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
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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
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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 Initially reliant on outdated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
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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
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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
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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
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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
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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
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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
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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).
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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
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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.
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CSG Annual Report 2018
Financial
Report
2017-2018
CSG Annual Report 2018
17
Corporate
Governance
Statement
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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.
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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
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CSG Annual Report 2018
CSG Annual Report 2018
7
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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.
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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).
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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.
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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
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103
104
CSG Annual Report 2018
Notes to the Financial StatementsFor year ended 30 June 2018 Independent
Auditor's
Report
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Notes to the Financial StatementsFor year ended 30 June 2018 106
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107
108
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110
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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.
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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
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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