or option expected cash inflows from trade and lease receivables are closely contracts to buy US$ / sell NZ$ to protect from exchange rate monitored against the predicted outflows arising from operations. movements between the shipping date and settlement. Forecast The Group has access to various financing facilities to support its highly probable but not yet committed purchases may also be lease receivables financing activities, and to provide funding for hedged using forward contracts or option contracts. Foreign working capital and general corporate purposes. Refer to Note 25 exchange hedge contracts generally have maturities of less than for details on the unused banking facilities. one year and are designated as cash flow hedges. The securitisation financing facilities in both Australia and New As at 30 June 2018, a total of US$1.6m (2017: US$5.5m) of forward Zealand require the Group to contribute to credit enhancement. At cover was in place with an average NZ$/US$ rate of 0.6742 (2017: 30 June 2018, this comprised 7.7% of the net pool balance of securitised leases for the New Zealand facility ($7.28m (NZ$7.94m)) 0.7083). Also, as at 30 June 2018, there was a total of NZ$3.245m of forward cover AU$ in place at an average floor and cap of 0.90 – and 6.7% of the net pool balances of securitised leases for the 0.9301 (2017: no forward cover in place). Australian facility ($9.0m). CSG Annual Report 2018 75 Notes to the Financial StatementsFor year ended 30 June 2018  % 7 1 0 2 % 8 1 0 2 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ 7 1 0 2 0 0 0 $ ’ 8 1 0 2 0 0 0 $ ’ d e t h g e W i e v i t c e f f E e g a r e v A e t a R t s e r e t n I i g n y r r a C l a t o T t n u o m A t e e h S e c n a l a B r e p g n i r a e B t s e r e t n I - n o N s r a e y 5 - 1 s s e l r o r a e y 1 s r a e y 5 - 1 s s e l r o r a e y 1 s t n e m u r t s n I : n i g n i r u t a M e t a R t s e r e t n I d e x F i e t a R t s e r e t n I g n i t a o l F i l a c n a n F i - - - - - - - - % 1 6 1 . % 9 3 1 . 4 5 3 0 2 , 4 9 1 , 4 1 6 1 2 - - 6 8 7 8 2 , 8 2 8 6 3 , 6 8 7 8 2 , 8 2 8 6 3 , - - - - - - - - % 8 9 9 . % 2 8 9 . , 8 8 2 6 6 2 , 4 4 2 2 4 2 - - - - - - 7 9 2 8 , 9 6 5 6 , 7 9 2 8 , 9 6 5 6 , - - - - - - - - 6 7 7 9 6 1 , 5 1 2 , 1 6 1 3 1 5 6 9 , 9 2 0 , 1 8 , 5 2 7 3 2 3 , 5 3 8 5 9 2 9 9 0 7 3 , 9 9 3 3 4 , 6 7 7 9 6 1 , 5 1 2 1 6 1 , 3 1 5 6 9 , 9 2 0 1 8 , % 9 6 2 . % 7 5 2 . 4 7 4 , 1 5 9 2 , 1 % 1 7 3 . % 9 0 4 . 2 7 4 6 , 8 9 9 2 1 2 , - - % 4 7 3 . % 5 7 3 . 9 0 5 3 4 , 2 0 3 8 4 , - - - - - 7 4 2 7 0 2 2 , 2 1 1 9 9 7 4 2 7 0 2 2 , - - 2 1 1 9 9 - 3 6 2 4 2 , 2 0 6 3 2 , 3 6 2 4 2 , 2 0 6 3 2 , 5 6 2 7 2 , 7 9 7 9 2 , 5 6 2 7 2 , 7 9 7 9 2 , - - - - 4 7 4 , 1 5 9 2 , 1 , 5 5 3 5 2 2 8 9 9 2 1 2 , - - - - - - - - - - - - - - - - - - 9 8 8 1 2 4 2 , 7 1 1 , 2 4 1 8 8 5 4 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8 3 3 0 2 , 2 9 1 , 4 1 i l s e b a v e c e R e d a r T e s a e L e c n a n F i l s e b a v e c e R i s r o t b e D y r d n u S s e v i t a v i r e D h s a C d n a h s a C l s t n e a v u q E i 8 3 3 0 2 , 2 9 1 4 1 , s t e s s A i l a c n a n F l a t o T i - - - - - - - - - - - - - - l d n a s e b a y a P r e h t O e m o c n i d e r r e f e d l s e b a y a P e d a r T h t i w d e t a c o s s A i t b e D s e s a e L e c n a n F i e t a r t s e r e t n i - s e v i t a v i r e D s p a w s l e b a y a P s l l i B / t b e D m r e T i n g e r o F - s e v i t a v i r e D s n o i t p o y c n e r r u c y t i l i i b a L x a T t n e r r u C s e i t i l i i i b a L l a c n a n F ) i i ( i s t e s s A i l a c n a n F ) i ( i CSG Annual Report 2018 CSG Annual Report 2018 7 3 4 5 0 1 , 7 9 9 6 1 3 , 2 8 9 3 5 , 2 0 4 4 5 , 9 2 8 6 2 2 , 3 9 2 4 1 2 , 9 8 8 1 2 4 2 , 7 1 1 2 4 , 1 8 8 5 4 , s e i t i l i i i b a L l a c n a n F l a t o T i ) . t n o c ( t n e m e g a n a M k s i R i l a c n a n F i : 6 e t o N 76 76 Notes to the Financial StatementsFor year ended 30 June 2018                                                                                                                              Notes to the Financial Statements For year ended 30 June 2018 Note 7: Revenue and other Income Revenues from continuing operations Sales revenue Revenue from sale of goods Revenue from services Other income Sundry Interest rate swap income Gain on foreign exchange Consolidated entity 2018 $’000 2017 $’000 89,651 104,939 106,641 103,787 194,590 210,428 4,263 53 308 6,622 176 196 4,624 6,994 CSG Annual Report 2018 CSG Annual Report 2018 77 77 Notes to the Financial StatementsFor year ended 30 June 2018                Note 8: Expenses Profit from continuing operations before income tax has been determined after the following specific expenses: Cost of sales Cost of goods Inventory write down in relation to the business restructure (ii) Onerous contracts in relation to the business restructure (ii) Cost of sales - service Cost of sales - service (employee benefits) Total cost of sales Other expenses Bad debts expense (i) Derecognition of unrecoverable assets and other charges in relation to the business restructure (ii) (iii) Redundancy costs relating to the business restructure (ii) Other Total other expenses Depreciation and amortisation Plant and equipment Leasehold improvements Amortisation of customer contracts/relationships Amortisation of intangible assets Total depreciation and amortisation Finance costs Interest Bank fees Amortisation of borrowing costs Total finance costs Consolidated entity 2018 $’000 2017 $’000 55,992 59,754 7,482 8,778 47,530 18,939 - - 40,567 19,341 138,721 119,662 2,584 16,147 2,058 68 20,857 1,027 148 3,836 1,692 6,703 3,345 217 264 3,826 2,804 - - 236 3,040 1,356 129 3,773 1,592 6,850 2,224 186 250 2,660 (i) (ii) (iii) Bad debt expense relating to the Finance segment totals $4,385,000; Business Solutions $947,000. Relates to the Business Solutions segment Due to the withdrawal from the Enterprise Solutions business, assets comprising deferred finance charges and non-trade receivables were written off. Additionally, provisions were raised for transition-out costs for contracts that are not expected to be renewed. 78 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018                                  Note 9: Income Tax (a) Components of tax expense Current tax expense/benefit in respect of the current year Deferred tax expense/benefit recognised in the current year (i) Adjustments recognised in the current year in relation to the prior year Total tax expense/(benefit) (b) Prima facie tax payable Consolidated entity 2018 $’000 2017 $’000 (7,380) (5,699) 1,684 (11,395) 4,362 (214) (2,515) 1,633 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% (2016: 30%) (161,524) (48,457) (42,082) (12,625) Add tax effect of: - other non-allowable items - impairment - effect of different tax rates in other jurisdictions (ii) - share-based payments - over provision for income tax in prior years(i) Less tax effect of: - other non-assessable items - research and development benefit 2,871 34,265 380 (199) 101 37,418 (356) - (356) 1,432 16,500 (176) (354) (2,515) 14,887 (252) (377) (629) Income tax expense attributable to profit (11,395) 1,633 (i) (ii) Origination and reversal of temporary differences The corporate tax rate in New Zealand is 28%. CSG Annual Report 2018 79 Notes to the Financial StatementsFor year ended 30 June 2018                              Note 9: Income Tax (cont.) (c) Deferred tax Deferred tax relates to the following: Deferred tax assets The balance comprises: Inventories Doubtful debts Property, plant and equipment Accrued expenses Employee Entitlements Other provisions Research and development tax offsets Tax losses carried forward Share issue costs Other Total deferred tax assets Deferred tax liabilities The balance comprises: Intangibles Property, plant and equipment Leases Other Total deferred tax liabilities (d) Deferred income tax related to items charged or credited directly to equity Share issue costs Derivatives Total Net deferred tax assets/(liabilities) 80 CSG Annual Report 2018 Consolidated entity 2018 $’000 2017 $’000 2,459 2,668 183 2,056 1,627 730 6,603 17,665 137 301 997 781 281 1,088 1,384 145 6,416 9,133 205 926 34,429 21,247 (3,806) (3,854) (4,373) (3,254) (20,201) (19,629) (642) (46) (28,503) (27,483) 67 305 372 63 (299) (236) 6,298 (6,472) Notes to the Financial StatementsFor year ended 30 June 2018                                Note 10: Dividends on Ordinary Shares (a) Dividends paid during the year (i) Current Year Interim Unfranked dividends (2017: nil cents per share) (ii) Prior Year Final Unfranked dividends (nil cents per share) (2017: 5 cents per share) Consolidated entity 2018 $’000 2017 $’000 - - - - 15,904 15,904 (b) Franking credit balance (i) 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 1,730 1,730 (i) The ability to utilize the franking credits is dependent upon the ability to declare dividends. Note 11: Cash and Cash Equivalents Cash at bank Restricted cash (i) Cash on hand Consolidated entity 2018 $’000 6,241 7,951 2 2017 $’000 11,944 8,378 16 14,194 20,338 (i) Restricted cash relates to cash the consolidated entity is required to have on hand under various financing arrangements - refer note 6. CSG Annual Report 2018 81 Notes to the Financial StatementsFor year ended 30 June 2018                                Note 12: Receivables Trade receivables Impairment provision Sundry debtors Finance lease receivables Gross receivable Impairment provision Unearned finance income Represented by: Current net receivable Non-current net receivable Note 13: Inventories Finished goods Consumables Toner in field Note 14: Other current assets Prepayments Other 82 CSG Annual Report 2018 Consolidated entity 2018 $’000 36,828 (5,319) 6,567 2017 $’000 28,786 (1,316) 8,297 38,076 35,767 285,006 311,222 (3,699) (1,337) (39,063) (43,597) 242,244 266,288 81,029 161,215 96,513 169,775 242,244 266,288 Consolidated entity 2018 $’000 12,333 9,833 26,545 48,711 2017 $’000 24,657 14,188 26,965 65,810 Consolidated entity 2018 $’000 3,429 312 3,741 2017 $’000 4,251 6,135 10,386 Notes to the Financial StatementsFor year ended 30 June 2018                                    Note 15: Property, Plant and Equipment Leasehold Improvements $ ‘000 Plant & Equipment $ ‘000 Furniture & Fittings $ ‘000 Office Computer Equipment $ ‘000 Leased Plant & Equipment $ ‘000 Total $ ‘000 At 1 July 2016 Cost Accumulated depreciation Net book amount Year ended 30 June 2017 Opening net book amount Acquisitions through business combinations Foreign exchange impact Additions Disposals Depreciation charge Closing net book amount At 30 June 2017 Cost Accumulated depreciation Net book amount Year ended 30 June 2018 Opening net book amount Foreign exchange impact Additions Disposals Depreciation charge Closing net book amount At 30 June 2018 Cost Accumulated depreciation Net book amount 3,383 (2,879) 504 504 21 (6) 634 - (129) 1,024 4,031 (3,007) 1,024 1,024 (90) 401 - (147) 1,188 4,342 (3,154) 1,188 640 (640) - - 2 - - - - 2 640 (638) 2 2 - - (1) 1 20,571 (17,989) 2,582 2,582 548 112 1,752 (113) (1,485) 3,396 22,651 (19,255) 3,396 3,396 (106) 1,093 (50) (1,175) 3,158 2,530 (1,662) 868 3,890 (3,556) 334 10,128 (9,252) 876 334 122 (12) 498 (1) (345) 596 876 386 (80) 424 (2) (756) 848 4,476 11,130 (3,880) (10,282) 596 848 596 31 203 (43) (218) 569 848 260 378 (8) (589) 889 868 17 210 196 (110) (255) 926 2,374 (1,448) 926 926 (308) 111 1 (220) 510 2,179 (1,668) 511 4,667 11,760 (4,098) (10,871) 569 889 640 (639) 1 23,588 (20,430) 3,158 CSG Annual Report 2018 83 Notes to the Financial StatementsFor year ended 30 June 2018  Note 16: Intangible Assets Year ended 30 June 2017 Opening net book amount Acquisitions through business combinations Acquisitions Impairment Foreign exchange impact Amortisation for the year Closing net book amount At 30 June 2017 Cost Accumulated amortisation Net book amount Year ended 30 June 2018 Opening net book amount Adjustment to acquisition accounting through business combinations Acquisitions Impairment Foreign exchange impact Amortisation for the year Closing net book amount At 30 June 2018 Cost Accumulated amortisation Net book amount Goodwill $’000 Customer Contracts/ Relationships $’000 Licenses and Other Intangibles $’000 Total $’000 179,224 5,268 - (55,000) - - 29,410 3,217 - - (14) (3,773) 129,492 28,840 14,343 222,977 9 4,790 - (31) (1,592) 17,519 8,494 4,790 (55,000) (45) (5,365) 175,851 129,492 - 129,492 47,774 (18,934) 28,840 21,416 198,683 (3,898) (22,832) 17,518 175,851 129,492 28,840 17,518 175,851 (18) - (109,640) - - 19,834 - - (6,460) (138) (3,836) 18,406 - 4,328 (18) 4,328 - (116,100) (238) (1,692) 19,916 (376) (5,528) 58,156 19,834 41,062 25,331 86,227 - (22,656) (5,415) (28,071) 19,834 18,406 19,916 58,156 84 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018                                              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 Business Solutions Australia Enterprise Solutions Australia Business Solutions New Zealand Finance Solutions Australia Finance Solutions New Zealand CodeBlue 2018 $’000 6,171 - - - - 13,663 19,834 2017 $’000 25,660 7,028 50,262 8,637 24,385 13,520 129,492 Terminal EBITDA Growth Rate Discount Rate 2018 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2017 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2018 10.44% 10.44% 10.60% 10.44% 10.60% 10.60% 2017 9.40% 9.40% 10.45% 9.40% 9.50% 9.50% Goodwill testing incorporated a five year forecast including the board approved FY19 budgets and growth rates. Historical growth rates were used and over the first five years were ranged from (10.7%) in the declining print businesses to 13.0% in the technology business. A rate of 2.50% was then used to calculate a terminal value. The discount rate applied was a post-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. This was then adjusted for a premium to reflect both the increased risk of investing in the Company and equities generally along with the systemic risk of each specific CGU. Following on from the prior financial year, business conditions across the traditional print units proved challenging. Pressure on volumes and margins was evident and certain CGUs underperformed to forecasted expectations. The value in use methodology calculation resulted in a deficiency of headroom within the Australian and New Zealand CGUs. This had a flow-on effect to the Finance entities in each region. As a result, management have impairedthe goodwill held within these CGUs from $25.7m to $6.2m in BSA, $7.0 to nil in ESA, $50.3m to nil in BSNZ, $8.6m to nil in Finance Solutions Australia, and $24.4m to nil in Finance Solutions New Zealand. Additionally, BSNZ had further negative headroom and an amount of $6.2m of customer contracts were impaired. Finance Australia also had negative headroom and an amount of $0.2m of customer contracts were impaired. This represents total impairment of $116.1m. Following the impairment losses, goodwill has been written down to nil in the CGUs other than BSA and CodeBlue. As the recoverable amount recognised is equal to the carrying value in BSA. If there is any adverse movement, in a key assumption this would lead to further impairment. Note 17: Payables Current Trade payables Other payables Consolidated entity 2018 $’000 2017 $’000 23,602 29,797 53,399 24,263 27,266 51,529 CSG Annual Report 2018 85 Notes to the Financial StatementsFor year ended 30 June 2018            Note 18: Deferred Consideration The Group has provided an amount of $5,141,000 to complete the acquisitions of CodeBlue, Printsync, and pcMedia. This payment is contingent on meeting certain targets. A further non-current deferred consideration of $214,000 has been recognised and contingent on certain targets being met. The payment of the above amounts are represented by both cash and CSG Ltd shares.  Note 19: Borrowings Current Secured Loans and Borrowings Other Non-Current Secured Loans and Borrowings Total Borrowings Note 20: Debt associated with lease receivables Non-Current Loans and borrowings Note 21: Derivative liabilities Non-Current Interest rate swaps Foreign currency forward contracts Information about interest rate risk is detailed in Note 6. 86 CSG Annual Report 2018 Consolidated entity 2018 $’000 2017 $’000 21 2,400 2,421 29 860 889 45,881 45,881 42,117 42,117 48,302 43,006 Consolidated entity 2018 $’000 2017 $’000 212,998 212,998 225,355 225,355 Consolidated entity 2018 $’000 2017 $’000 1,295 12 1,307 1,474 247 1,721 Notes to the Financial StatementsFor year ended 30 June 2018                                      Note 22: Provisions Current Employee benefits Restructure of Enterprise Solutions business Other Non-Current Employee benefits Note 23: Contributed Equity (a) Issued and paid up capital Ordinary shares fully paid (No. of shares): Consolidated entity 2018 $’000 2017 $’000 4,244 2,328 2,156 8,728 448 448 4,244 - 85 4,329 313 313 Consolidated entity 2018 $’000 213,425 213,425 2017 $’000 205,727 205,727 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 320,872,439 205,727 319,076,671 207,623 2018 2017 No. of shares $’000 No. of shares $’000 Share buy-backs Issued shares Tax exempt share plan Treasury shares - - (4,074,588) 21,735,618 8,730 5,118,676 - - 751,680 (4,000,000) (1,032) - (5,179) 2,757 526 - Balance at the end of the year 338,608,057 213,425 320,872,439 205,727 (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. CSG Annual Report 2018 87 Notes to the Financial StatementsFor year ended 30 June 2018                Note 23: Contributed Equity (cont.) (d) 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 2018: Issued Lapsed Cancelled Vested Performance Hurdle Date Opening 1 July 2017 30-09-2018 418,900 30-09-2018 1,256,700 30-09-2019 1,256,700 30-09-2020 1,256,700 01-07-2017 1,555,637 - - - - - 18-08-2020 18-08-2021 18-08-2022 30-06-2019 30-06-2020 30-06-2021 - - - - - - 3,200,975 3,200,975 3,200,975 1,666,666 1,666,667 1,666,667 - - - - - (572,161) (572,161) (572,161) - - - (418,900) (1,256,700) (1,256,700) (1,256,700) - - - - - - - Closing 30 June 2018 - - - - - - - - - (1,555,637) - - - - - - 2,628,814 2,628,814 2,628,814 1,666,666 1,666,667 1,666,667 5,744,637 14,602,925 (1,716,483) (4,189,000) (1,555,637) 12,886,442 Performance Rights on issue at 30 June 2017: Performance Hurdle Date Opening 1 July 2016 Issued Lapsed Cancelled Vested 30-09-2018 30-09-2018 30-09-2019 30-09-2020 - - - - 418,900 1,256,700 1,256,700 1,256,700 - - - - LTIP Issue 5 & 7 30-11-2016 4,071,329 LTIP Issue 8 30-11-2016 40,000 01-07-2017 1,555,637 - - - (133,333) - - 5,666,966 4,189,000 (133,333) Closing 30 June 2017 418,900 1,256,700 1,256,700 1,256,700 - - - - - - (3,937,996) (40,000) - - - - - - - - - 1,555,637 (3,977,996) 5,744,637 Issued Date LTIP Issue 9 LTIP Issue 9 LTIP Issue 9 LTIP Issue 9 MAIP LTIP Issue 10 LTIP Issue 10 LTIP Issue 10 LTIP Issue 11 LTIP Issue 11 LTIP Issue 11 Total Issued Date LTIP Issue 9 LTIP Issue 9 LTIP Issue 9 LTIP Issue 9 MAIP Total 88 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 Plan LTIP 10 Detail Executive and Senior Management were granted 9,602,925 Performance Rights in FY2018 under LTIP 10. The terms of the grant were: LTI Stage 1 LTI Stage 2 LTI Stage 3 TSR Performance Hurdle Vesting Date Expiry Date $0.58 $0.93 $1.39 18/08/2020 28/09/2020 18/08/2021 28/09/2021 18/08/2022 28/09/2022 When calculating the TSR CAGR for a performance period, the CSG share price on the trading day following the release of the Company’s relevant financial results will be deemed to be the 30-day volume weighted average sale price on the ASX of CSG shares commencing on that trading day plus any cash dividend paid. If Stage 1 or Stage 2 performance rights do not vest at their initial testing date, they will not lapse and may vest if subsequent stages vests. If Stage 3 lapses due to failure to meet their TSR vesting condition, all unvested Stage 1 and Stage 2 rights will automatically lapse at the same time. Rights that vest are subject to disposal restrictions. 100% of shares resulting from vesting of Stage 1 rights must not be disposed of until the 2nd trading day after the Company’s FY2021 full-year results being released to the ASX. 50% of shares resulting from vesting and exercise from Stage 2 rights must not be disposed of until the 2nd trading day after the Company’s FY2022 full-year results being released to the ASX. 25% of shares resulting from vesting and exercise of Stage 1 rights must not be disposed of until the 2nd trading day after the Company’s FY2023 full-year results being released to the ASX. Since issue, employees holding 1,716,483 rights left the Group and these rights have lapsed. LTIP 11 The Executive Chairman was granted 5,000,000 Performance Rights in FY2018 under LTIP 11. The terms of the grant were: LTI Stage 1 LTI Stage 2 LTI Stage 3 Share price hurdle Vesting Date Expiry Date $0.40 $0.45 $0.50 N/A(i) 30/06/2023 N/A(i) 30/06/2023 N/A(i) 30/06/2023 (i) The performance period for all performance rights under LTIP 11 is from 27 June 2018 to 30 June 2023. 1The rights vest on any day the vesting conditions are achieved within the performance period. If Stage 1 is completed prior to 30 June 2019, the shares issued remain in escrow until 30 June 2019. If Stage 2 is completed prior to 30 June 2020, the shares issued remain in escrow until 30 June 2020. If Stage 3 is completed prior to 30 June 2021, the shares issued remain in escrow until 30 June 2021. CSG Annual Report 2018 89 Notes to the Financial StatementsFor year ended 30 June 2018    Note 24: Reserves And Retained Earnings Share-based payment reserve Foreign currency translation reserve Cash flow hedge reserve Total reserves Retained earnings (a) Share-based payment reserve i. Nature and purpose of reserve 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 90 CSG Annual Report 2018 Notes 24(a) 24(b) 24(c) Consolidated entity 2018 $’000 555 4,287 (1,338) 3,504 2017 $’000 2,090 6,244 (1,352) 6,982 24(d) (149,380) 902 2,090 (1,535) 555 2,630 (540) 2,090 6,244 (1,957) 4,287 6,414 (170) 6,244 (1,352) (406) 420 (1,338) 902 (150,282) (149,380) - (149,380) (3,139) 1,820 (33) (1,352) 61,219 (44,413) 16,806 (15,904) 902 10 Notes to the Financial StatementsFor year ended 30 June 2018   Note 25: Cash Flow Information (a) Reconciliation of cash flow from operations with profit after income tax Profit/(loss) from ordinary activities after income tax Non-cash items Deferred consideration unwind Amortisation of intangibles Impairment of goodwill Depreciation of property, plant & 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 Net cash from operating activities (b) Reconciliation of cash Cash balance comprises: Restricted cash Non-restricted cash Cash at bank (c) Credit stand-by arrangements and loan facilities Facilities Multi-function facility (i) Securitisation and lease finance facilities - NZ (ii) Securitisation and lease finance facilities - Australia (iii), (iv) Facilities Used Multi-function facility Securitisation and lease finance facilities - NZ Securitisation and lease finance facilities - Australia Facilities Unused Multi-function facility Securitisation and lease finance facilities - NZ Securitisation and lease finance facilities - Australia Consolidated entity 2018 $’000 2017 $’000 (150,130) (43,715) 310 5,528 220 5,615 116,100 55,000 1,175 368 20 123,501 2,995 1,337 17,098 (16,896) 20,005 1,925 4,548 4,126 (1,229) 7,280 7,951 6,243 14,194 60,000 100,892 165,000 325,892 50,302 79,918 125,866 256,086 9,698 20,974 39,134 69,806 1,484 1,884 (3,048) 61,155 (1,845) (900) (15,697) (5,168) (5,398) 4,398 88 2,308 1,946 (2,828) 8,378 11,960 20,338 60,000 109,526 210,000 379,526 42,028 93,333 132,022 267,383 17,972 16,193 77,978 112,143 CSG Annual Report 2018 91 Notes to the Financial StatementsFor year ended 30 June 2018                                            (i) (ii) (iii) (iv) On 15 November 2017, the Company amended the three year multi-option facility, increasing the limit to $70m with the CBA (Australian Senior Debt Facility) between a $35m Multi-Option Facility and a $35m Amortising Term Cash Advance Facility which begins to be repaid on 30 June 2018 in accordance with a repayment schedule. 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, but excluding CSG Finance Group and subsidiaries with a shareholding less than 100%. 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 10 October 2019. On 29 June 2018 a repayment of $10m was made reducing the Amortising Term Cash Advance Facility. During the year, the Group breached certain requirements of its Australian Senior Debt Facility. A waiver was sought ahead of the financial impact of the business restructure. Without this waiver, certain covenants with respect to this facility would have been breached at 30 June 2018. The Group’s Westpac Banking Corporation New Zealand funding facility, securitised by finance lease receivables (“New Zealand Securitisation Facility”), matures on 15 April 2021. The facility limit is NZ$110m. The Group’s Westpac Banking Corporation Australia funding facility ("Class A Financier") securitised by finance lease receivables, matures on 20 April 2021. The facility limit is $135m. The Group’s IFM Australia funding facility ("Class AB Financiers") securitised by finance lease receivables, matures on 20 April 2021. The facility limit is $30m. Together the Class A Financier and Class AB Financiers make up the Australian Securitisation Facility (“Australian Securitisation Facility”). 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 Note 27: Related Party Disclosures The key management personnel compensation comprised: Short term employee benefits Post-employment benefits Termination benefits Other long term benefits Consolidated entity 2018 $’000 2017 $’000 6,792 9,083 1,808 6,658 10,776 3,516 17,683 20,950 Consolidated entity 2018 $’000 2017 $’000 1,403,313 2,885,628 68,150 - 250,914 131,761 187,508 416,010 1,722,377 3,621,907 Individual directors and executives compensation disclosures Apart from the details disclosed in this report, 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. 92 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018              Note 27: Related Party Disclosures (cont.) Transactions with Key Management Personnel 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. During the financial year, the Group was a supplier to the Commonwealth Games located at the Gold Coast, Queensland. Support staff were required to be located on-site at a time when accommodation was difficult to attain. Julie-Ann Kerin entered into an agreement with the Group, on an arm’s length basis, for the use of her property during this period. As such, $13,500 in rent was paid to Ms Kerin. Group Entities The consolidated financial statements include the financial statements of CSG Ltd and its controlled entities listed below: Former Name Country of Incorporation Parent Entity CSG Limited Subsidiaries of CSG Limited: CSG Business Solutions (AUS) Pty Ltd(i)  CSG Communications Pty Ltd CSG Finance Pty Ltd(i) Australia Australia Australia New Zealand Ownership Interest 2018 % 2017 % 100 100 100 100 100 100 100 100 CSG Print Services NZ Limited(ii) CSG Enterprise Solutions Pty Ltd(i) Subsidiaries of CSG Business Solutions (AUS) Pty Ltd: CSG Enterprise Print Solutions Pty Ltd Australia CSG Services Pty Ltd(i) Connected Solutions Group Pty Ltd Australia 100 100 CSG Print Services Pty Ltd(i) CSG Business Solutions (Sunshine Coast) Pty Ltd(i) CSG Business Solutions (South Queensland) Pty Ltd(i) CSG Business Solutions (North Queensland) Pty Ltd(i) CSG Business Soloutions (NT) Pty Ltd Sunshine Coast Office Equipment Pty Ltd Australia Australia 100 100 100 100 Haloid Holdings Pty Ltd Australia 100 100 Seeakay Pty Ltd Australia 100 100 CSG Business Solutions (WA) Pty Ltd(i) Edgeview Enterprises Pty Ltd Australia 100 100 Subsidiaries of CSG Enterprise Print Solutions Pty Ltd: CSG Enterprise Solutions (Singapore) Pte. Ltd Subsidiaries of CSG Finance Pty Ltd: Valedus Group 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 Leasing Solutions Limited Singapore 100 100 Australia New Zealand Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 CSG Annual Report 2018 93 Notes to the Financial StatementsFor year ended 30 June 2018                    Note 27: Related Party Disclosures (cont.) Former Name Country of Incorporation Ownership Interest 2018 % 2017 % 100 90 100 100 100  100 100 100 100  100 100 100  100 100 100 90 100  100 100  100 100 100 100  100 100 100  100  100 Parent Entity RELATED PARTY DISCLOSURES cont. Subsidiaries of CSG Print Services NZ Limited: CSG Business Solutions Limited(ii) CSG Technology Limited Ubix Business Solutions Limited(ii) pcMedia Technologies Limited CodeBlue Limited Subsidiaries of CodeBlue Limited: CodeBlue Christchurch Limited Work IT Solutions Limited IT Synergy Limited CodeBlue Wellington Limited CSG Management Services Limited New Zealand Konica Minolta Business Solutions New Zealand Limited New Zealand 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(ii) Onesource Finance Limited New Zealand CSG Finance (NZ Warehouse) Limited(ii) CSG Finance New Zealand Trust Subsidiaries of Valedus Group Pty Ltd R&G Technologies Pty Ltd Client Heartbeat Pty Ltd Solutions Group Receivables Limited New Zealand New Zealand  Australia Australia (i) (ii) CSG Limited and its Australian subsidiaries are part of a tax consolidated group. Form part of a NZ tax consolidated group. 94 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018                                      Note 28: 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. During the current reporting period, the legal entities of the R&G Technologies and PrintSync businesses were acquired and were added to the Deed of Cross Guarantee. By entering into the Deed, the participating wholly owned entities have been relieved of the requirements to prepare financial reports and Directors' Report under the ASIC Corporations (wholly-owned companies) Instrument 2016/785. 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 Directors' Report under the terms of ASIC Corporations (wholly-owned companies) Instrument 2016/785 and the Corporations. 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 Loss before income tax expense Income tax (expense)/benefit Net loss Statement of Other Comprehensive Income and Retained Earnings Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Retained profits at the beginning of the year Retained earnings adjustment Dividends distributed Retained profits at the end of the year Consolidated entity 2018 $’000 2017 $’000 114,370 117,327 (174,406) (153,053) (60,036) (35,726) 11,587 4,382 (48,449) (31,344) (48,449) (31,344) - (48,449) (1,063) - - (49,512) - (31,344) 45,736 449 (15,904) (1,063) CSG Annual Report 2018 95 Notes to the Financial StatementsFor year ended 30 June 2018                Note 28: Deed Of Cross Guarantee (cont.) Statement of Financial Position Current assets Cash and cash equivalents Receivables Inventories Current tax receivable Other Total current assets Non-current assets Property, plant and equipment Deferred tax asset Intangible assets Investment in subsidiaries Total non-current assets Total assets Current liabilities Overdrafts Payables Deferred income Deferred consideration Short term borrowings Provisions Total current liabilities Non-current liabilities Provisions Long term borrowings Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 96 CSG Annual Report 2018 Consolidated entity 2018 $’000 2017 $’000 - 25,738 26,161 211 14,885 66,995 2,035 13,879 42,938 130,183 189,035 256,030 2,554 33,498 366 - 48,294 6,674 91,386 448 8 456 1,390 30,902 31,686 231 5,832 70,041 2,449 2,420 79,072 130,183 214,124 284,165 - 30,705 165 1,365 43,032 2,974 78,241 313 458 771 91,842 164,188 79,012 205,153 213,426 205,728 274 (49,512) 488 (1,063) 164,188 205,153 Notes to the Financial StatementsFor year ended 30 June 2018                                              Note 29: Earnings per share Consolidated entity 2018 $’000 2017 $’000 The following reflects the income and share data used in the calculations of basic and diluted earnings per share Profit /(loss) (150,129) (43,715) Weighted average number of ordinary shares used in calculating basic earnings per share 329,995,450 318,708,450 Calculated basic earnings per share (cents) Effect of diluted securities: (45.5) (13.7) Effects of Performance Rights and options issued 7,884,590 6,036,445 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 (cents) 337,880,040 324,744,895 (45.5) (13.7) Note 30: Auditors Remuneration Audit and review services (excl. disbursements) Auditors of the Company - KPMG – Audit and review of financial statements – Other regulatory audit services Other services (excl. disbursements) Auditors of the Company - KPMG – In relation to other assurance, taxation and due diligence services Consolidated entity 2018 $ 2017 $ 465,872 466,938 - - 465,872 466,938 - - 160,502 160,502 Note 31: Segment Information 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: (i) 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 not been identified as a separate division within Business Solutions, as the business will no longer compete in this segment. 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. CSG Annual Report 2018 97 Notes to the Financial StatementsFor year ended 30 June 2018                                    (ii) 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. (iii) Other The remaining business operations/activities (including corporate office activities) are classified as ‘Other’ to facilitate reconciliation to Group results. Segment Information 2018 Segment revenue External segment revenue Inter-segment revenue Total Segment result Interest income Interest expense Depreciation and amortisation Impairment of intangible assets Total segment profit/(loss) before income tax Total segment assets(i) Total segment liabilities(i) 2017 Segment revenue External segment revenue Inter-segment revenue Total Segment result Interest revenue Interest expense Depreciation & amortisation Impairment of goodwill Total segment profit/(loss) before income tax Total segment assets(i) Total segment assets(i) (i) Excludes loans to and from CSG Group entities (related parties). 98 CSG Annual Report 2018 Business Solutions $’000 Finance Solutions $’000 Other $’000 Eliminations $’000 Total $’000 198,826 26,414 1,587 - 200,413 26,414 97 (10) (3,753) (115,025) (67,866) - 547 (325) (1,075) 4,791 463 - 463 2 (4,053) (2,625) - - 225,702 (1,587) (1,587) - 225,702 - (310) - - 99 (3,826) (6,703) (116,100) (23,372) (75,077) (161,524) 69,229 220,393 125,083 (127) 414,578 58,400 216,925 51,491 5,354 332,170 216,789 27,090 317 - 217,106 27,090 45 (228) (4,722) (17,182) (5,127) - 649 (392) - 8,715 641 220 861 6 (2,867) (2,553) (37,818) (46,048) - 244,520 (537) (537) - (214) 817 - 378 - 244,520 51 (2,660) (6,850) (55,000) (42,082) 328,813 315,604 26,425 (92,505) 578,337 68,404 236,765 31,829 12,521 349,519 Notes to the Financial StatementsFor year ended 30 June 2018                                                              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. 2018 Revenue Assets 2017 Revenue Assets Australia $’000 New Zealand $’000 Eliminations $’000 Total $’000 112,363 217,347 114,926 197,359 (1,587) (128) 225,702 414,578 126,354 371,097 118,703 299,245 (537) (92,505) 244,520 577,837 Note 32: Subsequent Events On 21 August 2018, CSG announced a fully underwritten equity raising of approximately $18 million through a 1 for 3.52 pro rata non- renounceable entitlement offer. Net proceeds of approximately $17.0 million will be used to repay corporate debt ($10 million), payment of acquisition earn-outs ($2.0 million), restructuring costs in relation to Enterprise Solutions business ($2.0 to $2.5 million) and working capital ($3.0 million). Assuming successful completion of the capital raising, the pro forma corporate debt balance as at 30 June 2018 is $38.3 million and the pro forma cash balance is $21.2 million (of which $8.0 million is restricted). Subsequent to year-end, the Group varied the corporate debt facility which will require the reduction and cancellation of $10m together with revised covenant arrangements. The Group’s forecast indicates that the Group will comply with all covenants of the new facility through to its maturity in October 2019. Details of the existing facility are in Note 25 (i). The Group has commenced implementation of a major restructure of the Australian and New Zealand businesses within sales, service and operations, is being undertaken. The Company is also undertaking cost-out initiatives to simplify its operational structure and distribution costs, and continue realising cost synergies through the integration of recent acquisitions. No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the Consolidated Financial Statements which has a significant affect on the operation of the Group. CSG Annual Report 2018 99 Notes to the Financial StatementsFor year ended 30 June 2018 Notes to the Financial Statements For year ended 30 June 2018 Note 33: Parent Entity Disclosures As at, and throughout the financial year ended 30 June 2018, 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: Parent Entity 2018 $’000 2017 $’000 (2,598) (2,598) 1,950 1,950 82,917 264,756 51,492 51,492 70,024 251,410 44,650 44,746 213,426 205,727 188 (349) (1,312) 2,249 213,265 206,664 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 34: Contingent Liabilities There were no contingent liabilities recorded at reporting date. 100 CSG Annual Report 2018           Intentionally left blank CSG Annual Report 2018 101 Directors' Declaration 102 CSG Annual Report 2018 Directors' Declaration Directors' Declaration CSG Limited And Controlled Entities DIRECTORS DECLARATION The Directors declare that the financial statements and notes set out on pages 55 to 100 and the Remuneration Report in sections 6 to 14 in the Directors’ Reports are in accordance with the Corporations Act 2001: (a) comply with Australian Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting requirements; and (b) give a true and fair view of the financial position of the consolidated entity as at 30 June 2018 and of its performance as represented by the results of its operations, changes in equity and its 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 28 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 Corporations (wholly-owned companies) Instrument 2016/785. 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 2018. 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. Julie-Ann Kerin Director Sydney 21 August 2018 CSG Annual Report 2018 103 104 CSG Annual Report 2018 Notes to the Financial StatementsFor year ended 30 June 2018 Independent Auditor's Report CSG Annual Report 2018 105 Notes to the Financial StatementsFor year ended 30 June 2018 106 CSG Annual Report 2018 CSG Annual Report 2018 107 108 CSG Annual Report 2018 CSG Annual Report 2018 109 110 CSG Annual Report 2018 Notes to the Financial Statements CSG Annual Report 2018 111 Notes to the Financial StatementsFor year ended 30 June 2018 112 CSG Annual Report 2018 Investor Relations CSG Annual Report 2018 113 Shareholding Information As at 31 July 2018 In accordance with Listing Rule 4.10 of the Australian Stock Exchange Limited, the Directors provide the following shareholding information as at 31 July 2018. Substantial Shareholders Name Caledonia (Private) Investments Pty Limited & its associates TDM Asset Management Pty Limited & its associates Forager Funds Management Pty Ltd Wentworth Williamson Management Pty Ltd Voting Rights Fully paid ordinary shares in the Company carry voting rights of one vote per share. Distribution of Shareholding Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Rounding Total Number of Ordinary Shares % of Ordinary Shares 98,546,699 24,990,579 24,228,256 20,394,431 28.76 7.29 7.07 5.95 Total holders Number of Ordinary Shares % of Issued Capital 448 591 338 757 155 105,265 1,782,613 2,675,579 24,766,411 313,278,189 0.03 0.52 0.78 7.23 91.44 0.00 2,289 342,608,057 100.00 Less than Marketable Parcels 687 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 J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD SANDHURST TRUSTEES LTD CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 MANDERRAH PTY LTD NATIONAL NOMINEES LIMITED CHRISTOPHER ELLIOT RITCHIE TUSCAN ENDEAVOURS LIMITED BOLTEC PTY LTD MARK BAYLISS BNP PARIBAS NOMINEES PTY LTD BOND STREET CUSTODIANS LIMITED GORDON TAN HOLDINGS PTY LTD MS JULIE-ANN KERIN QUOTIDIAN NO 2 PTY LTD WARBONT NOMINEES PTY LTD Total On-Market Buy-Back There is not a current on-market buy-back. 114 CSG Annual Report 2018 Number of Shares at 31 July 2018 % of Issued Capital 62,895,780 51,215,564 35,196,251 34,210,200 20,394,431 8,464,382 8,184,560 7,232,225 6,352,055 5,179,584 5,167,350 5,167,350 4,003,912 4,000,000 3,323,456 3,323,178 3,309,750 2,333,333 1,850,000 1,719,384 18.36 14.95 10.27 9.99 5.95 2.47 2.39 2.11 1.85 1.51 1.51 1.51 1.17 1.17 0.97 0.97 0.97 0.68 0.54 0.50 273,522,745 79.84 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: CSG Limited Investor Relations Level 1, 357 Collins Street Melbourne VIC 3000 t: 1800 985 445 f: +61 7 3840 1222 e: investor@csg.com.au w: www.csg.com.au 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 Group Executive. Our next Annual General Meeting is currently scheduled to be held on Tuesday, 20 November 2018 at 1:00pm (AEDT) at KPMG, Tower Two, Collins Square, 727 Collins Street, Melbourne VIC 3008. 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 t: +61 1300 552 270 f: +61 3 9473 2500 w: www.computershare.com/au Key Dates Our current key dates are: Annual General Meeting Tuesday, 20 November 2018 1H FY2019 Results Friday, 22 February 2019* FY2019 Results Friday, 16 August 2019* *These dates are subject to change without notice. CSG Annual Report 2018 115 Intentionally left blank 116 CSG Annual Report 2018 Corporate Directory CSG Limited ABN 64 123 989 631 Registered Office Level 1 357 Collins Street Melbourne VIC 3000 T 1800 985 445 F +61 7 3840 1222 www.csg.com.au Directors Mark Bayliss Executive Director & Chairman Julie-Ann Kerin Managing Director & Chief Executive Officer Bernie Campbell Non-Executive Director Tom Cowan Non-Executive Director Robin Low Non-Executive Director Company Secretary Kerrie-Anne Hutchins Share Registry Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford VIC 3067 T +61 1300 552 270 www.computershare.com/au Auditor KPMG Level 37 Tower Two Collins Square 727 Collins Street 118 CSG Annual Report 2018 csg.com.au

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