cellnet Annual Report 2021

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FY2021 Annual Report · cellnet

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Annual Report 2021

discover
the next

We source products and represent

market leading brands of lifestyle

technology products into retail and

business channels.

Our innovative and passionate

approach makes us the most

exciting and engaging company
to partner with.

ABN 97 010 721 749

Cellnet Group Limited
Tenancy E1/5 Grevillea Pl, Brisbane Airport QLD 4008
t: 1300 255 563 www.cellnet.com.au

Cellnet Group Limited and its consolidated entities Financial Report 2020–21excited
engaged
essential

Cellnet Group Limited and its consolidated entities Financial Report 2020–21The Cellnet Group

Cellnet listed on the Australian Stock Exchange in 1999 and now
employs more than 70 staff across Australia and New Zealand.
Cellnet sources products and represent market leading brands
of lifestyle technology including mobile accessories and gaming
products into retail, business, and online channels.

Cellnet

Established in 1992, Cellnet listed on the Australian Stock Exchange (ASX) in 1999 and
now employs over 70 people across Australia and New Zealand. Cellnet is one of the
largest accessory specialist distributors in the region. Cellnet’s success is derived from
its unique managed services model, combining world leading brands, its own 3sixT
brand and an innovative category management approach. Cellnet provides extensive
reach and coverage across all markets in both the Australian and New Zealand retail
and telecommunications channels.

cellnet.com.au

Turn Left Distribution

Turn Left Distribution (TLD) is a leading Interactive Entertainment specialist across
Australia and New Zealand. Partnering with some of the world’s market leading gaming
brands across software and accessories, TLD provides a full-service distribution model.
Working with vendors and partners to manage fully integrated and localised end-to-
end, go-to-market solutions. Supported by an overarching marketing and PR strategy
as well as event and activation management, TLD offers industry-leading services that
connect world leading brands and partners to their customers and the communities
they inspire. Building on decades of experience and a team of passionate, dedicated
individuals all sharing a love for the culture. Driven by a desire to deliver excellence,
TLD aims to provide its partners, customers and the gaming community award winning
campaigns, category leading service and products that deliver a highly satisfying
entertainment experience.

turnleft.net.au

Performance Distribution

Performance Distribution is a leading specialist in online channels and direct to

consumer distribution across Australia and New Zealand. Providing brands with

website, database management and digital campaigns as well as traditional distribution

services. Performance Distribution provides an Omni-Channel technology platform to

brands and retailers that wish to sell online and strengthens the established Cellnet and

Turn Left retail network with support for endless aisle and click and collect strategies.

performancedistribution.nz

Cellnet Group Limited and its consolidated entities Financial Report 2020–21About our Company

In 2017 Wentronic Holdings GmbH acquired a majority

shareholding in Cellnet Group. Wentronic distributes AV, IT and

mobility accessories throughout Europe, Asia and Africa. The

investment by Wentronic provides a strong strategic partnership

whereby Cellnet and Wentronic can ensure products are sourced

in the most cost-efficient manner.

In 2018 Cellnet diversified its product offering into the gaming

market with the acquisition of Turn Left Distribution. In 2020

Cellnet acquired online specialist Performance Distribution to

accelerate its digital capability.

Directors

Mr Tony Pearson

Non-Executive Chairman

Mr Kevin Gilmore

Non-Executive Deputy Chairman

Mr Michael Wendt

Non-Executive Director

Mr Brian Danos

Mr Giles Karhan

Non-Executive Director

Company Secretary

Mr Chris Barnes

Company Secretary

Principal Registered Office

Tenancy E1, 5 Grevillea Place,

Brisbane Airport QLD 4008 Australia

Phone: 1300 255 563
www.cellnet.com.au

29NUMBER

OF YEARS IN
OPERATION

LISTED ON THE

SINCE 1999
A S X : C LT

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Gaming
Industry

In its upcoming
Digital Australia Report
(due for release October 2021),
the Interactive Gaming &
Entertainment Association,
will highlight the vitally
important role played
by the video games industry
in keeping people connected
during the pandemic.

With the introduction of the Digital
Games Tax Offset recently announced by
the Australian government, the industry
is poised and positioned better than
ever to get stronger and further establish
itself as a major contributor to the local
economy. Such support will also ensure
alignment with the upward trajectory of
video games continuing to be the most
popular form of entertainment.

family,

businesses,

and
Friends,
educational institutions all benefited
by the platforms that gaming provides.
The report will reveal that 75% of
Australian parents and children played
games together during COVID-19. (DA21
upcoming IGEA report)

Highlighting the Australian video games
industry’s strength and resilience, the
2020 Australian Game Development
increase of
Survey showed revenue
almost 29%, despite COVID-19. (AGDS
2020, via IGEA)

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Resident Evil success,
RIG partnerships
and upcoming global
licensed gaming titles.

AAA

anticipated

Highly
release
RESIDENT EVIL™ VILLAGE from Capcom,
launched on May 7, 2021. The title was
favourably received by the gaming
community, meeting all pre-release
hype and delivering both commercial
and critical success.

RIG gaming headsets partnerships with
both the Australian Esports League
(AEL) and the NBL’s Illawarra Hawks,
delivered the desired strategic and
tactical
success. Garnering brand
exposure on a national scale as well as
gaming community support through
grassroots channels. Also tapping into
the FMCG category, the brand was well

positioned as the front and centre piece
in a national month-long campaign with
major partners in Redbull, Woolworth’s
and Pringle.

as Nickelodeon and NERF
launch
respective gaming titles as well as the
online global phenomenon Among Us,
also release a physical retail version.

Delivering on all objectives,
the
renewed
partnerships have been
and confirmed to continue for the
upcoming year which will run well into
2022. RIG will continue to be the official
event and game day partner as well as
being the official and exclusive headset
partner
for the upcoming esports
program of events.

With supply constraints still hampering
the availability of PlayStation 5 and
Xbox Series X gaming consoles almost
10 months into the console cycle, this
would indicate future growth as supply
becomes more available heading into
2022. This would also bode well for
future accessories attachment sales as
more consoles are sold.

The second half of 2021 will also see
such
popular,

renowned

licenses

Cellnet Group Limited and its consolidated entities Financial Report 2020–21NEW
GEAR

Offering the latest
in technology,
we are constantly
researching
and testing new
products, and are
frequently updating
our list of cool tech
gadgets.

Aluminium
Dual Wireless Charger +
Watch 10W 3-1 Charger

Dual+Watch

The
Aluminium
Wireless Charger has an ultra-
thin design that is made out of
one piece high-grade aluminium
and is designed to (fast-)charge
two devices and an Apple Watch
simultaneously.
charger
supports Apple and Samsung Fast
Charge and has a 20W output to
support triple device charging.

The

MG-X
WIRELESS MOBILE
CONTROLLER

Designed
for Xbox, the MG-X
delivers console-like precision to
your Android smartphone.

Featuring an extendable phone
cradle, the MG-X accommodates
Android
with
smartphones
screens of up to 6.7 inches.

Rubberized clamps hold your
phone securely ensuring it won’t
come loose during intense gaming
sessions.

Emotion Max -
ANC Wireless Headphone
w/Multipoint

Welcome to the ultimate audio
experience. EMOTION MAX is a
perfect blend of optimal sound
quality, the latest technology and
extreme comfort designed
for
casual and high fidelity listeners
alike.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Magnetic Wireless
Vent Mount 15W
with Charger

Built for Performance. Never be
out of charge. With an easy to
operate vent mounting system
and MagSafe compatible circular
magnet array, the 3sixT Magnetic
Wireless Charger is designed to
charge your device continually,
securely, and safely so you can
focus on the drive. Works with
any MagSafe or any Qi compatible
device.

Car charger included. Provides
perfect charging result straight
out of the box!

S-Nano -
Ultra Portable
True Wireless Earphones

in size,

Redefined.

Portability
True
wireless the way it should be,
sleek
lightweight and
compact. The S-NANO also comes
in multiple colourways to brighten
up your music experience. The
smallest true wireless we've ever
created without sacrificing sound.

True Wireless
Earbuds - Iso Series

The Wave Audio Iso Series True
Wireless Earbuds will fast become
your everyday go-to when rocking
out to music during the day or
settling down to a movie at night.

International ﬂight – no issue.
Big road trip – you're covered.
With between 4-5 hours extended
media playtime and up-to an
additional 35 hours of in-case
charging, there is nothing these
earbuds can’t handle.

Mini Link

The Instax Mini Link Printer allows
you to access the essence of the
Instax range of products, using
the camera of your smartphone.
A truly portable product, the Mini
Link printer is sleek in design,
while
the downloadable Mini
Link App allows you to do the
bulk of your editing, including
adding frames and filters in your
smartphone
printing.
Photos from your camera roll
can be sent to the printer Via
Bluetooth, while at just 200 grams
you can choose between bringing
your printer along to make your
prints on location or wait until you
get back home to sort out your
Instax album.

before

Essential XL Spotlight
Camera

Capture clear details in full high
definition and see in colour at
night. Set your wire-free camera
up in just a few simple steps and
keep an eye on your home from
anywhere.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Board Members

Tony Pearson
B. Bus (Management)

Kevin Gilmore
B. Econ. MBA

Non-Executive Chairman

Non-Executive Deputy Chairman

Michael Wendt
Non-Executive Director

Mr Gilmore is the Managing Partner
at Pegu Partners, a capital and
strategy advisory firm.

He has also held management positions
with many multinational corporations
such as General Electric, Shell Petroleum,
Philips Electronics and Belkin where he
gained extensive experience in strategy,
business development and marketing.

is currently a member
and Nomination

Remuneration

Mr Gilmore
of
Committee.

Mr Wendt is the Chief Executive
Officer of Wentronic Group, a
market leading electronic accessory
distributor that is headquartered in
Braunschweig, Germany.

Wentronic employs over 200 people
worldwide and has offices in Germany as
well as in Hong Kong and China. Mr Wendt
has about 30 years of experience in the
international electronic accessory industry
and has had roles in sales, marketing and
human relations.

Mr Wendt is currently a member of the
Remuneration and Nomination Committee
(Chairman).

Tony is an experienced international
executive and company director,
with over ten years’ experience on
ASX, Hong Kong, Toronto and not-
for-profit boards.

He is currently Chair of ASX listed Peak
Resources, and a non-executive director
of ASX listed Xanadu Mines, a Trustee
of the Royal Botanic Garden & Domain
Trust, and a non-executive director of
Communicare, and the Foundation &
Friends of the Botanic Gardens. Tony’s
prior non-executive appointments include
as a Commissioner of the Independent
Planning Commission, chair of White
Ribbon, and non-executive director of
Aspire Mining and
International
Grammar School. Prior to this, Tony was
Managing Director at HSBC.

the

Mr Pearson is a member of the Audit and
Risk Committee and the Remuneration
and Nomination Committee.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Brian Danos
Bachelor of Science (Management)

Non-Executive Director

Giles Karhan
Non-Executive Director

Mr Danos is the Chief Operations
Officer for Wentronic GmbH. He has
held this position since September
2019 and leads the process,
supply chain, quality control
and international operations for
Wentronic.

From April 2015 until August 2019 he
was the General Manager of Wentronic
Asia Pacific where he led the overall
operations of the Asian region and directed
Wentronic’s offices in China in all sourcing
and logistical operations. Prior to his
joining Wentronic Asia Pacific, Mr Danos
held the position of Director of Marketing
and Sales with A&L International Holdings
Limited, a Hong Kong based private label
manufacturer. He has also held senior
positions with Philips Consumer Electronic
Accessories in both Europe and the USA.

Mr Danos is currently a member of the
Audit and Risk Committee.

Giles has worked in operations, sales
and marketing and management
across both equities and funds
management for over 15 years.

He has worked in both large Australian
Banks and Wealth Managers as well as in
boutique funds management. Giles is a
keen entrepreneur and currently is the
CEO and Founder of Rocking Horse, a
debt platform for early stage businesses.
He has obtained a Bachelor of Arts from
Australian National University
(ANU),
Graduate Diploma
in Finance and
Investment (FINSIA) and a Masters of
Business Administration from University of
Technology, Sydney.

Mr Karhan is the Chairman of the Audit and
Risk Committee.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Leadership Team

Dave Clark
Chief Executive

Chris Barnes B. Acc, CPA, GAICD
Chief Financial Officer & Company Secretary

Craig Kingshott
Managing Director - Cellnet Australia

Chris has been with the Company for
14 years and has been the Head of
Finance for the past 11 years.

Craig has been with Cellnet since
March 2013 in the role of Chief
Commercial Officer.

Chris

Over this time, he has gained significant
experience in accounting, treasury and
is also the
corporate finance.
Company Secretary and works closely with
the Cellnet Board to ensure that a culture
of strong governance is in place. He is CPA
qualified and is a member of the Australian
Institute of Company Directors.

Craig was appointed Managing Director
of Australia July 1, 2020 to spearhead the
next exciting chapter for Cellnet Australia.

is an accomplished

He
commercial
executive with over 30 years experience
in the technology
distribution sector,
specialising in strategic resets, revenue
growth strategies and development of
high functional commercial cultures.

four

Over the last 30 years he has established,
independent
grown and sold
distribution businesses where Craig
was appointed and acted as Managing
Director. Over the last 7 years Craig has
overseen the commercial reconstruction
of the Cellnet business to a best-in-class
category manager leading the way in
accessory retail development.

Dave is an experienced, results
driven executive with over 25 years’
experience in consumer electronics.
Appointed as Chief Executive of
Cellnet Group in July 2020, Dave was
previously the Managing Director of
Cellnet NZ for over 10 years.

Prior to Cellnet, Dave was with Sony
for 10 years managing strategic growth
video,
categories
computers, and television.

including

audio,

After 15 years at Cellnet, Dave has inspired
and developed a culture that is highly
productive, results driven and rewarding.
A strategic thinker, able to turn theory into
reality by leading, influencing, developing,
and motivating
teams. Passionate,
enthusiastic, and driven to succeed with a
demonstrated and proven ability to deliver
practical solutions and with a commitment
in achieving long term growth, sustained
profitability, and success.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
Belinda Campos
Managing Director - Turn Left Distribution

Paul Elliot
Executive Consultant - Turn Left Distribution

Belinda was one of the owners
of Turn Left Distribution and was
extremely excited to stay on after
the sale to Cellnet in 2018.

Prior to this, Belinda ran both Turn Left
and Q V Software as General Manager
until both businesses were consolidated
under Turn Left, gaining synergies and
efficiencies within the business and into
the retail channel.

Belinda has over 30 years of experience in
Management roles including Commercial
Manager for Tyco Electronics, completing
15 years’ service. This exposed her to
a variety of industries within the Tyco
Group including Aviation, I.T Telecom and
Professional Services, Structured Cabling
Infrastructure Management along
and
in technical product
with specializing
knowledge and
to support
training
Maritime and Military requirements.

With her strengths in people management
and strong business acumen developed
over the years, it allows her to be a mentor,
as well as a leader in any type of business
environment.

Paul was the co-founder, majority
owner and CEO of QV Software (QVS)
and Turn Left Distribution (TLD).

Founded in 2003, both QV Software and
TLD went on to establish themselves as the
leading independent gaming distributors
in Australia. After enjoying years of
independent success, QV Software was
merged into Turn Left Distribution to build
on their combined experience and strengths.

In 2018, selling Turn Left Distribution to
Cellnet made for a natural progression
fit. Over the span of 18 years, Paul has
worked with key leading brands across the
interactive entertainment space such as;
Sony, Nintendo, Microsoft, Capcom, Konami,
Disney, Plantronics, Nacon, Thrustmaster,
Razer and Steel Series.

lie

ensuring Turn

in building partner
Paul’s strengths
long term
relations and mapping out
strategic plans,
Left
Distribution remains not only relevant in an
ever-evolving industry but to also reinvent
itself to take advantage of potential growth
opportunities that come
its way. Paul
remains involved with Turn Left Distribution
as Executive Consultant.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Partner brands

Cellnet Group Limited and its consolidated entities Financial Report 2020–21owned brands

Cellnet owned brands are designed
to meet customer needs with the aim
of providing quality products catered
for a variety of segments and retailers.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21A B O U T

C O M P L I A N C E

Established 2014 in Brisbane Australia, and available in more
than 30 countries around the world, 3sixT makes great lifestyle
products for the everyday consumer.

3sixT categories includes Cases, Screen Protection and Power
products.

3sixT continuously works towards a more sustainable future
with plastic free packaging and biodegradable and compostable
materials.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21A B O U T

Since 2002, PowerGuard has been one of
the leaders in surge protection products
across Australia and New Zealand.

Designed to protect your most valuable
electronics, the products come with
a Lifetime Warranty and Connected
Equipment Warranty.

Lifetime Warranty

Connected Equipment
Cover

Designed & Engineered
in Australia

Protection at Home
and On The Go

Cellnet Group Limited and its consolidated entities Financial Report 2020–21A B O U T

Introduced in 2020, Wave by 3sixT
is a lifestyle audio brand aimed
at a younger demographic looking
for value.

Wave audio products include Speakers,
True Wireless Earbuds and Overear
Headphones.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21A B O U T

For every office, for every family and for every single person –
goobay stands for reliable, uncomplicated functional quality
and an attractive price-performance ratio.

The claim: always the right accessories for every electronic need.

Goobay provides a range of cables, cable management,
tv brackets and a large range of USB-C products.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21digital services

Cellnet Digital Services manages our brands online digital shops
and gives them access to millions of customers across Australia
and New Zealand.

Enrichment
of Product
Data

Orders
Management
& Fulfilment

Sales
& Marketing
Channels

Pricing
& Inventory
Data

Website

Social

Affiliates

Retargeting

Marketplaces

Email
Marketing

Recommendations
& Reviews

Digital Asset
Management

Drop Shippers
/ Suppliers

Backend
Systems - ERP, POS

Cellnet Group Limited and its consolidated entities Financial Report 2020–21eCommerce

• One stop tech shop, with an extended
range from suppliers not offered
in stores.

• Clearance of end of life

product from retail channels.

• Test and measure of new and emerging
categories, such as refurbished phones
and connected home.

• Techunion marketplace stores now
live incl Amazon, Kogan and eBay

• Free delivery and returns, utilising
Cellnet DC’s across Australia
and New Zealand.

• Secure payments, Afterpay now added.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Catman Services

Guided by purpose, Driven by data, Powered by technology, and Enabled by Cellnet

its competitors.

Category Management or Catman is the
single biggest differentiator between
Cellnet and
It has
been the key to not only the survival
of the company in recent economic
times, it has been the driving force
behind our growth and our customers
growth. Managing categories requires
a deep understanding of the market,
the consumer, and the products. The
term Catman refers to a number of
business functions and principles that
all contribute to a seamless enjoyable
experience for a consumer, and an
efficient profitable business for the
retailer.

For our customers and partners, this
program results in substantial revenue
and margin growth, training programs,
seamless merchandising, and
the
removal of their risk in inventory.

Our Services

Key Deliverables

Data integration

Data analytics

Product marketing

Space management

Field services

Financial services

Cost of business
reduction for the
retailer

Flexible financial
modelling

One touch support
team

Consistent customer
experience

Strategic ranging
and life cycle
management

Revenue and share
growth

Business Intelligence

Cellnet uses a range of high-powered tools to:

• Measure true return on investment
Increase sales through world class
•
planograms, clear ranging strategy
and segmentation
Increase margin by ensuring
focusing on lifting average sell price
and attachment

•

• Cut the cost of doing business
by reduced capital investment,
obsolescence and administration
Identify trends in categories and
devices

•

• Produce more reliable business

forecasts

Spaceman

Cellnet uses a range of high-powered
tools to:

• Bespoke space planning developed

• Explore new categories with external

with Nielsen

market insights

• Exploit world leading tools with little
IT development or training required
• Empower customers with detailed
insights by state, store and staff

• Know the customer, using

demographics and age segmentation

• Customer experience management

• Range development
•

Individual store Planograms and
ordering

• Min-Max architecture
• Weekly data feed
• Weekly analysis
• Weekly replenishment
• Bespoke Planogram evolution
• Heat-mapping

Cellnet Group Limited and its consolidated entities Financial Report 2020–2121

Cellnet Group Limited and its consolidated entities Financial Report 2020–2122

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Chair and Chief Executive’s Report

Dear Shareholder,

It is with pleasure we present to you the
FY2021 report for Cellnet Group Limited.

Cellnet performed extremely well during FY2021, delivering an

The second half of the financial year was marked by significant

outstanding result despite market headwinds with an EBITDA

challenges, including a softening of the local retail market,

of $5.54m (5.8%). A full year profit after tax of $3.81m for the

international shipping delays and product shortages due

year was announced, up $6.18m on the corresponding prior

to global semiconductor supply constraints. Against this

year period.

During the first-half of the financial year the Company fully

repaid all its outstanding term loans, which has further

challenging backdrop, the Company continued to generate

additional profit, building on its strong first-half result to

report the strongest full-year pre-tax profit result in 15 years.

strengthened Cellnet’s financial position for the full year with

Cellnet is anticipating continued demand in FY2022 for its

cash held of $7.0m at 30 June 2021.

Given the strong result, the Cellnet board of directors has

reinstated the Company’s full year dividend, declared at 0.30

cents per share. The final dividend will be paid on 11 November

2021, the record date for determining the entitlement for the

final dividend is 21 October 2021.

Turn Left gaming and Cellnet New Zealand business units

both experienced considerable year-on-year organic revenue

growth of 27% and 22% respectively, benefiting from

increased demand in gaming and the highly anticipated AAA

release RESIDENT EVIL™ VILLAGE from Capcom.

Cellnet’s landmark result was further achieved through

continued strong attention to costs, and a focused drive to

improve margins. The Company’s strategic decision to pivot

its brand portfolio to meet market demand in high growth

categories, including securing new brands on improved

commercial terms contributed to the higher earnings

performance.

During the financial year Cellnet partnered with several new

brands in high growth segments such as audio, imaging and

gaming including Nacon, Stealth, Subsonic, Wave Audio, Soul

mobile accessories with Apple and Samsung flagship device

launches in the first-half, including a new era of foldable

hybrids. This, combined with an expected improvement

in availability of new generation of gaming consoles from

Sony and Microsoft, means demand for gaming accessories

is set to continue. Cellnet has also recently announced new

partnerships with Poly and RAM Mounts, strengthening

Cellnet’s presence

in the B2B, work from home, and

commercial space.

The key to the Company’s success continues to be its

relationships with its customer and brand partners, who

are supported by a talented and committed team of over

70 professionals. We would like to thank our partners and

team members for their support and commitment, ensuring

that Cellnet remains a market leading distributor of lifestyle

technology products in what remains challenging times.

Finally, we would like to thank all our shareholders for their

ongoing support.

If any current or prospective

investors would

like to

make contact, please email Cellnet

Investor Relations

on, ir@cellnet.com.au .

Electronics, BlueAnt and Fujifilm. These brands opened new

We look forward to a successful year in FY2022.

channels and provided additional revenue streams.

Tony Pearson

Dave Clark

Chairman

Chief Executive

Contents

Corporate Information .......................................................22

13. Non-current assets -

Directors’ Report ...............................................24

Financial Report ................................................40

Statement of financial position...........................................40

Statement of comprehensive income..................................41

Statement of changes in equity ..........................................42

Statement of cash flows .....................................................43

Notes to the financial statements .......................................44

1. Corporate Information ............................................44

2. Significant accounting policies................................44

3. Financial risk management objectives

and policies ............................................................54

4. Fair Value Measurement ..........................................57

5. Operating segments ................................................59

6. Other income ..........................................................60

Items included in profit/(loss) .................................60

Income Tax .............................................................61

9. Earnings per share ..................................................62

10. Current assets – cash and cash equivalents .............63

11. Current assets – trade and other receivables ...........63

12. Current assets – inventories ....................................64

property, plant and equipment ...............................65

14. Non-current assets - intangible assets .....................66

15. Current liabilities - trade and other payables ..........68

16. Provisions ...............................................................68

17. Interest bearing loans and borrowings ....................69

18. Derivative Financial Instruments ............................69

19. Leases .....................................................................70

20. Contributed equity and reserves .............................70

21. Share based payments ............................................72

22. Financial guarantees ...............................................75

23. Business combinations ...........................................75

24. Key management personnel remuneration .............76

25. Related party disclosure .........................................76

26. Subsequent events .................................................77

27. Parent entity information .......................................78

28. Auditors’ remuneration ...........................................78

29. Dividends franking account .....................................78

30. Cash flow statement reconciliation .........................79

Directors’ declaration .........................................................80

Independent Auditor’s Report ............................................81

ASX Additional information ................................................86

Corporate Information

ABN 97 010 721 749

Directors
T. Pearson (Independent
Chairman)
K. Gilmore (Deputy Chairman)
M. Wendt
B. Danos
G. Karhan

Company Secretary
C. Barnes

Principal Registered Office
Cellnet Group Limited
E1 / 5 Grevillea Place
Brisbane Airport Qld 4008
Phone: 1300 255 563
Fax: 1800 255 563

Banker
Westpac Banking Corporation
260 Queen Street
Brisbane QLD 4000

Auditor
Pitcher Partners
345 Queen Street
Brisbane QLD 4000

Share Register
Link Market Services Ltd
Level 21, 10 Eagle Street
Brisbane QLD 4000
Phone: 1300 554 474

Solicitors
Reddie Lawyers
Level 40, 140 William Street
Melbourne VIC 3008

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

Corporate Governance
All corporate governance
related matters and associated
disclosures regarding
the company, including
the company’s corporate
governance statement, can
be found on the company’s
website in the investor relations
section at:
https://www.cellnet.com.au/
investor-hub/

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Directors’ Report

Directors’ Report

Your Directors submit their report for the year ended 30 June
2021.

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

Tony Pearson

B. Com (Management)
(Non-Executive Chairman)

Tony is an experienced international executive and company
director, with over ten years’ experience on ASX, Hong Kong,
Toronto and not-for-profit boards. He is currently Chair of ASX
listed Peak Resources, and a non-executive director of ASX listed
Xanadu Mines, a Trustee of the Royal Botanic Garden & Domain
Trust, and a non-executive director of Communicare, and the
Foundation & Friends of the Botanic Gardens. Tony’s prior
non-executive appointments include as a Commissioner of the
Independent Planning Commission, chair of White Ribbon, and
non-executive director of Aspire Mining and the International
Grammar School. Prior to this, Tony was Managing Director at
HSBC.

Mr Pearson is a member of the Audit and Risk Committee and
the Remuneration and Nomination Committee.

Kevin Gilmore

B. Econ. MBA
(Non-Executive Director Deputy Chairman)

Mr. Gilmore is the Managing Partner at Pegu Partners, a capital
and strategy advisory firm. He has also held management
positions with many multinational corporations such as
General Electric, Shell Petroleum, Philips Electronics and Belkin
where he gained extensive experience in strategy, business
development and marketing.

Mr Gilmore is currently a member of Remuneration and
Nomination Committee and was a member of the Audit and
Risk Committee during the year.

Michael Wendt
(Non-Executive Director)

Mr Wendt is the Chief Executive Officer of Wentronic Group,
a market leading electronic accessory distributor that is
headquartered in Braunschweig Germany. Wentronic employs
over 200 people worldwide and has offices in Germany, Italy,
and UK as well as in Honk Kong and China. Mr Wendt has over
26 years of experience in the international electronic accessory
industry and has had roles in sales, marketing and human
relations.

Mr Wendt is currently a member of the Remuneration and
Nomination Committee (Chairman).

Giles Karhan

B. Arts, Grad. Dip. Finance & Investment, MBA
(Non-Executive Director)

Mr Karhan has worked in operations, sales and marketing, and
management roles across both equities and funds management
for over 20 years. He has worked in both large Australian
banks and wealth managers as well as in boutique funds
management. He currently is founder and CEO of Rocking Horse
Finance, which accelerates a company’s growth prospects and
supports cash flow by providing financing against eligible R&D.
Mr Karhan is a keen entrepreneur and has invested in a number
of innovative businesses over the past 10 years. He has a wide
range of asset management experience with institutional and
wholesale clients. Mr Karhan in the Chairman of the Audit and
Risk Committee.

Mr Karhan in the Chairman of the Audit and Risk Committee.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21 Directors’ Report

Dividends

A final dividend of 0.30 cents per share was declared on 25th
August 2021 with a payment date of 11 November 2021. No
dividend was declared for the 2020 financial year.

Principal activities

The principal activities of the group are:

•

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

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

Operating and financial review

The Directors hereby present the results of Cellnet Group
Limited for the 2021 financial year.

•

Profit after tax of $3.81m, up $6.18m year-on-year

EBIT up 480% year-on-year to $4.37m

Full-year dividend declared of 0.30 cents per share

Return on equity of 15.0%

Strong balance sheet with $7.0m cash at bank as of 30 June
2021

All term debt fully repaid during financial year

• NTA 8.34 cents per share, 22.6% improvement year-on-year

•

Basic earnings per share of 1.61 cents per share, up 3.85
cents per share year-on-year.

The group reported a net profit after tax of $3.81m for the year
ending 30 June 2021, up $6.18m on the corresponding prior
year period.

The group’s strategic decision to pivot its brand portfolio to meet
market demand in high growth categories, including securing
new brands on improved commercial terms contributed to the
higher earnings performance. During the financial year Cellnet
partnered with several new brands in high growth segments
such as audio, imaging and gaming including Nacon, Stealth,
Subsonic, Wave Audio, Soul Electronics, BlueAnt and Fujifilm.

Brian Danos

B. Bus (Management)
(Non-Executive Director - appointed 1 July 2020)

Mr. Danos is the Chief Operations Officer for Wentronic GmbH.
He has held this position since September 2019 and leads
the process, supply chain, quality control and international
operations for Wentronic. From April 2015 until August 2019
he was the General Manager of Wentronic Asia Pacific, where
he led the overall operations of the Asian region and directed
Wentronic’s offices in China in all sourcing and logistical
operations. Prior to his joining Wentronic Asia Pacific Mr. Danos
held the position of Director of Marketing and Sales with A&L
International Holdings Limited, a Hong Kong based private label
manufacturer. He has also held senior positions with Philips
Consumer Electronic Accessories in both Europe and the USA.

Mr Danos is currently a member of the Audit and Risk Committee.

Chris Barnes

B. Acc, CPA, GAICD
(Company Secretary and Chief Financial Officer)

Mr Barnes has been with the Company since 2006. He holds a
Bachelor of Accounting Degree, is CPA qualified and is a graduate
of the Australian Institute of Company Directors. Mr Barnes has
been the head of finance for 11 years and is responsible for all
the financial management, administration, and compliance
functions of the company.

As at the date of this report, the interest of the directors
(including their related parties) in the shares and options of
Cellnet Group Limited were:

Director

M. Wendt

T. Pearson

K. Gilmore

G. Karhan

B. Danos

Number of
ordinary
shares

129,658,107

6,375,000

3,288,000

Number of options/
performance rights

5,000,000

Directors’ Report continued

The second half of the financial year was marked by significant
challenges, including a softening of the local retail market,
international shipping delays and product shortages due
to global semiconductor supply constraints. Against this
challenging backdrop, the group continued to generate
additional profit, building on its strong first-half result to report
the strongest full-year pre-tax profit result in 15 years.

During the first-half of the financial year the group fully repaid
all its outstanding term loans, which has further strengthened
Cellnet’s financial position for the full year with cash held of
$7.0m on 30 June 2021.

Given the strong result, the board of directors has reinstated
the Company’s full year dividend, declared at 0.30 cents per
share, a yield of approximately 4.4% on the Cellnet share price
as of close of trading 24 August 2021. The final dividend will be
paid on 11 November 2021, the record date for determining the
entitlement for the final dividend is 21 October 2021.

Significant changes in the state of affairs

There have been no significant changes in the state of affairs of
the company during or since the end of the financial year.

Significant events after balance date

There are no other matters or circumstances that have arisen
since the end of the financial year which significantly affected or
may significantly affect the operations of the group, the results
of those operations, or the state of affairs of the group in future
periods.

Likely Developments

In respect of future strategy and future performance, the group
is constantly reviewing the strategic value inherent in the
business. In conjunction with this, the group 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.

Share options

At the date of this report there were a total of 5,000,000 share options over ordinary shares in the company on issue. No option holder
has any rights under the terms of the instruments to participate in any other share issue of the company or any other entity.

Grant Date

22/10/2020

Vest Date

19/11/2020

13/01/2021

23/02/2021

Expiry Date

Exercise Price ($)

Number of Options on Issue at Date of This Report

21/10/2022

21/10/2023

21/10/2025

0.03

1,000,000

2,000,000

During the financial year, the company issued a total of 10,000,000 ordinary shares on exercise of share options, at an exercise price of $0.03. The total consideration paid on these shares was $300,000, and
no amount of consideration is unpaid.

Indemnification and insurance of
officers

Indemnification

Insurance premiums

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 have been paid in respect of Directors’
and Officers’ Liability Insurance. Insurance premiums paid for
Directors insurance covers Directors whilst they are appointed
as Directors of the Company and for a period of seven years after
their resignation. 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 Financial Report 2020–21 Directors’ Report

Rounding

Non-audit services

The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Report) Instrument 2016/191
dated 1 April 2016 and in accordance with that Instrument,
amounts in the financial report and Directors’ report have been
rounded off to the nearest thousand dollars, unless otherwise
stated.

Directors’ meetings

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

Meetings

Board

Audit & Risk

Nomination &
Remuneration

Held

Attended

Held

Attended

Held

Attended

M. Wendt

K. Gilmore

B. Danos

T. Pearson

G. Karhan

Committee membership

As at the date of this report the Company had an Audit and Risk
Committee, and a Nomination and Remuneration Committee.
Members acting on the committees of the Board during the year
were:

Audit & Risk

Nomination & Remuneration

G. Karhan (Chairman)

M. Wendt (Chairman)

T. Pearson

B. Danos

T. Pearson

K. Gilmore

Non-audit services were provided by the entity’s current auditor,
Pitcher Partners during the year. Pitcher Partners received or
are due to receive the following amounts for the provision of
non-audit services.

Consolidated

2020
$

2021
$

Taxation Services

110,590

103,236

Financial due diligence services

25,000

135,590

103,236

The board of directors, in accordance with advice provided by
the audit and risk committee, is 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 directors are satisfied that the provision of non-
audit services by the auditor did not compromise the auditor
independence requirements of the Corporations Act 2001 for the
following reasons:

•

All non-audit services have been reviewed by the audit
and risk committee to ensure they do not impact the
impartiality and objectivity of the auditor; and

• None of the services undermine the general principles

relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants (including
Independence Standards).

Auditor’s independence declaration

The Auditor’s independence declaration is set out on page 42
and forms part of the Directors’ report for the financial year
ended 30 June 2021.

Remuneration Report (audited)

This remuneration report for the year ended 30 June 2021
outlines the remuneration arrangements of the group 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 group,
directly or indirectly, including any director (whether executive
or otherwise) of the parent.

Remuneration report
approval at FY20 AGM

The FY20 remuneration report received positive shareholder
support at the FY20 AGM with a vote of 99.97% in favour.

For the purposes of this report, the term “executive” includes
the executive directors, senior executives, general managers
and secretaries of the group 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

1. Individual key management personnel disclosures

(i) Directors

T. Pearson

K. Gilmore

M. Wendt

G. Karhan

B. Danos

M. Reddie

C. Barnes

B. Danos

(ii)

Executives

D. Clark

C. Barnes

A. Sparks

Chairman (Non-Executive)

Deputy Chairman (Non-Executive)

Director (Non-Executive)
Director (Non-Executive) – Appointed 9
June 2020
Director (Non-Executive) – Appointed 1 July
2020
Director (Non-Executive) – Retired 1 May
2020
Director (Executive) – Appointed 1 May
2020, Retired 9 June 2020
Director (Non-Executive) – Retired 3
October 2018; Reappointed 1 July 2020

Chief Executive Officer (appointed 16 June
2020) & General Manager - New Zealand
Chief Financial Officer and Company
Secretary
Chief Executive Officer – Retired 16 June
2020

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 group 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, although may from time
to time receive compensation in the form of shares or share
options subject to the approvals outlined in section 4.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Remuneration Report (audited)

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 group’s performance including:

›

the group’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.

3. Board oversight of remuneration

Nomination and remuneration committee

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

The nomination and 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 group.

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

•

are aligned to the group’s business strategy;

offer competitive remuneration benchmarked against the
external market;

provides strong linkage between the individual and the
performance and rewards of the group.

Remuneration structure

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

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. Total Non-executive Director remuneration
exceeded this limit in the 2021 financial year, due to options
granted as detailed below. These options were approved by the
shareholders at the AGM held on 22 October 2020.

The Chairman’s base fee for the financial year ended 30 June
2021 was $50,000 (2020: $30,000). Non-executive director base
fees ranged from $20,000 to $30,000 during the financial year
ended 30 June 2021 (2020: $30,000). Non-executive directors do
not receive performance related remuneration. Non-executive
directors may, at the discretion of the Remuneration Committee
and subject to shareholder approval, receive compensation in
the form of shares or share options.

In June 2020, the Chairman and two non-executive directors
each agreed to reduce their base remuneration by $15,000
per annum in return for options over ordinary shares in the
company, as detailed below. Further, 875,000 ordinary shares
were issued to the Chairman in October 2020 in respect of
services provided in the 2020 financial year. These share-based
remuneration arrangements were approved by the Company’s
shareholders at the 2020 AGM on 22 October 2020.

Remuneration Report (audited) continued

Terms and conditions of options granted during the year

15,000,000 options were granted to Non-executive Directors
during the year, as described above. These options were subject
to a market-based vesting condition, whereby the options
would vest on the earlier of the Volume Weighted Average
Price (VWAP) of the company’s shares exceeding a target price
for 5 consecutive days on which the shares are traded on the
ASX, or 15 trading days regardless of whether shares trade on
the ASX for consecutive trading days. For the purpose of these
vesting conditions, the options were split into three tranches of
3,000,000, 6,000,000, and 6,000,000 options, with target share-
prices of $0.05, $0.10 and $0.15 respectively.

The grant date fair value per option of each of the three tranches
granted during the year are $0.2162, $0.2178 and $0.2175
respectively.

In addition, an option cannot be exercised unless the Board
acting reasonably is satisfied that the following conditions have
been satisfied:

•

The option holders were also directors at the time when
the relevant vesting condition was satisfied

There is no outstanding breach of the terms of engagement
with the company

• No notice of termination of engagement has been either
given by the director or received by the company; and

•

All vesting conditions have been satisfied.

The following table summarises the Non-executive Director options issued granted, exercised, or forfeited/lapsed during the financial
year:

KMP

Grant Date

Expiry Date

Exercise Price

Opening
Balance

No Granted No. Forfeited

No Exercised

Closing
balance

M Wendt

T Pearson

K Gilmore

22/10/2020

21/10/2022

22/10/2020

21/10/2023

22/10/2020

21/10/2025

22/10/2020

21/10/2022

22/10/2020

21/10/2023

22/10/2020

21/10/2025

22/10/2020

21/10/2022

22/10/2020

21/10/2023

22/10/2020

21/10/2025

$0.03

1,000,000

2,000,000

1,000,000

2,000,000

1,000,000

2,000,000

(1,000,000)

(2,000,000)

(1,000,000)

(2,000,000)

1,000,000

2,000,000

All options outstanding as at 30 June 2021 are vested and exercisable. The full amount of the exercise price of $0.03 was paid on options exercised during the period, and no amount of consideration is
unpaid.

5. Executive remuneration arrangements and the link to

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

Cellnet Group Limited and its consolidated entities Financial Report 2020–215.3 STI bonus

The group operates an annual STI program that
applies to executives and awards a cash bonus subject
to the attainment of clearly defined group, 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 12
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.

Return on equity

Chief Executive Officer

General Manager New Zealand

Chief Financial Officer

100%

N/A

100%

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.

At the end of the financial year the Board assesses the
actual performance of the group and the individual
against their respective financial KPI’s set at the
beginning of the financial year. No bonus is awarded
where performance falls below 90% of the return on
equity target. Performance beyond 90% is uncapped,
and there is therefore no maximum amount of STI that
may be awarded.

The following table outlines the proportion of the
agreed STI (as a percentage of base remuneration)
that was earned and forfeited in relation to the 2021
financial year.

Proportion of
maximum STI
earned in FY21

Proportion of
maximum STI
forfeited in FY21

D. Clark

C. Barnes

144%

No other executives were eligible to earn an STI in the
2021 financial year.

Remuneration Report (audited)

STI awards for 2020 and 2021 financial years

For the 2021 financial year, a total of $217,478 has
been accrued which represents 100% of the total STI
cash bonus which has vested to executives, based on
the table above. This will be paid in the 2022 financial
year. For the 2020 financial year, a total payment of
$53,893 was made in the 2020 financial year which
represents 100% of the total STI cash bonus previously
accrued in that period which has vested to executives.

5.4 LTIs

Executive Share Option Plan

The Board has established an Executive Share Option
Plan which is designed to provide incentives to the
Executives of the group. 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.

Remuneration Report (audited) continued

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 options issued under the plan at that time. The following
table summarises the Executive options issued granted, exercised, or forfeited/lapsed during the financial year.

KMP

Grant Date

Expiry Date

D. Clark

29/11/2017

30/08/2022

29/11/2017

30/08/2022

29/11/2017

30/08/2022

C. Barnes

29/11/2017

30/08/2022

C. Barnes

29/11/2017

30/08/2022

C. Barnes

29/11/2017

30/08/2022

Exercise
Price ($)

Opening
Balance

No. Granted No. Forfeited No Exercised

Closing
balance

$0.28

124,000

177,000

124,000

177,000

(124,000)

(177,000)

(124,000)

(177,000)

Options granted to D. Clark and C. Barnes were subject to successfully achieving profit before tax performance hurdles over the financial years 2019 to 2021. The final measurement date for
achievement of these performance hurdles was 30 June 2021. As the hurdles were not met, the options did not vest and were forfeited.

financial year ended 30 June 2020. A further 117,778
shares were issued to the Chief Financial Officer under
the plan in July 2020, for services provided in the 2020
financial year.

No securities were issued under the performance
rights plan in the 2020 financial year.

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.

LTI Plan

The Board has established a Long Term Incentive
Plan which is designed to provide incentives to the
Executives of the group. 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.

Performance Rights Plan

On 10 October 2018 at the Company’s Annual General
Meeting, shareholders approved a performance rights
plan. Under this plan, performance rights (which may
take the form of options or ordinary shares) are issued
to executives. The rights deliver ordinary shares to
senior management and Directors (at no cost to the
senior management employee or Director) where the
performance hurdle (where applicable) in relation to
those performance rights is met.

875,000 shares were issued to the Chairman under
the performance rights plan during the 2021 financial
year. The shares, which were subject to shareholder
approval at the company’s AGM on 22 October 2020,
were in respect of performance rendered during the
2020 financial year, and the value of the shares was
included in the Chairman’s remuneration for the

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Remuneration Report (audited)

5.6 Consequences of performance on shareholder wealth

In considering the group’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.

2021

2020

2019

2018

2017

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

$3,810,000

($2,373,000)

$405,000

$5,982,000

$2,035,000

Return on equity

Dividends paid

15.0%

(10.98%)

1.9%

38.2%

15.0%

$782,439

$688,946

$649,325

Reduction (increase) of share capital

$(336,000)

$(4,936,000)

Change in share price

$0.01

($0.19)

($0.17)

$0.11

$0.07

5.7 Other benefits

During the current and prior year, there were no non-cash bonuses or benefits provided to executives.

6. Executive contractual arrangements

It is the group’s policy that service contracts for executives are unlimited in term but capable of termination as per the
relevant period of notice and that the group 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 executive 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 executive termination payment provisions apply to all current executives, including the Chief Executive Officer.
The standards contractual provisions are as follows:

Employer initiated
termination

Termination for serious
misconduct

Employee initiated
termination

Notice period

Payment in
lieu
of notice

3 months

Treatment of STI on termination

Treatment of LTI on termination

Pro-rated for time and
performance

None

Unvested awards forfeited

3 months

Pro-rated for time and
performance

Pro-rated for time and
performance.

Remuneration Report (audited) continued

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 group,
directly or indirectly, including any director (whether executive or otherwise). Remuneration of Directors and executive
officers are as follows:

Short Term $

Post
Employment $

Long Term Benefits $

Termination
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

%
Options/
Rights

Non-executive directors

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

M. Wendt

B. Danos

K. Gilmore

M. Reddie

T. Pearson

Giles Karhan

Total non-executive
directors

19,637

30,000

20,000

30,000

25,000

39,638

30,000

18,500#

30,000

2,500

2021

129,275

2020

117,500

18,500

3,766

83,400

31,500#

250,200

31,500

103,037

30,000

20,000

103,400

30,000

25,000

126,804

80,000

30,000

2.500

80.9

80.7

65.8

62.5

65.8

39.4

383,241

65.3%

167,500

18.81%

# On 25 June 2020 the board approved a bonus of $50,000 for Mr Pearson and $8,000 for Mr Barnes in acknowledgement of their efforts in connection with the entitlement offer announced on
7 May 2020. The bonus relates to services provided prior to 30 June 2020, and there were no vesting conditions attached. A total of 117,778 shares were issued to Mr Barnes at an issue price of
3.6 cents per share in July 2020, while 875,000 shares were issued to Mr Pearson at an issue price of 3.6 cents per subsequent to shareholder approval at the company’s AGM held on 22 October
2020, after allowing for withholding tax payable on the bonuses.

Short Term $

Post
Employment $

Long Term Benefits $

Termination
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

%
Options/
Rights

Executives

D. Clark

C. Barnes

A. Sparks

2021

2020

2021

2020

2021

2020

267,145

116,704

215,101

53,893

256,579

100,774

206,528

4,240#

279,848

13,017

17,127

Total executives

Total key
management
personnel

2021

523,724

217,478

13,017

2020

701,477

58,133

17,127

2021

652,999

217,478

13,017

2020

818,977

76,633

17,127

9,227

6,813

21,694

20,136

22,181

30,921

49,130

34,687

49,130

9,812

7,510

(2,055)

5,749

5,609

1,705#

415,905

298,389

384,796

238,218

5,224

(6,802)

112,785

413,236

15,561

800,701

17,343

(7,152)

112,785

948,843

15,561

250,200

1,183,942

17,343

24,348

112,785

1,116,343

28.1

17.4

26.19

2.5

(1.6)

27.2

5.4

39.5

9.1

(0.7)

0.7

(1.6)

(0.8)

21.1

2.1

Cellnet Group Limited and its consolidated entities Financial Report 2020–217. Additional statutory disclosures

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

Transactions and balances with related parties:

Wentronic Holding GmbH

Wentronic Holding GmbH and its associated entities hold
53.45% (2020: 56.64%) of the ordinary shares in Cellnet Group
Limited. At 30 June 2021, the group had a receivable from
Wentronic Holding GmbH of $92,000 (2020: $nil).

Wentronic Asia Pacific Limited

During the 2021 and 2020 financial years, the group enlisted
the services of, or otherwise purchased inventory from,
Wentronic Asia Pacific Limited (WAPL). WAPL is a wholly owned
subsidiary of Wentronic Holding GmbH, the group’s controlling
shareholder. A function of WAPL is to source and purchase
inventory through bulk buying arrangements with third party
suppliers on behalf of the Wentronic Group.

Prior to 27 February 2020, WAPL sold inventory to the group at
cost price plus a fee to cover WAPL’s operating costs. The fee
paid was approximately 9% of the gross amount of purchases
paid in United States Dollars. Following 28 February 2020, and
as announced to the ASX on 2 March 2020, the group started
purchasing products directly from suppliers and now pays
WAPL a 6% management / services fee for coordination of the
purchasing and logistics function provided by WAPL under a
service agreement between Cellnet Group Limited, Cellnet
Limited and WAPL. During the 2020 financial year the group
obtained an independent expert’s report concluding that the
transactions with WAPL prior to 27 February 2020 were fair and
reasonable, and the purchasing arrangements prior to that date
were ratified by the shareholders of Cellnet Group Limited at a
general meeting held on 26 June 2020.

The total value of transactions with WAPL under these
arrangements during the 2021 financial year was $840,000
(2020: $5,764,000). At 30 June 2021, the group had a total of
$9,000 owing to WAPL in respect of these arrangements (2020:
$5,000).

Wentronic GmbH

At 30 June 2021, the group had a receivable from Wentronic
GmbH, a wholly owned subsidiary of Wentronic Holdings
Gmbh, of $9,000 (2020: $nil), arising from expense recharging
arrangements.

Remuneration Report (audited)

Joint venture with entity with ultimate control over the
group

During the year 2020 financial year, the group made loan
contributions of $26,000 to Wentronic International Pty Ltd,
being a joint venture between the group and its controlling
shareholder Wentronic Holding GmbH. The group held a 49%
interest in this entity and the investment was equity accounted
for on the group’s balance sheet. The joint venture was
dissolved during the 2020 financial year. The group’s share of
losses of the joint venture for the year ended 30 June 2020 was
$6,702. An impairment charge of $454,000 was recognised in
profit and loss for the year ended 30 June 2020 on write-off of
loans extended to the joint venture on its dissolution.

Remuneration Report (audited) continued

Option/right holdings:

The tables below details the number of options or rights over ordinary shares in the company held by directors, KMP or their related
parties:

No. Held at
1/7/2020
-

425,000

No. Held at
1/7/2019
-

500,000

425,000

No. Granted

No. forfeited

No. Exercised

5,000,000

(425,000)

(5,000,000)

No. Granted

No. Lapsed

No. Exercised

(500,000)

No. Held at
30/6/2021
-

No. Vested &
Exercisable
-

5,000,000

No. Held at
30/6/2020
-

No. Vested &
Exercisable
-

425,000

2021

Director/KMP

M. Wendt

B. Danos

K. Gilmore

T. Pearson

G. Karhan

C. Barnes

D. Clark

2020

Director/KMP

M. Wendt

B. Danos

K. Gilmore

M. Reddie

T. Pearson

A. Sparks

C. Barnes

D. Clark

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Remuneration Report (audited)

Shareholdings:

The table below details the number of ordinary shares in the company held by directors, KMP or their related parties. Unless otherwise
stated, shares were acquired on-market.

2021

Director/ KMP

No. Held at
1/7/2020

No. Acquired –
Bonus Shares

No. Acquired –
On Market

No. Acquired
– Exercise of
Options

No. Disposed

Shareholding
at date of
appointment/
resignation

M. Wendt

K. Gilmore

T. Pearson

G. Karhan

B. Danos

C. Barnes

D. Clark

2020

124,658,107

3,288,000

5,000,000

875,000

500,000

5,000,000

644,750

750,000

117,778

250,000

Director/ KMP

No. Held at
1/7/2019

No. Acquired –
Bonus Shares

No. Acquired –
On Market

No. Acquired
– Exercise of
Options

No. Disposed

Shareholding
at date of
appointment/
resignation

M. Wendt

K. Gilmore

T. Pearson

M. Reddie

B. Danos

A. Sparks

C. Barnes

D. Clark

33,691,380

90,966,727

400,000

2,888,000

1,300,000

3,510,000

322,375

500,000

322,042

500,000

(250,000)

(4,810,000)

No. Held at
30/6/2021

129,658,107

3,288,000

6,375,000

762,528

1,000,000

No. Held at
30/6/2020

124,658,107

3,288,000

644,750

750,000

*All shares were acquired through the 2.7: 1 renounceable pro-rata entitlement offer announced on 7 May 2020. Acquisitions were on the same terms and conditions as other shareholders.

End of Remuneration Report

This report is made with a resolution of the Directors:

Tony Pearson
Chairman

Signed at Brisbane on 25th August 2021

Auditor’s independence declaration

Auditor’s Independence Declaration to the Directors of Cellnet Group Limited

In relation to the independent audit for the year ended 30 June 2021, to the best of my knowledge and belief
there have been:

(i) No contraventions of the auditor independence requirements of the Corporations Act 2001; and

(ii) No contraventions of APES 110 Code of Ethics for Professional Accountants (including Independence

Standards).

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

PITCHER PARTNERS

DANIEL COLWELL
Partner

Brisbane, Queensland
25th August 2021

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

Financial Report

Statement of financial position

As at 30 June 2021

ASSETS

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Other current assets

Derivative financial instruments

Total current assets

Non-current assets

Property, plant and equipment

Right of use asset

Deferred tax assets (net)

Intangible assets

Total non-current assets

TOTAL ASSETS

LIABILITIES

Current liabilities

Trade and other payables

Provisions

Current tax liabilities

Lease liability

Interest-bearing loans and borrowings

Total current liabilities

Non-current liabilities

Provisions

Lease liability

Interest-bearing loans and borrowings

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Issued capital

Reserves

Accumulated losses

TOTAL EQUITY

Note

8(c)

20(a)

20(b)

Consolidated

2021

$000

6,999

13,161

17,700

1,566

39,426

293

408

2,815

6,495

10,011

49,437

2020

$000

6,936

15,027

15,377

1,409

38,786

299

700

2,750

6,812

10,561

49,347

10,073

11,905

860

229

8,359

19,570

252

321

19,891

29,546

38,725

14,282

(23,461)

29,546

768

360

9,042

22,108

168

420

1,250

1,838

23,946

25,401

38,389

10,473

(23,461)

25,401

The above statement of financial position should be read in conjunction with the accompanying notes.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
Statement of comprehensive income

For the year ended 30 June 2020

Revenue from contracts with customers

Other income

Materials, packaging and consumables used
Depreciation and amortisation expense
Employee benefit expense
Finance costs
Freight expense
Occupancy expense
Warehousing expense
Other expense

Profit / (loss) before income tax

Income tax (expense) / benefit

Net profit / (loss) for the period

Items that may be reclassified subsequently to profit or loss

Foreign currency translation

Total comprehensive income / (loss) for the period

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)

Consolidated

2021

$000

2020

$000

96,141

96,225

517

172

(72,527)
(1,166)
(10,238)
(754)
(2,137)
(142)
(2,797)
(3,087)

3,810

(251)

3,559

1.61
1.58

(78,113)
(1,207)
(9,827)
(845)
(2,719)
(213)
(2,525)
(2,910)

(1,962)

(411)

(2,373)

(152)

(2,525)

(2.28)
(2.28)

Note

8(a)

9
9

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Financial Report

Financial Report continued

Statement of changes in equity

Share
capital
$000

38,389

Reserve for
own shares
$000

(25)

At 1 July 2020

Profit for the period

Foreign currency translation

Total comprehensive profit for the
period

Transfers to/from reserves

Transactions with owners
in their capacity as owners:

Issue of shares

Share based payments

Dividends paid

336

Balance as at 30 June 2021

38,725

At 1 July 2019

Loss for the period

Foreign currency translation

Total comprehensive income for the
period

Transfers to/from reserves

Transactions with owners
in their capacity as owners:

Share based payments

Issue of shares

Dividends paid

33,453

5,070

(134)

Foreign
Currency
translation
reserve
$000

Share based
payment
reserve
$000

Reserve for
Profits
$000

Accumulated
losses
$000

Total equity
$000

(339)

(251)

1,695

9,142

(23,461)

250

3,810

(3,810)

25,401

3,810

(251)

3,559

336

250

(590)

1,945

12,952

(23,461)

29,546

(187)

(152)

1,711

9,142

(16)

1,695

(21,088)

(2,373)

23,006

(2,373)

(152)

(2,373)

(2,525)

5,070

(134)

(16)

9,142

(23,461)

25,401

(25)

Balance as at 30 June 2020

38,389

(25)

(339)

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

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
Statement of cash flows

For the year ended 30 June 2020

Note

Consolidated

2021

$000

2020

$000

Cash flows from / (used in) operating activities

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)
Income tax paid

Interest paid

Net cash flows from / (used in) operating activities

Cash flows used in investing activities

Loans to associates
Payment for acquisition of businesses, net of cash acquired
Purchase of property, plant and equipment
Payments for purchase of intangibles
Lease incentives received
Payment of contingent consideration

Net cash flows used in investing activities

Cash flows from financing activities

Proceeds from issuance of shares

Share issue costs

Principal repayments on leases

Proceeds from borrowings

Repayment of borrowings
Dividends

Net cash flows (used in) / from financing activities

Net increase 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.

107,253

(103,848)
(51)

(560)

2,794

-
-
(64)
(341)
-
-

(405)

300

(445)

26,509

(28,442)
-

(2,078)

311

(248)
6,936

6,999

108,874

(104,240)
(197)

(812)

3,625

(26)
(1,001)
(87)
(24)
71
(1,131)

(2,198)

5,070

(191)

(353)

28,738

(28,963)
-

4,301

5,728

(103)
1,311

6,936

Financial Report

Notes to the financial statements

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 2021 comprises the
Company and its subsidiaries (together referred to as
the ‘group’ or 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 25th August 2021. The nature of the
operations and principal activities of the group 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 consolidated financial statements also comply
with International Financial Reporting Standards
(IFRS) as issued by the International Accounting
Standards Board (IASB).

The financial report is presented in Australian
dollars and has been prepared on the historical cost
basis, except for derivative financial instruments
and contingent consideration liabilities which are
measured at fair value.

(Rounding

The Company is of a kind referred to in ASIC
Corporations
in Financial/Directors’
Report) Instrument 2016/191 dated 1 April 2016 and
in accordance with that Instrument, 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. Refer to note 2(v) for further
information on the critical accounting estimates
and judgements made in the preparation of these
financial statements.

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

(b) New accounting standards and

interpretations

(i) Application of new accounting standards

No new or revised accounting standards
considered as having a material effect on the
group have become effective for the first time in
preparing this financial report.

(ii)

Accounting
standards
issued but not yet effective

and

interpretations

The AASB has
issued a number of new
and amended Accounting Standards and
Interpretations that have mandatory application
dates for future reporting periods, some of which
are relevant to the group. The group has decided
not to early adopt any of these new and amended
pronouncements. The directors have assessed
that none of these standards will have a material
impact on the group’s financial statements in the
period of initial application.

(iii) IFRIC final agenda decisions not yet adopted

the

issued a

In April 2021,
International Financial
Reporting Standards Interpretations Committee
(IFRIC)
final agenda decision,
Configuration or customisation costs in a cloud
computing arrangement. The decision discusses
customisation
whether
expenditure
to cloud computing
arrangements is able to be recognised as an
intangible asset and if not, over what time period
the expenditure is expensed.

configuration
relating

The group’s accounting policy has historically been
to capitalise all costs related to cloud computing
arrangements as intangible assets in the consolidated
statement of financial position. The adoption of this
agenda decision could result in a reclassification

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

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 group
has subsidiaries with functional currencies of
New Zealand dollars and United States dollars.
The results of these subsidiaries which are
translated to the presentation currency as
described in (iii) below.

(ii) Transactions and balances

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
rates
ruling at the dates of the transactions. Foreign
exchange differences arising on translation are

foreign exchange

the

of these intangible assets to either a prepaid asset
in the consolidated statement of financial position
and/or recognition as an expense in the consolidated
statement of comprehensive income, impacting both
the current and/or prior periods presented.

As at 30 June 2021:

•

The group has not adopted this IFRIC agenda
decision. The impact of the change is not
reasonably estimable as the group has yet to
complete its assessment of the impact of the
IFRIC agenda decision. The group expects to
adopt this IFRIC agenda decision in its half-year
financial statements as at and for the half-year
ended 31 December 2021.

Intangible assets relating to cloud computing
arrangements with a written down value
of $0.922m have been capitalised on the
consolidated statement of financial position
and are subject to this detailed assessment.
total amortisation
The group
expenditure of $0.121m in respect of these
assets for the financial year ended 30 June 2021
(2020: $0.119m) and capital additions to these
assets during the year totalled $0.159m (2020:
$0.024m).

recognised

•

The group’s preliminary analysis indicates that
the impact may be material

The group has had regard to ASIC media release
21-129MR ASIC highlights focus areas for 30 June
2021 financial reports under COVID-19 conditions in
making the above disclosures

The consolidated financial statements comprise
the financial statements of Cellnet Group Ltd and
its subsidiaries (as outlined in note 25) as at and
for the year ended 30 June each year (the group or
the consolidated entity). Interests in associates
are equity accounted and are not part of the group.
Subsidiaries are all those entities over which the
group has control. The group controls an entity
where it has power over the entity, exposure or rights
to variable returns from its involvement with the
entity, and for which it has the ability to use its power
over the entity to affect the amount of its returns.

The financial statements of the subsidiaries are

Notes to the financial statements
2. Significant accounting policies continued

recognised directly in a separate component of
equity.

payable to customers in relation to sales made until
the end of the reporting period.

In addition, products sold by the group carry a right
of return. A refund liability (included in trade and
other payables) and a right to returned goods asset
(other current assets in the statement of financial
position) are recognised for the products expected
to be returned. Accumulated experience is used
to estimate such returns at the time of sale at an
operating segment level (expected value method).
Because the percentage of sales returns has been
steady for a number of years, it is highly probable
that a significant reversal in the cumulative revenue
recognised will not occur. The validity of this
assumption and the estimated amount of returns are
reassessed at each reporting date.

Sales are made with credit terms of 60 days or less;
as such no element of financing is deemed present
in sales of goods made to customers. The group does
not generally receive funds in advance of providing
goods nor provide goods in advance of contractual
entitlement to invoice the customer.

Disaggregation of revenue

The group’s sole material source of revenue is the
sale of goods to customers. The nature of contracts
with customers for sale of goods is consistent across
the group. Required disaggregation disclosures
under AASB 15 are made within note 5.

(g) Financial instruments

(i) Financial assets

Initial recognition and measurement

Financial assets within the scope of AASB
9 Financial Instruments are classified as at
amortised cost, at fair value through profit and
loss, or at fair value through other comprehensive
income. The group determines the classification
of its financial assets at initial recognition.

(e) 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 group
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 group 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.

(f) Revenue from contracts with customers

Revenue from the sale of goods is recognised at
the point in time when control of the products has
transferred, being when the products are delivered
to the customer.

Products are typically sold with an attaching
contractual or constructive entitlement to rebates
and other incentive arrangements. As such, revenue
from the sale of goods is recognised based on the
price specified in the contract (i.e. the gross sale
price) net of the estimated rebates and incentives.

Accumulated experience is used to estimate and
provide for the rebates and
incentives, using
the expected value method, and revenue is only
recognised to the extent that it is highly probable
that a significant reversal will not occur. A refund
liability (included in trade and other payables) is
recognised for expected rebates and incentives

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial 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, on the basis of both the group’s
business model for managing the financial assets,
and the contractual cash flow characteristics of
the financial asset. The group’s financial assets
include cash and short-term deposits (amortised
cost), trade and other receivables (amortised
cost), and derivative financial instruments (fair
value through profit and loss).

(ii) Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of AASB
9 Financial Instruments are classified as at
amortised cost, at fair value through profit and
loss, or as derivatives designated as hedging
instruments as appropriate.
The group
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 group’s financial liabilities include
trade and other payables (amortised cost), and
contingent consideration payable (fair value
through profit and loss).

Derecognition

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

(iii) Fair value of financial instruments

Information regarding fair value measurements
made by the group is included in note 4.

(h) Receivables

Receivables from contracts with customers, loans,
and other receivables are stated at their amortised
cost less allowances for expected credit losses.
Receivables from contracts with customers are
recognised at the time the goods are delivered to
the customer, as this is the point in time that the
consideration is unconditional because only the
passage of time is required before the payment is
due. Other receivables are recognised when the
entity becomes party to the contractual provisions
of the asset.

The group applies the simplified expected credit
loss model prescribed in AASB 9 to determine
an allowance for expected credit losses on its
receivables from contracts with customers and
its other receivables. Under this approach, the
lifetime expected credit losses are estimated using
a provision matrix based on historical rates of losses
observed on similar assets, as adjusted for the
group’s forecasts of future economic conditions

The measurement of expected credit losses reflects
the group’s ‘expected rate of loss’, which is a product
of the probability of default and the loss given default,
and its ‘exposure at default’, which is typically the
carrying amount of the relevant asset. In determining
the allowance for expected credit losses, the group
has consideration to expected recoveries through
collateral or trade credit insurance arrangements.
The group has identified contractual payments
more than 90 days past due as default events for
the purpose of measuring expected credit losses.
These default events have been selected based on
the company’s historical experience. Receivables
are written off when they exceed 150 days past due
and have been submitted to the group’s trade credit
insurer for processing.

Notes to the financial statements
2. Significant accounting policies continued

(i)

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. A
provision is recognised when there is objective
evidence that the group will not be able to sell the
inventory at normal reseller pricing.

(j) 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.

(l)

Intangible assets

(i) Goodwill

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 identifiable
net assets acquired and liabilities assumed.
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 group are stated at cost less accumulated
amortisation (see below) and impairment losses
(see accounting policy (m)). The group’s other
intangible assets represent software assets
purchased by the entity or developed by a third
party, and customer and supplier relationships
acquired
combination
transactions.

business

through

(k) Property, plant and equipment

(iii) Subsequent expenditure

expenditure

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

(iv) Amortisation

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.

impairment

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

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

3–5 years

Plant and equipment

2–3 years

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

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

(m) Impairment

(n) Trade and other payables

The carrying amounts of the group’s property, plant
and equipment and intangible assets, 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 below).

intangible assets that have an
For goodwill,
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.

Calculation of recoverable amount

The recoverable amount of property, plant and
equipment and intangible assets is the greater of
their fair value less costs to sell or 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.

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 group prior to the end of
the financial year that are unpaid and arise when the
group becomes obliged to make future payments in
respect of the purchase of these goods and services.

(o)

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 applying the effective interest method.

(p) Provisions and employee leave benefits

(i) Provisions

Provisions are recognised when the group 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 group 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.

Notes to the financial statements
2. Significant accounting policies continued

(ii) Long-term service benefits

(s) Leases

The group’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
high quality corporate bonds at the balance date
which have maturity dates approximating the
terms of the group’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
wholly 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 group expects to pay as at
reporting date including related on-costs, such
as worker’s remuneration insurance and payroll
tax. Amounts not expected to be wholly 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.

(q) Share based payment transactions

The group provides incentives to KMP in the form of
share based payments. 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 21 for
further details).

(r) Share capital

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.

Leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the
leased asset is available for use by the group. Each
lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or
loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life
and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities
include the net present value of the following lease
payments:

•

Fixed payments (including in-substance fixed
payments), less any lease incentives receivable

Variable lease payments that are based on an
index or a rate

Amounts expected to be payable by the group
under residual value guarantees

The exercise price of a purchase option if the
group is reasonably certain to exercise that
option, and

Payments of penalties for terminating the lease,
if the lease term reflects the group exercising
that option.

The
lease payments are discounted using the
interest rate implicit in the lease. If that rate cannot
be determined, the group’s incremental rate of
borrowing is used, being the rate that the group
would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic
environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising
the following:

•

The amount of the initial measurement of lease
liability

Any lease payments made at or before the
commencement date less any lease incentives
received

Any initial direct costs, and

Restoration costs

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Payments associated with short-term leases and
leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT
equipment and small items of office furniture.

(t)

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.

A 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.

Financial Report

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.

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.

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)

Notes to the financial statements
2. Significant accounting policies continued

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.

(u) 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 relevant taxation authority
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 relevant taxation authority are classified as
operating cash flows.

(v) Critical accounting estimates and judgements

Management discusses with the Audit Committee the
development, selection and disclosure of the group’s
critical accounting judgements 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.

Revenue recognition

As described in note 2(f) revenue is recognised net of
expected sales returns, incentives and rebates offered
to customers. Management applies the expected
value method in making estimates of the amounts
of incentives and rebates outstanding and the
value of expected returns (including any associated
right to returned goods asset) as at balance date
based on customer trading and claim history, the
terms of underlying contractual arrangements, and
historical rates of product return. Such estimates
involve the use of management’s judgement and
the actual amount of incentives and rebates settled,
and products returned, may vary from the amounts
accrued at balance date.

Valuation of consideration paid and net assets
acquired in business combinations

Consideration paid and net assets acquired in
business combination transactions are recognised
at their acquisition date fair values, as outlined
in Note 23 (net assets acquired) and Note 4 (fair
value of contingent consideration). The most
significant judgements and assumptions are made in
determining the fair value of identifiable intangible
assets
relationships)
and contingent consideration payable. These
assumptions include forecast cash flows (including
growth rates), probability weightings applied to
different earn-out scenarios, customer and supplier
attrition rates, contributory asset charges and
discount rates.

(customer and

supplier

Impairment assessment for cash-generating units
containing goodwill

The group completes an impairment assessment on
cash-generating units to which goodwill is allocated
on an annual basis, or otherwise where there are
indicators that CGU assets may be impaired. This
assessment involves comparison of the value-in-
use of a cash-generating unit to its carrying value.
There are a number of assumptions made in the
determination of value-in-use, which are outlined in
detail in note 14(b).

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

Impairment losses for stock on hand

Expected credit loss allowances on trade receivables

The group’s inventory is exposed to a risk of
obsolescence. A provision for obsolescence is raised
where there is evidence suggesting that the net
realisable value of inventory is less than its cost to the
group. Management relies on inventory ageing data,
days stock on hand (based on recent sales data), and
future sales forecasts in determining the required
provision against inventory at an individual product
level. Note 7 discloses the amount of stock which has
been scrapped throughout the course of the year, or
which has been written down to net realisable value
in accordance with the policy outlined in note 2 (i).

Share based payments

The group 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 by
management using a binomial model. The related
assumptions are detailed in note 21. The accounting
estimates and assumptions relating to equity-settled
share-based payments will have no impact on the
carrying amounts of assets and liabilities, or on profit
or loss, within the next annual reporting period.

Recovery of deferred tax assets

Deferred tax assets are recognised for tax losses and
deductible temporary differences to the extent that
management considers that it is probable that future
taxable profits will be available to utilise temporary
differences and recognised tax losses. Where the
group has made a taxable loss in the current or
preceding year, a deferred tax asset for carry forward
tax losses 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. Significant
judgement was required to determine the amount
of deferred tax assets that can be recognised, based
upon the probability weighted forecasts of future
taxable profits over the next three years.

The group recognises an allowance for expected
credit losses on its trade receivables. The basis for
determination of this allowance is as described in
note 2(h). There are a number of assumptions made
in the determination of the allowance for expected
credit losses, which are outlined in detail in note 11.

(w) Earnings per share

The group 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

(x) Government grants

Government grants are recognised when there is
reasonable certainty that the grant will be received
and all grant conditions are met. Grants relating to
expense items are recognised as income over the
periods necessary to match the grant to the costs they
are compensating. Grants relating to depreciable
assets are credited to deferred income and are
recognised in profit or loss over the period and in the
proportions in which depreciation expense on those
assets is recognised.

Government grants include amounts received or
receivable under the Australian Federal Government’s
JobKeeper Payment Scheme, and the New Zealand
Federal Government’s Job Subsidy Scheme, which
provides a temporary subsidy to eligible businesses
significantly affected by coronavirus (COVID-19).
Wage subsidies received have been offset against
the related employee benefits expense
in the
statement of comprehensive income. The amount
of these subsidies received during the year has been
disclosed in note 7.

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

3. Financial risk management
objectives and policies

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

Risk exposures and responses

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

The group enters into derivative transactions, principally
forward currency exchange contracts. The purpose is
to manage the currency risks arising from the group’s
operations. The main risks arising from the group’s
financial instruments are interest rate risk, foreign
currency risk, credit risk and liquidity risk. The group
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 Committees
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 group’s exposure to market interest rates relates
solely to the group’s short-term cash deposits and
interest bearing loans and borrowings as disclosed in
note 10 and 17.

Cash and cash
equivalents

Interest bearing loans
and borrowings

Note

2021

$000

6,999

2020

$000

6,936

(8,359)

(10,292)

(1,360)

(3,356)

The group 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.

At 30 June 2021, if interest rates had moved as illustrated
in the table below, with all other variables held constant,
post-tax profit and net assets would have been affected
as follows:

Post tax profit
higher/(lower)

Net assets
higher/(lower)

2021

$000

2020

$000

2021

$000

2020

$000

(10)

(23)

(10)

(23)

Consolidated

+1% (100 basis
points) (2020: 1%)

-0.5% (50 basis
points) (2020: 0.5%)

The movements in profit are due to higher / lower cash receipts / payments from
variable rate net interest bearing balances.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Foreign currency risk

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

The group has subsidiaries with function currencies
of New Zealand and United States dollars. There are
currently no hedges in place to mitigate the foreign
currency risk for these subsidiaries.

into

forward

Entering
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 group had the following
exposure to US$ foreign currency that is not designated
as cash flow hedges:

2021

2020

USD $000

244

Financial assets

Trade and other receivables

Financial liabilities

Trade and other payables

(2,359)

(1,608)

Forward foreign currency
contracts*

Net exposure

(118)

(3,949)

(2,477)

(2,379)

(5,557)

(5,313)

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

Financial Report

At 30 June 2021, 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)

2021

$000

2020

$000

Net assets
higher/(lower)

2021

$000

2020

$000

206

579

206

579

(251)

(707)

(251)

(707

Consolidated

AUD / USD +10%
(2020: +10%)

AUD / USD -10%
(2020: -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 group.

Credit Risk

Credit risk represents the loss that would be recognised
if counterparties failed to perform as contracted. The
maximum exposure to credit risk on financial assets of
the group is the carrying amount, net of any allowance
for expected credit losses, as disclosed in the maturity
analysis table below. The group mitigates this risk
by adopting procedures whereby it only deals with
creditworthy customers. Wherever possible the group
also insures debtors that have an approved credit limit
of greater than $5,000 through trade credit insurance.
Where possible trade receivables that are greater than
$5,000 are insured up to 90% of the approved credit limit,
with a $5,000 excess payable per claim. Details regarding
the determination of the allowance for expected credit
losses are contained in note 11(a).

Liquidity risk

Liquidity risk arises from both the financial liabilities
and lease liabilities of the group and the group’s
subsequent ability to meet its obligations to repay its
financial liabilities as and when they fall due. The group’s
objective is to maintain a balance between continuity of
at cash funding and short-term fixed cash deposits. The
group manages its liquidity risk by monitoring the total
cash inflows and outflows expected on a daily basis.

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

Maturity analysis of financial assets, financial liabilities and lease liabilities based on management’s expectation is presented
below.

Financial assets

Cash and cash equivalents

Trade and other receivables

Derivative financial instruments

Financial liabilities

Trade and other payables

Interest bearing loans and borrowings

Lease liabilities

Net inflow / (outflow)

Liquid financial assets

Cash and cash equivalents

Trade and other receivables

Derivative financial instruments

Financial liabilities

Trade and other payables

Interest bearing loans and borrowings

Lease liabilities

Net inflow / (outflow)

Carrying
Value
$000

Total
contractual
cash flows

Note

6 months
or less

6 – 12
months

1 – 5
years

2021

6,999

13,161

20,160

13,161

(10,073)

(8,359)

(18,432)

(481)

1,247

(512)

(186)

(5,783)

(5,457)

(59)

(267)

2020

Carrying
Value
$000

Total
contractual
cash flows

6 months
or less

6 – 12
months

1 – 5
years

6,936

15,027

22,000

15,064

(11,905)

(10,292)

(10,374)

(8,897)

(22,197)

(22,279)

(8,897)

(780)

(977)

(842)

(225)

(8,057)

(5,942)

(227)

(166)

(393)

(1,250)

(451)

(1,701)

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

4. 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.

2021

2020

Note

Carrying amount
$000

Fair value
$000

Carrying amount
$000

Fair value
$000

Amortised cost

Cash and cash equivalents

Trade and other receivables

Trade and other payables

Borrowings

Fair value through profit or loss

Contingent consideration payable

Derivative financial instruments

6,999

13,161

(10,073)

(8,359)

6,699

13,161

(10,073)

(8,359)

1,728

6,936

15,027

(11,905)

(10,292)

495

(197)

6,936

15,027

(11,905)

(10,292)

495

(197)

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 balances on the group’s balance sheet which
is measured at fair value are forward foreign exchange
contracts (refer note 18), and contingent consideration
payable (refer note 15). The fair value of forward
foreign exchange contracts 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.

surrounding

expectations

The fair value of contingent consideration is calculated
based on a probability weighted assessment of
the
management’s
performance targets outlined below. Key inputs into
the valuation
factors
which are determined based on forecast future cash
flows and margins, which are unobservable (Level 3
inputs). Details of the assumptions made in valuing
contingent consideration liabilities in respect of business
combinations described in note 23 are as follows:

include scenario probability

Notes to the financial statements
4. Fair Value Measurement continued

PowerGuard

Performance Distribution

Contingent consideration consisted of contractual earn-
out arrangements based on the financial performance
of the Powerguard business over the FY20 and FY21
financial years. These arrangements granted the vendor
an entitlement to 25% of the gross profit generated
above a gross profit floor of $600,000 per financial year.

At the conclusion of the earn-out period, being 30 June
2021, the group has assessed that the earn-out targets
as described above have not been met and the liability
has been valued at $nil as at 30 June 2021, resulting in a
gain on remeasurement of the contingent liability in the
current financial year of $131,000, being the value of the
contingent consideration liability recognised as at the
comparative balance date of 30 June 2020.

The fair value of the contingent consideration liability
at both the acquisition date and at 30 June 2020 was
$131,000. This amount was prepaid at the acquisition
date and was recognised as both a liability and
prepayment at 30 June 2020. The valuation of contingent
consideration allowed for gross profit margins of $0.8m
and $1m respectively for the FY20 and FY21 earn-out
periods. At 30 June 2020 it was estimated that reasonably
possible changes in these assumptions may result in an
increase or decrease in the fair value of the contingent
consideration liability of up to $131,000.

Contingent consideration consisted of contractual earn-
out arrangements amounting to 35% of net profit before
tax generated by the acquired business for a three year
period subsequent to the acquisition date of 1 April 2020.

On 18 March 2021, the group entered into an agreement
with the former owner of the Performance Distribution
business whereby a payment of $100,000 was made
by the group in full and final settlement of any future
contingent consideration liability payable under the
business acquisition agreement. As a result of this
liability
arrangement, the contingent consideration
has been derecognised and a gain on settlement of the
liability amounting to $264,000 has been recorded in
profit and loss.

The fair value of the contingent consideration liability
at both the acquisition date and at 30 June 2020 was
$364,000, which allowed for net profit before tax over
the earn-out period of $1.115m, discounted at a rate of
4.5%. At 30 June 2020 it was estimated that reasonably
possible changes in these assumptions may result in an
increase or decrease in the fair value of the contingent
consideration liability by $73,000.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

5. Operating segments

Identification of reportable 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
(the Chief Executive Officer) to make decisions about
resources to be allocated to the segment and assess its
performance and for which discrete financial information
is available.

Operating segments are identified by management

based on the manner in which products are sold. The
group has identified three operating segments, being
Cellnet Australia, Cellnet New Zealand, and Turn Left
Distribution. The Cellnet Australia and Cellnet New
Zealand operating segments are aggregated into the
one reportable segment (Cellnet), based on the similar
economic characteristics that exist between these two
segments, and similarities in the nature of products, type
and class of customer for these products, distributions
regulatory
similar economic and
methods and
environments in Australia and New Zealand.

Financial information for each of the group’s reportable segments is set out below:

June 2021

Australia

New Zealand

Total Revenue from contracts with customers

Other income

Profit before tax

Segment assets

Segment liabilities

June 2020

Australia

New Zealand

Total Revenue from contracts with customers

Other income

Profit before tax

Segment assets

Segment liabilities

Cellnet

$'000

56,541

16,293

72,834

1,675

34,076

16,037

64,566

13,339

77,905

(1,851)

34,710

17,834

Turn Left

$'000

Corporate and
Eliminations

$'000

23,307

1,758

13,449

3,854

18,320

11,105

4,368

495

377

1,912

172

(126)

3,532

1,744

Total

$'000

79,848

16,293

96,141

517

3,810

49,437

19,891

82,876

13,339

96,225

172

(1,962)

49,347

23,946

Notes to the financial statements
6. Other income

6. Other income

Items included in profit/(loss)

Fair value gain on revaluation
of contingent consideration
payable

Other income

Total other revenue

2021

$000

495

517

2020

$000

172

Increase / (decrease) in credit
loss allowance

Loss on scrapping of /
provisioning for obsolete
inventory

Rent expense on short-term
leases

Depreciation of right-of-use
assets

Interest expense on lease
liabilities

Government grants – wage
subsidies1

Defined contribution employee
superannuation expense

Share-based payments
expense/(income)

Write-off of investment /
receivables from associate

Fair value (gains) / losses on FX
derivatives

Net foreign exchange losses/
(gains)

2021

$000

2020

$000

819

149

1,801

2,751

438

113

362

(667)

(424)

579

250

618

(16)

454

109

(321)

(1,384)

1 During the year the group received $581,700 under the Australian government’s
JobKeeper wage subsidy scheme, and $85,406 under the New Zealand
government’s wage subsidy scheme. These amounts have been offset against
employee benefits expense in the statement of comprehensive income.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

2021

$000

(65)

2020

$000

(31)

362

411

Income Tax

(a)

Income tax expense / (benefit)

The major components to income tax are:

Current income tax charge

Prior year under/over provision – current tax

Deferred income tax charge

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

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

calculated per the statutory income tax rate.

A reconciliation between tax expense / (benefit) and the product of accounting profit / (loss) before income tax multiplied by the
group’s applicable income tax rate is as follows:

Accounting profit/(loss) before tax

At the parent entity’s statutory income tax rate 30% (2020: 30%)

Adjustments in respect of income tax of previous years

Entertainment

Share-based payments

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

Fair value gain on revaluation of contingent consideration payable

Other

Recognition of previously unrecognised tax losses

De-recognition of deferred tax assets for tax losses

Current year losses not recognised

Aggregate income tax expense / (benefit)

3,810

1,143

(3)

(149)

(1,075)

2021

$000

Consolidated

2021

$000

2020

$000

(1,962)

(589)

(31)

(5)

(52)

140

445

486

411

2020

$000

(c)

Recognised deferred tax assets and liabilities

Current tax
liability

Deferred tax
asset

Current tax
liability

Deferred tax
asset

Opening balance

Tax paid

Charged to income / (expense)

Charged to equity

Prior year over / (under) provision

FX translation

Closing balance

(33)

(65)

(2)

(49)

2,750

2,815

(185)

197

(80)

(33)

3,055

(362)

2,750

Notes to the financial statements
8.

Income Tax continued

Deferred income tax at 30 June relates to the following:

9. Earnings per share

2021

$000

2020

$000

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

Net deferred tax assets

Allowance for expected credit
losses

Right of return liabilities (net of
right to returned goods asset)

Lease liabilities (net of right-of-
use assets)

Employee provisions

Foreign exchange differences

Sundry accruals

Other

Inventory

Intangible assets

Tax losses carried forward

Net deferred tax asset

296

167

270

721

1,082

(873)

1,097

2,815

119

278

(18)

506

(991)

2,713

2,750

At 30 June 2021, the group has assessed that deferred
tax assets recognised above relating to carried forward
tax losses of the Australian tax consolidated group
are recoverable. This assessment is based on forecast
taxable profits over a three year period, and a history
of profits arising in all but one (2020) of the last seven
financial years.

(d) Tax losses not recognised

The group 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 $2,349,603 (Tax effected: $704,881) (2020: $5,932,482
(Tax effected: $1,779,745) which are available indefinitely
for offset against future gains subject to meeting the
relevant statutory tests.

(a)

Earnings used in calculating earnings per share

2021

$000

2020

$000

For basic earnings per share:

Profit / (Loss) from
continuing operations

Net profit/(loss)
attributable to ordinary
equity holders

For diluted earnings per share:

Profit / (loss) from
continuing operations

Net profit/(loss)
attributable to ordinary
equity holders

3,810

(2,373)

3,810

(2,373)

3,810

(2,373)

3,810

(2,373)

2021

2020

No. 000

(b) Weighted average number of shares

Weighted average
number of shares (basic)
at 30 June

Weighted average
number of shares
adjusted for effect of
dilution

236,008

105,907

240,629

105,907

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)

2021

$000

2020

$000

1.61

(2.24)

1.58

(2.24)

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

10. Current assets –

cash and cash equivalents

11. Current assets –

trade and other receivables

Cash at bank and in hand

2021

$000

6,999

2020

$000

6,936

Cash and funds held at bank earns interest at floating rates based on daily bank
deposit rates.

Receivables from contracts
with customers

Allowances for expected
credit losses

Other receivables and
prepayments

Carrying amount of trade
and other receivables

2021

$000

2020

$000

13,283

13,875

(993)

12,290

(176)

13,699

871

1,328

13,161

15,027

(a) Allowance for expected credit losses

As described in note 2(h), the group applies the simplified
expected credit loss model prescribed in AASB 9 to
determine an allowance for expected credit losses on its
receivables from contracts with customers. To measure
the expected credit losses, receivables from contracts
with customers have been grouped based on shared
credit risk characteristics and the days past due.

The expected loss rates are based on the payment profiles
for sales over a 4-5 year period prior to 30 June 2021
and 30 June 2020 respectively, and the corresponding
historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current
and forward looking macroeconomic factors affecting
the ability of customers to settle the receivables. The
group has identified retail trade industry output growth
and retail sector gross margin trends as the most relevant
factors, and accordingly adjusts the historical loss rates
based on expected changes in these factors.

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

The tables below show the calculation of the expected credit loss provision for receivables from contracts with customers at
both 30 June 2021 and 30 June 2020.

Current

0-30 days past
due

31-60 days past
due

Over 60 days
past due

Other*

$000

1.01%

1,657

2.00%

12.82%

23.79%

487

1,723

221

1.49%

2.42%

16.70%

734

387

898

150

Total

$000

3.56%

13,283

993

1.27%

13,875

176

3,118

742

2,608

30 June 2021

Expected loss rates

Gross carrying
amount

Loss allowance

30 June 2020

Expected loss rates

Gross carrying
amount

Loss allowance

0.05%

6,298

0.06%

9,248

*There is a significant concentration of credit risk within a single customer account balance, which has different characteristics to the remainder of the groups trade receivables. For this reason
the gross carrying value of this receivable and the related credit loss allowance have been disclosed separate from the group’s other receivables from contracts with customers.

The closing
loss allowances for receivables from
contracts with customers as at 30 June 2021 reconcile to
the opening loss allowance as follows:

12. Current assets – inventories

At 1 July

Increase in loss allowances
recognised in profit or loss

Receivables written off during
the year as uncollectable

At 30 June

2021

$000

176

819

(2)

993

2020

$000

164

149

(137)

176

Stock on hand

Less: provision for obsolescence

Total inventories at the lower
of cost and net realisable value

2021

$000

19,561

(1,861)

2020

$000

18,646

(3,269)

17,700

15,377

Cellnet Group Limited and its consolidated entities Financial Report 2020–2113. 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 2021

At 1 July 2019 net of accumulated depreciation and impairment

Additions

Disposals

Depreciation charge for the year

At 30 June 2021 net of accumulated depreciation and impairment

At 30 June 2021

Cost

Accumulated depreciation and impairment

Net carrying amount

For the year ended 30 June 2020

At 1 July 2019 net of accumulated depreciation and impairment

Additions

Disposals

Depreciation charge for the year

At 30 June 2020 net of accumulated depreciation and impairment

At 30 June 2020

Cost

Accumulated depreciation and impairment

Net carrying amount

Leasehold

improvements Plant & Equipment

$000

(14)

527

(446)

(6)

527

(432)

204

(56)

212

7,247

(7,035)

212

246

(82)

204

7,183

(6,979)

204

Financial Report

Total

$000

299

(70)

293

7,757

(7,464)

293

300

(88)

299

7,710

(7,411)

299

Notes to the financial statements
14. Non-current assets - intangible assets continued

14. Non-current assets - intangible assets

Software

Goodwill

Customer relationships

Supplier relationships

Net carrying amount

(a) Movements in intangible asset balances during the year

2021

$000

1,086

2,854

2,555

6,495

For the year ended 30 June 2021

Written down value at 1 July

Additions

Amortisation charge for the year

Written down value at 30 June 2021

At 30 June 2021

Cost

Accumulated amortisation and impairment

Net carrying amount

For the year ended 30 June 2019

Written down value at 1 July

Additions

Additions through business combinations (note 23)

Amortisation charge for the year

Written down value at 30 June 2020

At 30 June 2020

Cost

Accumulated amortisation and impairment

Net carrying amount

Software

Goodwill

Customer
Relationships

Supplier
Relationships

$000

884

341

(139)

1,086

1,548

(462)

1,086

979

(119)

884

1,207

(323)

884

2,854

1,946

908

2,854

(24)

286

(286)

167

(143)

286

(262)

3,050

(495)

2,555

3,957

(1,402)

2,555

3,545

(495)

3,050

3,957

(907)

3,050

2020

$000

884

2,854

3,050

6,812

Total

$000

6,812

341

(658)

6,495

8,645

(2,150)

6,495

6,637

908

(757)

6,812

8,304

(1,492)

6,812

Software, customer relationships and supplier relationships are amortised over useful lives of 10, 2 and 8 years respectively (2020: 10, 2 & 8 years). Remaining useful lives at 30 June 2021 for
these assets are 7.6, zero, and 5.2 years respectively (2020: 7.4, 0.2 and 6.2)..

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

(b)

Impairment testing

At each balance date, the group completes an
impairment assessment for each cash-generating unit
(CGU) to which goodwill is allocated. Where indicators
of impairment are present for other CGUs, these CGUs
are also tested for impairment. As the carrying value of
the group’s net assets exceeds its market capitalisation,
the group recorded a loss for the year, and operations
continue to be affected to varying degrees by the impact
of the COVID-19 pandemic on consumer demand,

impairment indicators are deemed to be present for each
CGU within the group at balance date and each has been
tested for impairment. The recoverable amount of each
CGU has been determined as its value-in-use. Value-in-
use is determined as the present value of future CGU
cash flows. In calculating value-in-use, the group has
projected cash flows over a 5 year period, based on the
board approved budget/forecast for FY22.

The results of the impairment assessments completed indicated that value-in-use of each CGU exceeds the CGU carrying value.
The table below summarises the key assumptions applied in testing CGUs for impairment:

2021

Cash-Generating Unit

Cellnet Australia

Cellnet New Zealand

Turn Left Distribution

Cellnet Online

Goodwill
allocated to CGU

($’000)

481

1,946

427

EBITDA

($’000)

2,907

1,736

1,296

Average Annual
Revenue growth

Terminal growth

Pre-tax discount

16%

For the Cellnet Australia, Cellnet New Zealand, and Turn Left Distribution CGUs, the following reasonably possible changes in
the EBITDA assumption would have resulted in an impairment charge being recognised at 30 June 2020:

2021

Cash-Generating Unit

Cellnet Australia

Cellnet New Zealand

Turn Left Distribution

Change in EBITDA Required
for Impairment

($’000)

(150)

(155)

(54)

Further, an increase in the discount rate applied for the Cellnet Australia CGU by 70 basis points would have resulted in an
impairment charge being recognised for this CGU at 30 June 2021. No reasonably possible change in any of the assumptions
above for the New Zealand CGU would result in an impairment of the carrying value of this CGU at 30 June 2021.

The following assumptions were applied in the impairment assessment completed as at the comparative balance date:

2020

Cash-Generating Unit

Cellnet Australia

Cellnet New Zealand

Turn Left Distribution

Powerguard*

Cellnet Online

Goodwill
allocated to CGU

($’000)

1,946

481

427

EBITDA

($’000)

1,931

1,223

1,243

1,066

1,221

* The Powerguard CGU has been reallocated to the Cellnet Australia CGU at 30 June 2021.

Average Annual
Revenue growth

Terminal growth

Pre-tax discount

14.7%

18%

Notes to the financial statements

(b)

Impairment testing (continued)

2020

Cash-Generating Unit

Cellnet Australia

Cellnet New Zealand

Turn Left Distribution

15. Current liabilities –

trade and other payables

16. Provisions

Trade payables

Rebate and incentive liability

Right of return liability#

Contingent consideration
payable^

Other payables and accrued
expenses

2021

$000

4,083

2,646

2,127

1,217

2020

$000

5,656

3,072

1,810

495

872

10,073

11,905

^ refer note 4 for reconciliation of movements in contingent consideration payable,
and description of how fair value has been determined.

# An associated right to returned goods asset is recognised in other current assets,
representing the expected value of goods to be returned by customers in future
periods.

Current

Provision for long-service leave

Provision for annual leave

Non-Current

Provision for long-service leave

Change in EBITDA Required
for Impairment

($’000)

(452)

(643)

(380)

2020

$000

248

520

768

168

2021

$000

339

521

860

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
17. Interest bearing loans and

borrowings

Weighted
Average
Interest Rate

Current

Maturity

2021

2020

$000

(a) Business Finance

3.06

3.14

6 - 29 July 2021

2,846

6 – 29 July 2020

2,128

(b) Invoice Finance

3.29

Various

5,513

6,542

5.06

6 July 2021

Non-Current

(d) Business Loan

5.06

6 July 2021

8,359

372

9,042

1,250

(a) $3,500,000 Business finance facility

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 $3,500,000 applies
across these individual facilities. As at 30 June
2021, the company has drawn down $2,846,000
(2020: $2,128,000) under its trade finance – imports
facility. This facility is subject to annual review,
and individual trade finance drawdowns under
the facility as at balance date mature on the dates
disclosed above.

(b) $17,000,000 Invoice finance facility

This is a facility for terms of trade. The total limit of
the facility is $17,000,000 (2020: $17,000,000). As at
30 June 2021, $5,513,000 was outstanding under this
facility (2020: $6,542,000). Amounts owing under
the facility are matched to the trade terms of the
underlying financed transaction up to a maximum
of 60 days. Subsequent to balance date, the limit
under this facility has been reduced to $15,000,000.

Financial Report

The business loan facility was provided to fund the
acquisition and initial working capital requirements
of Turn Left Distribution Pty Ltd. The facility required
monthly principal and
interest repayments of
$37,800 and the facility had an expiry date of 6 July
2021. The loan was fully repaid in December 2020
and as a result there is $nil owing as at 30 June 2021
(2020: 1,622,000)

All facilities above are secured by a general security
agreement given by Cellnet Group Limited and Turn
Left Distribution Pty Ltd over all existing and future
assets and undertakings.

Reconciliation of changes in borrowings to related
financing cash flows per the statement of cash
flows

There were no non-cash movements in borrowings
during the current or prior financial years. Changes in
the borrowings arising from cash flows are as disclosed
in the statement of cash flows.

18. Derivative Financial Instruments

Current

Forward foreign currency
exchange contracts

2021

$000

2020

$000

Forward foreign currency exchange contracts are carried
at fair value 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 profit or loss. 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 materials,
packaging and consumables used expenditure in the
statement of comprehensive income, and are included
in foreign currency gains or losses disclosed in note .

Notes to the financial statements

20. Contributed equity and reserves

2021

2020

No. of shares No. of shares

231,601,856

62,595,096

169,006,760

(a)

Share capital

Ordinary shares on
issue at 1 July

Shares issued
– renounceable
entitlement offer

Shares issued – bonus
shares

992,778

Shares issued –
exercise of options
(note 21)

Ordinary shares on
issue 30 June

Share capital at 1
July

Shares issued
– renounceable
entitlement offer

Share issue costs, net
of tax

Shares issued –
exercise of options

Shares issued – bonus
shares

Share capital at 30
June

10,000,000

242,594,634

231,601,856

2021

$000

2020

$000

38,389

33,453

300

5,070

(134)

38,725

38,389

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

19. Leases

(a) Right-of-use assets

All of the group’s right-of-use assets relate to leases
in the
of premises. Reconciliation of changes
carrying amount of right-of-use assets during the
period is as follows:

Opening value as at 1 July

Additions

Lease incentives received

Depreciation

Closing value at 30 June

At 30 June

Cost

Accumulated depreciation

Net carrying amount

(b) Lease liabilities

Opening value as at 1 July

Additions (non-cash)

Principal repayments (cash
outflow)

2021

$000

700

146

(438)

408

1,006

(598)

408

2021

$000

780

146

2020

$000

268

865

(71)

(362)

700

1,062

(362)

700

2020

$000

268

865

(445)

(353)

Closing value at 30 June

481

780

At 30 June

Current

Non-current

Total lease liability

229

252

481

360

420

780

During the year, the group entered into 1 year
extensions on two existing leases in Sydney. During
the comparative year ended 30 June 2020, the group
entered into a 5 year lease of a new head office
premises in Brisbane and a 2 year lease extension
on its existing lease arrangement in Auckland. These
non-cash financing activities resulted in an increase
in lease liabilities of $146,000 (2020: $865,000) on
initial recognition.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
Financial Report

Bonus shares

Translation reserve

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

Reserve for own shares

The reserve for own shares represents the cost of shares
held by an equity remuneration plan that the group is
required to include in the financial report. At 30 June
2021 the group held 18,209 of the Company’s shares
(2020: 18,209). 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
group’s own equity instrument.

Reserve for profit

Profits are transferred to the reserve for profits to facilitate
future franked dividend payments in accordance with
Australian taxation requirements for franked dividend
payments to be sourced from profits.

Share based payment reserve

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

On 25 June 2020, the board approved a bonus of
$50,000 for the chairman and $8,000 for the CFO in
acknowledgement of their efforts in connection with
the entitlement offer announced on 7 May 2020. A total
of 992,778 shares were issued during the period at an
issue price of 3.6 cents per share, after allowing for
withholding tax payable on the bonus.

Renounceable Entitlement Offer

On 7 May 2020, the group announced an accelerated
renounceable pro-rata (2.7 for 1) entitlement offer to
raise a total of $5.07m. The offer consisted of both a
fully subscribed institutional component and a fully
underwritten retail component.

The institutional offer extended to the controlling
shareholder of the company, Wentronic Holding GmbH,
was fully subscribed with 90,966,727 shares issued at an
issue price of $0.03 per share on 12 May 2020, raising a
total of $2.73m.

A total of 78,040,033 shares were issued on 5 June 2020
on completion of the retail offer, raising a total of $2.34m.

Share issue costs of $134,000 (net of tax) were incurred
and were offset against issued capital in equity.

(b) Reserves

Translation reserve

Reserve for own
shares

Reserve for profit

Share based payment
reserve

2021

$000

(590)

(25)

12,952

1,945

2020

$000

(339)

(25)

9,142

1,695

14,282

10,473

Notes to the financial statements
20. Contributed equity and reserves continued

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

21. Share based payments

(a) Long term incentive plan – employee options

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 group’s
capital adequacy ratio is between 40% and 60%.
The capital adequacy ratios based on continuing
operations at 30 June 2021 and 2020 were as follows:

Net Assets

Total Assets

Capital adequacy ratio

2021

$000

29,546

49,437

60%

2020

$000

25,401

49,347

51%

At 30 June 2021, no share options were outstanding under the company’s long-term incentive plan (2020: 1,587,500).
Details of the options issued are as follows:

Options granted

1,587,500, 312,500 and 500,000 (totalling 2,400,000)

Grant date

Issue date

29 November 2017, 17 April 2018 and 10 October 2018

1 July 2018, 1 July 2018 and 10 October 2018

Consideration payable

$Nil

Exercise price

$0.28, $0.375 and $0.28

Last exercise date

5pm Brisbane time on the date which is 12 months subsequent to market release of FY2021 result.

Exercise conditions

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

• 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 been either been given by the employee or received by

the Company.

• All performance hurdles have been met.

Performance hurdles

Options will vest upon meeting various profit before tax performance hurdles over the financial years
2019 to 2021.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

The following table illustrates movements in the number of employee share options on issue during the year:

2021

2020

Number of options

Weighted Average
Exercise Price

Number of options

Weighted Average
Exercise Price

Opening balance

Lapsed - vesting conditions not satisfied

Forfeited - employee departure

Outstanding as at 30 June

Vested and exercisable

1,587,500

(1,275,000)

(312,500)

(b) Long term incentive plan – employee options

0.315

2,400,000

(812,500)

1,587,500

0.292

0.280

0.315

At the Annual General Meeting held on 22 October 2020 shareholders approved the issue of options to non-executive
directors of the company, as consideration for the directors agreeing to forego cash payments for all or part of their
director fees during the 2021 financial year. Details of the options issued are as follows:

Options granted

15,000,000

Grant date

Issue date

22 October 2020

Consideration payable

$Nil

Exercise price

$0.03

Expiry date

21 October 2022 (3,000,000 options), 21 October 2023 (6,000,000 options) and 21 October 2025 (6,000,000
options).

Exercise conditions

An option cannot be exercised unless the Board acting reasonably is satisfied that the following
conditions have been satisfied:

• The option holders were also directors at the time when the relevant vesting condition was satisfied

• There is no outstanding breach of the terms of engagement with the Company.

• No notice of termination of engagement has been either been given by the director or received by the

Company.

• All vesting conditions have been satisfied.

Vesting conditions

Each tranche will vest on the earliest to occur of the Volume Weighted Average Price (VWAP) of the
company’s shares exceeding a target price:

•

for 5 consecutive trading days on which shares are traded on the ASX; and

• 15 trading days regardless of whether shares trade on the ASX on consecutive trading days.

As the vesting conditions above are market conditions, these were taken into consideration in deriving the grant date
fair value of the options. Provided that the Directors remain in service with the company over the life of the options, the
grant date fair value of the options will be recognised in full as an expense regardless of whether the market-based vesting
conditions are satisfied.

Notes to the financial statements
21. Share based payments continued

The fair value of the options granted was determined by management using an option pricing model. Expected volatility
was determined based on historical stock price volatility over a period consistent with the life of the options. The table
below summarises the key inputs into the valuation model for each tranche of options granted:

Tranche

Vesting
(Target) Price

Life (years)

No. of
Options

Exercise
Price

Expected
Volatility

Risk Free
Rate

Value per
Option

Tranche 1

Tranche 2

Tranche 3

$0.05

$0.10

$0.15

3,000,000

6,000,000

0.03

0.26

0.28

0.45

0.2162

0.2178

0.2175

The share price at the grant date was $0.052. The following table illustrates movements in the number of director share
options on issue during the year:

Opening balance – 1 July

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as at 30 June

Vested and exercisable

2021

15,000,000

(10,000,000)

5,000,000

Weighted Average
Exercise Price

2020

Weighted Average
Exercise Price

0.03

All options vested during the year. All outstanding options remain exercisable as at 30 June 2021.

The group has recognised share-based payments expense of $250,200 in respect of these options during the year (2020:
$nil).

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

22. Financial guarantees

deductible for tax purposes.

The group has provided financial guarantees in respect
of rental leasing arrangements disclosed in Note 19.
The group’s financier has also provided performance
guarantees in the form of standby letters of credit to the
group’s suppliers. 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.

Bank guarantees provided –
rental leases

Standby letters of credit

2021

$000

2020

$000

1,594

23. Business combinations

No business acquisitions were completed during the
financial year ended 30 June 2021. The following
disclosures are made in respect of business combinations
which occurred during the comparative financial year
ended 30 June 2020

Powerguard

On 1 July 2019, the group completed the acquisition of
100% of the business assets of Service Smart Pty Ltd, being
the business of designing, procuring the manufacture
of, and distributing Powerguard branded products. The
primary purpose of the acquisition was to expand the
group’s product offering. Details of the transactions were:

Cash consideration paid

Fair value of contingent consideration

Total consideration paid

Less: Fair value of identifiable net assets
acquired (see below)

Goodwill recognised on acquisition

$000

714

131

845

(364)

481

Refer to note 4 for a description of the contingent
consideration arrangement and details of how the fair
value of the contingent consideration liability has been
determined at the acquisition date and as at each of 30
June 2020 and 30 June 2021.

Goodwill represents the access to products obtained in
the transaction. No amount of goodwill is expected to be

Assets and liabilities acquired as part of the transaction
are set out below:

Trade and other receivables

Inventory

Trade and other payables

Fair value of net assets acquired

$000

212

192

(40)

364

Management assessed the fair value of identifiable
intangible assets acquired to be $nil. Between the
acquisition date and the comparative balance date
ended 30 June 2020, the Powerguard business recorded
revenue of $1,374,000 and net profit before tax of
$192,000.

Performance Distribution

On 1 April 2020, the group completed the acquisition of
100% of the business assets of Performance Distribution
(AUS) Pty Ltd and Performance Distribution Limited, being
an ecommerce and distribution business with comparable
product ranges to those sold by the existing Cellnet
business. The primary purpose of the acquisition was
to create alternative pathways to market for the group’s
product offering. Details of the transactions were:

Cash consideration paid

Fair value of contingent consideration

Total consideration paid

Less: Fair value of identifiable net assets
acquired (see below)

Goodwill recognised on acquisition

$000

287

364

651

(224)

427

Management assessed the fair value of identifiable
intangible assets acquired to be $nil. Between the
acquisition date and the comparative balance date ended
30 June 2020, the Performance Distribution business
recorded revenue of $384,000 and net profit before tax of
$272,000.

Refer to note 4 for a description of the contingent
consideration arrangement and details of how the fair
value of the contingent consideration liability has been

Notes to the financial statements
23. Business combinations continued

determined at the acquisition date and as at each of 30
June 2020 and 30 June 2021.

Goodwill represents the established selling platforms
within the acquired business. No amount of goodwill is
expected to be deductible for tax purposes.

Assets and liabilities acquired as part of the transaction
are set out below:

24. Key management personnel

remuneration

Short-term employee
benefits

2021

2020

883,494

912,737

Inventory

Employee provisions

Fair value of net assets acquired

$000

240

(16)

224

Post-employment benefits

34,687

49,130

Termination benefits

112,785

Long-term employee benefits

265,761

41,691

Total compensation

1,183,942

1,116,343

Management have assessed the fair value of identifiable
intangible assets acquired to be $nil. Since the
acquisition date, the Performance Distribution business
has recorded revenue of $384,000 and net profit before
tax of $272,000.

25. Related party disclosure

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

% Equity interest

2021

2020

100

Name

Cellnet Group
Limited (Parent)

Country of
incorporation

Australia

Cellnet Ltd

New Zealand

Australia

C&C Warehouse
(Holdings) Pty Ltd

Regadget Pty Ltd

OYT Pty Ltd

Turn Left Distribution
Pty Ltd

3SixT Pty Ltd
(formerly Cellnet
Online Pty Ltd)

Australia

100

3SixT Limited

Hong Kong

100

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Financial Report

Joint venture with entity with ultimate control
over the group

During the year 2020 financial year, the group made loan
contributions of $26,000 to Wentronic International Pty
Ltd, being a joint venture between the group and its
controlling shareholder Wentronic Holding GmbH. The
group held a 49% interest in this entity and the investment
was equity accounted for on the group’s balance sheet.
The joint venture was dissolved during the 2020 financial
year. The group’s share of losses of the joint venture for
the year ended 30 June 2020 was $6,702. An impairment
charge of $454,000 was recognised in profit and loss for
the year ended 30 June 2020 (refer note 7) on write-off
of loans extended to the joint venture on its dissolution.

26. Subsequent events

There are no other matters or circumstances that
have arisen since the end of the financial year which
significantly affected or may significantly affect the
operations of the group, the results of those operations,
or the state of affairs of the group in future periods.

Entity with ultimate control over the group

Wentronic Holding GmbH and its associated entities
holds 53.45% (2020: 54.64%) of the ordinary shares in
Cellnet Group Limited.

At 30 June 2021, the group had a receivable from
Wentronic Holding GmbH of $92,000 (2020: $nil).

Transactions with entities under common control

Wentronic Asia Pacific Limited

During the 2021 and 2020 financial years, the group
enlisted the services of, or otherwise purchased inventory
from, Wentronic Asia Pacific Limited (WAPL). WAPL is a
wholly owned subsidiary of Wentronic Holding GmbH,
Cellnet’s controlling shareholder. A function of WAPL is
to source and purchase inventory through bulk buying
arrangements with third party suppliers on behalf of the
Wentronic Group.

Prior to 27 February 2020, WAPL sold inventory to the
group at cost price plus a fee to cover WAPL’s operating
costs. The fee paid was approximately 9% of the gross
amount of purchases paid in United States Dollars.
Following 28 February 2020, and as announced to the
ASX on 2 March 2020, the group started purchasing
products directly from suppliers and now pays WAPL a
6% management / services fee for coordination of the
purchasing and logistics function provided by WAPL
under a service agreement between Cellnet Group
Limited, Cellnet Limited and WAPL. During the 2020
financial year the group obtained an independent
expert’s report concluding that the transactions with
WAPL prior to 27 February 2020 were fair and reasonable,
and the purchasing arrangements prior to that date were
ratified by the group’s shareholders at a general meeting
held on 26 June 2020.

The total value of transactions with WAPL under these
arrangements during the 2021 financial year was
$840,000 (2020: $5,764,000). At 30 June 2021, the group
had a total of $9,000 owing to WAPL in respect of these
arrangements (2020: $5,000).

Wentronic GmbH

At 30 June 2021, the group had a receivable from
Wentronic GmbH, a wholly owned subsidiary of
Wentronic Holdings Gmbh, of $9,000 (2020: $nil), arising
from expense recharging arrangements.

Notes to the financial statements
28. Parent entity information

27. Parent entity information

28. Auditors’ remuneration

Current assets

Total assets

Current liabilities

Total liabilities

Net assets

2021

$000

29,146

42,860

2020

$000

28,785

42,700

(18,614)

(20,031)

(18,928)

(21,809)

23,929

20,891

Issued capital

38,725

38,389

Retained earnings / (accumulated
losses)

Reserve for own shares

Reserve for profits

Reserve for share based payment

(27,240)

(25)

10,524

1,945

(25)

8,072

1,695

Total shareholder’s equity

23,929

20,891

Profit / (loss) of the parent entity
after tax

Total comprehensive income of
the parent entity

2,452

(2,446)

2,452

(2,446)

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 2021
(2020: Nil).

Amounts received or due and receivable by the auditors for:

2021

$000

2020

$000

Audit services

Audit or review of the financial
report of the entity and any
other entity in the group

Non-audit services

Taxation compliance services
in relation to the entity and any
other entity in the group

112,000

89,000

110,590

103,236

Financial due diligence

25,000

247,590

192,236

29. Dividends franking account

Franking credit balance

The amount of franking credits available for the
subsequent financial year are $nil (2020: $nil).

Cellnet Group Limited and its consolidated entities Financial Report 2020–2130. 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 of joint venture loan

Share based payments expense / (benefit)

Share of (profits) / losses of associates

Fair value gain on revaluation of contingent consideration payable

Changes in assets and liabilities:

(Increase) / decrease in trade and other receivables

(Increase) / decrease in right to returned goods asset

(Increase) / decrease in inventories

(Increase) / decrease in current tax asset

(Increase) / decrease in deferred tax assets

(Decrease) / increase in trade and other payables

(Decrease) / increase in provisions

(Decrease) / increase in current tax liability

Change in other financial instruments

Net cash from operating activities

2021

$000

3,810

1,166

286

(495)

1,879

(158)

(2,330)

(65)

(1,346)

(6)

2,794

Financial Report

2020

$000

(2,373)

1,207

454

(16)

(172)

1,561

(357)

3,258

361

205

(492)

(152)

109

3,625

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 consolidated entity are in accordance with the Corporations Act 2001, including:

i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its 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 2021.

On behalf of the Board

Tony Pearson
Chairman

Brisbane
25th August 2021

Cellnet Group Limited and its consolidated entities Financial Report 2020–21
Independent Auditor’s Report

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

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Cellnet Group Limited (“the Company”) and its controlled entities
(“the Group”), which comprises the consolidated statement of financial position as at 30 June 2021, 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 to the financial statements including a
summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:

(a)

giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial
performance for the year then ended; and

(b)

complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) “the
Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the Directors as at the time of this
auditor’s report.

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

Key audit matter

How our audit addressed the key audit matter

Impairment testing for non-current assets

Refer to note 14 Intangible assets and note 2(v) Critical accounting estimates and judgements

Impairment testing for goodwill is required to be
completed annually under Australian Accounting
Standard AASB 136 Impairment of Assets.

This standard also requires impairment testing to be
conducted for other non-current assets where there is
an indicator that those assets may be impaired. At the
reporting date the carrying value of the Group’s net
assets exceeded the Group’s market capitalisation,
which is an indicator that non-current assets may be
impaired. Certain cash-generating units (CGUs) with
the Group also performed below budget expectations
for the year, with operations continuing to be impacted
by the ongoing COVID-19 pandemic, with these results
also considered an indicator of potential impairment
within those CGUs.

Impairment testing for non-current assets is a key
audit matter due to the high degree of management
estimation and assumptions (as disclosed in notes 2(v)
and 14) made by the Group, specifically those relating
to EBITDA, average annual revenue growth rate,
discount rates and terminal growth rates used in the
determination of discounted cash flows.

Our procedures included, amongst others:

• Understanding and evaluating the design and

implementation of the relevant controls over impairment of
non-current assets;

• Assessing management’s determination of the Group’s
CGUs based on our understanding of the nature of the
Group’s business and the identifiable groups of cash
generating assets;

• Comparing the cash flow forecasts used in the value-in-
use calculation to Board approved budgets for the 2022
financial year;

• Evaluating whether the forecasts used in value-in-use

calculations include reasonable expectations regarding
the impact of COVID-19 on the business over the
forecast period;

• Checking the mathematical accuracy of the

impairment testing model and its consistency with the
requirements of AASB 136;

• Assessing the reasonableness of significant estimates

and assumptions used for the impairment assessment, in
particular, those relating to the EBITDA, average annual
revenue growth rate, discount rate and terminal growth
rates used in the cash flow forecasts;

• Evaluating the impact of sensitivities in respect of

reasonable changes to forecast cash flows, discount
rates, and growth rates used in management’s
impairment testing calculations; and

• Assessing the adequacy of disclosures.

Recoverability of deferred tax assets

Refer to note 8 Income tax and note 2(v) Critical accounting estimates and judgements

At 30 June 2021, the Group has a total of $2.815m of
deferred tax assets recognised on its balance sheet.

Australian Accounting Standards require deferred tax
assets to be recognised to the extent that it is probable
that sufficient future taxable profits will be generated in
order for the benefits of the deferred tax assets to be
realised. These benefits are realised by reducing tax
payable on future taxable profits.

Recoverability of deferred tax assets is a key audit
matter due to the high degree of estimation and
assumptions (as disclosed in notes 2(v) and 8) made by
the Group concerning forecast taxable profits.

Our procedures included, amongst others:

• Understanding and evaluating the design and

implementation of the relevant controls in place for
assessing the recoverability of deferred tax assets;

• Obtaining management’s forecast of taxable income for
the next 3 years and agreeing the FY22 forecast to the
latest Board approved budget;

• Performing procedures over forecast information as
outlined above in response to the key audit matter
regarding impairment testing for non-current assets,
noting that the same baseline forecasts for the
Group’s CGUs are used in management’s assessment
regarding recoverability of deferred tax assets;

• Checking the mathematical accuracy of

management’s calculation of forecast taxable profit;
and

• Assessing the adequacy of disclosures.

Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Independent Auditor’s Report

Valuation of inventory

Refer to note 12 Inventories and note 2(v) Critical accounting estimates and judgements

The Group held inventory of $17.700m at 30 June
2021. The valuation of inventory is a key audit matter for
the following reasons:

• Retailer demand continues to be subdued

in some segments serviced by the Group in
Australia and New Zealand as a result of the
COVID-19 pandemic, with prevailing uncertainty
in future consumer demand for these markets;

• Uncertainty surrounding the availability of vendor

support for obsolete stock;

• A large portion of the Group’s inventory is

considered to be at risk of obsolescence due to its
attachment to electronic and telecommunications
devices, such as smartphone handsets;

Our procedures included, amongst others:

• Understanding and evaluation of the design and
implementation of the relevant controls over
the determination of the provision for inventory
obsolescence;

• Evaluating the appropriateness of the Group’s
obsolescence model, including the basis for
obsolescence triggers and the percentage write-downs
applied at each trigger point;

• Confirming the methodology applied for providing
for inventory obsolescence is consistent with that
applied in previous reporting periods, adjusted where
necessary for changes in assumptions based on actual
and forecast demand;

• Delays in the rollout of the Group’s online strategy.

• Testing the net realisable value of a sample of inventory

• Management judgements and assumptions

applied in deriving the provision for obsolescence.

As a result of the above conditions we considered
valuation of inventory to be a key audit matter.

items through subsequent sales transactions, and
confirming results of this testing align with assumptions
applied in the obsolescence model;

• Performing trend analysis of changes in the

obsolescence provision by product over the past 12
months, and confirming trends correlate with age of
related product technology;

• Vouching vendor funding commitments obtained to

documented agreement of terms; and

• Assessing the adequacy of disclosures.

Revenue recognition – variable consideration

Refer to note 2(v) Critical accounting estimates and judgements

Revenue is recognised net of estimated incentives,
rebates and expected returns as prescribed under
AASB 15 Revenue from Contracts with Customers.

Rebate and incentive arrangements offered by
the Group vary and are customer specific. These
obligations are established either in contract or through
principal of constructive obligation based on customary
business practice, and the associated refund liabilities
are estimated based on past practice, sales volumes
and customer claim history.

The expected reversal of sales through customers
exercising their right of return is estimated based
on historical rates of return. Due to the variety of
contractual terms with customers and the degree of
management judgement involved, the estimation of
variable consideration in respect of these items is
considered to be complex.

There is a risk that revenue could be misstated due
to the level of estimation and judgement required
in accounting for these obligations. As such, we
considered revenue recognition to be a key audit
matter.

Our procedures included, amongst others:

• Understanding and evaluation of the design and
implementation of the relevant controls over the
recognition of rebates, incentives and rights of return;

• Evaluating the appropriateness of the Group’s revenue

recognition accounting policies;

• Assessing the accuracy of rebates and incentives

recognised throughout the year based on the terms of
underlying contractual or constructive obligations;

• Recalculating the valuation of refund liabilities for

outstanding rebates and incentives at year end, having
regard to contractual arrangements in place and past
practice, sales volumes, and customer claim history;

• Assessing the calculation of the right of return liability
and associated right to returned goods asset at year
end, including testing the accuracy of the historical
rate of return applied and the valuation of the right to
returned goods asset; and

• Assessing the adequacy of disclosures.

Other Information

The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial
report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to modify our

Cellnet Group Limited and its consolidated entities Financial Report 2020–21Independent Auditor’s Report

opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions to eliminate threats or
safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included on pages 8 to 18 of the directors’ report for the year ended
30 June 2021. In our opinion, the Remuneration Report of Cellnet Group Limited, for the year ended 30 June
2021, complies with section 300A of the Corporations Act 2001.

Responsibilities

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.

PITCHER PARTNERS

DANIEL COLWELL
Partner

Brisbane, Queensland

25th August 2021

Substantial shareholders

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:

Shareholder

Wentronic Holding Gmbh

Shares per notice

118,738,107

Distribution of equity security holders