cellnet Annual Report 2014

FY2014 Annual Report · cellnet

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annual

2013|14

ABN 97 010 721 749

Cellnet Group Limited
59-61 Qantas Drive, Eagle Farm, QLD 4009 Australia
t: 1300 255 563 www.cellnet.com.au

I’m NEO. I represent Cellnet’s spirit of
discovery with a relentless pursuit of the
new and the innovative. I am a self admitted
consumer electronics junkie, scouring the
globe for the latest developments in the world
of smartphone, tablet and hybrid accessories.

I would like to share with you some of the
great things Cellnet has been doing over the
past year as well as some insights on what is
to come.

Are you ready to discover the next?

Cellnet Group Limited and its consolidated entities
annual report 2013|14

The next represents the excitement of new
innovations and products - the exhilaration
of discovery.

It’s what keeps Cellnet on the hunt for the latest
and greatest gear in the smartphone, tablet and
hybrid accessory market.

As with any journey, a knowledgeable guide is
essential.

With our deep experience and relentless
dedication to discovery, Cellnet leads you to the
next innovation in the world of lifestyle technology
products.

Cellnet Group Limited and its consolidated entities annual report 2013|14Renewed
category
management
focus

Initiated
streamlined
supply
chain

Summary of key initiatives

Invigorated senior
management team

Cellnet Group Limited and its consolidated entities annual report 2013|14Corporate
rebranding

Consolidation
of Cellnet
brands

Summary of key initiatives

55%

reduction
in inventory
holdings from
inventory peak

Iconic
brand
proposition
to market
leading
retailers

Cellnet Group Limited and its consolidated entities annual report 2013|14S

n
tio

Cases

V i d e o &
I m a g i n g

u t
e vic e s

I n

welcome

to my
playground

This is where I frolick,
where I find the
latest and greatest
technology that the
STH market has to
offer through our own
brands and through
our innovative partners.

Cellnet Group Limited and its consolidated entities
annual report 2013|14

tio

e
m
atio
o
H
m
uto
A

o r y

A u d i o

Connectivity

ele

ets
g
d
a
G

Cellnet Group Limited and its consolidated entities
annual report 2013|14

V i d e o &

I m a g i n g

u t

e vic e s

I n

brand
consolidation

This year, Cellnet streamlined
our vendor portfolio down
from 72 to 12. In doing this, we
were able to ensure that our
category playground is focused
when it came to our message
to customers. Cellnet represents
market leading and emerging
brands across a wide range

of categories from cases and
covers, power, health & wellness
and memory just to name a few.
The brands we represent are
known in our industry as being
innovative and reliable and all
are backed by the expertise of a
dedicated Cellnet business unit
management team.

Cellnet Group Limited and its consolidated entities
annual report 2013|14

introducing

Today’s consumer is more demanding,
time-starved, informed & choice
saturated than ever before.

For the world of technology, it seems
like a new product is hitting the shelf
every day. To endure, a brand must
build value by creating strong bonds
with their customers.

What does this mean for 3SIXT? It’s time
for a change – instead of talking ‘at’ the
consumer in tech speak, it’s time to talk
‘to’ the consumer in everyday language
they can understand and relate to. The
3SIXT customer knows what they need
and we’re going to make it easy for
them to find it.

Complete full category management capability
Increased margin availability | Flexibility
Continuous innovation - discovering the next

Cellnet Group Limited and its consolidated entities annual report 2013|14contents

Corporate information ................................................... 11

14 Provisions ............................................................. 47

Directors’ report

15 Share-based payments ..................................... 47

Statement of financial position .................................. 24

16 Derivative financial instruments ..................... 49

Statement of comprehensive income ..................... 25

17 Fair value measurement ................................... 49

Statement of changes in equity ................................. 26

18 Commitments and contingencies ................ 50

Statement of cash flows .............................................. 27

19 Financial guarantees ......................................... 50

Notes to the financial statements ............................. 28

20 Discontinued operation .................................... 51

1 Corporate information ..................................... 28

21 Related party disclosure ................................... 52

2 Significant accounting policies ...................... 28

Financial risk management
objectives and policies ..................................... 38

22 Key management personnel .......................... 53

23 Subsequent events ............................................ 53

4 Operating segments ......................................... 41

24 Parent entity information ................................. 53

5 Other revenue .................................................... 41

25 Contributed equity and reserves ................... 53

Items included in profit/(loss) ......................... 41

26 Dividend franking account .............................. 54

Income tax........................................................... 42

27 Auditors’ remuneration ..................................... 54

8 Earnings per share ............................................. 44

28 Cash flow statement reconciliation .............. 55

Current assets –
cash and cash equivalents .............................. 44

10 Current assets –

29 Business combination ...................................... 56

30 Intangible assets ................................................. 56

trade and other receivables ............................ 44

31 Interest bearing loans and borrowings ........ 57

11 Current assets – inventories ............................ 45

Directors’ declaration ................................................... 58

12 Non-current assets –

property, plant and equipment ...................... 45

13 Current liabilities –

Independent auditors’ report ..................................... 59

Corporate Governance Statement ........................... 61

trade and other payables ................................. 46

ASX Additional Information ......................................... 63

Cellnet Group Limited and its consolidated entities annual report 2013|14

director’s report

Corporate Information

Directors
A. Beard (Chairman)
M. Brookman
E. Kaplan

Company Secretary
C. Barnes

Principal Registered Office
Cellnet Group Limited
59-61 Qantas Drive
Eagle Farm QLD 4009
Phone: 1300 255 563
Fax: 1800 255 563

Banker
Westpac Banking Corporation
260 Queen Street
Brisbane QLD 4000

Auditor
Pitcher Partners
345 Queens Street
Brisbane QLD 4000

Share Register
Link Market Services Ltd
Level 15 ANZ Building
324 Queen Street, Brisbane QLD 4000
Phone: 1300 554 474

Solicitors
Thomson Geer
Level 16 Waterford Place
1 Eagle Street, Brisbane QLD 4000

Securities Exchange
The Company is listed on the Australian
Securities Exchange. The Home
exchange is Brisbane.

Cellnet Group Limited and its consolidated entities annual report 2013|14Director’s Report

Your Directors submit their report for the year ended
30 June 2014.

Elliott Kaplan B. Acc, CA
(Non-Executive Director – appointed 25 July 2012)

Directors

The names and details of the Company’s Directors in office
during the financial year and until the date of this report
are as follows. Directors were in office for this entire period
unless otherwise stated.

Names, qualifications, experience and special
responsibilities

Alexander Beard B.Com, MAICD, FCA
(Non-Executive Chairman – appointed Director 15 December 2006 and
Chairman 20 August 2007)

Mr Beard is a Chartered Accountant and an experienced
financier of growth companies as well as having gained
considerable industry experience through his investee
board roles. He is a fellow of the Institute of Chartered
Accountants and a member of the Institute of Company
Directors.

Mr Beard is Executive Director of CVC Limited (ASX:CVC),
Executive Director of CVC Property Fund (ASX:CJT) and
Chairman and Non-Executive Director of Villa World
Group Limited (ASX:VLW). Mr Beard is currently a member
of the Audit and Risk Management and Remuneration
Committees.

During the past three years, Mr Beard also served as
Chairman and Non-Executive Director of Mnemon Limited
(formerly Mnet Group Limited) (ASX:MNZ), Non-Executive
Director of Lonestar Resources Limited (ASX:LNR) and
Non-Executive Director of Cyclopharm Limited (ASX:CYC).

Mel Brookman
(Non-Executive Director – appointed 4 June 1992)

Mr Brookman was a co-founder of Cellnet in 1992. He has
over 20 years experience in mobile phone and distribution
industries. He was previously the Managing Director of the
Company from 1999 to November 2002, and is presently
chair of the Remuneration Committee and a member of
the Audit and Risk Management Committee. Mr Brookman
acted as an Executive Director from the 25 July 2012 to
7 May 2014. At all other times during the 2013 and 2014
financial years he was appointed in the capacity of a non-
executive Director.

Mr Kaplan is a Chartered Accountant with extensive
experience in senior financial and chief executive officer
roles in both private and publicly listed companies.
His experience, from both an investor and investee
perspective spans a diverse range of industries including
manufacturing, environmental, distribution and services.

Mr Kaplan is Managing Director of CVC Private Equity
Limited, Chairman and Non-Executive Director of Pro-Pac
Packaging Limited (ASX:PPG) and Non-Executive Director of
Mnemon Limited (formerly Mnet Group Limited) (ASX:MNZ).
Mr Kaplan is Chairman of the Audit and Risk Management
Committee and a member of the Remuneration
Committee.

During the past three years, Mr Kaplan also served as Non-
Executive Director of Dolomatrix Limited (ASX:DMX).

As at the date of this report, the interest of the directors in
the shares and options of Cellnet Group Limited were:

Director

A. Beard

M. Brookman

E. Kaplan

Number of
ordinary shares

Number of
restricted shares

Number of
options

400,000

Company Secretary

Chris Barnes B. Acc, CPA
(Company Secretary and Finance Director – appointed 9 March 2011)

Mr Barnes has been with the Company since 2006. He
holds a Bachelor of Accounting Degree and is CPA qualified.

Dividends

No dividends were declared and paid in the current year.

Principal activities

The principal activities of the consolidated entity are:

Sourcing products and the distribution of market leading
brands of lifestyle technology products including mobile
phone, tablet and notebook/hybrid accessories into retail
and business channels in Australia and New Zealand.

Fulfillment services to the mobile telecommunications and
retail industries in Australia and New Zealand.

Cellnet Group Limited and its consolidated entities annual report 2013|14director’s report

Operating and financial review

Likely developments

The Company achieved good year on year top line growth
of 16% with revenue increasing from $70.9 million to $82.2
million. However this revenue growth did not translate
into an increased bottom-line performance mainly due to
suppressed margins resulting from the weakness of the A$
during the financial year and the charges detailed below.
This resulted in a pre-tax loss of $1.86 million.

In respect of future strategy and future performance, the
consolidated entity is constantly reviewing the strategic
value inherent in the business. In conjunction with this,
the consolidated entity will continue to pursue its trading
activities to further improve on operational aspects to
produce the most beneficial long term results for the
shareholders of the Company.

The result was negatively impacted by the following
charges:

1. $150,000 impairment of intangible asset;

2. Foreign exchange losses of $732,000 resulting from
the mark to market at balance date of US dollar
forward exchange contracts;

3. Scrapping of inventory totalling $1.97m predominantly
relating to accessories of superseded mobile phone
models;

4. Restructuring costs of $405,000.

In light of the pre-tax losses incurred in the 2014 financial
year and in accordance with AASB112 ‘Income Taxes’,
the Board has deemed it prudent to reduce the carrying
amount of the deferred tax asset at balance date, resulting
in a tax expense of $2.02 million.

The Company is forecasting a return to profitability in the
2015 financial year and an encouraging start has been
made with results exceeding budget for the first month of
the new financial year.

Significant changes in
the state of affairs

There have been no significant changes in the state of
affairs of the company during the current year.

Significant events after balance date

There have been no matters or circumstances that
have arisen since the end of the financial year which
have significantly affected or may significantly affect the
operations of Cellnet Group Limited, the results of those
operations, or the state of affairs of Cellnet Group Limited
in future years.

Share options

In the current year, no options (2013: Nil) were awarded
to key management personnel (KMP). The existing options
had a vesting period of two years. None of these options
had been exercised as at 30 June 2014. For further details,
please refer to note 15(c).

Indemnification and
insurance of officers

Indemnification

The Company has agreed to indemnify the current and
former Directors and Company Secretaries of its controlled
entities for all liabilities to another person, other than the
Company or a related body corporate that may arise
from their position, except where the liability arises out
of conduct involving a lack of good faith. The agreement
stipulates that the Company will meet the full amount of
any such liabilities, including costs and expenses.

Insurance premiums

Insurance premiums have been paid in respect of
Directors’ and Officers’ Liability Insurance. The Directors
have not included details of the nature of the liabilities
covered or the amount of the premium paid in respect of
Directors’ and Officers’ liability insurance as such disclosure
is prohibited under the terms of the contract.

Cellnet Group Limited and its consolidated entities annual report 2013|14Directors’ meetings

Non-audit services

(including meetings of committees of Directors) and
number of meetings attended by each of the Directors of
the Company during the financial year are:

Meetings of Committees

Board

Audit & Risk
Management

Remuneration

Number of meetings held:

Number of meeting attended:

A. Beard

M. Brookman

E. Kaplan

The following non-audit services were provided by the
entity’s current auditor, Pitcher Partners (2013: Ernst &
Young) during the year. The Directors are satisfied that
the provision of non-audit services is compatible with the
general standard of independence for auditors imposed
by the Corporations Act 2001. The nature and scope of
each type of non-audit service provided means that auditor
independence was not compromised.

Pitcher Partners (2013: Ernst & Young) received or are due
to receive the following amounts for the provision of non-
audit services:

Committee membership

Tax Compliance Services

As at the date of this report the Company had an Audit
and Risk Management Committee and a Remuneration
Committee.

Rounding

Consolidated

2014 $

24,000

2013 $

11,008

Members acting on the committee of the Board during the
year were:

Audit & Risk Management

Remuneration

E. Kaplan (Chairman)

M. Brookman (Chairman)

M. Brookman

A. Beard

E. Kaplan

The Company is of a kind referred to in ASIC Class Order
98/0100 dated 10 July 1998 and in accordance with that
Class Order, amounts in the financial report and Directors’
report have been rounded off to the nearest thousand
dollars, unless otherwise stated.

Cellnet Group Limited and its consolidated entities annual report 2013|14Auditor’s independence declaration

The Auditor’s independence declaration is set out on
page 16 and forms part of the Directors’ report for the
financial year ended 30 June 2014.

director’s report

Cellnet Group Limited and its consolidated entities annual report 2013|14Auditor’s independence declaration

The Directors
Cellnet Group Limited
59-61 Qantas Drive
EAGLE FARM QLD 4009

Auditor’s Independence Declaration

As lead auditor for the audit of Cellnet Group Limited for the year ended 30 June 2014, I declare that, to the
best of my knowledge and belief, there have been:

i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in

relation to the audit; and

ii. no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Cellnet Group Limited and the entities it controlled during the period.

PITCHER PARTNERS

J J EVANS
Partner
Brisbane, Queensland
19 August 2014

Cellnet Group Limited and its consolidated entities annual report 2013|14director’s report

Remuneration Report (audited)

This remuneration report for the year ended 30 June
2014 outlines the remuneration arrangements of the
consolidated entity in accordance with the requirements
of the Corporations Act 2001 (the Act) and its regulations.
This information has been audited as required by section
308 (3C) of the Act. The remuneration report details
the remuneration arrangements for key management
personnel (KMP) who are defined as those persons having
authority and responsibility for planning, directing and
controlling the major activities of the consolidated entity,
directly or indirectly, including any director (whether
executive or otherwise) of the parent.

Remuneration report approval
at FY13 AGM

The FY13 remuneration report received positive
shareholder support at the FY13 AGM with a vote of 93.5%
in favour.

For the purposes of this report, the term “executive”
includes the executive directors, senior executives, general
managers and secretaries of the consolidated entity and
the term “director” refers to non-executive directors only.

The remuneration report is presented under the following
sections:

Individual key management personnel disclosures

2. Remuneration at a glance

3. Board oversight of remuneration

4. Non-executive director remuneration arrangements

5. Executive remuneration arrangements and the link to

company performance

6. Executive contractual arrangements

7. Additional statutory disclosures

Individual key management personnel disclosures

Key management personnel

(i)

Directors

A. Beard

Chairman (Non-Executive)

M. Brookman

Director (Executive)^

E. Kaplan

Director (Non-Executive)

^Mr Brookman acted as an executive director of the from the 25 July 2012 to 7 May 2014.
At all other times during the 2013 and 2014 financial years he was appointed in the
capacity of a non-executive Director.

(ii)

Executives

A. Sparks

C. Barnes

Chief Executive Officer
(Appointed 7 May 2014)

Chief Financial Officer and
Company Secretary

D. Clark

General Manager - New Zealand

2. Remuneration at a glance

Remuneration levels for key management personnel
are competitively set to attract and retain appropriately
qualified and experienced executives. The Board
as necessary obtains independent advice on the
appropriateness of remuneration packages of the
consolidated entity given trends in comparative companies
both locally and internationally and the objectives of the
Company’s remuneration strategy.

Non-Executive Directors receive a fixed fee for their
services.

The remuneration structures explained below are
designed to attract suitably qualified candidates, reward
the achievement of strategic objectives, and achieve the
broader outcome of creation of value for shareholders.
The remuneration structures take into account:

•

the capability and experience of the key management
personnel;

the key management personnel’s ability to control
performance;

•

the consolidated entity’s performance including:

– the consolidated entity’s earnings; and

– the growth in share price and delivering of constant

returns on shareholder wealth;

•

the amount of incentives within each key management
person’s remuneration.

Remuneration packages include a mix of fixed and variable
remuneration including short and long-term performance-
based incentives.

Cellnet Group Limited and its consolidated entities annual report 2013|14Remuneration Report (audited) continued

3. Board oversight of remuneration

5. Executive remuneration arrangements and the link to

Remuneration committee

The remuneration committee is responsible for making
recommendations to the board on the remuneration
arrangements of directors and executives.

The remuneration committee assesses the appropriateness
of the nature and amount of remuneration of non-
executive directors and executives on a periodic basis
by reference to the relevant employment market
conditions, with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high performing
director and executive team.

Remuneration strategy

Cellnet Group Limited’s remuneration strategy is designed
to attract, motivate and retain employees and non-
executive directors by identifying and rewarding high
performers and recognising the contribution of each
employee to the continued growth and success of the
consolidated entity.

To this end, key objectives of the Company’s reward
framework are to ensure that remuneration practices:

• are aligned to the consolidated entity’s business

strategy;

• offer competitive remuneration benchmarked against

the external market;

• provides strong linkage between the individual and the
performance and rewards of the consolidated entity.

Remuneration structure

company performance

5.1 Fixed remuneration

Fixed remuneration consists of base remuneration
(which is calculated on a total cost basis and
includes any fringe benefits tax charges related to
employee benefits including motor vehicles) as
well as employer contributions to superannuation
funds. Remuneration levels are reviewed annually
by the Board.

5.2 Variable remuneration – short term incentive (STI)

and long term incentive (LTI)

Performance linked remuneration includes
both STI and LTI and is designed to reward key
management personnel for meeting or exceeding
their financial and personal objectives. The STI is
an ‘at risk’ bonus provided in the form of cash.

5.3 STI bonus

The consolidated entity operates an annual STI
program that applies to executives and awards a
cash bonus subject to the attainment of clearly
defined consolidated entity, business unit and
individual measures. Actual STI payments awarded
to each executive depends on the extent to
which specific targets set at the beginning of
each six months are met. The targets consist of
a number of key performance indicators (KPIs)
covering financial and non-financial, corporate and
individual measures of performance. A summary of
these measures and weightings are set out below.

In accordance with best practice corporate governance,
the structure of non-executive director and executive
remuneration is separate and distinct.

Earnings per Share

Gross Profit

Chief Executive Officer

General Manager New Zealand

100%

4. Non-executive director remuneration arrangements

Total remuneration for all Non-Executive Directors, last
voted upon by shareholders at the 1999 AGM, is not to
exceed $300,000 per annum.

The Chairman’s base fee is $54,500 per annum and
Non-Executive Directors’ base fees are presently $50,000
per annum. Non-Executive Directors do not receive
performance related remuneration. Directors’ fees cover
all major Board activities and membership of the Audit and
Risk Management Committee.

These performance indicators were chosen as
they represent the key drivers for the short term
success of the business and provide a framework
for delivering long-term value.

On a bi-annual basis, after consideration of
performance against KPI’s the Chief Executive
Officer, in line with his responsibilities, determines
the amount, if any, of the short term incentive to
be paid to each KMP. On an annual basis, after
consideration of the KPI’s, the board will determine
the amount, if any, of the short term incentive to
be paid to the Chief Executive Officer.

Cellnet Group Limited and its consolidated entities annual report 2013|14director’s report

At the end of the financial year the Board assesses
the actual performance of the consolidated
entity and individual against the KPI’s set at the
beginning of the financial year. A percentage of
the pre-determined maximum amount is awarded
depending on results, between 0% and 100 % for
reaching target performance for non-financial
objectives, and uncapped beyond 100% in
respect of financial performance objectives. No
bonus is awarded where performance falls below
the minimum. The following table outlines the
proportion of maximum STI that was earned and
forfeited in relation to the 2014 financial year.

Proportion of maximum STI
earned in FY14

Proportion of maximum STI
forfeited in FY14

A. Sparks

D. Clark

N/A

100%

N/A

Mr Sparks commenced employment with the
Company on 7 May 2014. He was not eligible
for a short-term incentive in the 2014 financial
year. No other members of the Company’s key
management personnel were eligible to earn an
STI in the 2014 financial year.

STI awards for 2013 and 2014 financial years

For the 2014 financial year, a total payment of
$94,853 was made which represents 100% of the
total STI cash bonus previously accrued in that
period which has vested to executives. For the
2013 financial year, a total payment of $45,174 was
made which represented 75% of the total STI cash
bonus previously accrued in that period which had
vested to executives. This was paid in bi-annual
instalments in both the 2013 and 2014 financial
years. The forfeitures amounted to $14,486.

5.4 LTIs

Executive Share Option Plan

The Board established an Executive Share Option
Plan which is designed to provide incentives to the
Executives of the consolidated entity. The plan was
approved by shareholders at the Annual General
Meeting held on 18 December 2007.

Under the plan the Board has the discretion
to issue options to Executives as long as the
issue does not result in the Executive owning or
controlling the exercise of voting power attached
to 5% or more of all shares then on issue. Each
option is convertible to one ordinary share. The
exercise price of the option is determined by the
Board.

The rules governing the operation of the plan
may be amended, waived or modified, at any time
by resolution of the Board provided there is no
reduction of rights to Executives in the plan. If an
amendment reduces the rights of Executives in the
plan, it requires written consent of three-quarters
of affected Executives.

The plan may be terminated or suspended at any
time by a resolution of the Board, provided the
termination or suspension does not materially
adversely affect the rights of persons holding
shares issued under the plan at that time. There
were no options issued in the current year to
either directors or KMP (2013: Nil).

LTl Plan

The Board established a Long Term Incentive Plan
which is designed to provide incentives to the
Executives of the consolidated entity. The plan was
approved by shareholders at the Annual General
Meeting held on 18 December 2007.

The purpose and rules of the plan are the same as
the Executive Share Option Plan described above,
except that there is no prohibition on issuing
shares if it would result in an Executive owning
(legally or beneficially) or controlling the exercise
of voting power attached to 5% or more of all
shares then on issue. No shares were issued in the
current year (2013: Nil).

5.5 STI structure

The Board considers that the above performance-
linked remuneration structure is appropriate at
this time. It provides both short-term focus on
operating performance and longer term focus on
share price growth.

Improving the performance of the operations was
the main focus in setting the financial year 2014
short-term incentive.

Cellnet Group Limited and its consolidated entities
annual report 2013|14

Remuneration Report (audited) continued

5.6 Consequences of performance on shareholder wealth

In considering the consolidated entity’s performance and benefits for shareholder wealth, the Board has regard to
the following indices in respect of the current financial year and previous financial years.

Net profit/(loss) attributable to equity
holders of the Company

Dividends paid

Reduction of share capital

Change in share price

5.7 Other benefits

2014

2013

2012

2011

2010

($3,887,000)

$962,000

($488,000)

$1,041,000

$1,472,000

$0.01

$7,912,000

$699,000

$5,308,000

($0.19)

$0.09

$0.05

During the current and prior year, there were no non-cash bonuses or benefits paid to key management
personnel.

6. Executive contractual arrangements

It is the consolidated entity’s policy that service contracts for key management personnel are unlimited in term but capable
of termination as per the relevant period of notice and that the consolidated entity retains the right to terminate the
contract immediately, by making payment that is commensurate with pay in lieu of notice.

The service contract outlines the components of remuneration paid to the key management person but does not
prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into
account cost-of-living changes, any change in the scope of the role performed by the senior executive and any changes
required to meet the principles of the remuneration policy.

Standard KMP termination payment provisions apply to all current members of the KMP, including the Chief Executive
Officer. The standards KMP provisions are as follows:

Notice period

Payment in lieu
of notice

Treatment of STI on
termination

Treatment of LTI on
termination

Employer initiated termination

3 months

Termination for serious misconduct

None

Employee initiated termination

3 months

Pro-rated for time and
performance

Unvested awards
forfeited

Pro-rated for time and
performance

Cellnet Group Limited and its consolidated entities annual report 2013|14director’s report

6.1 Directors’ and executive officers’ remuneration

The remuneration report details the remuneration arrangements for key management personnel (KMP) who are
defined as those persons having authority and responsibility for planning, directing and controlling the major
activities of the consolidated entity, directly or indirectly, including any director (whether executive or otherwise).
Remuneration of Directors and KMP are as follows:

Short Term $

Post
Employment $

Long Term Benefits $

Year

Salary
& Fees

STI Cash
Bonus

Motor Vehicle
Allowances

Non
Monetary
benefits

Superannuation
Benefits

Cash
Incentives

Long Service
Leave

Share-based
Payment

Termination/
Retention
Benefits

Total

Performance
Related

Non-executive directors

A. Beard(i)

2014

2013

M. Brookman (Appointed 07/05/14)

2014

4,167

E. Kaplan(ii) (Appointed 25/07/12)

Total

Executive directors

2013

2014

2013

2014

2013

4,167

M. Brookman (iii) (Appointed 07/05/14)

2014

237,342

2013

252,083

S. Smith (Resigned 25/07/14)

2014

2013

20,802

4,693

2,095

4,167

237,342

254,178

0.82

(212,332)

275,000

88,163

(240.84)

i During both the 2013 and 2014 financial years the Company paid management fees to CVC Managers Pty Limited totalling $54,500 in relation to director’s services performed by
Mr A Beard. ii During both the 2013 and 2014 financial years the Company paid management fees to CVC Managers Pty Limited totalling $50,000 in relation to director’s services
performed by Mr E Kaplan. iii Mr Brookman was appointed as an executive director 25 July 2012. Prior to this date in the 2013 financial year he acted as a non executive director.
Mr Brookman resigned from the position of executive director 7 May 2014. From this date and for the remainder of the 2014 financial year Mr Brookman acted as a non executive director.

Short Term $

Post
Employment $

Long Term Benefits $

Year

Salary
& Fees

STI Cash
Bonus

Motor Vehicle
Allowances

Non
Monetary
benefits

Superannuation
Benefits

Cash
Incentives

Long Service
Leave

Share-based
Payment

Termination/
Retention
Benefits

Total

Performance
Related

Other key management personnel

A. Sparks (Appointed 07/05/14)

2014

41,667

C. Barnes

2013

2014

202,423

2013

156,475

12,500

D. Clark

2014

158,777

94,853

13,747

2013

121,091

32,674

12,253

Total executive and KMP

2014

640,209

94,853

13,747

2013

550,451

45,174

12,253

Totals (Directors and KMP)

2014

644,376

94,853

13,747

2013

550,451

45,174

12,253

3,854

17,625

16,175

8,021

3,113

29,500

23,891

29,500

23,981

2,096

26,548

2,095

45,521

220,048

187,246

7.79

275,398

34.44

197,774

17.58

778,309

12.19

26,548

(206,046)

275,000

727,361

(22.12)

782,476

12.12

26,548

(206,046)

275,000

727,361

(22.12)

*Remuneration disclosures in the 2013 financial year included information for all executives who were part of the senior leadership team. The board has reassessed the executive
group and has reduced the disclosures in the above table strictly to those individuals with the authority and responsibility for planning, directing and controlling the activities of the
consolidated entity directly or indirectly.

Cellnet Group Limited and its consolidated entities annual report 2013|14

Remuneration Report (audited) continued

7. Additional statutory disclosures

This section sets out the additional disclosures required under the Corporations Act 2001.

There were no share options granted to executives as remuneration during the current financial year, and no options
granted to directors vested or lapsed during the year.

A related party of Mr. M Brookman (Ms. A Brookman) holds 1,851,943 ordinary shares as at 30 June 2014 (2013: 1,851,943).
There were no movements in this holding during the year.

No other member of KMP or their related parties held any shares in the company as at 30 June 2014 nor traded in any
shares in the company during the financial year then ended.

There were no other transactions with KMP during the financial year.

End of Remuneration Report

This report is made with a resolution of the Directors:

Alexander Beard
Chairman

Signed at Brisbane on 19 August 2014

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

financial
report

Cellnet Group Limited and its consolidated entities annual report 2013|14Financial Report

Statement of financial position

As at 30 June 2014

Note

2014

$000

2013 Restated*

$000

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Income tax receivable

Total current assets

Non-current assets

Property, plant and equipment

Deferred tax assets (net)

Intangible assets

Total non-current assets

TOTAL ASSETS

LIABILITIES

Current liabilities

Trade and other payables

Provisions

Derivative financial instruments

Interest-bearing loans and borrowings

Total current liabilities

Non-current liabilities

Provisions

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

7(c)

2,551

11,441

8,587

22,579

583

828

1,411

2,141

9,567

8,991

20,703

858

2,855

150

3,863

23,990

24,566

5,032

539

732

6,270

12,573

148

8,227

536

474

9,237

337

12,721

9,574

11,269

14,992

25(a)

25(b)

31,699

658

(21,088)

11,269

31,699

494

(17,201)

14,992

*Certain amounts shown here do not correspond to the 2013 financial statements and reflect classification adjustments made as detailed in Note 2.
The above statement of financial position should be read in conjunction with the accompanying notes.

Cellnet Group Limited and its consolidated entities annual report 2013|14Statement of comprehensive income

For the year ended 30 June 2014

Note

2014

$000

2013 Restated*

$000

Continuing operations

Sales of goods

Rendering of services

Revenue

Other income

Depreciation and amortisation expense

Employee benefit expense

Finance costs

Foreign currency losses

Freight expense

Impairment of intangible

Materials, packaging and consumables used

Occupancy expense

Other expense

Restructuring costs

Profit /(loss) from continuing operations before income tax

Income tax expense

Profit/(loss) from continuing operations after income tax

Discontinued operations

Loss from discontinued operations after income tax

Net profit/(loss) for the period

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Foreign currency translation

Total comprehensive income for the period

7(b)

79,772

2,456

82,228

(394)

(9,395)

(435)

(808)

(3,542)

(150)

(65,428)

(1,489)

(2,066)

(405)

(1,865)

(2,022)

(3,887)

164

(3,723)

68,652

2,279

70,931

355

(379)

(9,506)

(122)

(3,024)

(53,556)

(1,446)

(1,962)

(380)

911

180

1,091

(129)

962

(54)

908

1.7

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the Company

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Earnings per share for profit attributable to the ordinary equity holders of the Company

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

(6.9)

*Certain amounts shown here do not correspond to the 2013 financial statements and reflect classification adjustments made as detailed in Note 2.
The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Cellnet Group Limited and its consolidated entities annual report 2013|14Statement of changes in equity

Share capital
$000

Reserve for
own share
$000

Foreign Currency
translation reserve
$000

Share based
payment reserve
$000

Accumulated
losses
$000

Total equity
$000

31,699

(25)

(57)

164

107

(3)

(54)

(57)

(17,201)

(3,887)

14,992

(3,887)

164

(3,887)

(3,723)

576

(21,088)

11,269

780

(18,163)

14,288

962

(54)

908

(204)

576

(17,201)

(204)

14,992

At 1 July 2013

Loss for the period

Foreign currency translation

Total comprehensive income
for the period

Transactions with owners in their
capacity as owners

Balance as at 30 June 2014

31,699

At 1 July 2012

Loss for the period

Foreign currency translation

Total comprehensive income
for the period

Transactions with owners in their
capacity as owners:
Share based payments

31,699

(25)

Balance as at 30 June 2014

31,699

(25)

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Cellnet Group Limited and its consolidated entities annual report 2013|14Statement of cash flows

For the year ended 30 June 2014

Note

Consolidated

2014

$000

2013 Restated*

$000

Cash flows from operating activities

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Interest paid

Net cash flows used in operating activities

Cash flows from / (used in) investing activities

Proceeds from sale of property, plant and equipment

Interest received

Purchase of property, plant and equipment

Acquisition of assets through a business combination

Net inflow from sale of discontinued operation, net of cash disposed

Net cash flows from / (used in) investing activities

Cash flows from / (used in) financing activities

Proceeds from borrowings

Repayment of borrowings

Net cash flows from / (used in) used in financing activities

Net decrease in cash and cash equivalents

Net foreign exchange differences

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

The above statement of cash flows should be read in conjunction with the accompanying notes.

88,061

(93,056)

(325)

(5,320)

(120)

(66)

(166)

27,843

(22,047)

5,796

310

100

2,141

2,551

79,460

(81,868)

(3)

(2,411)

(29)

(300)

(228)

(2,639)

(28)

4,808

2,141

financial report

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

provide meaningful information to users of
the financial report as the resultant gross profit
measure is not a true reflection of the costs
involved in the sale process of a distribution
business. It is viewed that the presentation of
the statement of comprehensive income by
nature will provide more relevant information to
the users of the financial report. Accordingly, all
expenditure items in the consolidated statement
of comprehensive income have been reclassified
according to their nature in both the current and
comparative period.

In addition to the above, the Group has also
reclassified the comparative period rebates from
cost of sales to revenue, and freight revenue
from costs of sales to revenue from the rendering
of services. Accrued unsettled customer and
supplier rebates have also been reclassified to
offset the relevant receivables and payables to
which they relate.

Compliance with IFRS

The financial report complies with International
Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.

(b) New accounting standards and interpretations

Relevant accounting standards and
interpretations that have recently been issued or
amended but are not yet effective and have not
been adopted for the year are as follows:

(i) Application of new accounting standards

A number of new and revised standards
are effective for annual reporting periods
beginning on or after 1 January 2013 and
include:

• AASB 10 Consolidated Financial

Statements, AASB 11 Joint Arrangements,
AASB 12 Disclosure of Interests in Other
Entities, AASB 127 Separate Financial
Statements;

• AASB 13 Fair Value Measurement; and

• AASB 119 Employee Benefits (September

2011)

1. Corporate Information

Cellnet Group Limited (the ‘Company’) is a company
limited by shares and incorporated in Australia. The
consolidated financial report of the Company for the
financial year ended 30 June 2014 comprises the
Company and its subsidiaries (together referred to as the
‘consolidated entity’). The company is a for-profit entity for
the purpose or preparing these financial statements. The
financial statements of the subsidiaries are prepared for the
same reporting period as the parent company.

The financial report was authorised for issue by the
Directors on 19 August 2014.

The nature of the operations and principal activities of the
consolidated entity are described in the directors’ report.

2. Significant accounting policies

(a) Basis of preparation

The financial report is a general purpose financial
report, which has been prepared in accordance
with the requirements of the Corporations Act
2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian
Accounting Standards Board.

The financial report is prepared on the historical
cost basis and is presented in Australian dollars.

The Company is of a kind referred to in ASIC
Class Order 98/100 dated 10 July 1998 and in
accordance with that Class Order, amounts in
the financial report and directors’ report have
been rounded off to the nearest thousand
dollars, unless otherwise stated.

The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the
period in which the estimate is revised if the
revision affects only that period or in the period
of the revision and future periods if the revision
affects both current and future periods.

Change in basis of preparation

During the financial year the Directors have
undertaken a review of the presentation of
the consolidated entity’s financial statements.
As part of this review it was noted that the
presentation of cost of goods sold, as required
when presenting items in the statement of
comprehensive income by function, does not

Cellnet Group Limited and its consolidated entities annual report 2013|14The adoption of AASB 10, AASB 11, AASB
13 and AASB 119 and related amendments
resulted in changes to accounting policies
but no adjustments to the amounts
recognised in the financial statements.

(ii) Accounting standards and interpretations

issued but not yet effective

Relevant accounting standards and
interpretations that have recently been issued
or amended but are not yet effective and
have not been adopted for the year are as
follows:

Standard/Interpretation

AASB 9 Financial Instruments –
revised and consequential
amendments to other accounting
standards resulting from its issue

AASB 2012-3 Amendments to
Australian Accounting Standards –
Offsetting Financial Assets and
Financial Liabilities

AASB 2013-3 Amendments to
AASB136 – Recoverable Amount
Disclosures for Non-Financial Assets

AASB 2013-4 Amendments to
Australian Accounting Standards –
Novation of Derivative and
Continuation of Hedge Accounting

AASB 2014-1 Part A Amendments to
Australian Accounting Standards –
Annual Improvements 2010-2012
and 2011-2013

AASB 2014-1 Part B Amendments to
Australian Accounting Standards –
Defined Benefits Plans: Employee
Contributions (Amendments to
AASB119)

Application
date
of standard

Application
date for the
group

1 Jan 2018

1 Jul 2018

1 Jan 2014

1 Jul 2014

1 Jan 2014

1 Jul 2014

1 Jan 2014

1 Jul 2014

Interpretation 21 Levies

1 Jan 2014

1 Jul 2014

IFRS 15* Revenue from Contracts
with Customers

AASB 2014 – 4 Clarification of
Acceptable Methods of Depreciation
and Amortisation

1 Jan 2017

1 Jul 2017

1 Jan 2016

1 Jul 2016

*This IASB Standard was also issued but not yet effective, although an Australian
equivalent standard has not yet been issued.

financial report

The Directors anticipate that the adoption of
these Standards and Interpretations in future
years may have the following impacts:

AASB 9 – This revised standard provides
guidance on the classification and
measurement of financial assets, which is the
first phase of a multi-phase project to replace
AASB 139 Financial Instruments: Recognition
and Measurement. Under the new guidance,
a financial asset is to be measured at
amortised cost only if it is held within a
business model whose objective is to collect
contractual cash flows and the contractual
terms of the asset give rise on specified
dates to cash flows that are payments solely
of principal and interest (on the principal
amount outstanding). All other financial
assets are to be measured at fair value.
Changes in the fair value of investments in
equity securities that are not part of a trading
activity may be reported directly in equity, but
upon realisation those accumulated changes
in value are not recycled to the profit or loss.
Changes in the fair value of all other financial
assets carried at fair value are reported in the
profit or loss. The Group is yet to assess the
impact of the new standard. In the second
phase of the replacement project, the revised
standard incorporates amended requirements
for the classification and measurement of
financial liabilities. The new requirements
pertain to liabilities at fair value through
profit or loss, whereby the portion of the
change in fair value related to changes in
the entity’s own credit risk is presented in
other comprehensive income rather than
profit or loss. There is not expected to be a
significant impact on the Group’s accounting
for financial liabilities, as the Group’s
financial liabilities at fair value through profit
or loss are not exposed to material risk
of change in the group’s own credit risk.
Recent amendments as part of the project
introduced a new hedge accounting model
to simplify hedge accounting requirements
and more closely align hedge accounting
with risk management activities. There will be
no impact on the Group’s accounting, as the
Group does not utilise hedge accounting.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
2. Significant accounting policies continued

AASB 2012-3 – This amendment to AASB132
clarifies when an entity has a legally
enforceable right to set-off financial assets
and financial liabilities permitting entities to
present balances net on the balance sheet.
The amendments are not expected to have
an impact on the Group’s balance sheet in
the period of initial application.

AASB 2013-3 – These amendments introduce
additional disclosure requirements where
the recoverable amount of impaired assets
is based on fair value less cost of disposal.
There will be no impact on the Group’s
disclosures as the Group does not determine
the recoverable amounts of impaired asset
using fair value less cost of disposal.

AASB 2013-4 – These amendments to
AASB139 permit the continuation of hedge
accounting in circumstances where a
derivative, which has been designated as a
hedging instrument, is novated from one
counterparty to a central counterparty as a
consequence of laws or regulations. There
will be no impact on the Group as it does not
apply hedge accounting.

AASB 2014-1 Part A – These amendments
introduce various changes to AASBs, none of
which are expected to have a material impact
on the group’s financial statements in the
period of initial application.

Interpretation 21 – This interpretation clarifies
the circumstances which a liability to pay
a levy imposed by a government, other
than for income taxes and fines/breaches
imposed for breaches of legislation, should
be recognised, and whether that liability
should be recognised in full at a specific date
or progressively over a period of time. The
new interpretation is not expected to have an
impact on the Group’s financial statements in
the period of initial application.

IFRS 15 – This new standard contains a
single model that applies to contracts
with customers and two approaches to
recognising revenue. The model features
a contract-based five step analysis of
transactions to determine whether, how
much and when revenue is recognised. The
Group is yet to assess the impact of the new
standard.

AASB 2014 - 4 – These amendments
introduce a rebuttable presumption that
the use of revenue-based depreciation/
amortisation methods for intangible assets
is inappropriate and for property, plant and
equipment it cannot be used. There will be
no impact on the Group’s accounting as it
does not use revenue-based depreciation/
amortisation methods.

The consolidated financial statements comprise
the financial statements of Cellnet Group Ltd
and its subsidiaries (as outlined in note 21 as at
and for the period ended 30 June each year
(the consolidated entity). Interests in associates
are equity accounted and are not part of the
consolidated entity. Subsidiaries are all those
entities over which the consolidated entity has
the power to govern the financial operating
policies so as to obtain benefits from their
activities. The existence and effect of potential
voting rights that are currently exercisable or
convertible are considered when assessing
whether a Group controls another entity.

The financial statements of the subsidiaries are
prepared for the same reporting period as the
parent company, using consistent accounting
policies. In preparing the consolidated financial
statements, all intercompany balances and
transactions, income and expenses and profit
and losses resulting from intra group transactions
have been eliminated in full.

Intra-group balances and any unrealised gains
and losses or income and expenses arising
from intra-group transactions, are eliminated in
preparing the consolidated financial statements.

(d) Foreign currency

(i) Functional and presentation currency

Both the functional and presentation
currency of Cellnet Group Limited and its
Australian subsidiaries are Australian dollars
($). The New Zealand subsidiary’s functional
currency is New Zealand dollars which is
translated to the presentation currency.

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

(ii) Transactions and balances

(iii) Depreciation

Transactions in foreign currencies are
translated at the foreign exchange rate ruling
at the date of the transaction. Monetary
assets and liabilities denominated in foreign
currencies at the balance date are translated
to Australian dollars at the foreign exchange
rate ruling at reporting date. Foreign
exchange differences arising on translation
are recognised in net income.

Non-monetary assets and liabilities that are
measured in terms of historical cost in a
foreign currency are translated using the
exchange rate at the date of the transaction.

(iii) Financial statements of foreign operations

The assets and liabilities of foreign operations
are translated to Australian dollars at foreign
exchange rates ruling at the balance date.
The revenues and expenses of foreign
operations are translated to Australian dollars
at rates approximating the foreign exchange
rates ruling at the dates of the transactions.
Foreign exchange differences arising on
translation are recognised directly in a
separate component of equity.

(e) Property, plant and equipment

(i) Owned assets

Items of property, plant and equipment
are stated at cost or deemed cost less
accumulated depreciation (see below) and
impairment losses (see accounting policy (j)).

Where parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items of property,
plant and equipment.

(ii) Leased assets

Leases in terms of which the consolidated
entity assumes substantially all the risks and
rewards of ownership are classified as finance
leases.

Depreciation is charged to net income on a
straight-line basis over the estimated useful
lives of each part of an item of property, plant
and equipment. The estimated useful lives in
the current and comparative periods are as
follows:

Leasehold improvements

31/3–40 years

Plant and equipment

2½–10 years

Leased plant and equipment

4–5 years

The residual value, the useful life and the
depreciation method applied to an asset are
reassessed at least annually.

(iv) Derecognition

An item of property, plant and equipment
is derecognised upon disposal or when
no further future economic benefits are
expected from its use or disposal.

(f) Intangible assets

(i) Goodwill - Business combinations

Goodwill acquired in a business combination
is initially measured at cost of the business
combination being the excess of the
consideration transferred over the fair
value of the group’s net identifiable net
assets acquired and liabilities assumed. If
this consideration transferred is lower than
the fair value of the net identifiable assets
of the subsidiary acquired, the difference
is recognised in net income. After initial
recognition, goodwill is measured at cost less
any accumulated impairment losses.

(ii) Other intangible assets

Other intangible assets that are acquired by
the consolidated entity are stated at cost less
accumulated amortisation (see below) and
impairment losses (see accounting policy (j)).

(iii) Subsequent expenditure

Subsequent expenditure on capitalised
intangible assets is capitalised only when
it increases the future economic benefits
embodied in the specific asset to which it
relates. All other expenditure is expensed as
incurred.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
2. Significant accounting policies continued

(iv) Amortisation

(j)

Impairment

Amortisation is charged to net income on a
straight-line basis over the estimated useful
lives of intangible assets unless such lives
are indefinite. Goodwill and intangible assets
with an indefinite useful life are systematically
tested for impairment at each balance date.
Other intangible assets are amortised from
the date they are available for use over their
estimated useful lives.

(g) Trade and other receivables

Trade, loans and other receivables are stated
at their amortised cost less impairment losses.
Collectability of trade receivables is reviewed on
an ongoing basis at a customer level. Individual
debts that are known to be uncollectable are
written off when identified. An impairment
provision is recognised when there is objective
evidence that the consolidated entity will not
be able to collect the receivable. Debts which
are aged greater than 120 days or more are
considered as objective evidence of impairment
and a provision of 80% is recognised. For any
debts that are passed onto the consolidated
entities solicitors for collection a provision of
100% is recognised.

(h) Inventories

Inventories are stated at the lower of cost and
net realisable value. Net realisable value is the
estimated selling price in the ordinary course of
business, less the estimated costs of completion
and selling expenses. Cost is calculated using
the average cost method and includes direct
and allocated costs incurred in acquiring the
inventories and bringing them to their present
location and condition. Provision is recognised
when there is objective evidence that the
consolidated entity will not be able to sell the
inventory at normal reseller pricing.

(i) Cash and cash equivalents

Cash and cash equivalents in the statement
of financial position comprise of cash at bank
and in hand and short term deposits with a
maturity of 60 days or less that are readily
convertible to known amounts of cash and
which are subject to insignificant risks of
change in values.

The carrying amounts of the consolidated entity’s
assets, other than inventories (see accounting
policy (h)), trade and other receivables (see
accounting policy (g)) and deferred tax assets
(see accounting policy (r)), are reviewed at each
balance date to determine whether there is any
indication of impairment. If any such indication
exists, the asset’s recoverable amount is
estimated (see accounting policy (j) (i)).

For goodwill, intangible assets that have an
indefinite useful life and intangible assets that are
not yet available for use, the recoverable amount
is estimated at each balance date.

An impairment loss is recognised whenever
the carrying amount of an asset or its cash-
generating unit exceeds its recoverable amount.
Impairment losses are recognised in net income.

Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the
carrying amount of any goodwill allocated to
cash-generating units (group of units) and then, to
reduce the carrying amount of the other assets in
the unit (group of units) on a pro-rata basis.

(i) Calculation of recoverable amount

The recoverable amount of assets (apart from
receivables, inventory, and deferred tax) is
the greater of their fair value less costs to sell
and value in use. In assessing value in use, the
estimated future cash flows are discounted to
their present value using a pre-tax discount rate
that reflects current market assessments of the
time value of money and the risks specific to
the asset. For an asset that does not generate
largely independent cash inflows, the recoverable
amount is determined for the cash-generating
unit to which the asset relates.

Impairment losses, other than in respect of
goodwill, are reversed when there is an indication
that the impairment loss may no longer exist
and there has been a change in the estimate
used to determine the recoverable amount. An
impairment loss in respect of goodwill is not
reversed.

An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed
the carrying amount that would have been
determined, net of depreciation or amortisation,
if no impairment loss had been recognised.

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

(k) Share capital

(ii) Long-term service benefits

Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.

(l)

Interest-bearing loans and borrowings

Interest-bearing borrowings are recognised
initially at fair value of the consideration received
less related transaction costs. Subsequent to
initial recognition, interest-bearing borrowings
are stated at amortised cost with any difference
between cost and redemption value being
recognised in net income over the period of the
borrowings on an effective interest basis.

(m) Provisions and employee leave benefits

(i) Provisions

Provisions are recognised when the consolidated
entity has a present obligation (legal or
constructive) as a result of a past event, it
is probable that an outflow of resources
embodying economic benefits will be required to
settle the obligation and a reliable estimate can
be made of the amount of the obligation.

When the consolidated entity expects some or
all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement
is recognised as a separate asset but only when
the reimbursement is virtually certain. The
expense relating to any provision is presented in
net income net of any reimbursement.

Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the present obligation at the
balance date using a discounted cash flow
methodology. The risks specific to the provision
are factored into the cash flows and as such
a risk-free government bond rate relative to
the expected life of the provision is used as a
discount rate. If the effect of the time value of
money is material, provisions are discounted
using a current pre-tax rate that reflects the time
value of money and the risks specific to the
liability.

The consolidated entity’s net obligation in
respect of long-term service benefits is the
amount of future benefit that employees have
earned in return for their service in the current
and prior periods. The obligation is calculated
using expected future increases in wage and
salary rates including related on-costs and
expected settlement dates, and is discounted
using the rates attached to the Commonwealth
Government bonds at the balance date which
have maturity dates approximating the terms of
the consolidated entity’s obligations.

(iii) Wages, salaries, annual leave and sick leave

Liabilities for employee benefits for wages,
salaries and annual leave that are expected to
be settled within 12 months of the reporting
date represent present obligations resulting from
employees’ services provided to reporting date,
and are calculated using undiscounted amounts
based on remuneration wage and salary rates
that the consolidated entity expects to pay as at
reporting date including related on-costs, such
as workers remuneration insurance and payroll
tax. Amounts not expected to be settled within
12 months are carried at a net present value
determined in the same manner as long service
leave benefits described in note 2(m)(ii). Expenses
for non-accumulating sick leave are recognised
when the leave is taken and are measured at the
rates paid or payable.

(iv) Contingent consideration

Contingent consideration, resulting from
business combinations, is valued at fair value
at the acquisition date as part of the business
combination. Subsequent changes to the
fair value of the contingent consideration
that is deemed to be an asset or liability will
be recognised in accordance with AASB 139
either in profit or loss or as a change to other
comprehensive income.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
2. Significant accounting policies continued

(n) Share based payment transactions

(q) Leases

The consolidated entity provides benefits to KMP
in the form of share based payments, whereby
the KMP renders services in exchange for shares.
There are currently share based payment plans
in place for the KMP. The cost of share based
payments with KMP is measured by reference to
the fair value of the equity instrument at the date
at which they are granted (refer note 15 (b) and
(c) for further details).

(o) Trade and other payables

Trade and other payables are stated at their
amortised cost. Trade payables are non-
interest bearing and are normally settled on
average between 30 day and 45 day terms.
They represent liabilities for goods and services
provided to the consolidated entity prior to the
end of the financial year that are unpaid and arise
when the consolidated entity becomes obliged
to make future payments in respect of the
purchase of these goods and services.

(p) Revenue

Goods sold and services rendered

Revenue from the sale of goods is recognised
in net income when the significant risks and
rewards of ownership have been transferred
to the customer. This transfer generally occurs
when the goods are delivered to the customer.
Revenue from the provision of warehousing
services to external parties is recognised as the
service is provided. No revenue is recognised
if there are significant uncertainties regarding
recovery of the consideration due, the costs
incurred or to be incurred cannot be measured
reliably, there is a risk of return of goods or there
is continuing managerial involvement with the
goods.

Interest income is recognised in net income as
it accrues, using the effective interest method.
Dividend income is recognised in net income on
the date the entity’s right to receive payments is
established.

(i) Operating lease payments

Payments made under operating leases are
recognised in net income on a straight-line basis
over the term of the lease. Lease incentives
received are recognised in net income as an
integral part of the total lease expense and
spread over the lease term.

(ii) Finance leases

Finance leases, which transfer to the
consolidated entity substantially all the risks and
benefits incidental to ownership of the leased
item are capitalised at the inception of the lease
at fair value of the leased asset or, if lower, at the
present value of the minimum lease payments.
Minimum lease payments are apportioned
between the finance charge and the reduction
of the outstanding liability. The finance charge is
allocated to each period during the lease term so
as to produce a constant periodic rate of interest
on the remaining balance of the liability. Finance
charges are recognised as an expense in net
income.

(r) Income tax

Current tax assets and liabilities for the current
and prior periods are measured at the amount
expected to be recovered from or paid to the
taxation authorities based on the current period’s
taxable income. The tax rates and tax laws used
to compute the amount are those that are
enacted or substantively enacted by the reporting
date.

Deferred tax is provided using the statement
of financial position method, providing for
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and the amounts used for
taxation purposes. The following temporary
differences are not provided for - initial
recognition of goodwill, the initial recognition of
assets or liabilities that affect neither accounting
nor taxable profit, and differences relating to
investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is
based on the expected manner of realisation or
settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively
enacted at the balance date.

Cellnet Group Limited and its consolidated entities annual report 2013|14A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits
will be available against which the asset can
be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the
related tax benefit will be realised.

Deferred tax assets and deferred tax liabilities
are offset only if a legally enforceable right exists
to set off current tax assets against current tax
liabilities and the deferred tax assets and liabilities
relate to the same taxable entity and the same
taxation authority.

Tax consolidation

The Company and its wholly-owned Australian
resident subsidiaries have formed a tax-
consolidated entity with effect from 1 July
2003 and are therefore taxed as a single entity
from that date. The head entity within the tax-
consolidated entity is Cellnet Group Limited.

Current tax expense/income, deferred tax
liabilities and deferred tax assets arising from
temporary differences of the members of the
tax-consolidated entity are recognised in the
separate financial statements of the members of
the tax-consolidated entity using the ‘separate
taxpayer’ within the consolidated entity approach.
Deferred tax assets and deferred tax liabilities
are measured by reference to the carrying
amounts in the separate financial statements of
each entity and the tax values applied under tax
consolidation.

Any current tax liabilities (or assets) and
deferred tax assets arising from unused tax
losses or unused tax credits of the subsidiaries
are assumed by the head entity in the tax
consolidated entity and are recognised as
amounts payable / (receivable) to / (from)
other entities in the tax-consolidated entity in
conjunction with any tax funding arrangement
amounts (refer below). Any difference between
these amounts is recognised by the Company as
an equity contribution or distribution.

financial report

The Company recognises deferred tax assets
arising from unused tax losses and unused tax
credits of the tax-consolidated entity to the extent
that it is probable that future taxable profits of the
tax-consolidated entity will be available against
which the asset can be utilised. Any subsequent
period adjustments to deferred tax assets arising
from unused tax losses and unused tax credits as a
result of revised assessments of the probability of
recoverability are recognised by the head entity only.

Nature of tax funding arrangements

The head entity, in conjunction with other
members of the tax-consolidated entity, has
entered into a tax funding arrangement which
sets out the funding obligations of members
of the tax-consolidated entity in respect of tax
amounts. The tax funding arrangements require
payments to / (from) the head entity equal to
the current tax liability / (asset) assumed by the
head entity and any tax-loss or tax credit related
deferred tax asset assumed by the head entity,
resulting in the head entity recognising an inter-
entity payable / (receivable) equal in amount to
the tax liability / (asset) assumed. The inter-entity
payable / (receivable) is at call.

Contributions to fund the current tax liabilities are
payable as per the tax funding arrangement and
reflect the timing of the head entity’s obligation to
make payments for tax liabilities to the relevant tax
authorities.

(s) Goods and services tax

Revenue, expenses and assets are recognised net
of the amount of goods and services tax (GST),
except where the amount of GST incurred is not
recoverable from the taxation authority. In these
circumstances, the GST is recognised as part of
the cost of acquisition of the asset or as part of
the expense.

Receivables and payables are stated with the
amount of GST included. The net amount of
GST recoverable from, or payable to, the ATO
is included as a current asset or liability in the
statement of financial position.

Cash flows are included in the statement of cash
flows on a gross basis. The GST components of
cash flows arising from investing and financing
activities which are recoverable from, or payable
to, the ATO are classified as operating cash flows.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
2. Significant accounting policies continued

(t) Accounting estimates and judgements

(u) Non-current assets held for sale and

Management discussed with the Audit and Risk
Management Committee the development,
selection and disclosure of the consolidated
entity’s critical accounting policies and estimates
and the application of these policies and
estimates. The estimates and judgements that
have a significant risk of causing a material
adjustment to the carrying amounts of assets
and liabilities within the next financial year are
discussed below.

Impairment losses for trade receivables and stock
on hand

Note 10 contains information about the
assumptions and their risk factors relating to
trade receivable impairment losses and note 6
contains information regarding stock that has
been scrapped throughout the course of the
year.

Share based payments

The consolidated entity measures the cost of
equity-settled transactions with employees
by reference to the fair value of the equity
instruments at the date at which they are granted.
The fair value is determined with the assistance
of an external valuer using a binomial model. The
related assumptions are detailed in note 15. The
accounting estimates and assumptions relating to
equity-settled share-based payments would have
no impact on the carrying amounts of assets and
liabilities within the next annual reporting period
but may impact expenses and equity.

Recovery of deferred tax assets

Deferred tax assets are recognised for deductible
temporary differences as management considers
that it is probable that future taxable profits will
be available to utilise temporary differences and
recognised tax losses. Significant judgement is
required to determine the amount of deferred tax
assets that can be recognised, based upon the
likely timing and the level of future taxable profits
over the next three years together with future
tax planning strategies. Where the consolidated
entity has made a taxable loss in the current or
preceding year, a tax asset is only recognised
to the extent that there is convincing other
evidence that sufficient taxable profit will be
available against which the recognised unused
tax losses can be utilised.

discontinuing operations

Non-current assets and disposal groups classified
as held for sale are measured at the lower of
their carrying amount and fair value less costs
to sell. Non-current assets and disposal groups
are classified as held for sale if their carrying
amounts will be recovered through a sale
transaction rather than through continuing use.
This condition is regarded as met only when the
sale is highly probable and the asset or disposal
group is available for immediate sale in its present
condition. Management must be committed to
the sale, which should be expected to qualify for
recognition as a completed sale within one year
from the date of classification. In the statement
of comprehensive income, income and expenses
from discontinued operations are reported
separately from income and expenses from
continuing operations, down to the level of profit
after taxes.

(v) Earnings per share

The consolidated entity presents basic and
diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted
average number of ordinary shares outstanding
during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number
of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares. Potential
ordinary shares shall be treated as dilutive when
their conversion to ordinary shares would
decrease earnings per share or increase loss per
share from continuing operations.

(w) Operating segments

An operating segment is a component of an
entity that engages in business activities from
which it may earn revenues and incur expenses
(including revenues and expenses relating to
transactions with other components of the same
entity), whose operating results are regularly
reviewed by the entity’s chief operating decision
maker to make decisions about resources to
be allocated to the segment and assess its
performance and for which discrete financial
information is available.

Cellnet Group Limited and its consolidated entities annual report 2013|14Operating segments have been identified
based on the information provided to the chief
operating decision maker – being the Chief
Executive Officer. Note 4 contains information
on reportable segments.

(x) Business combinations

Business combinations are accounted for
using the acquisition method. The cost of an
acquisition is measured as the aggregate of
the consideration transferred, measured at
acquisition date fair value and the amount of any
non controlling interest in the acquiree. For each
business combination the consolidated entity
elects whether it measures the non-controlling
interest in the acquiree either at fair value or
at the proportionate share of the acquiree’s
identifiable net assets. Acquisition costs incurred
are expensed and included in administrative
expenses.

When the consolidated entity acquires a
business, it assesses the financial assets and
liabilities assumed for appropriate classification
and designation in accordance with the
contractual terms, economic circumstances and
pertinent conditions as at the acquisition date.

If the business combination is achieved in stages,
the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date
through profit or loss.

(y) Financial instruments – initial recognition and

subsequent measurement

(i)

Financial assets

Initial recognition and measurement

Financial assets within the scope of AASB139
are classified as financial assets at fair value
through the profit or loss, loans and receivables,
held to maturity investments, available for sale
financial assets, or as derivatives designated as
hedging instruments in an effective hedge, as
appropriate. The consolidated entity determines
the classification of its financial assets at initial
recognition.

financial report

All financial assets are recognised initially at fair
value plus transaction costs, except in the case of
financial assets recorded at fair value through the
profit or loss. The consolidated entity’s financial
assets include cash and short term deposits,
trade and other receivables, and derivative
financial instruments.

(ii) Impairment of financial assets

The consolidated entity assesses, at each
reporting date, whether there is any objective
evidence that a financial asset or a group of
financial assets is impaired. A financial asset
or a group of financial assets is deemed to
be impaired if, and only if, there is objective
evidence of impairment as a result of one or
more events that has occurred after the initial
recognition of the asset (an incurred ‘loss
event’) and that loss event has an impact on
the estimated future cash flows of the financial
asset or group of financial assets that can be
reliably estimated. Evidence of impairment may
include indications that the debtors or a group
of debtors is experiencing significant financial
difficulty, default or delinquency in interest or
principal payments, the probability that they will
enter bankruptcy or other financial reorganisation
and when observable data indicates that there
is a measurable decrease in the estimated
future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.

(iii) Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of AASB 139
are classified as financial liabilities at fair value
through profit or loss, loans and borrowings, or
as derivatives designated as hedging instruments
in an effective hedge as appropriate. The
consolidated entity determines the classification
of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair
values plus, in the case of loans and borrowings,
directly attributable transaction costs. The
consolidated entity’s financial liabilities include
trade and other payables.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
2. Significant accounting policies continued

Derecognition

A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.

(iv) Fair value of financial instruments

The fair value of financial instruments that
are in active markets at each reporting date
is determined by reference to quoted market
prices or dealer price quotations, without any
deductions for transaction costs.

For financial instruments not traded in an
active market, the fair value is determined
using appropriate valuation techniques. Such
techniques may include:

• Using recent arms length market transactions;

• Using reference to current fair value of

another instrument that is substantially the
same; and

• Applying a discount cash flow analysis or

other valuation models.

The fair value of forward foreign exchange
contracts is determined using forward exchange
rates at the balance sheet date.

3. Financial risk management
objectives and policies

The consolidated entity’s principal financial instruments
comprise of receivables, payables, cash and short-term
deposits, interest bearing loans and forward foreign
currency contracts.

Risk exposures and responses

The consolidated entity manages its exposure to key
financial risks, including interest and currency risk in
accordance with the consolidated entity’s financial risk
management policy. The objective of this policy is to
support the delivery of the consolidated entity’s financial
targets whilst protecting future financial security.

The consolidated entity enters into derivative transactions,
principally forward currency contracts. The purpose is to
manage the currency risks arising from the consolidated
entity’s operations. The main risks arising from the
consolidated entity’s financial instruments are interest
rate risk, foreign currency risk, credit risk and liquidity
risk. The consolidated entity uses different methods to
measure and manage different types of risks to which it
is exposed. These include monitoring levels of exposure
to interest rate and foreign exchange risk and assessment
of market forecasts for interest rate and foreign exchange
prices. Ageing analysis and monitoring of specific credit
allowances are undertaken to manage credit risk. Liquidity
risk is monitored through using future rolling cash flow
forecasts.

Primary responsibility for identification and control of
financial risks rests with the Audit & Risk Management
Committee under the authority of the Board. The Board
reviews and agrees policies for managing each of the risks
identified below, including the setting of limits for forward
currency contracts, credit allowances and future cash flow
forecast projections.

Interest rate risk

The consolidated entity’s exposure to market interest rates
relates solely to the consolidated entities short-term cash
deposits and interest bearing loans and borrowings as
disclosed in note 9 and 31.

Cash and cash equivalents

Interest bearing loans
and borrowings

Note

2014

$000

2,551

(6,270)

2013

$000

2,141

(474)

(3,719)

1,667

The consolidated entity frequently analyses its interest rate
exposure. Within this analysis consideration is given to
potential renewals of existing positions, alternative hedging
positions and the mix of fixed and variable interest rates.

The following sensitivity analysis is based on the interest
rate risk exposures in existence at the reporting date.

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

At 30 June 2014, if interest rates had moved as illustrated in
the table below, with all other variables held constant, post
tax profit and other comprehensive income would have
been affected as follows:

Post tax profit
higher/(lower)

Other comprehensive
income
higher/(lower)

2014

$000

(26)

2013

$000

2014

$000

2013

$000

(6)

Consolidated

+1% (100 basis points)
(2013:: 1%)

-0.5% (50 basis points)
(2013: 0.5%)

The movements in profit are due to higher / lower cash
receipts / payments from variable rate net interest bearing
balances. The assumed reasonably possible interest rate
movements are based on an economic forecaster’s
expectations.

Foreign currency risk

The consolidated entity is exposed to foreign currency risk
on sales and purchases that are denominated in a currency
other than Australian dollars. The currencies giving rise to
risk are primarily U.S dollars and New Zealand dollars.

The consolidated entity enters into forward foreign
exchange contracts to hedge certain anticipated purchase
commitments denominated in foreign currencies
(principally U.S dollars). The terms of these commitments
are no more than 45 days. It is the consolidated entity’s
policy not to enter into forward contracts until a firm
commitment is in place.

The consolidated entity has a subsidiary based in New
Zealand and all transactions for this subsidiary are
denominated in New Zealand dollars. There is currently no
hedge in place to mitigate the foreign currency risk for this
subsidiary.

Entering into forward foreign currency exchange contracts
minimises the risk of sharp fluctuations in foreign exchange
rates and allows for better cash flow management in
relation to paying international suppliers. At balance date,
the consolidated entity had the following exposure to
US$ foreign currency that is not designated as cash flow
hedges:

Consolidated

Financial assets

Trade and other receivables

Financial liabilities

Trade and other payables

Forward foreign currency contracts*

Net exposure

2014

2013

USD $000

486

(1,095)

(13,433)

(14,528)

(14,042)

1,801

(3,027)

(1,226)

*Denotes the amount of USD to be exchanged at the forward exchange rate.

At 30 June 2014, had the Australian dollar moved, as
illustrated in the table below, with all other variables held
constant, post tax profit and other comprehensive income
would have been affected as follows:

Post tax profit
higher/(lower)

Other comprehensive
income
higher/(lower)

2014

$000

2013

$000

2014

$000

2013

$000

(865)

179

1,108

(761)

Consolidated

AUD / USD +10%
(2013: +10%)

AUD / USD -10%
(2013: -10%)

Significant assumptions: The reasonably possible movement was calculated by taking
the USD spot rate as at balance date, moving the spot rate by the reasonably possible
movements and then re-converting the USD into AUD with the ‘new spot rate’. This
amount was then tax effected. This methodology reflects the translation methodology
undertaken by the consolidated entity.

Cellnet Group Limited and its consolidated entities annual report 2013|14

Notes to the financial statements
3. Financial risk management objectives and policies continued

Credit Risk

Liquidity risk

Credit risk represents the loss that would be recognised
if counterparties failed to perform as contracted. The
credit risk on financial assets of the consolidated entity
is the carrying amount, net of any impairment losses.
The consolidated entity mitigates this risk by adopting
procedures whereby they only deal with creditworthy
customers. Where there is evidence of credit risk, an
impairment loss is recognised. The consolidated entity also
insures all debtors through trade finance insurance. Trade
receivables are insured up to 90% of the approved credit
limit, with a $5,000 excess payable per claim.

Liquidity risk arises from the financial liabilities of the
consolidated entity and the consolidated entity’s
subsequent ability to meet their obligations to repay its
financial liabilities as and when they fall due.

The consolidated entity’s objective is to maintain a balance
between continuity of at cash funding and short-term fixed
cash deposits. The consolidated entity manages its liquidity
risk by monitoring the total cash inflows and outflows
expected on a daily basis.

Maturity analysis of financial assets and financial liabilities
based on management’s expectation.

Note

Total

6 months
or less

6–12 months

1–5 years

6–12 months

2014

2,551

11,441

2,551

11,441

13,992

(5,032)

(6,270)

(732)

(5,032)

(6,270)

(732)

(12,034)

1,958

Note

Total

6 months
or less

6–12 months

1–5 years

6–12 months

2013

2,141

9,567

2,141

9,567

11,708

(8,227)

(100)

(474)

(8,801)

2,907

(8,227)

(100)

(474)

(8,801)

2,907

Liquid financial assets

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Trade and other payables

Interest bearing loans and borrowings

Derivative financial instruments

Net inflow

Liquid financial assets

Cash and cash equivalents

Trade and other receivables

Financial liabilities

Trade and other payables

Contingent consideration

Interest bearing loans and borrowings

Net inflow

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

4. Operating segments

5. Other revenue

Identification of reportable segments

The consolidated entity has identified its operating
segments based on the internal reports that are reviewed
and used by the Chief Executive Officer (the chief
operating decision maker) in assessing performance and in
determining the allocation of resources.

The operating segments are identified by management
based on the manner in which products are sold, whether
direct to retail customer or via on-line sales. Discrete
financial information about each of these operating
segments is reported to the Chief Executive Officer at
least on a monthly basis. For the 2013 and 2014 financial
years the consolidated entity’s activities related solely to
retail sales as the Board announced on 8 June 2012 that it
planned to exit from the online segment, and completed
this exit in the 2013 financial year. Details relating to the
online business segment are disclosed in note 20.

As there is only one segment, segment revenues, profit/
(loss), assets and liabilities are consistent with those
reported in the statement of comprehensive income and
statement of financial position.

Revenue from external customers by geographical location
is detailed below. Revenue is attributable to geographic
location based on the location of the customers. The
company does not have external revenues from external
customers that are attributable to any foreign country other
than as shown.

Australia

New Zealand

Total revenue

2014

$000

62,040

20,188

2013

$000

52,295

18,636

82,228

70,931

Interest

Net foreign currency gain

Total other revenue

2014

$000

Items included in profit/(loss)

2014

$000

1,972

978

Doubtful debts expense

Loss on scrapping of inventory

Minimum lease payments – operating
leases

Share-based payments expense/
(income)

2013

$000

309

355

2013

$000

1,314

921

(204)

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

Income Tax

(a)

Income tax (expense)/benefit

The major components to the income tax are:

Current income tax charge

Items charged to equity

Deferred income tax charge

Total income tax (expense)/benefit reported in net income

2014

$000

(4)

(2,027)

(2,022)

2013*

$000

(b) Numerical reconciliation between aggregate tax expense recognised in net income and tax

expense calculated per the statutory income tax rate.
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the consolidated
entity’s applicable income tax rate is as follows:

Accounting profit / (loss) before tax from continuing operations

Profit / (loss) before tax from discontinuing operations

Total accounting profit before income tax

At the parent entity’s statutory income tax rate 30% (2013: 30%

Adjustments in respect of current income tax of previous years

Other non-deductible expenses

Entertainment

Effect of lower tax rate in New Zealand (28%)

De-recognition of prior year losses

Utilisation of previously unrecognised tax losses

Losses used to reduce deferred tax asset

Current year losses not recognised

Aggregate income tax

Aggregate income tax (expense)/benefit is attributable to:

Continuing operations

Discontinued operations

(1,865)

560

(395)

(10)

(1,813)

129

(495)

(2,022)

911

(47)

864

(259)

239

180

(82)

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

Notes to the financial statements
7.

Income Tax continued

(c)

Recognised deferred tax assets and liabilities

Current
income tax

Deferred
income tax

Current
income tax

Deferred
income tax

2014

$000

Consolidated

2014

$000

2013

$000

2013*

$000

(13)

2,744

111

2,855

2,913

(58)

2,855

Opening balance

Items charged to equity

Deferred income tax charge

Closing balance

Amounts recognised in the statement of financial position:

Deferred tax asset

Deferred tax liability

Deferred income tax at 30 June relates to the following:

Net deferred tax assets

Doubtful debts

Employee provisions

Foreign exchange differences

Inventory and consumables

Other

Property, plant and equipment

Tax losses carried forward

Net deferred tax asset

(4)

2014

$000

196

224

134

223

828

2,855

(2,018)

(9)

828

845

(17)

828

2013

$000

235

441

(2)

111

2,036

2,855

As at 30 June 2014, the Company has a deferred tax asset relating to timing differences and tax losses arising from
prior years totalling $828,000 (2013: $2,855,000). Management has recognised deferred tax assets on the basis that
achievement of profit before tax within the next 3-5 years in the amounts sufficient to offset the reversal of timing
differences and enable the utilisation of recognised unused losses is probable.

(d) Tax losses

The consolidated entity has gross tax losses, stated in the reporting currency of Australian dollars, for which no deferred
tax asset is recognised on the statement of financial position of $26,692,614 (2013: $19,366,070) which are available
indefinitely for offset against future gains subject to meeting the relevant statutory tests.

The consolidated entity has recognised tax losses to the extent that forecasts suggest it is probable that sufficient taxable
income will be earned to recoup the recognised losses.

Cellnet Group Limited and its consolidated entities annual report 2013|14

Notes to the financial statements

8. Earnings per share

The following reflects the income used in the basic and
diluted earnings per share computations:

2014

$000

2013

$000

(b)

Earnings used in calculating earnings per share

For basic earnings per share

Profit / (Loss) from continuing
operations

Loss from discontinued
operations

(3,887)

1,091

(129)

Net profit/(loss) attributable to
ordinary equity holders

(3,887)

962

For diluted earnings per share:

Profit / (loss) from continuing
operations

Loss from discontinued
operations

(3,887)

1,091

(129)

Net profit/(loss) attributable to
ordinary equity holders

(3,887)

962

Current assets – cash and cash
equivalents

Cash at bank and in hand

Funds held by bank (note 19)

2014

$000

2,201

350

2,551

2013

$000

1,791

350

2,141

Cash and funds held at bank earns interest at floating rates
based on daily bank deposit rates. Funds held by banks
represent monies pledged to fulfil financial guarantee
collateral requirements.

10. Current assets – trade and other

receivables

Trade receivables

Allowances for impairment loss (a)

(b) Weighted number of shares

Weighted average number of
shares (basic) at 30 June

Weighted average number of
shares adjusted for effect of
dilution

55,684

56,462

Other receivables and prepayments

55,684

56,462

Carrying amount of trade and other
receivables

2014

$000

11,069

(59)

11,010

431

11,441

2013

$000

8,207

(92)

8,115

1,452

9,567

Potential ordinary shares under option and restricted shares
are considered non-dilutive where the current share price
is lower than the exercise price.

(c)

Earnings per share

Basic earnings per share (cents
per share)

Diluted earnings per share
(cents per share)

2014

$000

(6.9)

2013

$000

1.7

(a) Allowance for impairment loss

Trade receivables are non-interest bearing and are generally
on 30 day terms. Trade receivables are insured through a
debtors’ insurance policy, as described in note 3. A provision
for impairment loss is recognised when there is objective
evidence that an individual trade receivable is impaired and
not recoverable within the terms of the insurance policy.

Movements in the provision for impairment loss were as
follows:

At 1 July

Charge for the year

Amounts written off

As at 30 June

2014

$000

(67)

2013

$000

(64)

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

Notes to the financial statements
10. Current assets – trade and other receivables continued

At 30 June, the ageing analysis of trade receivables is as follows:

Total
$000

11,069

8,207

0-30 days
$000

31-60 days
$000

4,530

3,504

4,340

4,183

61-90 days
PDNI*
$000

962

265

+ 91 days
PDNI*
$000

1,178

127

+ 91 days
CI*
$000

2014 Consolidated

2013 Consolidated

*Past due not impaired (PDNI) *Considered impaired (CI)

Receivables past due but not considered impaired are $2,140,000 (2013: $392,000). Payment terms on these amounts
have not been re-negotiated however credit has been stopped until full payment is made. Each debtor has been directly
contacted by debt recovery agents and the consolidated entity is satisfied that payment will be received in full. Note 2(g)
details how the Company manages and measures credit quality of trade receivables that are neither past due nor impaired.

11. Current assets – inventories

Stock on hand

Less: provision for obsolescence

2014

$000

9,645

(1,058)

2013

$000

10,648

(1,657)

Total inventories at the lower of cost
and net realisable value

8,587

8,991

12. Non-current assets – property, plant and equipment

Reconciliation of the carrying amounts at the beginning and end of the period.

For the year ended 30 June 2014

At 1 July 2013 net of accumulated depreciation and impairment

Additions

Write-offs

Depreciation charge for the year

At 30 June 2014 net of accumulated depreciation and impairment

At 30 June 2014

Cost of fair value

Derivative financial instruments

Accumulated depreciation and impairment

Leasehold
improvements

Plant &
Equipment

Plant & Equipment
under lease

$000

187

(76)

131

355

(224)

131

668

100

(1)

(315)

452

6,513

(6,061)

452

(3)

2,135

(2,135)

Total

$000

858

120

(1)

(394)

583

9,003

(8,420)

583

Cellnet Group Limited and its consolidated entities annual report 2013|14Total

$000

1,213

(5)

(379)

858

(2)

2,135

(2,132)

11,750

(10,892)

858

Notes to the financial statements
12. Non-current assets – property, plant and equipment continued

Leasehold
improvements

Plant &
Equipment

Plant & Equipment
under lease

$000

For the year ended 30 June 2013

At 1 July 2013 net of accumulated depreciation and impairment

Additions

Write-offs

Depreciation charge for the year

At 30 June 2013 net of accumulated depreciation and impairment

At 30 June 2013

Cost of fair value

Derivative financial instruments

Accumulated depreciation and impairment

267

(80)

187

728

(541)

187

941

(5)

(297)

668

8,887

(8,219)

668

13. Current liabilities – trade and other payables

Current

Trade payables

Other payables and accrued expenses

2014

$000

4,043

989

5,032

2013

$000

6,477

1,750

8,227

For terms and conditions relating to trade payables refer to Note 2(o).

Cellnet Group Limited and its consolidated entities annual report 2013|1414. Provisions

Current

Provision for fringe benefits tax

Provision for long-service leave

Liability for annual leave and
employee provisions

Non-Current

Liability for long-service leave

Provision for contingent
consideration(1)

(1) See the table below for movement during the year.

At 1 July 2013

Arising/(reversed) during the year

Utilised

As at 30 June 2014

2014

$000

2013

$000

132

380

539

148

(2)

130

408

536

237

100

337

Provision for contingent
consideration

$000

100

(34)

(66)

(a) Nature and timing of provisions

Refer to Note 2(m)(i) for the relevant accounting policy and
a discussion of the significant estimates and assumptions
applied in the measurement of this provision.

financial report

15. Share based payments

(a) Employee share bonus

No employee bonus shares were issued to employees
during the current year or prior year.

2010 allocation

2,000,000 shares were issued to Stuart Smith on 28
October 2009. The shares were issued for $0.35 each. It
was accounted for as an option. The Black and Scholes
methodology was used to value the options. The
theoretical value of the options was calculated as being
$0.1195 per option.

Under the terms of issue, Mr Smith is required to forfeit
his Plan Shares by transferring them to the Company if
the Loan becomes repayable. On 25 July 2012, Mr Smith
resigned as Chief Executive Officer and Executive Director
of Cellnet Group Limited and the Loan became repayable.

Mr Smith agreed to the forfeiture and cancellation of those
shares under their terms and conditions of issue and has
no outstanding liability to the Company. In order to give
effect to the forfeiture, these shares were required to be
cancelled by an ordinary resolution of shareholders under
section 258D of the Corporations Act 2001. This resolution
was approved by shareholders at the annual general
meeting held 19 November 2013.

(b) Long term incentive plan

Employee expenses

Consolidated

2014

$000

Note

Income arising from
cancellation of 2,000,000
shares granted to Stuart Smith
on 18 October 2009

Expense arising from
3,300,000 options issued to
KMP on 21 October 2011

Total income recognised in
employee costs

2013

$000

(212)

(204)

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
15. Share based payments continued

On 18 December 2007, shareholders of the Company approved an Executive share option plan that entitles Executives of
the Company to purchase shares in the Company.

Each option is convertible to one ordinary share. The exercise price of the options is determined by the Board.

Upon the exercise of an option, each share issued will rank equally with other shares of the Company.

The Company may offer to provide such financial assistance to a person in relation to an invitation to participate in the
plan, as the Board may determine from time to time in its discretion.

The rules governing the operation of the plan may be amended, waived or modified, at any time by resolution of the
Board provided there is no reduction of rights to Executives in the plan. If an amendment reduces the rights of Executives
in the plan, it requires written consent of three-quarters of affected Executives.

The plan may be terminated or suspended at any time by a resolution of the Board, provided the termination or
suspension does not materially adversely affect the rights of persons holding shares issued under the plan at that time.

Movements in the year

The following table illustrates the number of weighted average exercise price (WAEP) of, and movements in, share options
during the year.

Opening balance

Granted during the year

Options vested

Options lapsed

Outstanding as at 30 June

The following summarises the details of the grant.

2014

2013

Number of
options

WAEP $

Number of
options

WAEP $

1,600,000

0.36

3,300,000

(400,000)

1,200,000

0.36

(1,700,000)

1,600,000

0.36

Grant date

First exercise date

Last exercise date

Exercise price*

Exercise Conditions

21 October 2011

21 October 2013

21 October 2014

$ 0.45

Subject to the Plan Rules, an option cannot be exercised unless the Board acting reasonably are satisfied that the
following conditions have been met:

• The employee remains employed by the Company;
• There is no outstanding breach of the terms of engagement with the Company;
• No notice of termination of engagement has either been given by the employee or received from the Company.

Lapse of options

The options lapse in occurrence of the earlier of:

• Last exercise date;
• Board determination that the employee has committed an act that brings the Company into disrepute;
• Ceased employment other than due to a special circumstances;
• The option is surrendered.

*The exercise price is subject to reduction as per the Plan Rules at a rate equal to the amount of share capital returned to share holders. Subsequent to the grant of the options an
amount of $0.09 was returned to share holders by way of equal capital reduction. The new exercise price of the options issued in the 2012 financial year is $0.36.

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

16. Derivative Financial Instruments

Current

Forward foreign currency exchange contracts

2014

$000

732

2013

$000

The consolidated entity fair values forward foreign currency exchange contracts held at balance date. Changes in the fair
value of forward foreign currency exchange contracts that economically hedge monetary assets and liabilities in foreign
currencies are recognised in net income. Both the changes in fair value of the forward contracts and the foreign exchange
gains and losses relating to the monetary items are recognised as part of other revenue (Note 5) or other expenses.

17. Fair Value Measurement

The fair values together with the carrying amounts of financial assets and financial liabilities shown in the statement of
financial position are outlined in the table below. For short term trade receivables and payables with a maturity date of less
than one year, the carrying amount, as adjusted for any allowances for impairment, is deemed to reflect the fair value.

Note

Carrying amount

Fair value

Carrying amount

Fair value

2014

$000

2,551

11,441

(5,032)

(732)

8,228

2014

$000

2,551

11,441

(5,032)

(732)

8,228

2013

$000

2,141

9,567

(8,227)

3,481

2013

$000

2,141

9,567

(8,227)

3,481

Cash and cash equivalents

Trade and other receivables

Trade and other payables

Derivative financial instruments

Fair value hierarchy

Outlined below are the judgements and estimates made in determining the fair value of assets and liabilities that are
recognised and measured at fair value. To provide an indication about the reliability of the inputs used in determining fair
value, the group has classified its assets and liabilities into the three levels prescribed under the accounting standards, as
follows:

Level 1:

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of
the reporting period.

Level 2:

The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques which maximise the use of observable market data and rely as little as possible on entity-specific
estimates. That is, all valuation inputs are observable.

Level 3:

If one or more of the significant inputs is not based on observable market data, the instrument is included in
level 3.

The only balance on the Group’s balance sheet which is measured at fair value are forward foreign exchange contracts
(refer note 16). The fair value of these financial instruments is determined using forward exchange rates at the balance
sheet date. Such fair value measurement is included in level 2, as it is based on an observable input.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

18. Commitments and contingencies

Contingencies

Commitments

The consolidated entity has entered into commercial
leases on office and warehouse facilities, and items of
computer equipment. The leases typically run for a period
of 1 to 5 years, with an option to renew the lease after that
date. Lease payments generally comprise a base amount
plus an incremental contingent rental which is based on
movements in the Consumer Price Index.

Future minimum rentals payable under non-cancellable
operating leases at 30 June 2014 are payable as follows
and are inclusive of any revenue received from third parties
that are sub leasing premises which the consolidated entity
is lessee of the head lease of the associated facility:

Less than one year

Between one and five years

2014

$000

844

978

1,822

2013

$000

842

1,737

2,579

The group subleases a portion of its office space at its
Eagle Farm premises. The sublease term is matched to the
term of the head lease, with an expiry date of September
2016. Minimum amounts receivable under the sublease
total $0.257m within one year (2013: $0.249m), and
$0.332m after one year but within 5 years (2013: $0.590m).

Recovery of an alleged outstanding debt relating to a
freight consultancy agreement from 2006 has been
commenced against the company. The company intends
to vigorously defend the claim and pursue recovery of
any costs associated with this action. Costs associated
with the defence of this claim totalling $40,000 have been
expensed in the current financial year.

19. Financial guarantees

The consolidated entity has provided financial guarantees
in respect of rental leasing arrangements disclosed in Note
18. The Directors are of the opinion that provisions are not
required in respect of these matters, as it is not probable
that a future sacrifice of economic benefits will be required
or the amount is not capable of reliable measurement.

Bank guarantees provided

2014

$000

350

2013

$000

350

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

20. Discontinued operation

The company advised that on 8 June 2012 that it planned to exit the online business segment. The Company completed
the sale of OYT Pty Ltd, Buyii Pty Ltd, Cellnet Online Pty Ltd on 1 October 2012, 3 October 2012 and 9 April 2013
respectively for a total consideration of $112,000. The net cash flows of $55,000 generated by the sale are in the statement
of cash flows as part of the cash flows from investing activities.

Results of the discontinued operations for the year are presented below:

Results of discontinued operation

Revenue

Expenses

Gross profit

Depreciation

Gain on disposal of discontinued operation

Loss before tax

Tax

Loss for the period from a discontinued operation

Cash inflow on sale of discontinued operation

Consideration received

Net cash disposed of with the discontinued operation

Net cash inflow

Earnings per share:

Basic, profit / (loss) for the year, from discontinued operation (cents per share)

Diluted, profit / (loss) for the year from discontinued operation (cents per share)

2014

$000

2013

$000

561

(641)

(80)

(4)

(46)

(83)

(129)

112

(57)

($0.002)

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

21. Related party disclosure

Subsidiaries

The consolidated financial statements include the financial statements of Cellnet Group Ltd and the subsidiaries included
in the following table:

Name

Country of incorporation

2014

2013

Cellnet Group Ltd (Parent)

Cellnet Ltd

C&C Warehouse (Holdings) Pty Ltd

Regadget Pty Ltd^

OYT Pty Ltd*

Cellnet Online Pty Ltd*

Australia

New Zealand

Australia

100

*Entity’s represent discontinued operations of which the businesses were sold in the prior year. ^The group acquired the remaining 10% interest in Regadget Pty Ltd during the year.

The following table provides the total amount of transactions which have been entered into with related parties during the
twelve month periods ending 30 June 2014 and 30 June 2013.

Interest paid
on loans from
related parties

Services from
related parties

Drawdown’s
on loans from
related parties

Repayment
of loans from
related parties

$000

Entity with ultimate control over the consolidated entity

CVC Ltd

CVC Manager Pty Limited

2014

2013

2014

2013

105

800

Entity with ultimate control over the consolidated entity

CVC Ltd holds 52.99% (2013: 51.11%) of the ordinary shares in Cellnet Group Limited.

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length
transactions.

Transactions with entity with ultimate control over the group

A CVC Ltd’s consultant was engaged on a work placement basis to provide business advice to Cellnet Group Limited. The
engagement was for the period 1 July 2013 to 31 October 2013.

In December 2013 CVC Ltd advanced a short term loan to the Group in order to enable the group to procure inventory
to meet seasonal demand. The loan, which was provided on normal commercial terms, was unsecured and attracted an
interest rate of 12%. The loan was fully repaid prior to the maturity date of 7 February 2014.

During both the 2014 and 2013 financial years the Company paid management fees to CVC Managers Pty Limited, a
wholly owned subsidiary of CVC Ltd, for director related services.

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

22. Key management personnel

(a) Key management personnel remuneration

The parent has not issued any guarantees in relation to the
debts of its subsidiaries and has no contingent liabilities or
contractual obligations as at 30 June 2014 (2013: Nil).

Short-term employee benefits

Post-employment benefits

Long term benefits

Termination / retention benefits

Share-based payment benefits

2014

$000

748,809

29,500

2013

$000

607,878

23,981

26,548

275,000

(206,046)

Total compensation

778,309

727,361

(b) Directors shares

25. Contributed equity and reserves

(a)

Share capital

2014

2013

No. of shares

Ordinary shares on issue

55,684,090

57,684,090

Directors restricted shares
cancelled

(2,000,000)

On issue at 30 June

55,684,090

On 25 July 2012, 2,000,000 restricted shares were issued
to a Director were cancelled, for details refer to note 15(b).

Ordinary shares

Issued and fully paid

55,684,090

23. Subsequent events

Fully paid ordinary shares carry one vote per share and
carry the right to receive a dividend.

No matters or circumstances have arisen since the end
of the financial year which significantly affected or may
significantly affect the operations of the consolidated
entity, the results of those operations, or the state of affairs
of the consolidated entity in future periods.

Ordinary shares on issue

24. Parent entity information

(b) Reserves

Current assets

Total assets

Current liabilities

Total liabilities

Net assets

Issued capital

Retained earnings

Reserve for own shares

Reserve for share based payment

Consolidated

2014

$000

17,950

20,002

(10,564)

(12,782)

2013

$000

16,411

20,022

(7,957)

(8,424)

7,220

11,598

31,699

(25,028)

(20,650)

(26)

575

(26)

575

Total shareholder’s equity

7,220

11,598

Profit / (loss) of the parent entity after tax

(4,379)

2,796

Total comprehensive income of the
parent entity

(4,739)

2,796

2014

$000

31,699

2014

$000

107

(25)

576

658

2013

$000

31,699

2013

$000

(57)

(25)

576

494

Translation reserve

Reserve for own shares

Share based payment

Translation reserve

The translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of foreign operations where their functional
currency is different to the presentation currency of the
reporting entity.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements
25. Contributed equity and reserves continued

Reserve for own shares

26. Dividends franking account

The reserve for own shares represents the cost of shares
held by an equity remuneration plan that the consolidated
entity is required to include in the financial report. At 30
June 2014 the consolidated entity held 107,110 of the
Company’s shares (2013: 107,110). This reserve will be
reversed against share capital when the underlying shares
are exercised under performance rights. No gain or loss
is recognised in profit or loss on the purchase, sale, issue
or cancellation of the consolidated entity’s own equity
instruments.

Share based payment

The share based payment reserve is used to recognise the
value of equity-settled share based payments to KMP.

When managing capital, management’s objective is to
ensure the entity continues as a going concern as well as
to maintain optimal returns to shareholders and benefits
for other stakeholders. Management also aims to maintain
a capital structure that ensures the lowest cost of capital
available to the entity.

Management adjusts the capital structure to take
advantage of favourable costs of capital or high returns on
assets. As the market is constantly changing, management
may change the amount of dividends to be paid to
shareholders, return capital to shareholders, or issue new
shares.

Management monitors capital through the capital
adequacy ratio (net assets/total assets). The target for the
consolidated entity’s capital adequacy ratio is between 40%
and 60%. The capital adequacy ratios based on continuing
operations at 30 June 2014 and 2013 were as follows:

Franking credit balance

The amount of franking credits available for the subsequent
financial year are:

Franking account balance as at the
end of the financial year at 30%
(2012:30%)

2014

$000

2013

$000

586

The above available amounts are based on the balance of
the dividend franking account at year end adjusted for:

(i)

(ii)

(iii)

franking debits that will arise from the refund of the
current tax receivable;

franking debits that will arise from the payment of
dividends recognised as a liability at the year end;

franking credits that will arise from the receipt of
dividends recognised as receivables by the tax
consolidated entity at the year end; and

(iv)

franking credits that the entity may be prevented from
distributing in subsequent years.

The ability to utilise the franking credits is dependent upon
there being sufficient available profits to declare dividends.
The impact on the dividend franking account of dividends
proposed after the balance date but not recognised as a
liability is to reduce it by $Nil (2013: $Nil). In accordance
with the tax consolidation legislation, the Company as the
head entity in the tax-consolidated entity has also assumed
the benefit of $Nil (2013: $Nil) franking credits from its
Australian wholly-owned subsidiaries during the year.

Consolidated

27. Auditors’ remuneration

Net assets

Total assets

Capital adequacy ratio

2014

$000

11,269

23,990

47%

2013

$000

14,992

24,566

61%

2014

$000

2013

$000

Amounts received or due and receivable by the auditors for:
Audit or review of the financial report of the entity and any other entity
in the consolidated entity

Pitcher Partners

75,000

Ernst & Young (Australia & New Zealand)

101,553

Other services in relation to the entity and any other entity in the
consolidated entity

Pitcher Partners

24,000

Ernst & Young (Australia & New Zealand)

11,008

99,000

112,561

Cellnet Group Limited and its consolidated entities annual report 2013|1428. Cash flow statement reconciliation

Reconciliation of net profit after tax to net cash flows from operations:

Net profit / (loss)

Adjustments for:

Depreciation and amortisation

Impairment

Movement in provision for obsolescence

Movement in provision for impairment

Interest revenue classified as investing cash flow

Gain on sale of intellectual property

Share based payments expense

Foreign exchange (gain) / loss

Changes in assets and liabilities:

(Increase) / decrease in trade and other receivables

(Increase) / decrease in inventories

(Increase) / decrease in current tax assets

(Increase) / decrease in deferred tax assets

(Decrease) / increase in trade and other payables

(Decrease) / increase in other financial instruments

(Decrease) / increase in provisions

Net cash used in operating activities

Consolidated

2014

$000

2013

$000

(3,887)

962

394

150

(603)

(34)

(19)

(1,869)

1,050

2,036

(3,150)

732

(124)

(5,320)

379

1,314

(64)

(50)

(204)

(309)

(913)

(5,026)

(118)

1,128

477

(2,411)

financial report

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

29. Business combination

Acquisition of Stuff Products Pty Ltd

On 28 March 2013 the consolidated entity entered
into a purchase agreement whereby it acquired the
business of Stuff Products Pty Ltd, a synergistic Brisbane
based distributor of mobile phone and tablet fashion
accessories for a consideration of $300,000. The Stuff
Products transaction represented an opportunity for the
consolidated entity to gain access to new fashion centric
brands that could be offered to both new and existing
customers.

Fair value recognised on acquisition date

The fair values of the identifiable assets and liabilities of
Stuff Products Pty Ltd at the date of acquisition were
recognised on a provisional basis and were as follows:

Fair value
recognised on
acquisition

Note

$000

Contingent consideration

As part of the purchase agreement, a contingent
consideration of $100,000 was payable to the seller should
the company achieve a profit contribution of $300,000.
At the acquisition date, a fair value of the contingent
consideration was estimated to be $100,000. This was
based on management’s opinion that there was a 100%
probability of the conditions being met. During the 2014
financial year a total of $66,000 of this consideration was
paid. The remaining $34,000 did not vest and was written
back to profit and loss. Refer note 14.

Identifiable intangibles of $150,000 comprised the value of
supplier contracts, customer relationships and expected
synergies arising from the acquisition that is anticipated to
result from combining the operations of the acquiree and
the acquirer that do not qualify for separate recognition.
The intangible asset was impaired in full during the 2014
financial year, refer note 30.

Fair value on acquisition 30 June 2013

The table below details the fair value of net assets as at 30
June 2013.

Assets

Inventories

Liabilities

Contingent Consideration

Total Identifiable net assets at fair value

Identifiable intangibles arising on acquisition

Purchase consideration transferred

Cash flow on acquisition

Cash paid

Net cash flow on acquisition

250

(100)

150

300

(300)

Assets

Inventories

Identifiable intangible

Liabilities

Contingent Consideration

Total identifiable net assets at fair value

30. Intangible assets

From the date of the Stuff Products transaction to 30 June
2013, the business has contributed revenues of $305,000
and profit before tax of $45,000. If the combination had
been in place at the beginning of the 2013 year, revenues
from continuing operations would have been $77,985,000
and profit before tax of $1,191,000.

Opening balance

Identifiable intangibles aquired in
business combinations (note 29)

Impairment

Closing balance

2014

$000

150

(150)

2013

$000

250

150

400

(100)

300

2013

$000

150

Cellnet Group Limited and its consolidated entities annual report 2013|14financial report

31. Interest bearing loans and borrowings

Interest Rate

Maturity

3.99

5.76

5.71

3 July 2014

7 July 2014

10 July 2014

21 July 2014

2 August 2013

Various

2014

$000

251

450

427

190

4,952

6,270

2013

$000

474

Business Finance

Invoice Finance

$4,000,000 Business finance

This facility consists of three individual facilities, namely surrendered bills of lading, trade finance-imports and special
documentary import letters of credit. The combined limit of $4,000,000 applies across these individual facilities. As at 30
June 2014, the company has drawn down $1,318,000 under its trade finance – imports facility. This facility is a perpetual
facility and has no fixed expiry date, although individual trade finance draw downs under the facility as at balance date
mature on the dates disclosed above. The facility is secured by a general security agreement given by Cellnet Group
Limited over all existing and future assets and undertakings.

$6,000,000 Invoice finance

This facility was extended to the company on 10 March 2014. It is a facility for terms of trade. The total limit of the facility
is $6,000,000. As at 30 June 2014, the company has drawn down $4,952,000 under this facility. The facility is secured
by general security agreement given by Cellnet Group Limited over all existing and future assets and undertakings, and
a flawed asset agreement providing for deposits by Cellnet Group Limited in relation to a deposit account held with the
financier. Amounts owing under the facility are matched to the trade terms of the underlying financed transaction up to a
maximum of 60 days.

Breach of Covenant

The Group was in breach of its minimum interest coverage ratio covenant under the terms of the above facility
agreements. The facilities are due to be reviewed in August 2014. Details of the pending breach were advised to the
financier in May 2014, at which time the financier indicated that support would most likely continue to be provided, subject
to:

• Trading performance improved in line with projections to be evaluated in the next mid-year review;

• Possible change from half yearly to quarterly reviews;

• All existing facilities operating within guidelines including invoice finance, trade finance and forward foreign exchange

contracts;

• Possible increase in interest rate due to change in risk profile.

The group’s budgeted EBITDA for the 30 June 2015 financial year is sufficient to comply with the covenant.

Cellnet Group Limited and its consolidated entities annual report 2013|14Notes to the financial statements

Directors’ declaration

In accordance with a resolution of the Directors of Cellnet Group Limited, I state that:

In the opinion of the Directors:

the financial statements and notes of the company are in accordance with the Corporations Act 2001, including:

giving a true and fair view of the company’s financial position as at 30 June 2014 and of their performance
for the year ended on that date;

ii)

complying with Australian Accounting Standards and Corporations Regulations 2001;

the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 2(a);

there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable; and

this declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2014.

On behalf of the Board

Alexander Beard
Chairman

Brisbane
19 August 2014

Cellnet Group Limited and its consolidated entities annual report 2013|14

financial report

Independent Auditor’s Report to the Members of Cellnet Group Limited

Report on the Financial Report

We have audited the accompanying financial report of Cellnet Group Limited, which comprises the consolidated
statement of financial position as at 30 June 2014, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the directors’
declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair
view and is free from material misstatement, whether due to fraud or error. In Note 2(a), the directors also state, in
accordance with Accounting Standard AASB101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of
material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and

Cellnet Group Limited and its consolidated entities annual report 2013|14fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors,
as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Opinion

In our opinion:

the financial report of Cellnet Group Limited is in accordance with the Corporations Act 2001, including:

ii)

giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and

the consolidated financial report also complies with International Financial Reporting Standards as disclosed in
Note 2(a).

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 17 to 22 of the directors’ report for the year ended 30
June 2014. The directors of the company are responsible for the preparation and presentation of the Remuneration
Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Cellnet Group Limited for the year ended 30 June 2014 complies with
Section 300A of the Corporations Act 2001.

PITCHER PARTNERS

J J EVANS
Partner
Brisbane, Queensland
19 August 2014

Cellnet Group Limited and its consolidated entities annual report 2013|14

financial report

Corporate Governance Statement

Background

Principles of Good Corporate Governance and Best
Practice Recommendations” were published in March
2003, revised effective 1 January 2008 and the latest
amendments issued under Corporate Governance
Principles and Recommendations (2nd Edition) by the
Australian Securities Exchange Limited’s Corporate
Governance Council. The ASX Listing Rules require listed
companies to include in their annual report a statement
disclosing the extent to which they have not followed
the Best Practice Recommendations during a reporting
period and are also required to provide reasons for
their non-compliance. In addition, specific corporate
governance information must be included in the Corporate
Governance Statement section or elsewhere in the Annual
Report.

Compliance

Cellnet has reviewed its Corporate Governance Statement
and this has been published on the Company website:
http://www.cellnet.com.au/. The Company reports
annually on its compliance with the Best Practice
Recommendations. After the significant restructure
the Company has completed and in recognition of the
reduced scale of operations of the business, the Board has
adopted and is in the process of executing a turnaround
plan that focuses on future viable operations of the
business.

In the restructured operations, Cellnet has been unable
to fully comply with the requirements of the Corporate
Governance Principles and Recommendations and details
below the areas where it is not currently compliant. The
Board has indicated, however that it will return to full
compliance with the best practice recommendations as
soon as is practicable.

Principle 2 Structure the board to add value

ASX Principles and Recommendation

Summary of Company’s Position

Recommendation 2.1
A majority of the Board should be
independent directors

Recommendation 2.2
The chair should be an
independent director

Recommendation 2.4
The Board should establish a
nominations committee

The current scale of operations
has determined the need for
only a three person Board which
comprises one executive director
(who is the Managing Director) and
two non-executive directors (none
of whom are independent and
includes the Chairman). The Board
holds the view that notwithstanding
these departures from the
guidelines, the current Board has
the required capabilities appropriate
for the current operating
environment, are able to ensure that
corporate governance objectives
are achieved and their operational
performance is totally transparent.

In line with the Board’s view on
the composition and size of the
Board having regard to its current
strategies and requirements, there
is no nominations committee
however the full Board assumes
the functions of such a committee
as and when required.

Recommendation 2.5
Disclose the process for evaluating
the performance of the Board,
its committees and individual
Directors

While there is no structured
process in place, the Chairman
is able to regularly measure
performance through participation
at meetings of Directors.

Principle 3 Promote ethical and responsible decision-making

ASX Principles and Recommendation

Summary of Company’s Position

The Company has adopted a
formal diversity policy which has
been uploaded onto its website
http://www.cellnet.com.au/.

No measurable objectives has
been set by the Board due to the
Company’s size and because the
operation and development of the
diversity policy was relatively new
and being integrated with existing
employment and equal opportunity
practices.

It is Board policy to review
this policy as part of its annual
compliance review and to assess
and report on diversity at the end
of each financial year.

Company position is the same as
that for Recommendation 3.2.

Recommendation 3.2
Companies should establish a
policy concerning diversity and
disclose the policy or a summary
of that policy. The policy should
include requirements for the board
to establish measurable objectives
for achieving gender diversity for
the board to assess annually both
the objectives and progress in
achieving them.

Recommendation 3.3
Companies should disclose in
each annual report the measurable
objectives for achieving gender
diversity set by the board in
accordance with the diversity
policy and progress towards
achieving them.

Cellnet Group Limited and its consolidated entities annual report 2013|14
Corporate Governance Statement continued

Principle 3 Promote ethical and responsible decision-making continued

Diversity at Cellnet Group Limited

The Company promotes a diverse workplace by aiming to
ensure that all employees and applicants for employment
are fairly considered according to their skills, qualifications
and abilities. In respect of the gender diversity initiatives
contained in these changes, the Company has adopted a
formal diversity policy as disclosed to ASX on 22 October
2012. This policy can be found in the Company’s website
http://www.cellnet.com.au/.

The Company will monitor the progress towards the
achievement of appropriate gender diversity. As part of
this process, the Board will ensure that the policy contains
measureable objectives for gender diversity, but in doing
so will need to recognise the nature and size of the
Company’s business and ensure any policy objectives are
realistic and achievable.

The proportion of women employees in the whole
organisation, women in senior executive positions and
women on the Board as at 30 June 2014 are disclosed
below

Female

Male

% Female

Total

40.7

Senior
Management

Board

16.7

ASX Principles and Recommendation

Summary of Company’s Position

Recommendation 3.5
Companies should provide the
information indicated in the guide
to reporting on Principle 3.

Company position is the same as
that for Recommendation 3.2.

Principle 4 Safeguard integrity in financial reporting

ASX Principles and Recommendation

Summary of Company’s Position

Recommendation 4.2
Structure of the Audit Committee

The Company is unable to
comply with this recommendation
principally due to the current
composition of the Board.
Notwithstanding this departure, the
audit and risk committee process
operates in accordance with the
audit and risk committee charter.

Principle 8 Remunerate fairly and responsibly

ASX Principles and Recommendation

Summary of Company’s Position

Recommendation 8.2
The remuneration committee
should be structured so that it:

• consists of a majority of
independent directors

• is chaired by an independent

director

• has at least 3 members

Recommendation 8.4
Companies should provide
information in respect of
restrictions on entering into
transactions which limit risk
in of participating in unvested
entitlements.

Although there are 3 members
of the committee, the Company
is unable to comply with this
recommendation in full principally
due to the current composition
of the Board. However, the Board
assumes the functions of such a
committee as and when required.

While there is no structured
process in place, the Chairman
approves all equity participation
schemes.

Corporate Governance Principles and
Recommendations (2nd edition)

The ASX Corporate Governance Council announced on
30 June 2010 amendments to the current Corporate
Governance Principles and Recommendations. Cellnet will
recognise the impact of these changes in their Statement
of Corporate Governance and report on them as required.

Cellnet Group Limited and its consolidated entities annual report 2013|14
financial report

ASX Additional information

As at 8 September 2014

Substantial shareholders

Additional information required by the Australian Securities
Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below.

The number of shares held by substantial shareholders and
their associates, as advised in substantial holder notices
given to the Company, are set out below:

Name

CVC Ltd

Ordinary
share held

% of capital
held

McNeil Nominees Pty Limited

Hesley Consultants Limited

29,519,904

52.99

Distribution of equity security holders