Cirrus
Networks
APPENDIX 4E
30 June 2019
Cirrus Networks Holdings Ltd (CNW)
ABN: 98 103 348 947
Cirrus Staff Profile - Joe Citizen (Commercial in Confidence)
Copyright © 2019 Cirrus Networks Pty Ltd
2
CURRENT PERIOD
1 July 2018 to 30 June 2019
PREVIOUS CORRESPONDING PERIODS
1 July 2017 to 30 June 2018
For personal use only
Contents
DESCRIPTION
1. Results for announcement to the market
2. Net tangible assets per ordinary share
3. Details of entities over which control has been gained during the period
4. Details of entities over which control has been lost during the period
5. Dividends
6. Details of associates and joint venture entities
7. Audit qualification or review
8. Attachments
9.
Signed
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3
3
3
3
3
3
4
4
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
1
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1. Results for announcement to the market
Revenues from ordinary activities
Profit / (Loss) from ordinary activities after tax attributable to
the owners of Cirrus Networks Holdings Ltd
up
down
16%
73%
to
to
$88,038,326
$776,279
Profit / (Loss) for the year attributable to the owners of Cirrus
Networks Holdings Ltd
down
73%
to
$776,279
REVIEW OF OPERATIONS
Another excellent year for the Company in FY19 with revenues from ordinary activities up 16% to $88m and the preferred
earnings measure of EBTIDA (pre options) up 338% to $1.9m. The statutory result for the consolidated entity after
providing for income tax amounted to a net profit of $776k (30 June 2018: $2.83m). However, this result included a
number of one-off and non-cash expenses including:
• non cash expensing of share-based options $303k;
•
redundancy and restructure costs $268k; and
• amortisation of intangible and depreciation $663k
After adjusting for these transactions and non-cash expenses (per table below) the entity had an EBITDA (pre options) of
$1,918k (30 June 2018: $438k profit).
NORMALISED EBITDA
Adjustments
FY2017
FY2018
FY2019
$861,155
$1,033,825
$2,187,485
Investment in Canberra (Pre CC Acquisition)
($1,138,413)
($272,003)
Redundancy Cost
Voluntary Escrow Payment
($165,345)
($267,510)
($50,000)
Acquisition Costs for due diligence
($103,784)
($97,943)
Foreign Exchange Impact
EBITDA (PRE-OPTIONS)
Interest (Net)
R&D Tax Offset
($45,977)
($10,872)
($2,058)
($427,019)
$437,662
$1,917,917
$19,209
($175,404)
$1,188,686
$356,759
Amortisation & Depreciation
($130,164)
($466,215)
($663,196)
Share based compensation - options
($230,927)
($226,046)
($303,038)
NET PROFIT/(LOSS) BEFORE DTA RECOGNITION
$400,576
$121,369
$776,279
Deferred tax asset recognition
$2,709,922
STATUTORY NET PROFIT/(LOSS)
$400,576
$2,831,291
$776,279
At 30 June 2019, the Group had a cash balance of $5.01m. Cirrus has a positive $3.61m net cash (2018: positive $4.43m)
with the only borrowing being $1.4m of acquisition funding drawn down for the payment of the Correct Communications
acquisition.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
2
For personal use only
2. Net tangible assets per ordinary share
Net tangible assets per ordinary security
$0.003
$0.001
REPORTING PERIOD
PREVIOUS PERIOD
3. Details of entities over which control
has been gained during the period
Gain of control of entities during the period – Nil.
4. Details of entities over which control
has been lost during the period
Loss of control of entities during the period – Nil.
5. Dividends
Current Period
There were no dividends paid, recommended or declared during the current financial period.
6. Details of associates and joint
venture entities
Equity accounted Associates and Joint Venture Entities – Nil.
7. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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8. Attachments
Details of attachments (if any):
The Annual Report of Cirrus Networks Holdings Ltd for the year ended 30 June 2019 is attached.
9. Signed
Matt Sullivan
Managing Director
Signature:
Date: 22 August 2019
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
4
For personal use only
Cirrus
Networks
ANNUAL REPORT
30 June 2019
Cirrus Networks Holdings Ltd (CNW)
ABN: 98 103 348 947
Cirrus Staff Profile - Joe Citizen (Commercial in Confidence)
Copyright © 2019 Cirrus Networks Pty Ltd
2
For personal use only
Corporate Directory
CURRENT DIRECTORS
AUDITOR
• Mr Andrew Milner (Chairman)
• Mr Daniel Rohr (Non-Executive Director)
• Mr Matthew Sullivan (Managing Director)
• Mr Paul Everingham (Non-Executive Director)
COMPANY SECRETARY
Ms Catherine Anderson
Telephone: + 61 8 6180 4222
SHARE REGISTRY*
Computershare Registry Services Pty Ltd
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: +61 8 9323 2000
+61 8 9323 2033
Facsimile:
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Telephone: +61 8 6382 4600
ASX Code: CNW
REGISTERED OFFICE
Arcadia Chambers
Level 2, 1 Roydhouse Street
Subiaco WA 6008
Telephone: +61 8 6180 4222
Email:
info@cirrusnetworks.com.au
Website: www.cirrusnetworks.com.au
*This entity is included for information purposes only. This entity has not been involved in the preparation of this Annual Report.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
6
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Contents
DESCRIPTION
Directors Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance
Additional ASX Required Information
PAGE
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25
26
27
28
29
30
61
62
67
77
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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Letter from the Chairman
Dear Shareholder
Welcome to the Cirrus Networks Limited 2019 Annual Report. Your Company reported a record EBITDA of $1.9m (pre
option expense) for the period, as both consolidated revenue and gross margins continue their positive trajectory.
As the Company nears the end of its 5 year strategic plan, management’s focus moves from revenue growth to gross
margin expansion and improvement in quality of earnings. Approaching $100m in revenue, the business is starting to
benefit from rapidly accelerating economies of scale; blended gross margins across Professional & Managed Services
improved from 22% (FY18) to 29%, driving this year’s overall gross margin from 15.4% to 18%.
Growth in FY19 was entirely organic, with no acquisitions completed during the period – a positive indicator of the growing
sales and delivery capability in the Services portfolio, but more importantly a validation of the culture that is nurturing this
transformation as we seek long term competitive advantage.
The rapid growth of Professional & Managed Services at both the revenue and gross margin line (GM: $4.1m in FY18 to
$7.3m) has improved quality of earnings substantially, with all Services contributing 46% of total gross margin in FY19 – up
from 27% in FY17 and 35% in FY18.
Further growth in Services revenue with a continued focus on containing overheads is expected to drive improving EBITDA
in FY20.
Management’s disciplined approach to vendor selection, service capability and customer satisfaction ensures the business
remains focused on the strategic goal of becoming one of Australia’s top ranked Managed & Professional Services
organizations.
On behalf of the Board and Management I thank you for your continued support and look forward to a rewarding 2020.
Andrew Milner
Chairman
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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Directors’ Report – 30 June 2019
The Directors present their report, together with the financial statements, on the consolidated
entity (referred to hereafter as the 'Consolidated Entity' or ‘Group’) consisting of Cirrus Networks
Holdings Ltd (referred to hereafter as the 'Company' or 'Parent Entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2019.
DIRECTORS – TERMS OF OFFICE, SKILLS AND EXPERIENCE
The following persons were Directors of Cirrus Networks Holdings Ltd during the entire the financial year and up to the
date of this report, unless otherwise stated:
• Andrew Milner -Non-Executive Chairman
• Daniel Rohr – Non-Executive Director
• Matthew Sullivan – Managing Director
• Paul Everingham – Non-Executive Director (appointed 23 July 2018)
• Patrick Glovac – Non-Executive Director (resigned 23 July 2018)
ANDREW MILNER (Non-Executive Chairman)
Appointed 2 July 2015
Andrew Milner is a veteran of the Australian Information Communications Technology industry and has more than
20 years’ experience in managing successful high-growth technology businesses.
Founding Wantree Internet (Wantree) in 1995 (which became one of Australia’s first commercial Internet Service
Providers), he was appointed to the iiNet board when Wantree was vended into the iiNet Ltd IPO in 1999. Mr Milner spent
9 years with that company in a variety of executive and non-executive Director roles. iiNet grew to a $1.4 billion market
capitalization with over 2,000 staff and $1 billion in annual revenue, prior to being acquired by TPG Telecom Ltd
in 2015.
From 2004, Mr Milner was co-founder and non-executive Chairman of L7 Solutions, one of WA’s fastest growing systems
integrators, with a turnover of $55m at the time of its acquisition by Amcom Telecommunications in 2011.
During the previous 3 years, Mr Milner has not held any other directorships in listed entities.
DANIEL ROHR (Non-Executive Director)
Appointed 2 July 2015
Daniel Rohr is a Chartered Accountant with a Bachelor of Commerce degree and has over 25 years’ management,
corporate advisory, finance and accounting experience across a range of listed and unlisted companies in Australia and
overseas.
He is currently the CFO of HealthEngine Pty Ltd and has recently acted as a corporate advisor for a number of listed and
non-listed businesses in the IT and mining sectors. Mr Rohr has extensive experience in managing the development of high
growth and start-up companies in the digital, mining, real estate and financial services industries.
During the previous 3 years, Mr Rohr has held the role of non-executive director of Velpic Limited.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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MATTHEW SULLIVAN (Managing Director)
Appointed 2 July 2015
Matthew Sullivan has more than 20 years’ experience in the Information Technology (“IT”) industry and has held various
executive roles within strong performing and high growth IT organisations in Australia and was CEO and co-founder
(with Mr Milner) of L7 Solutions in 2004 until its 2011 acquisition by Amcom.
During this time the company was awarded numerous industry accolades including:
• 5th fastest growing WA company in 2007 (WA Business News)
• 18th fastest growing Australian company in 2008 (BRW Fast 100)
• 2005 Cisco A/NZ Partner of the Year; and
• 2010 EMC WA partner of the Year.
Mr Sullivan was also a 2005 and 2008 winner of the WA Business News "40 under 40" and Western Region finalist in the
2010 Ernst & Young Entrepreneur of the Year.
Most recently Mr Sullivan has been Chief Solutions Officer of Amcom and Chief Operations Officer at Comscentre. During
the previous 3 years, Mr Sullivan has not held any other directorships in listed entities.
PAUL EVERINGHAM (Non-Executive Director)
Appointed 23 July 2018
Mr Everingham is Chief Executive Officer of the Chamber of Minerals & Energy of Western Australia.
Prior to joining the Chamber of Minerals & Energy, Paul held numerous senior executive roles in business and government
including; Chief Executive of Marketforce Australia, a leading Australian advertising agency; Founder and Managing
Director of GRA Everingham Advisory, Western Australia's premier government relations advisory business; Executive
Director of the Liberal Party of Australia (WA); and as a Senior Adviser in the Commonwealth Treasury.
Paul has a Bachelor of Commerce from the University of Queensland; a Post Graduate Diploma in Applied Finance &
Investment from the University of NSW; and a Graduate Certificate in Financial Mathematics from Queensland University
of Technology.
During the previous 3 years, Mr Everingham has not held any other directorships in listed entities.
PATRICK GLOVAC (Former Non-Executive Director)
Appointed 2 July 2015 and Resigned 23 July 2018
Mr Glovac holds a Bachelor of Commerce majoring in Finance, Banking, Management and also holds a Diploma of
Management.
In 2013 Mr Glovac co-founded GTT Ventures Pty Ltd, a boutique corporate advisory firm, specializing in the resource and
technology sector. GTT has funded numerous listed and private companies since its inception across multiple markets
including Australia, USA and the United Kingdom. Previously he worked as an investment advisor for Bell Potter Securities
Limited since 2013, focusing on high net-worth clients and corporate advisory services.
During the previous 3 years, Mr Glovac has held other directorship positions including the role of managing director of ASX
listed Applabs Technologies Limited and non-executive director of ASX listed GB Energy Limited and Sovereign Gold
Company Limited.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
10
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DIRECTORS’ INTERESTS IN SHARES AND OPTIONS OF THE COMPANY
The following relevant interests in shares and options of the Company are held by the Directors who hold office as at the
date of this report, with the holdings being as at the date of this report:
DIRECTOR
Andrew Milner
Daniel Rohr
Matthew Sullivan
Paul Everingham
SHARES
OPTIONS
44,323,387
7,678,863
48,273,387
7,880,000
2,500,000
2,500,000
20,000,000
-
COMPANY SECRETARY - CATHERINE ANDERSON – B JURIS (HONS) LLB (UWA)
Appointed 8 March 2011
Catherine Anderson is a legal practitioner admitted in Western Australia and Victoria and has over 25 years’ experience
in both private practice and in-house legal roles from working in Melbourne and Perth, particularly in the area of capital
raisings and corporate structures. During her career, Ms Anderson has advised on all aspects of corporate and commercial
law and today brings this extensive commercial experience to the Company and oversaw the transition of the Company
from Liberty to Cirrus, including its re-admission to ASX.
Ms Anderson also has experience in company secretarial roles for other ASX listed resource companies, as well as having
been a director of an ASX listed junior explorer. She currently also provides consultancy services to entities wishing to
proceed to IPO and listing on ASX, and has twice been nominated for the Telstra Business Woman of the Year Award for
an online retail business she established in 2007.
MEETINGS OF DIRECTORS
The number of Directors’ meetings and number of committee meetings attended by each of the Directors of the Company
during the financial year or during the period of appointment were:
DIRECTOR
BOARD OF DIRECTORS
AUDIT COMMITTEE
REMUNERATION
COMMITTEE
Andrew Milner
Daniel Rohr
Matthew Sullivan
Paul Everingham
Patrick Glovac
A
12
12
11
10
1
B
12
12
12
11
1
A
2
2
-
2
-
B
2
2
-
2
-
A
1
1
-
1
-
B
1
1
-
1
-
A – Number of meetings attended
B – Number of meetings eligible to attend
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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PRINCIPAL ACTIVITIES
The principal activity of the Group is the provision of information technology services and related third-party product sales.
There were no significant changes in the nature of the activities of the Group during the year.
DIVIDENDS
There were no dividends paid, recommended or declared during the current or previous financial year.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Consolidated Entity other than those disclosed in other
areas of this annual financial report.
REVIEW OF OPERATIONS
*Non-IFRS Financial Information
Adjustments to reflect movement from underlying performance to statutory consolidated result of the Group:
NORMALISED EBITDA
$861,155
$1,033,825
$2,187,485
FY2017
FY2018
FY2019
Adjustments
Investment in Canberra (Pre CC Acquisition)
($1,138,413)
($272,003)
Redundancy Cost
Voluntary Escrow Payment
($165,345)
($267,510)
($50,000)
Acquisition Costs for due diligence
($103,784)
($97,943)
Foreign Exchange Impact
($45,977)
($10,872)
($2,058)
EBITDA (PRE-OPTIONS)
($427,019)
$437,662
$1,917,917
Interest (Net)
R&D Tax Offset
$19,209
($175,404)
$1,188,686
$356,759
Amortisation & Depreciation
($130,164)
($466,215)
($663,196)
Share based compensation - options
($230,927)
($226,046)
($303,038)
NET PROFIT/(LOSS) BEFORE DTA RECOGNITION
$400,576
$121,369
$776,279
Deferred tax asset recognition
$2,709,922
STATUTORY NET PROFIT/(LOSS)
$400,576
$2,831,291
$776,279
At 30 June 2019, the Group had a cash balance of $5.01m. Cirrus has a positive $3.61m net cash (2018: positive $4.43m)
with the only borrowing being $1.4m of acquisition funding drawn down for payment of the Correct Communications Pty
Ltd acquisition.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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OPTIONS ON ISSUE
The Company has the following classes of options on issue as at the date of this report:
CLASS
EXERCISE PRICE
EXPIRY DATE
VESTING
NUMBER
2019
2018
2,062,500
2,062,500
2,062,500
2,062,500
7,000,000
7,000,000
6,287,500
9,612,500
6,287,500
9,612,500
5,612,500
5,837,500
5,612,500
5,837,500
$0.035
$0.045
$0.080
$0.035
$0.045
$0.035
$0.045
30-06-22
30-06-22
31-12-19
13-11-20
13-11-20
30-06-21
30-06-21
Vested
Vests 09-07-20
Vested
Vested
Vested
Vested
Vests 20-07-19
5,000,000
5,000,000
$0.045
5 years from vesting date
When EBIT > $2M
5,000,000
5,000,000
$0.060
5 years from vesting date
When EBIT > $4M
5,000,000
5,000,000
5,000,000
5,000,000
1,762,500
3,000,000
1,762,500
3,000,000
7,500,000
7,500,000
7,500,000
7,500,000
4,250,000
4,250,000
4,250,000
4,250,000
1,500,000
1,500,000
-
-
$0.045
$0.060
$0.035
$0.045
$0.060
$0.045
$0.035
$0.045
$0.035
$0.045
18-04-23
18-10-24
30-06-22
30-06-22
11-10-23
11-10-21
22-11-21
22-11-21
30-06-22
30-06-22
Vested
Vests 18-10-19
Vested
Vested
Vests 11-10-22
Vests 11-10-20
Vested
Vested
Vests 28-03-20
Vests 28-09-21
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
TOTAL
84,950,000
111,775,000
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
13
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REMUNERATION REPORT (Audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity,
in accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the entity, directly or indirectly, including all directors.
The Key Management Personnel for the year 1 July 2018 – 30 June 2019 were the Directors of the Company:
• Andrew Milner – Non-Executive Chairman
• Daniel Rohr - Non-Executive Director
• Matthew Sullivan – Managing Director
• Paul Everingham – Non-Executive Director (appointed 23 July 2018)
• Patrick Glovac – Former Non-Executive Director (resigned 23 July 2018)
The other Key Management Personnel were:
• Christopher McLaughlin – Chief Operating Officer
• Matthew Green – Chief Financial Officer
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Key Management Personnel remuneration
• Share-based compensation
• Option holdings of Key Management Personnel
• Share holdings of Key Management Personnel
PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION
The objective of the Consolidated Entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the
delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria
for good reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage / alignment of executive compensation
•
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements
for its directors and executives. The performance of the consolidated entity depends on the quality of its directors and
executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the consolidated entity.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
• having economic profit as a core component of plan design
•
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and
delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers
of value
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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REMUNERATION REPORT (Audited) – (continued)
• attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives' interests by:
•
•
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
• providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director
remuneration is separate.
Non-Executive Directors’ Remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-Executive
Directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination
and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to
ensure non-executive directors' fees and payments are appropriate and in line with the market. The Chairman's fees are
determined independently to the fees of other Non-Executive Directors based on comparative roles in the external
market. The Chairman is not present at any discussions relating to the determination of his own remuneration. Non-
Executive Directors have not received share options or other incentives as Director remuneration.
ASX listing rules require the aggregate Non-Executive Directors' remuneration be determined periodically by a general
meeting. The most recent determination was at the Annual General Meeting held on 20 November 2018, where the
shareholders approved a maximum annual aggregate remuneration of $250,000 for Director fees.
Executive Remuneration
The Consolidated Entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
• base pay and non-monetary benefits
•
•
short-term performance incentives
share-based payments
• other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the consolidated entity and comparable market remunerations.
The short-term incentives ('STI') program is designed to align the targets of the business units with the performance
hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance
indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and
product management.
The long-term incentives ('LTI') include long service leave and share-based payments.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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REMUNERATION REPORT (Audited) – (continued)
Employment Contracts
Remuneration and other terms of employment for the Managing Director, Matthew Sullivan, as at 30 June 2019, were
formalised in an employment agreement, the terms of which are set out below:
Matthew Sullivan, Managing Director:
• Term of agreement: commenced 2 July 2015. Amended on 1 August 2018.
• Termination notice period: three months.
• Annual Executive Director salary of $280,000 (2018 - $265,000)
•
STI At-Risk of $120,000 based on the following KPI’s:
FY19
NPAT
Margin
Annuity Growth
Cost Control
Customer Satisfaction
Employee Satisfaction
%
70
10
5
5
5
5
FY18
Underlying Profit
Margin
Annuity Growth
Delivery Efficiency
Customer Satisfaction
Employee Satisfaction
%
Indexed
25
30
15
15
15
In addition, in October 2016 the general meeting of shareholders approved Matthew Sullivan to be issued with the
following options:
Options
Grant date
Expiry date
TIER 1
TIER 2
TIER 3
TIER 4
18 Oct 2016
18 Oct 2016
18 Oct 2016
18 Oct 2016
5 years from
vesting
5 years from
vesting
18 April 2023
18 Oct 2024
Share price at grant date
$0.028
Exercise price
$0.045
$0.028
$0.060
$0.028
$0.045
$0.028
$0.060
Vesting Conditions
When Cirrus
achieves $2
million in EBIT
When Cirrus
achieves $4
million in EBIT
After 18 months’
service
After 36 months’
service
Fair value at grant date
$0.0101
$0.0098
$0.0101
$0.0098
Number granted
5,000,000
5,000,000
5,000,000
5,000,000
Total fair value
$50,681
$48,766
$50,681
$48,766
Remuneration expense
for FY19
Remuneration expense
for FY18
$12,670
$18,287
-
$16,256
$12,670
$18,287
$25,340
$16,256
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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REMUNERATION REPORT (Audited) – (continued)
Remuneration and other terms of employment for the Chief Operating Officer, Christopher McLaughlin, as at 30 June
2019, were formalised in an employment agreement, the terms of which are set out below:
Christopher McLaughlin., Chief Operating Officer:
• Term of agreement: commenced 1 June 2016. Amended on 1 January 2019.
• Termination notice period: three months.
• Annual Chief Operating Officer salary of $250,000
•
STI At-Risk of $75,000 based on the following KPI’s:
FY19
NPAT
Annuity Growth
Professional Services Growth
Delivery Efficiency - Annuity
Delivery Efficiency - Professional Services
Customer Satisfaction
Employee Satisfaction
%
70
5
5
5
5
5
5
Options
Grant date
Expiry date
TIER 1
TIER 2
05/07/2016
05/07/2016
30/06/2021
30/06/2021
Share price at grant date
$0.028
Exercise price
$0.035
$0.028
$0.045
Vesting Conditions
Vested
Vests 20/07/2019
Fair value at grant date
$0.0123
$0.0105
Number granted
1,675,000
1,675,000
Total fair value
$20,593
$17,540
Remuneration expense
for FY19
-
$5,847
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
17
For personal use only
REMUNERATION REPORT (Audited) – (continued)
Remuneration and other terms of employment for the Chief Financial Officer, Matthew Green, as at 30 June 2019, were
formalised in an employment agreement, the terms of which are set out below:
Matthew Green, Chief Financial Officer:
• Term of agreement: commenced 10 August 2015. Amended on 1 August 2018.
• Termination notice period: three months.
• Annual Chief Financial Officer salary of $240,000
•
STI At-Risk of $75,000 based on the following KPI’s:
FY19
NPAT
Cost Control
Delivery Efficiency
Customer Satisfaction
Employee Satisfaction
%
70
10
10
5
5
Options
Grant date
Expiry date
TIER 1
TIER 2
TIER 3
TIER 4
20/11/2015
20/11/2015
05/07/2016
05/07/2016
13/11/2020
13/11/2020
30/06/2021
30/06/2021
Share price at grant date
$0.030
Exercise price
Vesting Conditions
$0.035
Vested
$0.030
$0.045
Vested
Fair value at grant date
$0.0095
$0.0088
Number granted
1,675,000
1,675,000
Total fair value
$31,829
$29,489
$0.028
$0.035
$0.028
$0.045
Vested
Vests 20/07/2019
$0.0123
862,500
$10,604
$0.0105
862,500
$9,032
Remuneration expense
for FY19
-
$3,683
-
$3,011
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
18
For personal use only
REMUNERATION REPORT (Audited) – (continued)
All other Key Management Personnel were appointed as Directors under the Corporations Act, on the following terms:
Andrew Milner, Non-Executive Chairman:
• Term of agreement: commenced 2 July 2015 and subject to re-election as required by the Company’s Constitution.
• Termination as per constitution or breach of the code of conduct.
• Annual Chairman’s fee of $70,000 (2018 - $70,000) (plus statutory superannuation)
Daniel Rohr, Non-Executive Director:
• Term of agreement: commenced 2 July 2015 and subject to re-election as required by the Company’s Constitution.
• Termination as per constitution or breach of the code of conduct.
• Annual non-executive director’s fee of $48,402 (2018 - $48,402) (plus statutory superannuation)
Paul Everingham, Non-Executive Director (appointed 23 July 2018):
• Term of agreement: commenced 23 July 2018 and subject to re-election as required by the Company Constitution.
• Termination as per constitution or breach of the code of conduct
• Annual non-executive director’s fee of $43,836 (plus statutory superannuation)
Patrick Glovac, Former Non-Executive Director (resigned 23 July 2019):
• Term of agreement: commenced 2 July 2015 and subject to re-election as required by the Company’s Constitution.
• Termination as per constitution or breach of the code of conduct.
• Annual non-executive director’s fee of $43,836, pro-rata for one month served $2,529 (2018 - $43,386) (plus
statutory superannuation)
No Director or Executive is entitled to any termination payments apart from payment in lieu of the notice periods outlined
above, remuneration payable up to and including the date of termination and payments due by way of accrued leave
entitlements.
Consolidated Entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash
bonus and incentive payments are dependent on defined growth targets being met. The remaining portion of the cash
bonus and incentive payments are at the discretion of the Nomination and Remuneration Committee.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in
part to the adoption of performance-based compensation and is satisfied that this improvement will continue to increase
shareholder wealth if maintained over the coming years.
Specifically, in relation to options, this effectively links directors’ performance to the share price performance and
therefore to the interests of the shareholders. For this reason, there are no performance conditions prior to grant, but
instead an incentive to increase the value to all shareholders.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
19
For personal use only
REMUNERATION REPORT (Audited) – (continued)
Performance KPI’s for the current and prior year are set out below:
FY2019
Underlying Profit
Margin
Annuity Growth
Cost Control
Customer Satisfaction
Employee Satisfaction
FY2018
Underlying Profit
Margin
Annuity Growth
Delivery Efficiency
Customer Satisfaction
Employee Satisfaction
Voting and comments made at the Company's 20 November 2018 Annual General Meeting ('AGM')
At the 2018 AGM, 91% of the votes received supported the adoption of the remuneration report for the year ended
30 June 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
KEY MANAGEMENT PERSONNEL REMUNERATION FOR THE YEAR ENDED 30 JUNE 2019
SHORT-TERM EMPLOYEE
BENEFITS
POST-EMPLOYMENT
BENEFITS
EQUITY-SETTLED
SHARE-BASED
NAME
POSITION
YEAR
Salary
& Fees $
Bonuses*
$
Other
$
Super
$
Other
$
Andrew Milner
2019
68,654
NON-EXECUTIVE CHAIRMAN
2018
70,000
Daniel Rohr
2019
47,471
NON-EXECUTIVE DIRECTOR
2018
48,402
Paul Everingham
NON-EXECUTIVE DIRECTOR
2019
40,520
Matthew Sullivan
2019
273,365
-
-
-
-
-
-
-
-
-
-
-
6,522
6,650
4,510
4,598
3,849
6,599
24,964
MANAGING DIRECTOR
2018
262,916
35,050¹
-
28,307
Christopher McLaughlin
CHIEF OPERATING OFFICER
2019
238,526
Matthew Green
CHIEF FINANCIAL OFFICER
2019
233,718
Patrick Glovac
2019
2,529
FORMER NON-EXECUTIVE
DIRECTOR
2018
43,836
TOTAL
2019
904,783
-
-
-
-
-
3,660
22,075
(1,524)
22,203
-
-
240
4,164
8,734
84,363
2018
425,155
35,050
-
43,719
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
-
-
-
-
-
-
-
-
-
-
-
-
-
Shares & Share
Options
TOTAL
$
PERFORMANCE
RELATED
$
-
75,176
23,625
100,275
-
51,981
23,625
76,625
-
44,369
47,213
352,141
72,553
398,826
5,847
270,108
6,693
261,090
-
2,769
23,625
71,625
59,753
1,057,634
143,428
647,352
-
-
-
-
-
9%
9%
-
-
-
-
-
-
20
For personal use only
REMUNERATION REPORT (Audited) – (continued)
¹. Matthew Sullivan achieved 35% of the STI in 2018 based on the following KPIs:
FY17
% Target
% Achieved
NPAT
Growth
Improvement
Customer Satisfaction
Employee Satisfaction
Total
30% Indexed
50% of target - Indexed
30%
20%
10%
10%
100%
30%
20%
10%
10%
35%
SHARE BASED COMPENSATION TO KEY MANAGEMENT PERSONNEL DURING THE YEAR ENDED
30 JUNE 2019
There are no performance conditions attached to the Director options issued in the prior year. Options issued to Directors
carry no dividends or voting rights and each option is convertible to one share of the company. Options have been valued
using a Black & Scholes model which includes the following inputs.
MATTHEW SULLIVAN’S
OPTIONS
Grant date
Expiry date
TIER 1
TIER 2
TIER 3
TIER 4
18 Oct 2016
18 Oct 2016
18 Oct 2016
18 Oct 2016
5 years from
vesting
5 years from
vesting
18 April 2023
18 Oct 2024
Share price at grant date
$0.028
Exercise price
$0.045
$0.028
$0.060
$0.028
$0.045
$0.028
$0.060
Vesting Conditions
When Cirrus
achieves $2
million in EBIT
When Cirrus
achieves $4
million in EBIT
After 18 months’
service
After 36 months’
service
Fair value at grant date
$0.0101
$0.0098
$0.0101
$0.0098
Number granted
5,000,000
5,000,000
5,000,000
5,000,000
Total fair value
$50,681
$48,766
$50,681
$48,766
Remuneration expense
for FY19
Remuneration expense
for FY18
$12,670
$18,287
-
$16,256
$12,670
$18,287
$25,340
$16,256
Matthew’s share-based payment expense for the 2019 year made up 20.10% of his total compensation.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
21
For personal use only
REMUNERATION REPORT (Audited) – (continued)
OPTION HOLDINGS OF KEY MANAGEMENT PERSONNEL
30 JUNE 2019
BALANCE
AT THE
START OF
THE YEAR
BALANCE AT
APPOINTMENT /
(RESIGNATION)
DATE
GRANTED AS
REMUNERATION
NET CHANGE
Andrew Milner
2,500,000
Daniel Rohr
2,500,000
Paul Everingham
-
Matthew Sullivan
20,000,000
Christopher McLaughlin
3,350,000
Matthew Green
5,075,000
-
-
-
-
-
-
Patrick Glovac
7,666,667
(7,666,667)*
TOTAL
41,091,667
(7,666,667)
-
-
-
-
-
-
-
-
*As at the time of Patrick Glovac’s resignation, he held 7,666,667 options.
BALANCE AT
THE END OF
THE YEAR
2,500,000
2,500,000
-
20,000,000
3,350,000
5,075,000
-
-
-
-
-
-
(7,666,667)
-
(7,666,667)
33,425,000
30 JUNE 2019
Andrew Milner
Daniel Rohr
Paul Everingham
TOTAL
2,500,000
2,500,000
-
Matthew Sullivan
5,000,000
Christopher McLaughlin
1,675,000
Matthew Green
4,212,500
VESTED AS AT END OF YEAR
EXERCISABLE
NOT EXERCISABLE
2,500,000
2,500,000
-
5,000,000
1,675,000
4,212,500
-
-
-
-
-
-
-
TOTAL
15,887,500
15,887,500
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
22
For personal use only
REMUNERATION REPORT (Audited) – (continued)
SHARE HOLDINGS OF KEY MANAGEMENT PERSONNEL
30 JUNE
2019
BALANCE AT
THE START OF
THE YEAR
BALANCE AT
APPOINTMENT /
(RESIGNATION)
DATE
GRANTED AS
REMUNERATION
ACQUIRED
/ (SOLD) ON
MARKET
NET
CHANGE
BALANCE AT
THE END OF
THE YEAR
Andrew Milner
44,323,387
Daniel Rohr
7,678,863
Paul Everingham
-
Matthew Sullivan
47,023,387
Christopher
McLaughlin
-
Matthew Green
14,457,781
-
-
-
-
-
Patrick Glovac
7,033,334
(7,033,334)
TOTAL
120,516,752
(7,033,334)
-
-
-
-
-
-
-
-
-
-
-
44,323,387
7,678,863
4,880,000
4,880,000
4,880,000
1,250,000
1,250,000
48,273,387
-
-
-
13,000,000
13,000,000
27,457,781
-
(7,033,334)
-
19,130,000
12,096,666
132,613,418
*As at the time of Patrick Glovac’s resignation, he held 7,033,334 shares.
This concludes the remuneration report, which has been audited.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
23
For personal use only
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
NON-AUDIT SERVICES
During the year, BDO, the Group’s auditor, has performed certain other services in addition to the audit and review of
financial statements.
The Board has considered the non-audit services provided during the year by the auditor and in accordance with written
advice provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during the
year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
•
•
all non-audit services were subject to the corporate governance procedures adopted by the Group and have been
reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for
the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, BDO, and its network firms for audit and non-audit services
provided during the year are set out below:
Services other than audit and review of financial statements
Audit and review of financial statements
TOTAL
AUDITOR'S INDEPENDENCE DECLARATION
90,818
48,854
139,672
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this Directors' report.
AUDITOR
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
On behalf of the Directors
Matt Sullivan
Managing Director
Signature:
Date: 22 August 2019
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
24
For personal use only Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF CIRRUS NETWORKS
HOLDINGS LIMITED
As lead auditor of Cirrus Networks Holdings Limited for the year ended 30 June 2019, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cirrus Networks Holdings Limited and the entities it controlled during
the period.
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 22 August 2019
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
For personal use only Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2019
REVENUE
Revenue
Other Income
EXPENSES
Purchase of Goods
Employee and labor related costs
Depreciation & Amortisation
Finance costs
Other Expenses
Foreign exchange losses
Share based compensation – options
Redundancy & Business Restructure
PROFIT/(LOSS) BEFORE INCOME TAX
Income tax benefit
PROFIT AFTER INCOME TAX FOR THE YEAR ATTRIBUTABLE TO THE
OWNERS OF CIRRUS NETWORKS HOLDINGS LTD
Other comprehensive income
NOTE
2.2
2.3
2.4
2.5
CONSOLIDATED
($) 2019
($) 2018
88,038,326
76,092,829
125,794
614,977
88,164,120
76,707,806
(56,805,785)
(57,014,004)
(25,753,011)
(16,630,743)
(663,196)
(223,564)
(466,215)
(23,198)
(3,369,679)
(2,537,538)
(2,058)
(303,038)
(267,510)
(10,872)
(226,046)
(165,345)
(87,387,841)
(77,073,961)
776,279
-
(366,155)
3,197,446
776,279
2,831,291
Other comprehensive income for the year, net of tax
-
-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE
TO THE OWNERS OF CIRRUS NETWORKS HOLDINGS LTD
776,279
2,831,291
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
NOTE
Basic earnings per share
Diluted earnings per share
2.6
CENTS
0.0884
0.0884
CENTS
0.343
0.343
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
26
For personal use only Consolidated Statement of Financial Position
As at 30 June 2019
NOTE
CONSOLIDATED
($) 2019
($) 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangibles
Deferred tax asset
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Borrowings
Provisions
Financial liability
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
4.1
4.2
3.1
3.2
3.3
2.4
4.3
5.2
4.4
6.4
5.2
4.4
5.1
6.1
2.5
5,012,769
22,383,899
294,406
78,518
5,263,581
14,659,295
210,069
341,658
27,769,592
20,474,603
559,888
8,727,466
2,709,922
11,997,276
39,766,868
653,143
8,792,795
2,709,922
12,155,860
32,630,463
26,100,021
17,877,816
800,000
695,057
-
27,595,078
600,000
267,513
867,513
28,462,591
11,304,277
14,200,608
1,037,493
(3,933,824)
11,304,277
333,332
656,490
3,000,000
21,867,638
500,001
257,490
757,491
22,625,129
10,005,334
13,775,608
734,455
(4,504,729)
10,005,334
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
27
For personal use only Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
CONSOLIDATED
($) ISSUED
CAPITAL
($) RESERVES
($) ACCUMULATED
LOSSES
($) TOTAL
EQUITY
Balance at 1 July 2017
12,552,411
508,409
(7,336,020)
5,724,800
Profit after income tax expense for
the year
Other comprehensive income for the year,
net of tax
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
-
-
-
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Issue of share capital (note 5.1)
Capital raising costs (note 5.1)
1,287,705
(64,508)
-
-
-
-
-
Issue of Options (note 6.1)
-
226,046
2,831,291
2,831,291
-
-
2,831,291
2,831,291
-
-
-
1,287,705
(64,508)
226,046
BALANCE AT 30 JUNE 2018
13,775,608
734,455
(4,504,729)
10,005,334
CONSOLIDATED
($) ISSUED
CAPITAL
($) RESERVES
($) ACCUMULATED
LOSSES
($) TOTAL
EQUITY
Balance at 1 July 2018
13,775,608
734,455
(4,504,729)
10,005,334
Retrospective adjustment upon change in
accounting policy (AASB 9) (Note 1.4)
-
-
(205,374)
(205,374)
Restated total equity at 30 June 2018
13,775,608
734,455
(4,710,103)
9,799,960
Profit after income tax for the year
Other comprehensive income for the year,
net of tax
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR
-
-
-
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS
Issue of share capital (note 5.1)
425,000
-
-
-
-
Issue of Options (note 6.1)
-
303,038
776,279
776,279
-
-
776,279
776,279
-
-
425,000
303,038
BALANCE AT 30 JUNE 2019
14,200,608
1,037,493
(3,933,824)
11,304,277
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
28
For personal use only Consolidated Statement of Cash Flows
For the year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
NOTES
CONSOLIDATED
($) 2019
($) 2018
90,827,446
85,695,903
(88,492,424)
(84,430,017)
48,159
42,407
NET CASH FROM OPERATING ACTIVITIES
4.1
2,383,181
1,305,493
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
(400,037)
(437,317)
Cash held by Correct Communications Pty Ltd at acquisition date
-
413,947
Payment for purchase of subsidiary
NET CASH (USED IN) INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Other - Interest paid
Other - Capital raising costs
NET CASH PROVIDED BY FINANCING ACTIVITIES
Net (decrease)/increase in cash and cash equivalents
(2,575,000)
(1,500,000)
(2,975,037)
(1,523,370)
-
787,705
1,250,000
1,000,000
(683,334)
(166,667)
(223,564)
(22,625)
-
(64,508)
343,102
1,533,905
(248,753)
1,316,028
Cash and cash equivalents at the beginning of the financial year
5,263,581
3,947,553
Effects of exchange rate changes on cash and cash equivalents
(2,058)
-
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
5,012,769
5,263,581
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
29
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2019
1
BASIS OF PREPERATION
In preparing the 2019 financial statements, the Group has made a number of changes in structure,
layout and wording in order to make the financial statements less complex and more relevant for
the shareholders and other users.
We have grouped notes into sections under six key categories
1.
2.
Basis of preparation
Results for the year
3. Assets and liabilities
4. Working capital disclosures
5.
Equity and funding
6. Other disclosures
Significant accounting policies, critical judgemental, estimates and assumptions specific to one note are included within
that note and where possible, wording has been simplified to provide clearer commentary on the financial report of the
Group. Accounting policies determined non-significant are not included in the financial statements. There have been no
changes to the Group’s accounting policies that are no longer disclosed in the financial statements.
1.1
GENERAL INFORMATION
Cirrus Networks Holdings Limited ('the Company') is a for-profit- public company domiciled in Australia. The
Company’s registered office is located at Arcadia Chambers, Level 2, 1 Roydhouse Street, Subiaco, WA, 6008.
These consolidated financial statements comprise the Company and its controlled entities at the end of, or
during, the year (together referred to as ‘the Group’) and were authorised for issue by the Board of Directors on
22 August 2019.
Cirrus Networks is a next-generation technology service provider delivering advisory services, integration
services and managed services.
1.2
BASIS OF PREPARATION
These financial statements are general purpose financial statements which
• have been prepared in accordance with the requirements of the Corporations Act 2001, Australian
Accounting Standards ('AASB’s') and other authoritative pronouncements of the Accounting Standards
Board. The consolidated financial statements comply with International Financial Reporting Standards
('AASB') as issued by the International Accounting Standards Board ('IASB');
• have been prepared on a going concern basis. Based on forecast cash flows, the Group has sufficient
working capital to fund its mandatory obligations for the period ending 12 months from the date of this
report. There are no indicators suggesting going concern problems and, therefore, no significant doubt
regarding the entity's ability to continue as a going concern;
• have been prepared on a historical cost basis, except for, where applicable, the revaluation of available-
for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment
properties, certain classes of property, plant and equipment and derivative financial instruments. The
basis of measurement is discussed further in the individual notes;
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
30
For personal use only 1.2 BASIS OF PREPARATION – (continued)
• are presented in Australian Dollars ($) unless otherwise stated, being, the Company’s functional currency,
in accordance with ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191;
• adopts all of the new, revised or amended Accounting Standards and Interpretations issued by AASB that
are relevant to the operations of the Group and effective for reporting periods beginning on or after 1
July 2018. Refer to note 1.4 for further details; and
• do not early adopt any Australian Accounting Standards or Interpretations that have been issued or
amended but not yet effective. Refer to note 6.7 for further details.
1.3
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Group. In preparing the
consolidated financial statements, all intercompany transactions, balances and unrealised gains on transactions
between entities in the Group are eliminated. Subsidiaries are consolidated from the date on which control is
obtained to the date on which control is disposed. The acquisition of subsidiaries is accounted for using the
acquisition method of accounting.
1.4
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
In the year ended 30 June 2019, the Group has reviewed all new and revised Standards and Interpretations
issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or
after 1 July 2018.
New standards impacting the Group that have been adopted from 1 July 2018 are:
• AASB 15 Revenue from Contracts with Customers (AASB 15); and
• AASB 9 Financial Instruments (AASB 9).
The Group has chosen to adopt the cumulative effect method for the above new standards and as such, the
comparative information throughout these consolidated financial statements has not been restated to reflect
the requirements of the new standards.
Other new and amended standards and interpretations issued by the AASB have been determined by the Group
to have no impact, material or otherwise, on its business and therefore no further changes, other than those
mentioned above, are necessary to the Group’s accounting policies. No retrospective change in accounting policy
or material reclassification has occurred requiring the inclusion of a third Statement of Financial Position as at
the beginning of the comparative financial period, as required by AASB 101.
Impact of new accounting standards
The effects of initially applying the following new standards on the Group’s consolidated financial statements
from 1 July 2018 are:
•
•
the adoption of AASB 15 has resulted in changes in accounting policies and disclosures in the financial
statements but has had no significant impact on the amount of revenue recognised for the Group in the
current or previous periods. Refer to note 2.2 for the new revenue accounting policy and the Group’s
new revenue disclosures; and
The adoption of AASB 9 has resulted in changes in accounting policies and has resulted in an adjustment
of $205,374 that has been posted to opening retained earnings to recognise the expected credit loss
relating to the Group’s trade receivables as at 1 July 2018. Refer to note 6.5 for the new financial
instruments accounting policy.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
31
For personal use only 1.5
ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with AASB’s requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimate is revised and in any future periods affected.
Information about judgements and estimates which are material to the consolidated financial statements are
included in the following notes:
NOTE
KEY JUDGEMENT AND ESTIMATE
Note 2.2 – Revenue
Note 2.2 – Revenue
Principal versus agent
Allocation of transaction price
Note 2.4 – Income tax
Income tax
Note 3.2 – Property, plant and equipment
Estimation of useful lives of assets
Note 3.3 – Intangible assets
Useful life of intangible assets
Note 3.3 – Intangible assets
Goodwill and other indefinite life intangible assets
Note 3.3 - Intangible assets
Key assumptions used for value-in-use calculations
Note 4.2 – Trade and other receivables
Provision for impairment of receivables
Note 4.4 – Provisions
Employee benefit provision
Note 6.1 – Share based payments
Share based payment transactions
Note 6.4 – Entity Acquisitions
Business combinations
2
RESULTS FOR THE YEAR
This section focuses on the results and performance of the Group, with disclosures including
segmental information, components of the operating profit, taxation and earnings per share.
2.1
OPERATING SEGMENTS
The Company has identified its operating segments based on the internal reports that are reviewed and used by
the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation
of resources. The reportable segment is represented by the primary statements forming this financial report,
being one segment, an information technology business in Australia.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
32
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2.2
REVENUE
As a result of the adoption of AASB 15, the Group has changed its accounting policy for revenue recognition from
1 July 2018 as detailed below:
Revenue is recognised when or as the Group transfers control of goods or services to a customer at the amount
to which the Group expected to be entitled. If the consideration promised includes a variable amount, the Group
estimates the amount of consideration to which it will be entitled.
The primary geographic market in which the Group generates its revenue is Australia.
The following is a description of the principle activities from which the Group generates its revenue:
• Product sales – The Group generates revenue from the sale of products, which is recognised at a point in
time when the goods are delivered, the legal title has passed and the customer has accepted the goods.
The amount of revenue recognised for goods delivered is adjusted by expected returns. Credit terms for
product sales is 30 days.
• Professional services – Revenue from the provision of professional services is recognised as follows:
-
Fixed price contracts: revenue is recognised based on actual services rendered as a proportion of
total services to be provided as the customer receives and uses the benefits simultaneously. Hence
revenue is recognised over time. Customers pay based on monthly payment schedules, if the services
rendered exceed the payment plan, a contract asset is recognised. If the payments exceed the
services rendered, a contract liability is recognised.
- Hourly charge out model: revenue is recognised based on actual services rendered over the agreed
customer term, representing a distinct service, that are substantially the same with the same pattern
of transfer, such that they would be recognised over time. Customers are invoiced on a monthly basis
and consideration is payable when invoiced.
- Bundled professional services: where professional services are bundles with sales of hardware and
software (‘products’), the sale of products is a separate performance obligation and the transaction
price is allocated to the products and the professional services based on the relative stand-alone
prices basis.
• Managed services – Revenue from the provision of managed services is recognised in the period in which
the services are rendered. The performance obligation is the supply of managed services over the
contractual terms. The terms represent distinct contracted services that are substantially the same with
the same pattern of transfer, such that they would be recognised over time.
Key judgements and estimates – principal versus agent
A key judgement made by the directors in the sale of goods is that the entity acts as the principal rather than an
agent. The directors arrived at this conclusion on the basis that:
• The entity has primary responsibility for fulfilling the order from the customer; and
• The entity has latitude in establishing prices.
On this basis the revenue recorded for goods is the gross amount billed.
Key judgements and estimates– allocation of transaction price
Some fixed price contracts include multiple deliveries such as sale of hardware and software, customisation and
installation and ongoing support and maintenance. In such contracts, two or more performance obligations are
identified as distinct and hence the transaction is allocated to the performance obligation on relative stand-alone
selling price basis. The standalone price of product sold is an estimate based on the retail price.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
33
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2.2
REVENUE – (continued)
DISAGGREGATION OF REVENUE
PRODUCT TYPE
Product sales
Professional services
Managed services
TIMING OF TRANSFER OF GOODS AND SERVICES
Point in time
Over time
CONSOLIDATED
($) 2019
($) 2018
62,800,220
57,504,282
15,439,527
13,453,816
9,798,579
5,134,731
88,038,326
76,092,829
62,800,220
57,504,282
25,238,106
18,588,547
88,038,326
76,092,829
The amount of revenue that will be recognised in future periods for the Company’s significant contracts greater than 12
months, when the remaining performance obligations will be satisfied is as follows:
CONSOLIDATED
($) 2020
5,095,912
($) 2021
3,817,118
($) 2022+
3,262,812
Significant Long Term Contracts
2.3
OTHER INCOME
Other income – is recognised when the amount can be reliably measured and control of the right to receive the
income has passed to the Group.
Finance income - is recognised using the effective interest method.
Government grants received - Grants for research and development incentives are recognised as revenue in the
period in which they are received, in accordance with IAS 20 “Government Grants”. The grants received in the
prior period are for Research and Development (R&D) tax incentives for the 2017 financial year and fulfil all the
necessary attached conditions.
Interest Income
Vendor Marketing Support
R&D Tax Offset
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
CONSOLIDATED
($) 2019
($) 2018
48,160
77,634
-
125,794
42,407
215,811
356,759
614,977
34
For personal use only
2.4
INCOME TAX
Income tax expense or benefit comprises current and deferred tax. Current tax assets and liabilities are
measured at the amount expected to be recovered from, or paid to, the taxation authorities. Current tax is based
on the applicable income tax rates enacted or substantially enacted at the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax base used for calculating taxable
profits except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled, and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax balances are disclosed net to the extent that they relate to taxes levied by the same authority and
the Group has the right of set-off. Deferred tax assets and liabilities are always classified as non-current.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
Key judgements and estimates– deferred tax assets
The group has concluded that a deferred tax asset will be recoverable using the estimated future taxable income
based on the approved business plans and budgets for the group. The group is expected to generate taxable
income from 2020 onwards. The losses can be carried forward indefinitely and have no expiry date.
Key judgements and estimates– income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement
is required in determining the provision for income tax. There are many transactions and calculations
undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The
consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's
current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying
amounts, such differences will impact the current and deferred tax provisions in the period in which such
determination is made.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
35
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2.4
INCOME TAX – (continued)
(A) INCOME TAX EXPENSE/(BENEFIT)
Current tax
Deferred tax
Recoupment of prior year tax losses
TOTAL INCOME TAX EXPENSE/(BENEFIT)
(B) RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE
(Loss)/profit for the period
Prima facie tax payable at 30%
ADD TAX EFFECT OF:
Non-deductible expenses
Non-assessable income
Current year losses realised
Movement in timing differences not brought to account
(344,622)
Other deferred tax assets brought to account
Deferred tax asset on losses brought to account
INCOME TAX BENEFIT / (EXPENSE)
(C) DEFERRED TAX LIABILITY
Accrued Revenue
Prepaid expenditure
Intangible
Other temporary differences
Offset of deferred tax assets
CONSOLIDATED
($) 2019
($) 2018
-
-
-
-
-
(3,197,446)
-
(3,197,446)
776,279
(366,155)
(232,884)
(109,847)
111,738
80,803
-
-
-
-
-
-
96
(107,013)
85,675
-
50,382
(3,197,446)
(3,197,446)
125,173
7,022
306,452
487,524
389
5,597
(306,937)
(625,315)
NET DEFERRED TAX LIABILITY RECOGNISED
-
-
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
36
For personal use only
2.4
INCOME TAX – (continued)
(D) DEFERRED TAX ASSET
Tax losses
Property, plant and equipment
Expenses taken into equity
Other temporary differences
Offset of deferred tax liabilities
Net deferred tax assets recognised
2,625,476
2,756,185
2,789
49,806
2,369
90,472
338,788
486,211
3,016,859
3,335,237
(306,937)
(625,315)
2,709,922
2,709,922
DEFERRED TAX ASSET ON TAX LOSSES NOT BROUGHT TO ACCOUNT
2,010,737
2,663,659
(E) TAX LOSSES CARRIED FORWARD
As at 30 June 2019, the Company had $2,010,737 (2018: $2,663,659) of unrecognised deferred tax assets
relating to unused tax losses. Net deferred tax assets of $318,378 (2018: $2,709,922) have been recognised
in the statement of financial position in respect of the amount of these losses brought to account to the
extent that it is probable future taxable profits will be generated by the Group.
2.5
ACCUMULATED LOSSES
CONSOLIDATED
($) 2019
($) 2018
Accumulated losses at the beginning of the financial year
(4,504,729)
(7,336,020)
Retrospective adjustment upon change in accounting policy (AASB 9)
(note 1.4)
(205,374)
Restated accumulated losses at the beginning of the financial year
(4,710,103)
-
-
Profit after income tax expense for the year
776,279
2,831,291
ACCUMULATED LOSSES AT THE END OF THE FINANCIAL YEAR
(3,933,824)
(4,504,729)
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
37
For personal use only
2.6
EARNINGS PER SHARE
Earnings per share (‘EPS’) is the amount of post-tax profit or loss attributable to each share.
The calculation of basic earnings per share at year end has been based on the profit attributable to ordinary
shareholders and weighted average number of ordinary shares outstanding. Diluted EPS takes into account the
dilutive effect of all potential ordinary shares, being share options on issue.
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
CONSOLIDATED
2019
2018
Profit attributable to the owners of Cirrus Networks Holdings Ltd
$776,279
$2,831,291
Weighted average number of ordinary shares
877,988,673
825,153,515
Earnings per share – cents
Diluted earnings per share – cents
0.0884
0.0884
0.3431
0.3431
The number of options on issue at 30 June 2019 is 84,950,000 (2018: 111,775,000). These are not considered
dilutive as the average market price of the ordinary shares exceeds the exercise price of the options.
3
ASSETS AND LIABILITIES
This section focuses on the assets and liabilities which form the core of the ongoing business,
including inventories, property, plant and equipment, intangible assets as well as capital and
other commitments at year end.
3.1
INVENTORIES
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of completion and the estimated costs necessary to
make the sale
INVENTORIES - AT COST
3.2
PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
CONSOLIDATED
($) 2019
294,406
($) 2018
210,069
The carrying value of property, plant and equipment is measured as the cost of the asset, less depreciation and
impairment. Costs include purchase price, other directly attributable costs and the initial estimate of the costs of
dismantling and restoring the asset, where applicable.
Depreciation
The depreciable amount of all property, plant and equipment is depreciated on a straight-line method from the
date that management determine that the asset is available for use.
Items of plant and equipment are depreciated using the cost model, depreciated on a straight-line basis over
their useful lives. The cost model is where the asset is carried at its cost less any accumulated depreciation and
any impairment losses. The estimated useful lives of plant and equipment held by the Group (office and
computer equipment and hosting infrastructure) is 4 years.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
38
For personal use only
3.2
PROPERTY, PLANT AND EQUIPMENT - (continued)
Leasehold improvements are depreciated over the shorter of the term of the lease and the assets useful life. The
estimated useful life of leasehold improvements is 4 years.
Impairment
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by
which the carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an assets fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows
are grouped together to form a cash-generating unit.
Derecognition
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or
losses are recognised in profit or loss when the item is de-recognised.
Key judgements and estimates – Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges
for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly
as a result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that
have been abandoned or sold will be written off or written down.
PROPERTY, PLANT AND EQUIPMENT
Computer equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Hosting Infrastructure - at cost
Less: Accumulated depreciation
Leasehold Improvements - at cost
Less: Accumulated depreciation
CONSOLIDATED
($) 2019
453,858
(287,495)
166,363
332,956
($) 2018
413,985
(209,959)
204,026
306,074
(222,342)
(179,463)
110,614
591,785
126,611
450,075
(332,318)
(159,772)
259,467
158,932
290,303
138,932
(135,488)
(106,729)
23,444
559.888
32,203
653,143
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
39
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3.2
PROPERTY, PLANT AND EQUIPMENT - (continued)
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
CONSOLIDATED
Balance at 1 July 2017
Additions
Additions through business
combinations
COMPUTER
EQUIPMENT
($)
OFFICE
EQUIPMENT
($)
HOSTING
INFRASTRUCTURE
($)
LEASEHOLD
IMPROVEMENT
($)
TOTAL
($)
147,908
114,604
40,913
11,151
80,665
297,000
13,233
108,420
-
78,788
348,274
-
-
422,755
121,653
Depreciation expense
(71,719)
(33,873)
(87,362)
(46,585)
(239,539)
BALANCE AT 30 JUNE 2018
204,026
126,611
Additions
34,371
17,178
290,303
141,710
32,203
653,143
20,000
213,259
Depreciation expense
(72,034)
(33,175)
(172,546)
(28,759)
(306,514)
BALANCE AT 30 JUNE 2019
166,363
110,614
259,467
23,444
559,888
3.3
INTANGIBLE ASSETS
The Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment.
The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured
as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method
and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business and is initially measured at cost. Cost is measured as the cost of
the business combination minus the net fair value of the acquired and identifiable assets, liabilities and
contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment
losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Impairment
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Impairment loss is recognised for the amount by which the carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an assets fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows
are grouped together to form a cash-generating unit.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
40
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3.3
INTANGIBLE ASSETS – (continued)
Key judgements and estimates – useful life of intangible assets
Intangible assets are stated at their historical cost and amortised on a straight-lined basis over their expected
useful lives. The fair value determination of customer contracts and related relationships is derived from
expected retention rates and cash flows over the customer’s remaining estimated lifetime. Amortisation of
customer relationships is over 5 years. Amortisation of software is over 3 years.
Key judgements and estimates – impairment of goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate
impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions, including estimated discount rates based on the current cost of
capital and growth rates of the estimated future cash flows.
Intangible assets
Goodwill - at cost
CONSOLIDATED
($) 2019
1,407,860
7,319,606
8,727,466
($) 2018
1,473,189
7,319,606
8,792,795
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
CONSOLIDATED
Balance at 1 July 2017
Additions through asset purchase
Additions through business combinations (note 6.4)
Accumulated amortisation and impairment
BALANCE AT 30 JUNE 2018
Additions through asset purchase
Accumulated amortisation and impairment
BALANCE AT 30 JUNE 2019
TOTAL ($)
3,532,247
1,625,080
3,862,144
(226,676)
8,792,795
291,354
(356,683)
8,727,466
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
41
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3.3
INTANGIBLE ASSETS – (continued)
The aggregate carrying amount of intangibles allocated to the Group’s reportable segment is:
Intangible assets – customer relationships
Intangible assets – software
Goodwill – Correct Communications Pty Ltd
Goodwill – NGage Technology Group Pty Ltd
Goodwill – L7 Solutions
CONSOLIDATED
($) 2019
1,116,506
291,354
3,862,144
2,499,988
957,474
8,727,466
($) 2018
1,473,189
-
3,862,144
2,499,988
957,474
8,792,795
For the purpose of impairment testing, intangibles are allocated to one (2018: one) Cash Generating Unit
(‘CGU’). As at 30 June 2019, the business monitors the operating results of one distinct business unit for the
purposes of making decisions about resource allocation and performance assessment.
The performance of this business unit was primarily evaluated based on Earnings before Interest, Taxes,
Depreciation and Amortisation (EBITDA).
2019: THE AGGREGATE CARRYING AMOUNTS ALLOCATED TO THE CGU IS:
Cirrus Networks Holdings Ltd
CLOSING VALUE AT 30 JUNE 2019
2018: THE AGGREGATE CARRYING AMOUNTS ALLOCATED TO THE CGUS ARE:
Cirrus Networks Holdings Ltd
CLOSING VALUE AT 30 JUNE 2018
($) 2019
8,727,466
8,727,466
($) 2018
8,792,795
8,792,795
Key judgements and estimates – key assumptions used for value-in-use calculations
The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of
a CGU is determine based on value-in-use calculations which require the use of assumptions. The calculations
use cash flow projections based on financial budgets approved by management covering a five-year period.
Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below.
These growth rates are consistent with forecasts included in industry reports specific to the industry in which
the CGU operates.
The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to them.
DESCRIPTION
Sales growth (% annual growth rate)
Budgeted gross margin (%)
Other operating costs ($’000)
Annual capital expenditure ($’000)
Long term growth rate (%)
Pre-tax discount rate (%)
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
2019 CGU
2018 CGU
5.0
20.0
14,256
100
2.5
13.0
5.0
18.0
15,108
100
2.5
13.0
42
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3.3
INTANGIBLE ASSETS – (continued)
Management has determined the values assigned to each of the above key assumptions as follows:
ASSUMPTION
Sales growth
APPROACH USED TO DETERMINE VALUES
Average annual growth rate over the five-year forecast based on past
performance and management’s expectations of market development.
Budgeted gross margin
Based on past performance and management’s expectations for the future.
Other operating costs
Fixed costs of the CGUs, which do not vary significantly with sales growth.
Management forecasts these costs based on the current structure of the business,
adjusting for inflationary increases but not reflecting any future restructurings or
cost saving measures.
Annual capital expenditure
There is generally limited need for additions or capital improvements therefore
no capital expenditure assumed in the five-year forecast.
Long-term growth rate
Post-tax discount rate
This is the weighted average growth rate used to extrapolate cash flows beyond
the budgeted period.
Reflect specific risks relating to the relevant segments and the countries in which
they operate.
Sensitivity to change in assumptions
The Directors and management have considered and assessed reasonable possible changes to key assumptions
that result in a change to the recoverable amount for each CGU. With regards to the assessment, management
recognises that the actual time value of money and the discount rate used may vary from the estimated.
Management note that there is sufficient headroom in estimates that no significant changes to key assumptions
will result in an impairment, based on expected cash flows of the CGU.
3.4
COMMITMENTS
Operating lease commitments
The Group leases three office premises which are all non-cancellable leases.
• One lease has a five-year term, with rent payable monthly in advance. Contingent rental provisions
within this lease agreement require that the minimum lease payments shall be increased by CPI + 1% per
annum. An option exists to renew the lease at the end of the five-year term and the lease allows for
subletting of all lease areas pending the lessor's consent.
• One lease has a five-year term, with rent payable monthly in advance. Contingent rental provisions
within this lease agreement require that the minimum lease payments shall be increased by 3.75% per
annum.
• The other lease has a four year, with rent payable monthly in advance. Contingent rental provisions
within this lease agreement require that the minimum lease payments shall be increased by 3.75% per
annum.
MINIMUM LEASE PAYMENTS UNDER NON-CANCELLABLE OPERATING LEASES
2019 ($)
2018 ($)
Within one year
After one year but not more than five years
More than five years
771,188
1,667,890
-
335,696
313,948
-
2,439,078
649,644
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
43
For personal use only
3.5
CONTINGENT LIABILITIES AND ASSETS
The Group has no known contingent liabilities or contingent assets.
4
WORKING CAPITAL DISCLOSURES
This section focuses on the cash funding available to the Group and working capital position at
year end.
4.1
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
RECONCILIATION OF CASH AND CASH EQUIVALENTS
CASH AT BANK
CONSOLIDATED
($) 2019
5,012,769
($) 2018
5,263,581
RECONCILIATION OF THE NET PROFIT AFTER INCOME TAX TO THE
CONSOLIDATED
NET CASH FLOWS USED IN OPERATIONS
PROFIT FOR THE YEAR
($) 2019
776,279
Cash flows excluded from profit attributable to operating activities non-cash flows in profit:
depreciation and amortisation
employee remuneration (options)
Changes in assets and liabilities (net effect):
(increase)/decrease in trade and other receivables
(increase)/decrease in other assets
663,196
303,038
(7,724,604)
84,337
($) 2018
2,831,291
466,215
226,046
4,043,486
298,813
increase/(decrease) in trade and other payables
8,232,345
(4,148,413)
increase/(decrease) in income taxes payable
increase/(decrease) in employee benefits
CASH FLOW FROM (USED IN) OPERATIONS
-
(2,709,922)
48,590
2,383,181
297,977
1,305,493
2019: NON-CASH INVESTING AND FINANCING ACTIVITIES
Issue of 21,881,449 deferred consideration shares in Cirrus Networks Holdings for acquisition
of Correct Communications Pty Ltd – refer to note 6.4
2018: NON-CASH INVESTING AND FINANCING ACTIVITIES
Issue of 21,969,621 deferred consideration shares in Cirrus Networks Holdings for acquisition
of Correct Communications Pty Ltd – refer to note 6.4
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
($) 2019
$425,000
($) 2018
$500,000
44
For personal use only
4.2
TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment. Trade receivables are generally due for settlement
within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable
are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised
when there is objective evidence that the consolidated entity will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than
60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the
impairment allowance is the difference between the asset's carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables
are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Key judgements and estimates– provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The
level of provision is assessed by using the expected credit loss model.
Trade receivables
Other receivables
CONSOLIDATED
($) 2019
($) 2018
20,467,838
14,091,213
1,916,061
568,082
22,383,899
14,659,295
Receivables past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $1,626,538 as
at 30 June 2019 (2018: $2,134,235).
The consolidated entity did not consider a credit risk on the aggregate balances after reviewing the credit terms
of customers based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
0 to 1 month overdue
1 to 3 months overdue
Over 3 months overdue
CONSOLIDATED
($) 2019
918,649
627,331
80,558
($) 2018
1,366,383
767,852
-
1,626,538
2,134,235
Refer to note 6.5 for further information on credit ratings of all trade receivables.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
45
For personal use only
4.3
TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of
the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and
are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Trade payables
Accruals & customer deposits
Other payables
Refer to note 6.5 for further information on financial risk management.
4.4
PROVISIONS
Provisions
CONSOLIDATED
($) 2019
($) 2018
24,795,131
15,394,753
381,320
923,570
730,438
1,752,625
26,100,021
17,877,816
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past
event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties
surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-
tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a
finance cost.
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured as the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date using the projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on national government bonds with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Key judgements and estimates - Employee benefits provision
The liability for employee benefits expected to be settled more than 12 months from the reporting date are
recognised and measured at the present value of the estimated future cash flows to be made in respect of all
employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and
pay increases through promotion and inflation have been taken into account.
CURRENT PROVISIONS
Annual leave
Provision for onerous lease
Lease incentive
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
CONSOLIDATED
($) 2019
680,230
12,847
1,980
695,057
($) 2018
615,966
38,544
1,980
656,490
46
For personal use only
4.5
PROVISIONS – (continued)
NON-CURRENT PROVISIONS
Lease incentive
Long service leave
CONSOLIDATED
($) 2019
11,880
255,633
267,513
($) 2018
23,760
233,730
257,490
5
EQUITY AND FUNDING
This section focuses on the share capital, options and debt funding available to the Group
at year end
5.1
ISSUED CAPITAL
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
ISSUED AND PAID UP CAPITAL
Share Capital
Capital Raising Costs
CONSOLIDATED
2019 (NO.)
2018 (NO.)
2019 ($)
2018 ($)
883,384,099
861,502,650
15,721,584
15,296,584
-
-
(1,520,976)
(1,520,976)
883,384,099
861,502,650
14,200,608
13,775,608
MOVEMENT RECONCILIATION
CONSOLIDATED
2019 (NO.)
2018 (NO.)
2019 ($)
2018 ($)
Balance at the beginning of the year
861,502,650
795,771,629
13,775,608
12,552,411
Issue of shares
21,881,449
43,761,400
425,000
Issue of deferred consideration shares
Less: Capital raising costs
-
-
21,969,621
-
-
-
787,705
500,000
(64,508)
BALANCE AT THE END OF THE YEAR
883,384,099
861,502,650
14,200,608
13,775,608
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
47
For personal use only
5.1
ISSUED CAPITAL – (continued)
Options on issue
The Company had the following classes of options on issue as at the balance date:
CLASS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
NUMBER
2019
2018
-
-
6,500,000
13,750,000
2,062,500
2,062,500
2,062,500
2,062,500
7,000,000
7,000,000
6,287,500
10,025,000
6,287,500
10,025,000
5,612,500
5,912,500
5,612,500
5,912,500
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
1,762,500
3,000,000
1,762,500
3,000,000
7,500,000
7,500,000
7,500,000
7,500,000
4,250,000
4,250,000
4,250,000
4,250,000
1,500,000
1,500,000
-
-
EXERCISE PRICE
EXPIRY DATE
VESTING
$0.180
$0.060
$0.035
$0.045
$0.080
$0.035
$0.045
$0.035
$0.045
$0.045
$0.060
$0.045
$0.060
$0.035
$0.045
$0.060
$0.045
$0.035
$0.045
$0.035
$0.045
31-12-18
31-05-18
30-06-22
30-06-22
31-12-19
13-11-20
13-11-20
30-06-21
30-06-21
Vested
Vested
Vested
Vests 09-07-20
Vested
Vested
Vested
Vested
Vests 20-07-19
5 years from vesting date
When EBIT > $2M
5 years from vesting date
When EBIT > $4M
18-04-23
18-10-24
30-06-22
30-06-22
11-10-23
11-10-21
22-11-21
22-11-21
30-06-21
30-06-21
Vested
Vests 18-10-19
Vested
Vested
Vests 11-10-22
Vests 11-10-20
Vested
Vested
Vests 28-03-20
Vests 28-09-21
TOTAL
84,950,000
112,750,000
Movements in the number of options on issue during the current and prior financial years are as follows:
DESCRIPTION
BALANCE AS AT 1 JULY 2017
Options issued during the year – employees
Options issued during the year – Directors
Options cancelled/expired during the year
BALANCE AS AT 30 JUNE 2018
Options issued during the year – employees
Options cancelled/expired during the year
BALANCE AS AT 30 JUNE 2019
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
NO.
100,925,000
24,250,000
7,500,000
(19,925,000)
112,750,000
3,000,000
(30,800,000)
84,950,000
48
For personal use only
5.2
LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and
borrowings. For more information about the Group’s exposure to interest rate risk, see note 6.5.
DESCRIPTION
Borrowings-current
Borrowings-non-current
CONSOLIDATED
($) 2019
800,000
600,000
1,400,000
($) 2018
333,332
500,001
833,333
The Group entered into a separate unsecured Commercial Advance Facility with Bankwest specifically for
Acquisition Funding. Interest payable at BBSY plus a margin of 3.00% per annum. The loan is repayable over 3
years. As at 30 June 2019, $1,400,000 has been drawn down under the Commercial Advance Facility
6
OTHER DISCLOSURES
This section focuses on share schemes in operation and financial risk management of the Group.
Other mandatory disclosures, such as details of related party transactions can also be found here.
6.1
SHARE BASED PAYMENTS
Goods or services received or acquired in a share-based payment transaction are recognised as an increase in
equity if the goods or services were received in an equity-settled share-based payment transaction or as a
liability if the goods and services were acquired in a cash settled share-based payment transaction.
Key judgements and estimates - Share-based payment transactions
For equity-settled share-based transactions, goods or services received are measured directly at the fair value of
the goods or services received provided this can be estimated reliably. If a reliable estimate cannot be made the
value of the goods or services is determined indirectly by reference to the fair value of the equity instrument
granted using a Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk-free interest rate for the term of the option.
Transactions with employees and others providing similar service are measured by reference to the fair value at
grant date of the equity instrument granted using a Black-Scholes option pricing model
RESERVES
Equity Settled Employee Benefits Reserve
CONSOLIDATED
($) 2019
1,037,493
1,037,493
($) 2018
734,455
734,455
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
49
For personal use only
6.1
SHARE BASED PAYMENTS – (continued)
Share based payment plans for Directors and other Key Management Personnel
The following share-based payment arrangements were in place during the current and prior periods:
2019
NUMBER
OF
OPTIONS
GRANT
DATE
EXPIRY
DATE
EXERCISE
PRICE
SHARE
PRICE AT
GRANT
DATE
FAIR
VALUE AT
GRANT
DATE
% VESTED
7,000,000
02-12-14
31-12-19
$0.0800
$0.0200
$162,400
100%
6,287,500
20-11-15
13-11-20
$0.0350
$0.0300
$190,498
100%
6,287,500
20-11-15
13-11-20
$0.0450
$0.0300
$176,490
100%
5,612,500
05-07-16
30-06-21
$0.0350
$0.0280
$72,686
100%
5,612,500
05-07-16
30-06-21
$0.0450
$0.0280
$61,911
$0.0450
$0.0280
$50,681
0%
0%
5,000,000
18-10-16
5,000,000
18-10-16
5 years
from
vesting
date
5 years
from
vesting
date
$0.0600
$0.0280
$48,766
0%
5,000,000
18-10-16
18-04-23
$0.0450
$0.0280
$50,681
100%
5,000,000
18-10-16
18-10-24
$0.0600
$0.0280
$48,766
0%
1,762,500
13-06-17
30-06-22
$0.0350
$0.0170
$6,169
1,762,500
13-06-17
30-06-22
$0.0450
$0.0170
$7,931
2,062,500
09-07-17
30-06-22
$0.0350
$0.0170
$24,956
2,062,500
09-07-17
30-06-22
$0.0450
$0.0170
$23,756
7,500,000
11-10-17
11-10-21
$0.0450
$0.0230
$76,530
7,500,000
11-10-17
11-10-23
$0.0600
$0.0230
$89,822
4,250,000
23-11-17
22-11-21
$0.0350
$0.0170
$41,650
4,250,000
23-11-17
22-11-21
$0.0450
$0.0170
$38,675
1,500,000
28-09-18
30-06-22
$0.0350
$0.019
$12,459
1,500,000
28-09-18
30-06-22
$0.0450
$0.019
$10,855
100%
100%
100%
0%
0%
0%
100%
100%
0%
0%
VESTING
DATE
02-12-14
13-05-17
13-11-18
05-12-17
20-07-19
When EBIT
>2M
When EBIT
>4M
18-03-18
18-10-19
13-06-17
13-06-17
09-12-18
09-07-20
11-10-20
11-10-22
23-11-17
23-11-17
28-03-20
28-09-20
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
50
For personal use only
6.1
SHARE BASED PAYMENTS – (continued)
2018
NUMBER
OF
OPTIONS
GRANT
DATE
EXPIRY
DATE
EXERCISE
PRICE
SHARE
PRICE AT
GRANT
DATE
FAIR
VALUE AT
GRANT
DATE
% VESTED
6,500,000
25-11-13
31-12-18
$0.1800
$0.0300
$117,000
100%
7,000,000
02-12-14
31-12-19
$0.0800
$0.0200
$162,400
100%
13,750,000
2-07-15
31-05-19
$0.0600
$0.0170
$123,750
100%
10,025,000
20-11-15
13-11-20
$0.0350
$0.0300
$190,498
100%
10,025,000
20-11-15
13-11-20
$0.0450
$0.0300
$176,490
0%
5,912,500
05-07-16
30-06-21
$0.0350
$0.0280
$72,686
100%
5,912,500
05-07-16
30-06-21
$0.0450
$0.0280
$61,911
$0.0450
$0.0280
$50,681
0%
0%
5,000,000
18-10-16
5,000,000
18-10-16
5 years
from
vesting
date
5 years
from
vesting
date
$0.0600
$0.0280
$48,766
0%
5,000,000
18-10-16
18-04-23
$0.0450
$0.0280
$50,681
100%
5,000,000
18-10-16
18-10-24
$0.0600
$0.0280
$48,766
0%
3,000,000
13-06-17
30-06-22
$0.0350
$0.0170
$13,500
3,000,000
13-06-17
30-06-22
$0.0450
$0.0170
$10,507
2,062,500
09-07-17
30-06-22
$0.0350
$0.0170
$24,956
2,062,500
09-07-17
30-06-22
$0.0450
$0.0170
$23,756
7,500,000
11-10-17
11-10-21
$0.0450
$0.0230
$76,530
7,500,000
11-10-17
11-10-23
$0.0600
$0.0230
$89,822
4,250,000
23-11-17
22-11-21
$0.0350
$0.0170
$41,650
4,250,000
23-11-17
22-11-21
$0.0450
$0.0170
$38,675
100%
100%
0%
0%
0%
0%
100%
100%
VESTING
DATE
25-11-13
02-12-14
02-07-15
13-05-17
13-11-18
05-12-17
05-07-19
When EBIT
>2M
When EBIT
>4M
18-03-18
18-09-19
13-06-17
13-06-17
09-12-18
09-07-20
11-10-20
11-10-23
23-11-17
23-11-17
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
51
For personal use only
6.1
SHARE BASED PAYMENTS – (continued)
The following table illustrates the number and weighted average exercise prices of and movements in share
options issued during the year.
2019
2018
NUMBER
($) WEIGHTED
AVERAGE
EXERCISE PRICE
NUMBER
($) WEIGHTED
AVERAGE
EXERCISE PRICE
Outstanding at the beginning of year
112,750,000
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of year
Exercisable at the end of the year
3,000,000
(10,550,000)
-
(20,250,000)
84,950,000
44,275,000
0.06
0.04
0.04
-
0.1
0.05
0.04
100,925,000
31,750,000
(15,425,000)
-
(4,500,000)
112,750,000
62,687,500
0.07
0.05
0.04
-
0.30
0.06
0.03
The options outstanding at 30 June 2019 had an exercise price in the range of $0.035 to $0.080. The weighted
average remaining contractual life of options outstanding (excluding EBIT based options) at the end of the year
was 1.9 years.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recoginsed during the period as part of employee
benefit expense were as follows:
Options issued under employee option plan
303,038
226,046
($) 2019
($) 2018
Fair value of options granted
The fair value of the equity-settled share options granted under the option plan is estimated as at the date of
grant using the Black and Scholes model taking into account the terms and conditions upon which the options
were granted.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
52
For personal use only
6.1
SHARE BASED PAYMENTS – (continued)
For the options granted during the current financial period, the valuation model inputs used to determine the
fair value at the grant date are as follows:
EMPLOYEE OPTIONS
Grant date
Expiry date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk free interest rate
Fair value at grant date
Number granted
Total fair value
2019
TIER 1
TIER 2
28 Sep 2018
28 Sep 2018
30 Jun 2022
30 Jun 2022
$0.019
$0.035
78.95%
0.00%
2.29%
$0.0083
1,500,000
$12,450
$0.019
$0.045
78.95%
0.00%
2.29%
$0.0072
1,500,000
$10,855
For the options granted during the 2018 financial year, the valuation model inputs used to determine the fair
value at the grant date are as follows:
EMPLOYEE OPTIONS
Grant date
Expiry date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk free interest rate
Fair value at grant date
Number granted
Total fair value
2018
TIER 1
TIER 2
9 Jul 2017
9 Jul 2017
30 Jun 2022
30 Jun 2022
$0.017
$0.035
110.58%
0.00%
2.25%
$0.0121
4,125,000
$49,820
$0.017
$0.045
110.58%
0.00%
2.25%
$0.0121
4,125,000
$47,511
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
53
For personal use only
6.1
SHARE BASED PAYMENTS – (continued)
EMPLOYEE OPTIONS
Grant date
Expiry date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk free interest rate
Fair value at grant date
Number granted
Total fair value
EMPLOYEE OPTIONS
Grant date
Expiry date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk free interest rate
Fair value at grant date
Number granted
Total fair value
2018
TIER 1
TIER 2
11 Oct 2017
11 Oct 2017
11 Oct 2021
11 Oct 2023
$0.023
$0.045
78.95%
0.00%
2.37%
$0.0102
7,500,000
$76,530
$0.023
$0.06
110.58%
0.00%
2.37%
$0.012
7,500,000
$89,821
2018
TIER 1
TIER 2
23 Nov 2017
23 Nov 2017
22 Nov 2021
22 Nov 2021
$0.017
$0.035
100%
0.00%
2.20%
$0.0098
4,250,000
$41,650
$0.017
$0.045
100%
0.00%
2.20%
$0.0091
4,250,000
$38,675
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns
that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future
trends, which may also not necessarily be the actual outcome. No other features of options granted were
incorporated into the measurement of fair value.
6.2
REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by BDO Audit (WA) Pty
Ltd, the auditor of the Company:
DESCRIPTION
Audit services - BDO Audit (WA) Pty Ltd
Audit or review of the financial statements
CONSOLIDATED
($) 2019
48,854
($) 2018
50,425
Other services - BDO Corporate Tax (WA) Pty Ltd
90,818
66,781
Tax advice & return preparation
139,672
117,206
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
54
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6.3
RELATED PARTY TRANSACTIONS
There were no key management personnel, or their related parties, holding positions in other entities during the
financial year that result in them having control or significant influence over the financial or operating policies
of those entities.
For the prior year, the terms and conditions of those transactions were no more favourable than those available,
or which might reasonably be expected to be available, in similar transactions with non-key management
personnel related companies on an arm’s length basis.
The aggregate value of transactions and outstanding balances (excluding reimbursements of expenses incurred
on behalf of the Company) relating to key management personnel and entities over which they have control or
significant influence for the prior year were as follows:
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits (superannuation)
Long-term benefits
Share-based payments
Marketing Costs
($) 2019
913,518
84,363
-
59,753
1,057,634
($) 2018
460,205
43,719
-
143,428
647,352
For the period ending 30 June 2019 no marketing fees and related costs (2018: $108,370) were paid to Roobix
Pty Ltd (of which Andrew Milner and Matthew Sullivan were Directors up to 30 April 2018). As at 30 June 2019,
there is nil (2018: nil) in outstanding invoices payable to Roobix Pty Ltd.
6.4
ENTITY ACQUISITIONS
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
•
•
fair values of the assets transferred
liabilities incurred to the former owners of the acquired business
• equity interests issued by the group
•
•
fair value of any asset or liability resulting from a contingent consideration arrangement, and
fair value of any pre-existing equity interest in the subsidiary
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with
limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-
controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-
controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
•
consideration transferred,
• amount of any non-controlling interest in the acquired entity,
• and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of
the net identifiable assets acquired is recorded as goodwill.
If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the
difference is recognised directly in profit or loss as a bargain purchase.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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6.4
ENTITY ACQUISITIONS – (continued)
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently re-measured to fair value with changes in fair value recognised in profit or loss.
Key judgements and estimates - Business combinations
Business combinations are initially accounted for on a provisional basis. The fair value of assets acquired,
liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into
consideration all available information at the reporting date. Fair value adjustments on the finalisation of the
business combination accounting is retrospective, where applicable, to the period the combination occurred and
may have an impact on the assets and liabilities, depreciation and amortisation reported.
Acquisition of Correct Communications Pty Ltd
On 23 November 2017, Cirrus Networks Holdings Limited completed the acquisition of 100% of the share capital
of Correct Communications Pty Ltd for 3.92 times FY18 EBIT (“EBIT multiple”) with a minimum purchase price of
$2 million and a maximum of $5 million.
The purchase price comprises two tranches. The first tranche being $1.5 million in cash on completion and
$500,000 in CNW shares to be issued by 30 June 2018 at an issue price based on 5-day VWAP at the time of issue
and escrowed for 2 years. The second tranche being dependent on the EBIT multiple result being greater than $2
million and to be calculated after the release of the audited 30 June 2018 full year financial results.
The first tranche was completed on 20 May 2018. The second tranche was calculated after the release of the
audited 30 June 2018 full year financial statements. The EBIT calculated resulted in a tranche 2 payment of $3
million being due. Pursuant to the sale agreement, the Company elected to pay $2.575 million in cash and issue
$425,000 in fully paid ordinary shares in the Company with the issue price being calculated using the 5-day
VWAP immediately prior to issue. The $2.575 million cash component was funding by a combination of a $1.25
million extension to the Company’s current acquisition facility (refer to note 5.2 for further details on the facility)
and the balance from the Company’s existing cash reserves. The second tranche payment was finalised on 28
September 2018.
6.5
FINANCIAL INSTRUMENTS
Fair value of financial instruments
Due to their short-term nature, the carrying amount of the current receivables, current payables and current
borrowings is assumed to approximate their fair value. Loans and borrowings are recognised at their fair value of
the consideration received, net of transaction costs.
Adoption of AASB 9 and new accounting policy for financial instruments
The Group has adopted AASB 9 with a date of initial application of 1 July 2018 and has elected not to restate its
comparatives. As a result, the Group has changed its accounting policy for financial instruments from 1 July 2018
as detailed below.
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or
when the financial asset and substantially all the risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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6.5
FINANCIAL INSTRUMENTS – (continued)
Classification and initial measurement of financial assets
Financial assets are classified according to their business model and the characteristics of their contractual cash
flows and initially measured at fair value adjusted for transaction costs (where applicable).
Subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets, other than those designated and effective as
hedging instruments, are classified into the following four categories:
• Financial assets at amortised cost
• Financial assets at fair value through profit or loss (FVTPL)
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Equity instruments at FVTOCI
All income and expenses relating to financial assets that are recognised in profit or loss are presented within
finance costs, finance income or other financial items, except for impairment of trade receivables which is
presented within other expenses.
Financial assets at amortised cost
Financial assets with contractual cash flows representing solely payments of principal and interest and held
within a business model of ‘hold to collect’ contractual cash flows are accounted for at amortised cost using the
effective interest method. The Group’s trade and most other receivables fall into this category of financial
instruments.
Impairment
The Group assessed on a forward-looking basis the expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI.
The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract
assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this
practical expedient, the Group uses its historical experience, external indicators and forward-looking information
to calculate the expected credit losses using a provision matrix.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Group may also consider a financial asset to be in default when internal or external
information indicates the Group is unlikely to receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. The Expected Credit Loss is based on historical default
rates and expected future losses.
Financial risk management objectives
The Consolidated Entity's activities expose it to a variety of financial risks: market risk (including foreign currency
risk, price risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity's overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the consolidated entity.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework. Management monitors and manages the financial risks relating to the operations of the Group
through regular reviews of the risks.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
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6.5
FINANCIAL INSTRUMENTS – (continued)
risk management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.
Foreign currency risk
The Consolidated Entity undertakes certain transactions denominated in foreign currency and is exposed to
foreign currency risk through foreign exchange rate fluctuations. This risk is considered low for the Group.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using
sensitivity analysis and cash flow forecasting.
Price risk
The Consolidated Entity is not exposed to any significant price risk.
Interest rate risk
Any movement up or down 100 basis points on the Consolidated Entity's interest rate on borrowings would not
have a significant impact.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations and arises principally from the Group's receivables from customers.
The Group limits its exposure to credit risk from trade receivables through regular review. At the reporting date
there were no significant concentrations of credit risk.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to
external credit ratings (if available) or to historical information about counterparty default rates.
TRADE RECEIVABLES
Counterparties without external credit ratings*
Group 1
Group 2
Group 3
TOTAL TRADE RECEIVABLES
CONSOLIDATED
($) 2019
320,164
($) 2018
1,586,774
21,253,012
12,504,439
-
-
21,573,176
14,091,213
*Group 1 – new customers (less than 6 months)
Group 2 – existing customers (more than 6 months) with no defaults in the past
Group 3 – existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly
cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become
due and payable.
The Consolidated Entity manages liquidity risk by maintaining adequate cash reserves and available borrowing
facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of
financial assets and liabilities.
If the Directors anticipate a need to raise additional capital in the next 12 months to meet forecasted operational
activities, then the decision on how the Group will raise future capital will depend on market conditions existing
at that time.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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6.5
FINANCIAL INSTRUMENTS – (continued)
Financing Facilities Available
The Group maintains a Multi Option Facility with Bankwest which forms part of the cash management for
general business purposes. This Bankwest Multi Option Facility includes the following facilities drawn at the
company’s discretion across any or all of the facilities and totalling $1,000,000. The facility options are:
•
Commercial Advance Facility with interest payable at the rate of BBSY plus a Margin of
•
•
2.20% per annum;
Bank Guarantee Contingent Instrument Facility and
Business Corporate Transaction Account Facility with interest payable at the rate of the variable
Bankwest Business Variable Overdraft Reference Rate.
The Group also entered into a separate Commercial Advance Facility with Bankwest specifically for Acquisition
Funding. Interest is payable at BBSY plus a margin of 3.00% per annum. The loan is repayable over 3 years. As at
30 June 2019, $1,400,000 has been drawdown under the Commercial Advance Facility;
6.6
PARENT ENTITY DISCLOSURES
a)
Financial Position
DESCRIPTION
ASSETS
Current Assets
Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Non-Current Liabilities
TOTAL LIABILITIES
EQUITY
Issued Capital
Accumulated Losses
Equity Settled Employee Benefits Reserve
TOTAL EQUITY
b)
Statement of Profit or Loss and other Comprehensive Income
PROFIT FOR THE YEAR
Profit/(Loss) for the Year
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME
($) 2019
($) 2018
8,316,782
3,340,275
11,657,057
1,194,294
937,791
2,132,085
13,983,308
(5,495,828)
1,037,493
9,524,972
($) 2019
(1,207,542)
-
2,792,232
11,183,346
13,975,578
3,333,310
637,791
3,971,101
13,558,308
(4,288,286)
734,455
10,004,477
($) 2018
2,597,014
-
(1,207,542)
2,597,014
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
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6.6
PARENT ENTITY DISCLOSURES – (continued)
c)
Contingent Liabilities of the Parent Company
The Company has no known contingent liabilities or contingent assets.
d)
Guarantees
The Company has entered into cross guarantees in relation to the debts of its subsidiaries.
e)
Contractual Commitments
At 30 June 2019, the Company had not entered into any contractual commitments for the acquisition of
property, plant or equipment.
6.7
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
At the date of authorisation of the financial statements, the following Australian Accounting Standards and
Interpretations have recently been issued or amended but are not yet effective and have not been adopted by
the Group for the year ended 30 June 2019.
APPLICATION
DATE OF
STANDARD
APPLICATION
DATE FOR
THE GROUP
PERIODS BEGINNING
ON OR AFTER
1 Jan 2019
1 Jul 2019
REF
LEASES
SUMMARY
AASB 16
Leases
The new Standard introduces three main changes:
• Enhanced guidance on identifying whether a
contract contains a lease;
• A completely new leases accounting model for
lessees that require lessees to recognise all leases
on balance sheet, except for short-term leases and
leases of low value assets;
• Enhanced disclosures.
Lessor accounting will not significantly change.
Impact: The Company has assessed the impact of the
new leasing standard and concluded there will be no
change to the accounting treatment for short-term
leases less than 12 months and leases of low value
items, which will continue to be expensed on a straight-
line basis. Right to use assets will be brought on the
Balance sheet and the Company is in the process of
assessing the impact.
6.8
SUBSEQUENT EVENTS
There has been no transaction or event of a material and unusual nature likely, in the opinion of the directors of
the Company, to affect significantly the operations of the Group, the results of those operations, or the state of
affairs of the Group, in future financial years.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
60
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Directors’ Declaration
30 June 2019
The Directors of the Company declare that:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board as described in note 1.2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position
as at 30 June 2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become
due and payable.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
Matt Sullivan
Managing Director
Signature:
Date: 22 August 2019
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
Appendix 4E and Annual Report
61
For personal use only
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Cirrus Networks Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cirrus Networks Holdings Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30
June 2019, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial report, 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:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year ended on that date; and
(ii)
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 Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (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.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
For personal use only Impairment testing of intangible assets
Key audit matter
How the matter was addressed in our report
Note 3.3 in the financial report discloses the
individual intangible assets and the
assumptions used by the Group in testing
these assets for impairment.
This was determined to be a key audit matter
as management’s assessment of the
recoverability of the intangible assets is
supported by a value in use cash flow forecast
which requires estimates and judgements
about future performance.
These include judgements and estimates over
the expectation of future revenues,
anticipated budgeted costs, growth rates
expected and the discount rate applied.
Our procedures included, but are not limited to
the following:
(cid:127)
(cid:127)
(cid:127)
Evaluating the Group’s categorisation of cash
generating units (“CGUs”) and the allocation
of goodwill to the carrying value of CGUs
based on our understanding of the Group’s
business;
Evaluating management’s ability to
accurately forecast cash flows by assessing
the precision of the current year actuals
against forecasted outcomes;
Challenging key inputs used in the value in
use calculations including the following:
o
o
o
o
assessing the discount rate used by
involving internal valuation experts and
comparing them to market data and
industry research;
Comparing growth rates with third party
data for the information technology
industry;
Comparing the Group’s forecast cash
flows to the board approved budget; and
Performing sensitivity analysis on the
growth and discount rates.
Evaluating the adequacy of the related
disclosures in the financial report.
For personal use only Revenue recognition
Key audit matter
How the matter was addressed in our audit
AASB 15 Revenue from Contracts with
Customers (AASB 15) became effective for
periods beginning on or after 1 July 2018. A
substantial amount of the Group’s revenue
relates to revenue from sale of goods and
rendering of services (which includes
professional services and managed services).
Revenue recognition was determined to be a
key audit matter as this area involves
significant judgments and estimates made by
management including whether contracts
contain multiple performance obligations which
should be accounted for separately and the
most appropriate method of recognition of
revenue for the identified performance
obligations. This comprises allocation of
consideration to the individual performance
obligations based on its standalone pricing and
whether the performance obligation is satisfied
at a point in time or overtime.
Refer to note 2.2 in the financial report for
disclosures relating to the Group’s revenue
accounting policy and significant judgements
applied in revenue recognition.
Our audit procedures in respect of this area
included but were not limited to the following:
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
Discussing with management and critically
assessing the financial impact of the new
revenue standard and changes to the
Group’s revenue recognition policies on
transition 1 July 2018;
Obtaining and reviewing a sample of
contracts, considering the terms and
conditions, performance obligations of these
arrangements, its stand-alone pricing and
assessing the accounting treatment under
AASB 15;
Challenging management’s assessment of
the performance obligations promised to
customers within a contract;
Performing cut-off procedures to ensure all
revenue was captured in the appropriate
financial year;
Performing detailed analytical procedures to
identify any revenue trends outside our
expectations; and
Assessing the adequacy of the disclosure in
Note 2.2 in the financial report.
For personal use only Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
For personal use only Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 23 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Cirrus Networks Holdings Limited, for the year ended 30
June 2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Group 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.
BDO Audit (WA) Pty Ltd
Dean Just
Director
Perth, 22 August 2019
For personal use only Corporate Governance
This statement reports on the Company’s key governance framework, principles and practices as
at 22 August 2019. These principles and practices are reviewed regularly and revised as
appropriate to reflect changes in law and best practice in corporate governance.
ASX PRINCIPLES OF GOOD CORPORATE GOVERNANCE
The Company, as a listed entity, must comply with the Corporations Act 2001 (Cth) (“Corporations Act”), the Australian
Securities Exchange Limited (“ASX”) Listing Rules (“ASX Listing Rules”) and other Australian laws.
To the extent applicable, the Company has adopted the 3rd edition of The Corporate Governance Principles and
Recommendations (“Recommendations”) as published by the ASX Corporate Governance Council.
ASX Listing Rule 4.10.3 requires ASX listed companies to report on the extent to which they have followed the
Recommendations and require the Board to consider carefully the development and adoption of appropriate corporate
governance policies and practices founded on the same.
ACCESS TO INFORMATION ON THE WEBSITE
Further information about the Company's corporate governance practices is set out on the Company's website at
www.cirrusnetworks.com.au. In accordance with the Recommendations, information published on the Company's website
includes charters (for the Board and its Committees), the Company's code of conduct and other policies and procedures
relating to the Board and its responsibilities.
COMPLIANCE WITH ASX PRINCIPLES OF GOOD CORPORATE GOVERNANCE
Commensurate with the spirit of the Recommendations, the Company has followed each recommendation where the
Board has considered it to be an appropriate benchmark for corporate governance practices, taking into account factors
such as the size of the Company and the Board, resources available and the activities of the Company. Where, after due
consideration, the Company's corporate governance practices depart from the Recommendations, the Board has offered
full disclosure of the nature of, and reason for, the adoption of its own practice.
1.
THE BOARD OF DIRECTORS
a)
Board composition and expertise
The Board has an expansive range of relevant industry experience, financial and other skills and expertise to
meet its objectives.
Election of Board members is substantially the province of the Shareholders in general meetings, with the
Company being committed to the following principles:
• The Board is to comprise persons with a blend of skills, experience and attributes appropriate for the
Company and its business; and
• The principal criterion for the appointment of new Directors is their ability to add value to the
Company and its business.
No formal nomination committee or procedures have been adopted for the identification, appointment and
review of the Board’s membership, but an informal assessment process, facilitated in consultation with the
Company’s professional advisors, has been committed to by the Board.
The Board at the end of the Reporting Period comprised of one Managing Director, one Non-Executive
Chairman and two other Non-Executive Directors.
Details on each of the director’s backgrounds including experience, knowledge and skills and their status as an
independent or non‐independent director are set out in the directors’ report.
Cirrus Networks Holdings Ltd – ABN 98 103 348 947
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b)
Board role and responsibilities
The roles and responsibilities of the Board are formalised in the Board Charter. The Board Charter defines in
detail the matters that are reserved for the Board and its committees, and those that the Board has delegated
to management. The central role of the Board is to oversee and approve the company’s strategic direction, to
select and appoint a Managing Director (“MD”), to oversee the Company’s management and business activities
and report to Shareholders.
The goals of the corporate governance processes are to:
• Maintain and increase Shareholder value;
• Ensure a prudential and ethical basis for the Company’s conduct and activities; and
• Ensure compliance with the Company’s legal and regulatory objectives.
Consistent with these goals, the Board assumes the following responsibilities:
• Developing initiatives for profit and asset growth;
• Reviewing the corporate, commercial and financial performance of the Company on a regular basis;
• Acting on behalf of, and being accountable to, the Shareholders; and
•
Identifying business risks and implementing actions to manage those risks and corporate systems to
assure quality.
The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate
Directors’ participation in the Board’s discussions on a fully-informed basis.
The Board also recognises its responsibilities to the Company’s personnel, the communities and environments
within which the Company operates and, where relevant, other stakeholders.
Responsibility for management of the Company’s business activities is delegated to the Managing Director who
is accountable to the Board.
c)
Chairman
The Chairman is responsible for leadership of the Board, for the efficient organisation and conduct of the
Board’s function and for the promotion of relations between Board members and between Board and
management that are open, cordial and conducive to productive co‐operation.
Mr Andrew Milner was appointed Non-Executive Chairman of the Company on 2 July 2015.
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d)
Director independence
The Board has approved a policy on independence of Directors, a copy of which is available in the corporate
governance section of the Company’s website.
The policy provides that the independence of a Director will be assessed by determining whether the Director
is independent of management and free of any business or other relationship that could materially interfere
with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and
independent judgement.
The test of whether a relationship or business is material is based on the nature of the relationship or business
and on the circumstances and activities of the director. Materiality is considered from the perspective of the
Company, the persons or organisations with which the Director has an affiliation and from the perspective of
the Director. Materiality thresholds are considered by the Board from time to time. The Board considers that:
A supplier is material if the Company accounts for more than 5% of the supplier’s consolidated gross revenue;
• A substantial shareholder of the Company is someone who holds greater than 5% of the voting capital
of the Company; and
• Service on the Board for a period exceeding 10 years is a period which could, or could reasonably be
perceived to, materially interfere with a director’s ability to act in the best interests of the Company.
In the event that one or more of these thresholds is exceeded, the Board then focuses on whether or not in
their view that impacts materially on the independent judgement of the Director.
On appointment, each Director is required to provide information for the Chairman to assess and confirm their
independence as part of their consent to act as a Director.
The Chairman has considered the associations of each of the Non‐Executive Directors in office at the date and
considers that all Non‐Executive Directors are considered independent.
e)
Directors’ retirement and re‐election
The Company’s Constitution states that at each annual general meeting (“AGM”) one of its Directors (excluding
the Managing Director and any director appointed to fill a casual vacancy) and any director who has held office
for three or more years since their last election must retire. At least one non‐executive Director must stand for
election at each AGM.
Any Director appointed to fill a casual vacancy since the date of the previous AGM must submit themselves to
shareholders for election at the next AGM. Directors who retire as required may offer themselves for re‐
election by shareholders at the next AGM. Re‐appointment of Directors retiring by rotation or filling a casual
vacancy is not automatic.
f)
Board succession planning
The Board in conjunction with the Remuneration and Nominations Committee reviews the size and
composition of the Board and the mix of existing and desired competencies across members from time to time.
Criteria considered by the Directors when evaluating prospective candidates are contained in the Board’s
Charter
g)
Board performance evaluation
The Board undertakes ongoing self‐assessment and review of performance of the Board, committees and
individual Directors annually. The Chairman of the Board is responsible for determining the process for
evaluating Board performance. The Chairman’s performance is reviewed each year by the other members of
the Board.
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h) Nominations and appointment of new directors
Recommendations for nomination of new Directors are considered by the Remuneration and Nominations
Committee and approved by the Board as a whole.
The Remuneration and Nominations Committee reviews director appointments having regard to the
candidate’s commercial experience, skills and other qualities. External consultants may be used from time to
time to access a wide base of potential Directors. Further information on the Remuneration and Nominations
Committee is set out below.
i)
Professional advice
Subject to the Chairman’s approval (not to be unreasonably withheld), the Directors, at the Company’s
expense, may obtain independent professional advice on issues arising in the course of their duties.
j)
Conflicts of interest
Directors are required to disclose any actual or potential conflict or material personal interests on appointment
as a Director and are required to keep these disclosures up to date.
In the event that there is, or may be, a conflict between the personal or other interests of a Director, then the
Director with an actual or potential conflict of interest in relation to a matter before the Board does not receive
the Board papers relating to that matter. When the matter comes before the Board for discussion, the Director
withdraws from the meeting for the period the matter is considered and takes no part in the discussion or
decision-making process.
k)
Terms of appointment, induction training and continuing education
All new Directors are provided with a formal letter of appointment setting out the key terms and conditions of
the appointment, including duties, rights and responsibilities, the time commitment envisaged and the Board’s
expectations regarding their involvement with committee work. An induction folder is provided to all new
Directors. It includes a copy of the Constitution, board and committee charters and key Company policies.
All Directors are expected to maintain the skills required to discharge their obligations to the Company.
Directors are encouraged to undertake continuing professional education and where this involves industry
seminars and approved education courses, this is paid for by the Company where appropriate. A Directors’
Skills Matrix is contained in the Directors’ Report.
l)
Directors’ remuneration
Details of remuneration paid to Directors (Chairman and non‐executive) are set out in the remuneration
report. The remuneration of an executive Director will be decided by the Board, without the affected executive
Director participating in that decision-making process.
The total maximum remuneration of non-executive Directors is initially set by the Constitution and subsequent
variation is by ordinary resolution of Shareholders in general meeting in accordance with the Constitution, the
Corporations Act and the ASX Listing Rules, as applicable. The determination of non-executive Directors’
remuneration within that maximum will be made by the Board having regard to the inputs and value to the
Company of the respective contributions by each non-executive Director. The current amount has been set at
an amount not to exceed $250,000 per annum.
In addition, a Director may be paid fees or other amounts (i.e. subject to any necessary Shareholder approval,
non-cash performance incentives such as options) as the Directors determine where a Director performs
special duties or otherwise performs services outside the scope of the ordinary duties of a Director.
Directors are also entitled to be paid reasonable travelling, accommodation and other expenses incurred by
them respectively in or about the performance of their duties as Directors.
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The Board will review and approve the remuneration policy to enable the Company to attract and retain
executives and Directors who will create value for Shareholders having consideration to the amount
considered to be commensurate for a company of its size and level of activity as well as the relevant Directors’
time, commitment and responsibility. The Board is also responsible for reviewing any employee incentive and
equity-based plans including the appropriateness of performance hurdles and total payments proposed.
Further information on the Remuneration Committee is set out below.
m) Board meetings
The Chairman sets the agenda for each meeting in conjunction with the executive management and the
Company Secretary. Any Director may request additional matters be added to the agenda. Members of senior
management attend meetings of the Board by invitation and sessions are also held for non‐executive Directors
to meet without management present.
Copies of Board papers are circulated in advance of the meetings in either electronic or hard copy form.
Directors are entitled to request additional information where they consider the information is necessary to
support informed decision making.
The Board works to an agenda encompassing periodic reviews of the Company’s operating business units,
recurring statutory obligations, business approvals, strategy and other responsibilities identified in the Board
Charter.
n)
Company Secretary
Responsibilities for the secretarial function include providing advice to directors and executives on corporate
governance and regulatory matters, developing the Company’ corporate governance framework and giving
effect to the Board’s decisions. All directors have access to advice from the Company Secretary.
The Company Secretary is Catherine Anderson. Ms Anderson is a legal practitioner admitted in Western
Australia and Victoria and has over 25 years’ experience in both private practice and in house legal roles from
working in Melbourne and Perth.
Catherine also has experience in company secretarial roles for ASX listed companies, as well as having been a
director of an ASX listed junior explorer. She currently also provides consultancy services to entities wishing to
proceed to IPO and listing on ASX and has twice been nominated for the Telstra Business Woman of the Year
Award for an online retail business she established.
2. BOARD COMMITTEES
a)
Board committees and membership
During the reporting period, the Board had a maximum of five and a minimum of three members but
continued to maintain two committees to assist in the discharge of its responsibilities. These are the:
i.
Audit and Risk Management Committee; and
ii.
Remuneration and Nominations Committee.
As at the date of this Report, the Company has 4 Directors.
The charters of all Board committees detailing the roles and duties of each are available in the corporate
governance section of the Company’s website. All Board committee charters are reviewed at least annually.
During the reporting period and while the relevant person remained a Director of the Company the
membership of each Board committee was as follows:
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AUDIT AND RISK MANAGEMENT COMMITTEE
REMUNERATION AND NOMINATIONS
COMMITTEE
Andrew Milner
Andrew Milner (Chairman)
Daniel Rohr (Chairman)
Paul Everingham
Daniel Rohr
Paul Everingham
Committee members are chosen for the skills, experience and other qualities they bring to the committees.
The executive management attends, by invitation, board committee meetings. Any papers considered by the
standing committees are available on request to Directors who are not on that committee.
Following each committee meeting, generally at the next Board meeting, the Board is given a verbal update by
the Chair of each committee. In addition, minutes of all committee meetings are provided to all Directors. The
Company Secretary provides secretariat services for each committee.
Other committees are convened to address major transactions or other matters calling for special attention.
This did not occur in this reporting period.
b)
Audit and Risk Management Committee
The role of the Audit and Risk Management Committee is to assist the Board to meet its oversight
responsibilities in relation to the Company’s financial reporting, internal control structure, financial and
operational risk management procedures and the internal and external audit function. In doing so, it is the
Committee’s responsibility to maintain free and open communication between the Committee and the
external auditors and the management of the Company.
The duties of this Committee include but are not limited to, monitoring and reviewing any matters of
significance affecting financial reporting and compliance, the integrity of the financial reporting of the
Company, the Company’s internal financial control system and risk management systems and the external
audit function.
The Audit and Risk Management Committee is required to have a minimum of three members composed of
independent non‐executive Directors.
The external auditors and Managing Director attend Committee meetings by invitation.
This Committee met twice during the reporting period.
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c)
Remuneration and Nominations Committee
The role of the Remuneration and Nominations Committee is to assist the Board by reviewing and approving
the Company’s remuneration policies and practices and the appointment of non‐executive Directors to the
Board. The Committee’s responsibilities include:
• Assessing the necessary and desirable competencies of Board members;
• Reviewing Board succession plans and Board performance;
• Reviewing the Company’s remuneration framework, which is used to attract, retain and motivate
employees to achieve operational excellence and create value for shareholders;
• Reviewing the remuneration packages and incentive schemes for the Managing Director and senior
executives, to establish rewards, which are fair and responsible, having regard to the financial results of
the group, individual performance and general remuneration conditions;
• Reviewing the performance and succession planning for the Managing Director and senior executives;
• Reviewing the Company’s corporate governance policies and practices.
• The Managing Director attends committee meetings by invitation
This Committee met once during the reporting period.
3. AUDIT GOVERNANCE AND INDEPENDENCE
a)
Approach to audit and governance
The Board is committed to the basic principles that:
• The Company’s financial reports represent a true and fair view;
• The Company’s accounting practices are comprehensive, relevant and comply with applicable
accounting standards and policies; and
• The external auditor is independent and serves shareholder’s interests.
b)
External auditor relationship
The Company’s independent external auditor is BDO Audit (WA) Pty Ltd (“BDO”). BDO was appointed by
shareholders at the 2015 Annual General Meeting in accordance with the Corporations Act.
c)
Attendance of auditor at the AGM
The Company’s external auditor attends the AGM and is available to answer questions from shareholders on:
• The conduct of the audit;
• The preparation and content of the auditor’s report;
• The accounting policies adopted by the Company in relation to the preparation of the financial
statements; and
• The independence of the auditor in relation to the conduct of the audit.
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4. CONTROLLING AND MANAGING RISK
a)
Approach to risk management
The Board and senior executives are responsible for overseeing the implementation of the Company’s Risk
Management Policy.
The Company’s approach to risk management is based on the identification, assessment, monitoring and
management of material risks embedded in its business and management systems. This framework is based on
the Australian Standards for Risk Management.
The Company’s management team is responsible for implementation of the Board approved risk management
strategy and developing policies, processes and procedures to identify risks and mitigation strategies in the
Company’s activities.
b) Managing Director and accounting assurance on corporate reporting
The Board receives regular reports about the financial condition and operational results of the Company and its
controlled entities.
The Managing Director and the Company accountants provide, at the end of each six-monthly period, a formal
statement to the Board confirming that the Company’s financial reports present a true and fair view, in all
material respects, and the group’s financial condition and operational results have been prepared accordance
with the relevant accounting standards.
The statement also confirms the integrity of the Company’s financial statements and notes to the financial
statements, is founded on a sound system of risk management and internal compliance and control which
implements the policies approved by the Board, and that the Company’s risk management and internal
compliance and control systems, to the extent they relate to financial reporting, are operating efficiently and
effectively in all material respects.
5. PROMOTING ETHICAL AND RESPONSIBLE BEHAVIOUR
a)
Codes of conduct
The Board has approved a Code of Conduct which describes the standards of ethical behaviour that the
Directors and employees are required to maintain.
Compliance with the Code of Conduct by Directors and employees will also assist the Company in effectively
managing its operating risks and meeting its legal and compliance obligations, as well as enhancing the
Company’s corporate reputation.
The Code of Conduct describes requirements on matters such as confidentiality, conflicts of interest, sound
employment practices, compliance with laws and regulations and the protection and proper use of the
Company’s assets.
The Code of Conduct can be viewed on the Company’s website.
b)
Share trading policy
The Company’s Securities Trading Policy (“Policy”) is binding on all Directors and employees. The Policy
provides a summary of the law on insider trading and other relevant laws, sets out the restrictions on dealing
in securities by people who work for, or are associated with, the Company and is intended to assist in
maintaining market confidence in the integrity of dealings in the Company’s securities.
The Policy stipulates that the only appropriate time for a Director or employee to deal in the Company’s
securities is when he or she is not in possession of ‘price sensitive information’ that is not generally available to
the share market.
A Director wishing to deal in the Company’s securities may only do so after first having advised the Chairman of
their intention to do so. A senior executive wishing to deal must first notify the Managing Director.
Confirmation of any dealing must also be given by the director or senior executive within two business days
after the dealing and advised to the Company Secretary.
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In the case of other employees, contractors, consultants and advisers, there is no notification requirement.
Directors and senior executives’ dealings in the Company’s securities are also subject to specified closed
periods, which are set out in the Policy or as otherwise determined by the Board from time to time.
The Policy can be viewed on the Company’s website.
6. CORPORATE RESPONSIBILITY AND SUSTAINABILITY
The Company aims to produce positive outcomes for all stakeholders in managing its business and to maximise
financial, social and environmental value from its activities.
In practice, this means having a commitment to transparency, fair dealing, responsible treatment of employees and
customers and positive links into the community.
Sustainable and responsible business practices within the Company are viewed as an important long-term driver of
performance and Shareholder value. Through such practices, the Company seeks to reduce operational and
reputation risk and enhance operational efficiency while contributing to a more sustainable society.
The Company accepts that the responsibilities on the Board and management, which flow from this approach, go
beyond strict legal and financial obligations. The Board seek to take a practical and broad view of directors’ fiduciary
duties, in line with stakeholders’ expectations.
7. CONTINUOUS DISCLOSURE
The Company is committed to maintaining a level of disclosure that meets the highest standards and provides all
investors with timely and equal access to information.
The Company’s Continuous Disclosure Policy reinforces the Company’s commitment to ASX continuous disclosure
requirements and outlines management’s accountabilities and the processes to be followed for ensuring compliance.
The policy also describes the Company’s guiding principles for market communications.
The Company’s Continuous Disclosure Policy can be viewed on the Company’s website.
8.
SHAREHOLDER COMMUNICATIONS AND PARTICIPATION
The Company is committed to giving all Shareholders comprehensive, timely and equal access to information about
its activities so that they can make informed decisions. Similarly, prospective new investors are entitled to be able to
make informed investment decisions when considering the purchase of the Company’s shares.
A wide range of communication approaches are employed including direct communications with Shareholders and
presentations to Shareholders at the company’s Annual General Meeting. Publication of all relevant Company
information, including the Company’s Annual Report is in the “Investors” section of the Company’s website.
Shareholders have the opportunity to receive information in print or electronic format.
The Company strive to communicate effectively with Shareholders and give them ready access to balanced and
understandable information about the Company. The way it does this includes:
•
•
•
•
•
Ensuring that financial reports are prepared in accordance with applicable laws;
Ensuring the disclosure of full and timely information about the Company’s activities in accordance with
the continuous disclosure principles of the ASX Listing Rules and the Corporations Act 2001.
The Chairman and Managing Director being present at the Company’s Annual General Meeting;
Placing all ASX announcements (including financial reports) on the Company’s website as soon as
practicable following release; and
Ensuring that reports, notices of meeting and other Shareholder communications are prepared in a clear
and concise manner.
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9. DIVERSITY POLICY
The Company has in place a Diversity Policy.
The Board is committed to workplace diversity and is responsible for developing measurable objectives and
strategies to meet the Objectives of the Diversity Policy (Measurable Objectives) and monitoring the progress of the
Measurable Objectives through the monitoring, evaluation and reporting mechanisms listed below.
The Board will conduct all Board appointment processes in a manner that promotes gender diversity, including
establishing a structured approach for identifying a pool of candidates, using external experts where necessary.
The Company’s diversity strategies include:
a)
Recruiting from a diverse pool of candidates for all positions, including senior management and the various
subsidiary company boards;
b)
Reviewing succession plans to ensure an appropriate focus on diversity;
c)
d)
Identifying specific factors to take account of in recruitment and selection processes to encourage
diversity;
Developing programs to develop a broader pool of skilled and experienced senior management and board
candidates, including, workplace development programs, mentoring programs and targeted training and
development; and
e)
Developing a culture which takes account of domestic responsibilities of employees.
As at 30 June 2019, the Board consisted of 4 male members and no female members. The Company Secretary
is female.
As at 30 June 2019, the Company has 137 employees, of which 113 are male (FY18:115) and 24 are female (FY18:15)
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ASX RECOMMENDATION AND PRINCIPLES COMPLIANCE TABLE
Set out below is a table describing the various ASX Principles and statements as to the Company’s compliance or otherwise
with them.
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1
YES
The Company has adopted a Board Charter.
A listed entity should have and disclose a
charter which sets out the respective roles and
responsibilities of the board, the chair and
management; and includes a description of
those matters expressly reserved to the board
and those delegated to management.
Recommendation 1.2
A listed entity should:
(a) Undertake appropriate checks before
appointing a person, or putting forward to
security holders a candidate for election,
as a director; and
Provide security holders with all material
information relevant to a decision on
whether or not to elect or re-elect a
director.
Recommendation 1.3
A listed entity should have a written
agreement with each director and senior
executive setting out the terms of their
appointment.
Recommendation 1.4
The company secretary of a listed entity
should be accountable directly to the board,
through the chair, on all matters to do with
the proper functioning of the board.
YES
YES
YES
The Board Charter sets out the specific responsibilities of
the Board, requirements as to the Boards composition,
the roles and responsibilities of the Chairman and
Company Secretary, the establishment, operation and
management of Board Committees, Directors access to
company records and information, details of the Board’s
relationship with management and details of the Board’s
disclosure policy.
The Managing Director (as a delegate of the board) is
responsible for the effective leadership and day to day
operations and administration of the Company.
A copy of the Company’s Board Charter is available on
the Company’s website.
(a) The Company undertakes checks on any person who
is being considered as a director. These checks may
include character, experience, education and
financial history and background.
(b) All material information relevant to a decision on
whether or not to elect or re-elect a Director will be
provided to security holders in a Notice of Meeting
pursuant to which the resolution to elect or re-elect
a Director will be voted on.
Each senior executive and executive director has a
formal employment contract and the non-executive
directors have a letter of appointment.
The Company Secretary is accountable directly to the
Board, through the Chair, on all matters to do with the
proper functioning of the Board.
The Company Secretary has primary responsibility for
ensuring that Board processes and procedures run
efficiently and effectively.
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YES
(a) The Company has adopted a Diversity Policy
(i) The Diversity Policy provides a framework for the
Company to achieve a list of measurable
objectives that encompass gender, age, ethnicity
and cultural equality.
(ii) The Diversity Policy provides for the monitoring
and evaluation of the scope and currency of the
Diversity Policy. The Company is responsible for
implementing, monitoring and reporting on the
measurable objectives.
(b) Information on the Company’s Diversity Policy is set
out in the Annual Report.
(i) The measurable objectives set by the board are
included in the Annual Report. In addition, the
board will review progress against the objectives
in its annual performance assessment.
The Board includes in the Annual Report each year
the measurable objectives, progress against the
objectives, and the proportion of male and female
employees in the whole organisation, at senior
management level and at Board Level.
Recommendation 1.5
A listed entity should:
(a) Have a diversity policy which includes
requirements for the board:
(i) To set measurable objectives for
achieving gender diversity; and
(ii) To assess annually both the objectives
and the entity’s progress in achieving
them;
(b) Disclose that policy or a summary or it;
and
(c) Disclose as at the end of each reporting
period:
(i) The measurable objectives for
achieving gender diversity set by the
board in accordance with the entity’s
diversity policy and its progress
towards achieving them; and
(ii) Either:
(A) The respective proportions of men
and women on the board, in senior
executive positions and across the
whole organisation (including how
the entity has defined “senior
executive” for these purposes); or
(B) The entity’s “Gender Equality
Indicators”, as defined in the
Workplace Gender Equality Act
2012.
Recommendation 1.6
A listed entity should:
YES
(a) Have and disclose a process for
periodically evaluating the performance of
the board, its committees and individual
directors; and
(b) Disclose in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
The Chairman is responsible for evaluating the
performance of the Board, its committees and individual
directors. This is generally done through a meeting with
the Chair.
The review is currently informal but is based on a review
of goals for the Board and individual Directors. Due to the
re-admission of the Company to ASX on 8 July 2015, the
regulatory requirements for which had been underway for
a significant part of the reporting period, no formal
evaluations took place.
Generally, the goals for the Board are based on corporate
requirements and any areas for improvement that may be
identified. The Chairman will provide each Director with
confidential feedback on his or her performance.
Recommendation 1.7
A listed entity should:
(a) Have and disclose a process for
periodically evaluating the performance of
its senior executives; and
(b) Disclose in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
YES
(a) The Remuneration Committee is responsible for
evaluating the performance of senior executives. The
Committee is to arrange an annual performance
evaluation of the senior executives.
(b) The Remuneration Committee is required to disclose
whether or not performance evaluations were
conducted during the relevant reporting period.
Details of the performance evaluations conducted will
be provided in the Company’s Annual Report.
Due to the re-admission of the Company to ASX on 8
July 2015, the regulatory requirements for which had
been underway for a significant part
of the reporting period, no formal evaluations took
place.
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PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1
YES
The board of a listed entity should:
(a) Have a nomination committee which:
(i) Has at least three members, a
majority of whom are independent
directors; and
(ii)
Is chaired by an independent
director, and disclose:
(iii) The charter of the committee;
(iv) The members of the committee; and
(v) As at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b) If it does not have a nomination
committee, disclose that fact and the
processes it employs to address board
succession issues and to ensure that the
board has the appropriate balance of
skills, experience, independence and
knowledge of the entity to enable it to
discharge its duties and responsibilities
effectively.
Recommendation 2.2
YES
A listed entity should have and disclose a
board skill matrix setting out the mix of skills
and diversity that the board currently has or is
looking to achieve in its membership.
A nomination committee has been established and the
Company has a Remuneration and Nomination Committee
Charter which is available on the Company’s website. This
Committee comprises a minimum of 3 non-executive
Directors. During the reporting period, this Committee met
once.
The Board reviews capabilities, technical skills and
personal attributes of its directors. It will normally review
the Board’s composition against those attributes and
recommend any changes in Board composition that may
be required. An essential component of this will be the
time availability of Directors. Information about the skills
and expertise of all Board members is contained in the
Annual Report.
The Board believes that it has a diverse mix of experience
and skills which will lead to a better outcome for the
Company and the Shareholders, and the Board is
comfortable with the skills matrix represented by the
current Board.
Recommendation 2.3
A listed entity should disclose:
(a) The names of the directors considered by
the board to be independent directors;
(b) If a director has an interest, position,
association or relationship of the type
described in Box 2.3 of the ASX Corporate
Governance Principles and
Recommendation (3rd Edition), but the
board is of the opinion that it does not
compromise the independence of the
director, the nature of the interest,
YES
(a) Disclosure of the names of Directors, considered by
the board to be independent is provided in the Annual
Report.
(b) Directors’ interests, positions, associations and
relationships are regularly assessed by the Board.
Details of the Directors interests, positions
associations and relationships are provided in the
Annual Report.
(c) The Board Charter provides for the determination of
the Directors’ terms and requires the length of service
of each Director to be disclosed. The length of service
of each Director is provided in the Annual Report.
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position, association or relationship in
question and an explanation of why the
board is of that opinion; and
(c) The length of service of each director
Recommendation 2.4
A majority of the board of a listed entity
should be independent directors.
Recommendation 2.5
The chair of the board of a listed entity should
be an independent director and, in particular,
should not be the same person as the CEO of
the entity.
Recommendation 2.6
A listed entity should have a program for
inducting new directors and providing
appropriate professional development
opportunities for continuing directors to
develop and maintain the skills and knowledge
needed to perform their role as a director
effectively.
YES
YES
YES
The Board Charter requires that an appropriate balance
between independent and non-independent directors is
represented on the Board.
Details of each Director’s independence are provided in
the Annual Report.
This is complied with as at the date of this Report, with
Andrew Milner the non-executive, independent Chairman
from 2 July 2015.
All new Directors are provided with a copy of all Company
Policies and Charters. It is also the responsibility of the
Board to procure appropriate professional development
opportunities for Directors. The Remuneration and
Nominations Committee is responsible for the approval
and review of induction and continuing professional
development programs and procedures for Directors to
ensure that they can effectively discharge their
responsibilities.
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
Recommendation 3.1
A listed entity should:
(a) Have a code of conduct for its directors,
senior executives and employees; and
(b) Disclose that code or a summary of it.
YES
(a) The Company’s Code of Conduct applies to the
Company’s Directors, senior executives and
employees.
(b) The Company’s Code of Conduct is available on the
Company’s website.
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PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Recommendation 4.1
YES
(a) The Audit and Risk Committee Charter states that:
(i) The Audit and Risk Committee shall comprise the
Company’s non-executive directors;
(ii) The Audit and Risk Committee Charter is available
on the Company website;
(iii) The Audit and Risk Committee Charter requires
the Committee in relation to the reporting period
to disclose the number of times that the
Committee met throughout the period, and the
individual attendances of the members at those
Committee meetings. Details of the Committee
meetings will be provided in the Company’s
Annual Report.
This Committee met twice during the reporting period.
The board of a listed entity should:
(a) Have an audit committee which:
(i) Has at least three members, all of
whom are non-executive directors
and a majority of whom are
independent directors; and
(ii)
Is chaired by an independent
director, who is not the chair of the
board, and disclose:
(iii) The charter of the committee;
(iv) The relevant qualifications and
(v)
experience of the members of the
committee; and
In relation to each reporting period,
the number of times the committee
met throughout the period and the
individual attendances of the
members at those meetings; or
(b) If it does not have an audit committee,
disclose that fact and the processes it
employs that independently verify and
safeguard the integrity of its financial
reporting, including the processes for the
appointment and removal of the external
auditor and the rotation of the audit
engagement partner.
Recommendation 4.2
YES
The board of a listed entity should, before it
approves the entity’s financial statements for
a financial period, receive from its CEO and
CFO a declaration that the financial records of
the entity have been properly maintained and
that the financial statements comply with the
appropriate accounting standards and give a
true and fair view of the financial position and
performance of the entity and that the opinion
has been formed on the basis of a sound
system of risk management and internal
control which is operating effectively.
Before the Board approves the entity’s financial
statements for a financial period, the CEO and CFO
declares that in their opinion the financial records of the
entity have been properly maintained and that the
financial statements comply with the appropriate
accounting standards and give a true and fair view of the
financial position and performance of the entity and that
the opinion has been formed on the basis of a sound
system of risk management and internal control which is
operating effectively.
Recommendation 4.3
YES
A listed entity that has an AGM should ensure
that its external auditor attends its AGM and is
available to answer questions from security
holders relevant to the audit.
The Audit and Risk Committee Charter provides that the
Committee must ensure the Company’s external auditor
attends its AGM and is available to answer questions from
security holders relevant to the audit.
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PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Recommendation 5.1
A listed entity should:
(a) Have a written policy for complying with
its continuous disclosure obligations under
the Listing Rules; and
(b) Disclose that policy or a summary of it.
YES
(a) The Company has a Continuous Disclosure Policy.
(b) This Policy is available on the Company’s website, as is
all information provided to ASX for release to the
market.
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS
Recommendation 6.1
A listed entity should provide information
about itself and its governance to investors via
its website.
YES
Information about the Company and its governance is
available in its Corporate Governance Policies which can
be found on the Company’s website.
Recommendation 6.2
YES
A listed entity should design and implement an
investor relations program to facilitate
effective two-way communication with
investors.
Recommendation 6.3
YES
A listed entity should disclose the policies and
processes it has in place to facilitate and
encourage participation at meetings of
security holders.
A link is available on the Company’s website to the
Company’s announcements page on the ASX website,
meaning that all the Company’s ASX announcements are
immediately accessible through the Company’s website.
The Company aims to promote and facilitate effective two-
way communication with investors through the availability
of the MD and the Company Secretary to respond directly
to shareholder queries. A link to directly email the
Company Secretary is available on the Company’s website,
as well as the provision of a general email address
investors@cirrusnetworks.com.au
Shareholders are encouraged to participate at all EGMs
and AGMs of the Company. Upon the dispatch of any
notice of meeting to Shareholders, the Company Secretary
shall send out material with that notice of meeting stating
that all Shareholders are encouraged to participate at the
meeting.
Shareholders who are not able to attend at meetings and
vote in person are able to utilise the share registry’s
electronic voting platform, either online or by
downloading the relevant phone Application. The
introduction of this facility has resulted in a marked
increase in the number of Shareholders voting.
Recommendation 6.4
A listed entity should give security holders the
option to receive communications from, and
send communications to, the entity and its
security registry electronically.
YES
The Company's share registry provides (through its
website) the ability to email the share registry and to
receive documents by email from the share registry.
Shareholders queries should be referred to the Company
Secretary at first instance. Contact details are provided on
the Company’s website.
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PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
The Board has adopted an Audit and Risk Committee
Charter and a Financial Risk Management Policy. These are
available on the Company’s website. There is no other risk
management committee and this role is undertaken by the
Board, however, the overall basis for risk management is
to provide recommendations about:
1. Assessing the internal processes for determining and
managing key risk areas, particularly:
• Non-compliance with laws, regulations, standards
and best practice guidelines, including
environmental and industrial relations laws;
• Litigation and claims; and
• Relevant business risks other than those that are
dealt with by other specific Board Committees.
2. Ensuring that the Company has an effective risk
management system and that major risks are reported
at least annually to the Board.
3. Receiving from management reports on all suspected
and actual frauds, thefts and breaches of laws.
4. Evaluating the process, the Company has in place for
assessing and continuously improving internal
controls, particularly those related to areas of
significant risk.
5. Assessing whether management has controls in place
for unusual types of transactions and/or any potential
transactions that may carry more than an acceptable
degree of risk.
6. Meeting periodically with key management, internal
and external auditors and compliance staff to
understand and discuss the Company’s control
environment.
The Board meets on a regular basis to discuss the
Company’s operating activities. As part of this, all risks are
considered including but not limited to strategic,
operational, legal, reputation and financial risks. This is an
on-going process rather than an annual formal review. As
referred to above, the Company has in place a Financial
Risk Management Policy.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Recommendation 7.1
YES
The board of a listed entity should:
(a) have a committee or committees to
oversee risk, each of which:
(i)
has at least three members, a
majority of whom are independent
directors; and
(ii)
is chaired by an independent
director, and disclose:
(iii)
the charter of the committee;
(iv)
the members of the committee; and
(v)
as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b) if it does not have a risk committee or
committees that satisfy (a) above, disclose
that fact and the process it employs for
overseeing the entity’s risk management
framework.
Recommendation 7.2
YES
The board or a committee of the board
should:
(a) Review the entity’s risk management
framework with management at least
annually to satisfy itself that it continues
to be sound, to determine whether there
have been any changes in the material
business risks the entity faces and to
ensure that they remain within the risk
appetite set by the board; and
(b) Disclose in relation to each reporting
period, whether such a review has taken
place. Recommendation 6.2
A listed entity should design and
implement an investor relations program
to facilitate effective two-way
communication with investors.
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YES
The Company does not have a formal internal audit
function but reviews its risk management and internal
control processes on a regular basis and has in place a
Financial Risk Management Policy as referred to above.
Recommendation 7.3
A listed entity should disclose:
(a) If it has an internal audit function, how the
function is structured and what role it
performs; or
(b) If it does not have an internal audit
function, that fact and the processes it
employs for evaluating and continually
improving the effectiveness of its risk
management and internal control
processes.
Recommendation 7.4
YES
A listed entity should disclose whether, and if
so how, it has regard to economic,
environmental and social sustainability risks
and, if it does, how it manages or intends to
manage those risks.
The Company is of the view that its operations do not
create a material exposure to economic and social
sustainability risks. With respect to past minerals
exploration activities and the environment, the Company
has complied with all rehabilitation requirements of the
relevant legislation.
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Recommendation 8.1
YES
(a) The Remuneration and Nomination Committee
The board of a listed entity should:
(a) Have a remuneration committee which:
(i) Has at least three members, a
majority of whom are independent
directors; and
(ii)
Is chaired by an independent
director, and disclose:
(iii) The charter of the committee;
(iv) The members of the committee; and
(v) As at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b) If it does not have a remuneration
committee, disclose that fact and the
processes it employs for setting the level
and composition of remuneration for
directors and senior executives and
ensuring that such remuneration is
appropriate and not excessive.
Recommendation 8.2
A listed entity should separately disclose its
policies and practices regarding the
remuneration of non-executive directors and
the remuneration of executive directors and
other senior executives and ensure that the
different roles and responsibilities of non-
executive directors compared to executive
Charter outlines the roles and responsibilities of that
Committee and provides that the Committee
comprises the non-executive members of the Board
but excludes the relevant member of the Board when
their performance is under review;
(b) The Remuneration and Nomination Committee
Charter is available on the Company’s website.
(c) The Remuneration and Nomination Committee
discloses the number of times that the Committee
meets throughout the period, and the individual
attendances of the members at those Committee
meetings. Details of the Committee meetings will be
provided in the Company’s Annual Report. During the
reporting period this Committee met once.
YES
The Company provides disclosure of all Directors’ and
executives’ remuneration in its Annual Report.
Non-executive Directors are remunerated at a fixed fee to
take account of their time, commitment and
responsibilities. Remuneration for non-executive Directors
is not linked to the performance of the Company. There
are no documented agreements providing for termination
or retirement benefits for non-executive Directors. Any
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directors and other senior executives are
reflected in the level and composition of their
remuneration.
Recommendation 8.3
N/A
A listed entity which has an equity-based
remuneration scheme should:
(a) Have a policy on whether participants are
permitted to enter into transactions
(whether through the use of derivatives or
otherwise) which limit the economic risk
of participating in the scheme; and
(b) Disclose that policy or a summary of it.
long term performance incentives may include options or
shares granted at the discretion of the Board and subject
to obtaining the relevant Shareholder approvals.
Executive Directors and senior executives are offered a
competitive level of base pay at market rates which are
reviewed annually to ensure market competitiveness. Long
term performance incentives may include performance
and sales bonus payments, shares and/or options granted
at the discretion of the Board and subject to obtaining
relevant Shareholder approvals (if required).
The Company does not have an equity based
remuneration scheme which is affected by this
recommendation although it has previously obtained
Shareholder approval to the issue of shares to directors in
lieu of fees; and for the issue of bonus options to
Directors. The Company has in place a “Directors and
Employees Share Option Plan”, under which both
employees and Directors may be offered options (subject
to Shareholder approval in the case of any officer of the
Company).
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DISTRIBUTION OF SHAREHOLDERS
At 20 August 2019 there were 1,473 holders of 883,384,099 ordinary fully paid shares in the Company. Analysis of
numbers of equity holders by size of holding:
NUMBER OF SHARES HELD
HOLDERS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
52
138
82
611
590
1,473
UNITS
6,970
486,774
677,528
26,799,834
855,412,993
883,384,099
The number of shareholders holding less than a marketable parcel of 11,905 shares: 290
SUBSTANTIAL SHAREHOLDERS
At 20 August 2019 the substantial shareholders in the Company are the following:
NAME OF SHAREHOLDER
NUMBER HELD
PERCENTAGE
WILSON ASSET MANAGEMENT GROUP
69,659,366
7.89
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At 20 August 2019 the substantial option holders in the Company are set out below:
NAME OF OPTION HOLDER
NUMBER HELD
PERCENTAGE
JARABA AVENUE PTY LTD
20,000,000
MR GLENN MCATEE + MS HEIDI MCATEE
15,000,000
ZENIX NOMINEES PTY LTD
MR MATTHEW GREEN
MR CHRISTOPHER MCLAUGHLIN
MR BRENDAN MACDONALD
ALCOTRACK PTY LTD
BEARNICK PTY LTD
MURDOCH CAPITAL PTY LTD
GTT VENTURES PTY LTD
TESHA PTY LTD
Remaining Holders
TOTAL
VOTING RIGHTS
6,000,000
5,075,000
3,350,000
3,000,000
2,500,000
2,500,000
2,500,000
2,000,000
2,000,000
21,025,000
109,100,000
23.54
17.66
7.06
5.97
3.94
3.53
2.94
2.94
2.94
2.35
2.35
24.75
100.00
The voting rights attaching to the ordinary shares are in accordance with the Company’s Constitution being that:
•
•
•
Each Shareholder entitled to vote may vote in person or by proxy, attorney or corporate representative;
On a show of hands, every person present who is a Shareholder or a proxy, attorney or corporate
representative of a Shareholder has one vote; and
On a poll, every person present who is a Shareholder or a proxy, attorney or corporate representative of a
Shareholder shall, in respect of each fully paid share held by them, or in respect of which they are appointed a
proxy, attorney or corporate representative, have one vote for the share, but in respect of partly paid shares,
shall, have such number of votes as bears the proportion which the paid amount (not credited) is of the total
amounts paid and payable (excluding amounts credited).
There are no voting rights attached to options in the Company. Voting rights will be attached to the unissued ordinary
shares when options have been exercised.
STOCK EXCHANGE LISTING
Cirrus Networks Holdings Limited securities are listed on the Australian Securities Exchange (‘ASX’). The Company’s ASX
code is CNW. Prior to the re-admission to ASX as Cirrus on 8 July 2015, the Company was named Liberty Resources Limited
and its ASX code was LBY. The Company has no listed options on the ASX.
Directors’ interests in share capital are disclosed in the Directors’ Report.
There is currently no on-market buy-back in place.
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Top 20 ordinary shareholders at 20 August 2019:
NO.
NAME OF ORDINARY SHAREHOLDER
NUMBER OF
SHARES HELD
PERCENTAGE
OF SHARES
HELD
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
89,403,592
10.12
JARABA AVENUE PTY LTD
ALCOTRACK PTY LTD
WEIR SUPER FUND PTY LTD
MR MATTHEW GREEN + MRS NATALIE GREEN
CITICORP NOMINEES PTY LIMITED
MR MARK NEIL BLACKBURNE OLIVER
MR GRAHAME GILSON
VERTEC IT SOLUTIONS PTY LTD
ZERRIN INVESTMENTS PTY LTD
MR CHRISTOPHER STEVENS
CH GLOBAL PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NATIONAL NOMINEES LIMITED
MR MATTHEW CHARLES MILNER
MRS MEGAN LEANNE JOHNSON
MR DIGBY NEIL GILMOUR
MR GAVIN BRADLEY LEHMANN + MRS MICHELLE YVETTE LEHMANN
MR JOHNATHON MATTHEWS
UBS NOMINEES PTY LTD
TOTALS – TOP 20
TOTALS – REMAINING SHAREHOLDERS
48,273,387
44,323,387
43,851,070
27,457,781
25,753,642
22,000,000
17,466,478
17,172,572
16,000,000
11,779,477
10,000,000
9,066,251
8,429,675
8,227,001
8,000,000
8,000,000
7,940,066
7,588,382
7,278,328
5.46
5.02
4.96
3.11
2.92
2.49
1.98
1.94
1.81
1.33
1.13
1.03
0.95
0.93
0.91
0.91
0.90
0.86
0.82
441,054,936
354,716,693
49.58
50.42
REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS
Arcadia Chambers
Level 2, 1 Roydhouse Street
Subiaco WA 6008
Telephone: (08) 6180 4222
REGISTER OF SECURITIES
The register of securities is held at:
Computershare Registry Services Pty Ltd
Level 2, 45 St Georges Terrace
Perth WA 6000
Telephone: +61 8 9323 2000
Facsimile: +61 8 9323 2033
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