MNF Group Limited
Annual Report 2019
ABN 37 118 699 853
Contents
Message from our CEO ................................................................................................................................
Business overview ................................................................................................................................
Company structure .......................................................................................................................................
Business unit profiles ...................................................................................................................................
Corporate social responsibility .....................................................................................................................
People Experience (PX) ...............................................................................................................................
Directors’ report ............................................................................................................................................
Consolidated statement of profit or loss and other comprehensive income ..................................................
Consolidated statement of financial position .................................................................................................
Consolidated statement of cash flows ...........................................................................................................
Consolidated statement of changes in equity ...............................................................................................
Notes to the consolidated financial statements .............................................................................................
Directors’ declaration ....................................................................................................................................
Auditor’s independence declaration .............................................................................................................
Independent auditor’s report .......................................................................................................................
ASX additional information ..........................................................................................................................
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MNF Group
powers communication
in the apps and services
you use every day
Highlights
Recurring Revenue
Up 89% to $74m
Recurring Gross Margin
Up 89% to $74m
$
EBITDA
Up 11% to $27.2m
Underlying NPAT-A
Up 13% to $15.9m
Phone numbers
Up 19% to
3.8m
Gross Margin
Up 20% to
$82.5m
Underlying EPS-A
Up 12% to
$21.7m
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Message from our CEO
Dear Shareholders,
It has been another record year of growth for the MNF Group, with our total numbers on the
network growing 18% to 3.8 million phone numbers. We attribute this increase to consumers and
businesses moving their voice communications requirements into the cloud. Additionally, many of
our established customers are themselves experiencing booming growth which is in turn
compounding ours. We expect this trend to continue well into the future based on analyst
predictions for the UCaaS, CPaaS and CCaaS markets in Australia and globally.
Strong bottom line growth
This year saw MNF reach new record levels of profitability with EBITDA reaching $27.2m up 11% on
prior year (FY18: $24.5m). The year also saw several once-off expenses to do with the large and
complex acquisition of Telcoinabox, however underlying NPAT-A grew to $15.9m up 13% on prior year
comparable figures (FY18: $14.1m). This led to an underlying EPS-A rise of 12% to 21.7 cents per
share (FY18: 19 cps). Cash conversion in H2 was 77% of EBITDA leading the company to finish with
$15.5m cash in bank at June 30.
Reaffirmation of FY20 EBITDA guidance
With the acquisition in Telcoinabox behind us and the integration well progressed, this has allowed the
company to re-affirm its prior FY20 EBITDA guidance of $33.0m to $36.0m, a forecast growth of 27%
at the guidance mid-point.
Strong business
performance indicators
Our recurring revenue streams
grew 89% to $74m (FY18: $40m),
which makes up 34% of our over-
all revenue mix. These recurring
revenue streams are long term,
sticky and high margin.
Similarly, our gross margin grew
20% to $82.5m (FY18: $69.0m),
with recurring margin streams
growing 60% to $49m (FY18:
$31m). Our average gross margin
generation is now sitting at 38%
of revenue, up from 31% from the
prior year.
Given recurring margins are
generated from very sticky
products, this leads to long term
stability of gross margin
generation and a monotonically
increasing margin profile.
250
200
150
100
50
100%
90%
80%
70%
60%
50%
40%
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20%
10%
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191.8
220.7
215.6
161.2
134.3
158.6
181.1
141.9
73.7
26.9
33.2
39.6
FY16 FY17 FY18 FY19
Recurring revenue
Transactional revenue
83%
83%
82%
66%
34%
17%
17%
18%
FY16 FY17 FY18 FY19
Recurring revenue
Transactional revenue
Wholesale Global Customer Recurring Revenue Growth
7.0
6.0
5.0
4.0
M
$
3.0
2.0
1.0
4.9
3.7
4.0
6.2
H1
H2
FY18
FY19
The company saw H2’s existing global
recurring customer revenue grow by
56% compared to the same quarter in
the prior year – from $4.0m to $6.2m.
This rapid growth with existing
customers demonstrates MNFs ability to
deliver a high-quality product with high
levels of scalability.
FY19 Achievements:
Acquisition of Telcoinabox
The company successfully completed what was a complex and drawn out acquisition of Telcoinabox.
The acquisition consolidates the wholesale aggregation market and makes MNF a clear leader in this
space with over 800 wholesale customers across Australia utilising MNF for their voice, mobile and
NBN service delivery.
Sale of consumer DSL/NBN business
The company completed the sale of its DSL/NBN consumer customer base towards the end of FY19.
This divestment aids in the simplification of the MNF business and removes a potential EBITDA
headwind as the retail margins decline in the NBN space. This further allows MNF to focus resources
on growing customer segments such as Small to Medium Business and Enterprise and Government.
Re-launch of Connexus
the company relaunched the Connexus brand to be its premier brand for Small to Medium Business.
MNF has been growing steadily in the SMB space with its Virtual PBX product suite. This re-launch not
only allows MNF to provide a new set of products, but also a new approach to branding and marketing
which will allow it to maximise market share gain in the direct SMB segment.
Our Competitive Advantage:
Our company today offers a “one-stop shop” that hides all the “old world telco” complexity from our
customers. Below is a summary of our key differentiators, which we see as our competitive advantage:
1. We own our network, our quality, our reliability
2. We offer a comprehensive suite of voice and telco services through our APIs
3. We are uniquely a software company sitting on a strong telco foundation
4. We speak and act the way our customers demand
5. We hide the complexity of being a telco in Australia, New Zealand and shortly Singapore,
and eventually the majority of Asia-Pacific
6. Our strategic advantage is our ability to offer wholesale services at a lower cost than the
customer could build themselves
7. We benefit from all the margin advantages of owning our entire value stack
5
By 2021, 90% of IT leaders will not purchase
new premises-based UC infrastructure —
up from 50% today
Global UCaaS spending will grow
to reach $46.4 Billion (USD) in 2023
– Gartner
MNF underpins the voice, video, messaging and telco capabilities
that connect your daily life
Texting, calling and
browsing at home…
…collaborating and
conferencing at work…
…communicating via
everyday apps and ads…
…or chatting with friends
& colleagues overseas
6
The Future:
MNF is privileged to have a large established customer base that see their market opportunity
booming, and are growing on the back of a range of diverse drivers. Looking specifically at Australia,
there is a “once-in-a-generation” shift occurring driving strong growth for MNF.
The cease sale of legacy PSTN/ISDN services
The backbone of the telco incumbent offerings for the last 30 years is opening the doors for Small to
Medium Businesses and Enterprise & Governments alike to migrate to VoIP services. This is
supported by the 23% YoY organic growth we are seeing by MNFs global customers.
The NBN rollout
The government forced obsoletion of any remaining copper infrastructure is forcing consumers and
businesses to move to VoIP as the only option. There is a 30% YoY growth in our domestic wholesale
customers.
The UCaaS, CPaaS and CCaaS revolution
Looking internationally, we are seeing an increase in demand for our services from new customers
both large and small. This is supported by the Gartner research forecast for the future of UCaaS,
where spending is set to grow rapidly and reach over $46 Billion globally over the next 4 years.
Over the remainder of FY20 MNF intends to maximise its opportunities in this exciting area while
positioning itself for long term sustainable growth and expansion into the Asia Pacific region.
Thank you:
On behalf of my fellow directors, I would like to thank my executive team, and all my staff in achieving
another solid result in what has been an incredibly hectic year. Without the hard work and dedication of
a highly capable team we would not be able to maximise our growth in this rapidly changing industry.
I thank all our shareholders for their continued support. The company is looking forward to continuing
its growth well into the future.
Rene Sugo
CEO and Executive Director
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Business overview
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Glossary
API
A set of coding standards for developers
wishing to connect different bits of
software.
Termination
The process of routing a phone call, from
one telecom provider to another, until it
reaches the recipient.
CPaaS
Communication Platform
as a Service
A framework for developers to
add telecom capabilities to their
software, without needing to build
backend infrastructure.
MVNO
A way to provide mobile services
without the need to build an independant
mobile network.
Porting
The process of transferring a phone
number from one telecom carrier to
another.
PSTN
The global network of phone users,
encompassing every phone number in
the world.
SLA
The agreed standard of service reliability
between a customer and a service
provider.
Transaction Revenue
Revenue that is billed when a user
makes a phone call, typically low margin
and variable.
UCaaS
Unified Communication
as a Service
Software that enables users
to call, conference and
message from a single
interface, delivered as-a-
service via the cloud.
Virtual Number
A phone number that is operated on a
VoIP network without needing an
underlying phone line service.
Virtual PBX
A business phone service, typically
connecting multiple business users,
delivered as-a-service via the cloud.
SIP Trunk
A way for voice and video calls to travel
over VoIP networks. It is the digital
equivalent of a phone line.
VoIP
A way of turning phone calls into data
that can be transmitted over the internet
and routed to any recipient.
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4 Pillars of Growth
Geography
Market share
Extending our software capabilities
into new regions of SE Asia, built
on our own integrated
multi-regional voice IP network
Winning new customers directly
via our own brands, and indirectly
via our wholesale customers
Achievements:
• Strong organic growth in Australia
• Acquired Super Internet in Singapore
• New Zealand network fully operational
Vision:
• Continue to dominate Australian
wholesale segment
• Complete upgrade of Singapore
network
• Ramp up New Zealand revenue
Achievements:
• Massive growth in recurring
revenues from wholesale UCaaS
and CCaaS customers
• Market-leading wholesale and
enablement base of 800+
customers
• Achieved milestone 10,000
Pennytel mobile customers
• Exited the direct consumer NBN
market
• Continue recurring revenue growth
from Small to Medium Business
• Strong pipeline in Enterprise &
Government for Cisco and
Microsoft UCaaS solutions
Vision:
• Underpin the growth of UCaaS
and CCaaS market entrants in
Australia, NZ and Singapore
•
• Maintain organic growth
momentum in Domestic
Wholesale
Increase organic growth in
Domestic Retail with key brands –
Pennytel, Connexus, MNF
Enterprise & Express Virtual
Meetings
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Software
Deepening our technology
moat by providing the most
seamless, modern experience
for software and telco providers
Wholesale
partnerships
Working closely with market
leaders and innovators to create
the future of communications
Achievements:
• Acquired Telcoinabox including
specialist software underpinning
major MVNO and wholesale
customers
• Commenced integration of
Telcoinabox network, delivering
synergies due to cost saving and
scale
• Continued development of
communication APIs and launch
of developer portal for wholesale
customers
• Launch of video conferencing
product for CCI
• Launch of Open RTP calling
product for TNZI
• Launch of new hosted PBX
features for Telcoinabox
Vision:
• Deeply integrate the technology
of Inabox, iBoss and Symbio
Networks with the vision of a
single platform that can be
deployed globally
• Engineer highly scalable and
highly automated systems that
can support extreme growth and
demand from the world’s largest
software companies
• Continue to launch and refresh
products to serve the growing
demand for cloud communications
Achievements:
• Achieved world first Webex Calling
deployment in partnership with
Cisco
• Delivered a significant MVNO
project for disruptive mobile
market entrant in Australia
• Delivered cutting-edge IoT
solution for vehicles in
collaboration with global mobile
network
Vision:
• Deepen relationships with existing
global and domestic wholesale
partners to entrench their future
growth with MNF Group
• Secure more partnerships in the
IoT space, collaborating with
mobile network operators
• Continue to work closely with
Cisco and Microsoft and their
respective partner networks in
Australia
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Multi-region network
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Australia
Established network
Full national coverage
Global interconnect
Our integrated network provides global
reach and scale as well as comprehensive
in-country capabilities in Australia, New
Zealand with Singapore online this FY
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New Zealand
Network launched
Full national coverage
Global interconnect
Singapore
Metro fiber network
FBO (carrier) license
Build underway
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SE Asia growth focus
25M
AUS
5% Market
Share
30M
AUS + NZ
<4% Market Share
We plan to extend our network and
platform into Singapore and other
South East Asian countries –
powering communications in these
immense markets
Currently MNF Group is generating
$1.00 of EBITDA per head of population
in AU, growing at 11% YoY
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36M
AUS + NZ + SG
<3% Market Share
650M+
AUS + NZ + SG
+ SE Asia
SE Asia includes: Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines,
Thailand, Timor-Leste and Viet Nam (ex. China, India and Singapore).
Sources: ABS (2019), Stats NZ (2019), Singstat (2019), UN DESA (2019)
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Infinite use cases
The MNF Group platform enables developers to embed our telecom capabilities in
software, mobile apps, smart devices and more. Our capabilities power the apps and
services you use every day. The potential applications are endless, and our platform
already underpins market-leading vendors in UCaaS, CCaaS and online advertising.
Hosted PBX
Virtual
Numbers
Call
Analytics
International
calling
UCaaS &
Collaboration
Bots & AI
Emergency
Calling
Voice calling
Platform
Connected
Home
Authentication
Advertising
Smart
Vehicles
& IoT
In-app
privacy
NBN
Calling
CCaaS
Video calling
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Market share
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While local telcos are squeezed by NBN and aging infrastructure, MNF Group has
unlocked a large recurring revenue opportunity by supplying telecom capabilities as a
service to global software companies.
Technology tailwind
Copper networks being replaced by VoIP and unified
communications in the cloud (UCaaS).
Market leading position
MNF Group is the Australian provider of choice for
vendors in the Gartner UCaaS magic quadrant. MNF
Group is the only APAC provider with the CPaaS
capabilities and multi-regional voice network to
underpin global software companies.
Critical to customer success
We can power up to 80% of the UCaaS value stack
(call termination, number portability, SIP Trunks etc).
Numbers, SIP Trunks and routing underpin every
customer use case – the ‘picks and shovels’ of the
communications gold rush.
Long-term opportunity
Our customers are growing successfully, delivering
119% retention rate in dollar terms. We plan to extend
our network and CPaaS into Singapore and other
South East Asian countries – powering communica-
tions in these immense markets.
Gartner – Magic Quadrant for Unified Communications as a Service, Worldwide (30 July 2019) ID G00354149
17
Wholesale Partnerships
Powering smart cars & IoT
MNF Group underpins emergency calling systems built into prestige
cars and SUVs.
Our capabilities enable car makers to pinpoint drivers in distress,
and seamlessly dispatch local repairers or emergency services.
In partnership with:
Powering NBN calling
MNF Group underpins VoIP
calling for NBN resellers, mobile
networks and challenger telcos.
Our capabilities ensure that NBN
providers can win customers that
want to keep their landline
numbers as they move from
copper and ISDN.
In partnership with:
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Organic and acquisitive growth
$25M
$20M
A
D
T
B
E
I
$15M
$10M
$5M
$27.2M
$24.6M
$22.8M
$17.9M
$12.2M
$9.0M
$6.1M
$4.4M
2012 2013 2014 2015 2016 2017 2018 2019
2012
• Tasmanian Government $20M
Project win
• Acquisition of CallStream,
Connexus, GoTalk Wholesale
2014
• Acquisition of Pennytel & iBoss
• Strong organic growth
2016
• TNZI integration
• US completion
• Underlining EBITDA growth 15%
• 34% total EBITDA growth
2017
• Acquisition of CCI
• Underlying organic EBITDA
growth 25%
2018
• 18% margin growth
• NZ Domestic Network goes live
• SuperInternet acquisition
2019
• Acquisition of Inabox Group business
• Strong organic growth in Domestic
Wholesale
• Strong tailwinds for NBN phone line
migration, UCaaS and CPaaS markets
19
Company Structure
Rene Sugo
CEO and Executive Director
20
John Boesen
CTO
Technology
Business Unit
Andrew Tierney
Acting President - Global
Commercial
Global Commercial
Business Unit
Jon Cleaver
CCO
Domestic Commercial
Business Unit
Ritsa Hime
COO
Operations
Business Unit
Matthew Gepp
CFO
Finance
Business Unit
Helen Fraser
General Counsel
Legal & Compliance
Business Unit
Business unit profiles
John Boesen | CTO | Technology Business Unit
Our Technology business unit continued to accelerate its growth strategy
commenced in FY18, improving overall technology business unit efficiency
and effectiveness. We focused resource investment into core areas of deliv-
ery, software, systems and networks; and transitioned from waterfall prac-
tices to iterative delivery methods to inject additional agility into our delivery
processes.
Over the last 12 months, we saw increasing demand from our customers for
access to our capabilities via our Applications Programming Interfaces (API)
and as a result we launched our new API developer zone in Q1 FY19 to
improve the developer onboarding experience.
In Q4 FY19 the team successfully completed integration of the TIAB tech-
nology team post acquisition and commenced core voice network integration
and rationalisation activities that will result in a full year benefit in FY21.
We also commenced moving on-premise non-critical workloads into public
cloud services, going to serverless architectures where possible to reduce
operating and carbon footprints and commenced an aggressive program to
automate all cloud infrastructure provisioning to an Infrastructure as Code
(IaC) only approach to enable our technology teams to scale and move faster
than ever before. The technology team are rallying behind the growth poten-
tial we all see for our products and services and are currently excited and
focused on delivering our next major market rollout in Singapore.
Andrew Tierney | Acting President | Global Commercial Business Unit
Our TNZI brand remains one of a handful of global leaders in the interna-
tional voice trading business. This is due to its continued ability to bring new
technical and commercial concepts to market.
The TNZI global business has delivered a solid year in a market where retail
operators around the world are facing downward pressure on their tradition-
al minutes calling products. Despite some headwinds coming out of FY18,
strong results have been attained in FY19 through the delivery of further
innovation and a continued focus on world class customer relationships with
the biggest telecom companies around the globe.
The TNZI team has rallied around building solutions and capabilities for our
global telco customers. Leveraging our relationships, reputation and network
capabilities allows TNZI to provide complete solutions to our customers.
Of particular focus is the Asia-Pacific region where TNZI has a particularly
strong incumbency. While we continue to trade on our wholly-owned soft-
switch platform and global network, we will be leveraging capability from
across the MNF Group to bring solutions beyond just international calling to
our global customer base.
21
www.mnfgroup.limited Jon Cleaver | CCO | Domestic Commercial Business Unit
The Domestic Commercial business unit delivered yet another impressive
year of growth. We managed to continue delivering organic growth while ab-
sorbing major acquisitions, executing brand refreshes and navigating consol-
idation in a fast-changing market.
Wholesale growth was especially pleasing, achieving strong results in both
transactional and recurring revenue streams. Telco-In-A-BoxTelcoinabox
was a welcome addition, ensuring we remain the wholesale market leader in
Australia & New Zealand even as we push into Asia.
Enterprise & Government and Business segments kept up momentum while
building products and the hard work culminated in MNF Enterprise signing
the first Cisco Webex Calling customer in Australia. In the Business segment,
the exciting Connexus relaunch opens up an additional 50% of the SMB
market with a product that doesn’t require technical skills – complementing
MyNetFone’s more tech-savvy offering.
In the consumer space, Pennytel held its own in an extremely competitive
mobile market with its customer service- focused brand promise. The team
is set for another year of growth, focusing on efficiency and integration to
maximise opportunities in all segments.
Ritsa Hime | COO | Operations Business Unit
The Operations business unit provides a centralized customer experience
capability across the MNF Group. Our customer facing teams continued to
demonstrate all-round strong performance and remain the epicenter of our
service model across all customer segments supporting our multi brand
strategy.
We continued investment in our Customer Experience program across all
our customer segments and brands, capturing and tracking our customers’
sentiment from single interactions for our consumer and business customers
through to the relationship strength with our strategic wholesale customers.
This year we have achieved a new high of NPS +43 across our direct cus-
tomer segments, claiming an 8-point increase from the previous year. Simi-
larly, we improved our customer service performance with 94% of enquiries
being resolved in the first call. This is the second year of significant improve-
ment in our customers’ experience feedback across these two key metrics,
measured in real-time, and reflects on our staff’s engagement and value of
our Quality Assessment program.
22
Matthew Gepp | CFO | Finance Business Unit
Our Finance business unit focus is to support the business in fulfilling its
short- and long-term growth strategies. We provide the underlying business
partnering to assist the executive team in their decision-making processes.
This year the finance team provided critical support for the due diligence,
negotiation and integration of two strategic acquisitions for the group: the
acquisitions of SuperInternet in July and the Telcoinabox business in De-
cember. SuperInternet gives us access to key licensing and network assets
in Singapore, providing a launch pad for our new Singapore domestic voice
network. The Telcoinabox acquisition strengthens our Australian domestic
customer footprint, making us the dominant wholesale provider in the coun-
try. The Finance BU has been strengthened with the addition of several new
team members.
In addition to business as usual, the finance team worked on capital man-
agement, strengthening our balance sheet in order to support the acquisi-
tions and ongoing investment in the business. In December the debt facility
with Westpac (WBC) was raised to $55.0m to facilitate the acquisition of
Telcoinabox. Later in May 2019 this facility was re-financed, adding HSBC
Australia as a new banking partner, while maintaining the relationship with
WBC. The refinance had the effect of significantly strengthening the balance
sheet with the loan re-structured into 3- and 5-year tenors with no repay-
ments required during the term of facility.
Helen Fraser | General Counsel | Legal & Compliance Business Unit
The Legal & Compliance team supports the Board and the group as a whole
with strategic and operational advice. Our goal is to enable the business to
achieve its objectives while minimising legal and compliance risk.
A key focus area over the past year has been the acquisition of the Telcoina-
box group of companies and related early integration activities. At the same
time, we have continued to support the product expansion and new sales
initiatives of the commercial teams.
We are continually seeking to improve our customers’ experience – both in-
ternally and externally – while balancing the group’s legal interests. We work
closely with our business partners to understand what they want to achieve
and help craft solutions to get them there.
We value the trust placed in us by the business and work hard to be worthy
of it. We recognise that continuing development of our people is crucial to be
able to navigate the changing landscape of our business and industry.
23
www.mnfgroup.limited Corporate Social Responsibility
Parental Leave
MNF Group understands how valuable
providing support to our employees can
be as their families grow to enable them to
balance the needs of work and family life.
Paid parental leave (PPL) is
recognised globally as providing
significant benefits physically,
psychologically, socially and
economically to all of those
involved in the parenting equation.
Since July 1st we’ve had 6 primary
requests (2 male, 4 female) and 2 male
secondary requests.
Requests:
50%
male
50%
female
MNF Group’s Parental Leave was launched
on July 1st 2019 and is available to
permanent FT/PT employees with a
minimum of 12 months tenure. They’re
entitled to 12 weeks primary carer leave and
2 weeks partner/secondary carer leave at
100% of base salary.
MNF Group is proud to be recognised
by the Stillbirth Foundation Australia
and featured on their corporate
register.
www.stillbirthfoundation.org.au/
corporate-register
Flight Offset
In line with our Corporate Social
Responsibility Policy and our
commitment to the
environment, all flights are to
be selected with the Carbon
Offset option.
Environmental co-benefits include supporting the
maintenance of habitat for native animal and plant
species, avoiding clearing of vegetation and
re-establishing vegetation on previously cleared areas.
Social co-benefits include employment for local
people through managing the project, reduced social
welfare, and providing health and educational
improvements.
www.environment.gov.au
24
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the communities & causes they care about.
• Facilitated >$200 million to more than 7,000
Australian and international communities.
• Employees donating enjoy immediate tax
benefits; no need to keep/find tax receipts
• Admin fee covered by MNF Group so 100%
of donation goes to charity.
Launching August 2019.
•
www.good2give.ngo
Télécoms Sans
Frontières
As part of our continued commitment to corporate
social responsibility, MNF Group is proud to announce
our support of Télécoms Sans Frontières (TSF).
Since being established in 1998, TSF has been
providing technology and telecommunications in times
of humanitarian crises. We have committed to
bi-annual donations to help support their critical work
and look forward to continuing to find new ways to
support the telecommunications industry in the future.
www.tsfi.org/en/
Volunteer Days
www.ozharvest.org
OzHarvest accepts donated food items that
would normally go to waste. Under multi-faceted
programs, the donated goods are outsourced
to local charities, and are distributed either as
a whole item i.e groceries, or are prepared into
meals for outreach programs i.e. soup kitchens.
MNF Group took part in the OzHarvest ‘Cooking
for a Cause’ program, which engage volunteers
to prepare meals to provide to the less fortunate
in the community. The morning event (held in
purpose built kitchens) includes an information
session on food wastage and the impact this has
on the community/environment, kitchen skills
(headed by a chef), as well as an opportunity
to work alongside a colleague that you may not
encounter during your normal working day.
Upcoming 2019 volunteer days:
• Harbour Clean Up Sydney
• Ronald McDonald House
• Tree planting Sydney
• Guide Dogs Melbourne
Sydney
& Sydney
25
People Experience (PX)
MNF Group is a values-based organisation, and our people are what makes MNF Group a success. Be Brave,
Honest & Fair, Collaborate, Deliver Excellence, and We Care are not just values to us, they are part of our global
purpose statement - our GPS - that guide us in our everyday interactions with each other.
Across the
Globe
Australia
Australia (440)
New Zealand (47)
Singapore (7)
United Kingdom (5)
NSW (379)
VIC (47)
Canada (1)
United States (1)
TAS (2), QLD (2), WA (2)
NT (7), ACT (1)
2019 D&I Survey Result
3.95/5
‘Everyone at this company is treated fairly
regardless of ethnic background, race,
gender, age, disability, or other differences
not related to job performance’
Female
Female
Employees
Our workforce composition
in Australia, (based on our
2019 Workplace Gender
Equality Agency [WGEA]
Report) is 34% female and
66% male
Male
Male
Leadership
In senior leadership
roles in Australia, we
have 33% female
representation
Other
30-45
15-30
Language
52% of our workforce
fluently speak a language
other than English
Age
Over 60% of our
employees fall in the
30-45 age group
English
26
45-65+
Our PX Team runs a predominantly centralised support model.
Centres of Excellence are in place for Business Partnering,
Learning & Development, and Talent Acquisition. The team
focuses on the mantra of ‘empowering leaders to lead’, assisting
managers with driving the development, engagement and
performance of their people.
Our PX Journey focuses on 5 major lifecycle milestones
Welcome
Transitioning from a candidate to a member of the MNF Group family is the first
key component in an employee’s journey with us. Our approachable Talent
Acquisition experts manage a robust but friendly recruitment process which is
aligned to our values and our culture. Onboarding is managed through our online
system, giving a streamlined and consistent approach for all employees prior to
their start date and beyond.
Perform
We believe that it is essential for our people to have clear, attainable outcomes
because no matter how talented our people may be, they can’t do their jobs
without a clear picture of what success looks like. This is closely aligned to our
Deliver Excellence value. Our people have clear expectations and goals in place,
with competencies aligned to positions. Performance is managed through our
cloud-based system so that all employees, regardless of location, get a consistent
experience.
Develop
To assist our people in Delivering Excellence, we have a formal Leadership
Development program in place, and self-paced e-learning across a broad range
of competencies and topics. MNF Group in Australia hosts its very own
‘Toastmasters’ to assist our people to build confidence and public speaking skills.
We utilise an annual Gallup Engagement survey to ensure our people’s views are
heard and that we continually strive to improve.
Support
We Care is another of our Values at MNF Group which means that our people
are supported in both their Health & Wellbeing, as well as given opportunities to
support our local communities and various initiatives. Our Corporate Social
Responsibility (CSR) framework includes charity fundraisers, Volunteering Days,
and payroll giving. Our Wellbeing program provides EAP, regular webinars on
mental health, paid Domestic Violence leave, and employee blood donations with
Red25. These are just some of the ways that our people can engage in
bolstering their own wellbeing. In addition, our people are provided with space to
create, relax and innovate.
Appreciate
To reward our staff for their hard work and Delivering Excellence, we have
regular local level events and recognition initiatives. We also run an annual Global
Reward & Recognition program, based around our values. Our people love our
variety of great benefits which include our paid birthday leave, paid parental leave,
volunteering events and great flexibility options.
27
Directors’ report
Directors’ report
Your directors present this report, together with the financial statements of MNF Group Limited (the Company)
and its controlled entities (the Group), for the financial year ended 30 June 2019.
Board of directors
The names and details of the Company’s directors in office during the financial year and until the date of this
report are set out below. Directors were in office for this entire period unless otherwise stated.
Terry Cuthbertson
Chairman, Non-Executive Director
Qualifications
Bachelor of Business, Chartered Accountant
Experience and
expertise
Appointed as a Non-Executive Director in March 2006 and has been the Group
Chairman since March 2006.
Directorships of listed
entities (last 3 years)
Mr Cuthbertson was previously a partner of KPMG and has extensive corporate
finance expertise and knowledge.
Chairman of Austpac Resources N.L. from 2004 (Director from 2001);
Chairman of Australian Whisky Holdings Ltd from 2003 (resigned on 20 May 2019);
Chairman of South American Iron & Steel Corporation Ltd from 2009;
Chairman of Malachite Resources Ltd from 2013 (Director from 2012);
Director of Mint Payments Ltd from 2007 (Chairman from 2008 to 2018);
Director of Isentric Ltd from 2010 (resigned on 31 May 2019).
Special responsibilities
Member of the Audit and Remuneration Committees
Interest in shares
920,906
Interest in options
100,000
Michael Boorne
Non-Executive Director
Qualifications
Diploma in Electronics Engineering
Experience and
expertise
Appointed as Non-Executive Director in December 2006.
Mr Boorne is a successful entrepreneur with extensive experience in combining
technical expertise with commercial and corporate experience. He has founded
start-up businesses Spirit Modems and Mitron, and is a director and committee
member of numerous private companies and charitable foundations. He was
previously a Non-Executive Director of Netcomm Ltd.
Directorships of listed
entities (last 3 years)
None
Special responsibilities
Chairman of the Audit and Remuneration Committees
Interest in shares
709,543
Interest in options
100,000
Andy Fung
Non-Executive Director
Qualifications
Bachelor of Engineering, Master of Commerce
Experience and
expertise
Appointed as Non-Executive Director in March 2012.
Mr Fung is a co-founder of MNF Group Limited and Symbio Networks Pty Ltd.
He was formerly Managing Director of the Group from 2006 until 2012. Mr Fung
has had extensive telecommunications industry experience in Australia and Asia,
having previously held senior management positions with Telstra, Australian Trade
Commission, Optus and Lucent Technologies of US. He is also Executive Director of
a private company with interests in trade and investments.
Directorships of listed
entities (last 3 years)
None
Special responsibilities
Member of the Audit and Remuneration Committees
Interest in shares
14,213,185
Interest in options
100,000
29
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
David Stewart
Non Executive Director
Qualifications
MAICD
Experience and
expertise
Appointed as Non-Executive Director on 13 August 2019.
Mr Stewart is an experienced CEO and successful entrepreneur with more than 30
years in management and business leadership roles. Mr Stewart founded Banksia
Technology Pty Limited in 1988 and in 1996, he instigated the successful takeovers
of a number of his competitors, including NetComm Limited. He assumed the role of
Managing Director of the merged entity and remained at the helm of the company
until his retirement in 2016. A year later, Mr Stewart was appointed as a
Non-Executive Director of NetComm Wireless, a position he held until 2019.
In 2016, Mr Stewart was recognised for his significant contribution to the Australian
communications industry with the presentation of the Communications Ambassador
2016 award, the highest honour presented by ACOMMS Communications Alliance
and CommsDay each year.
Since retiring, Mr Stewart began working with a number of tech startups in an
advising and investing capacity. He was announced as Chairman for Pycom on July
01, 2017 and a Director of Beam Communications (formerly known as World Reach
Limited) on November 9, 2017, following investments in both. The start of 2018 saw
Mr Stewart join the board of Lockbox Technologies.
Directorships of listed
entities (last 3 years)
Director of Beam Communications Holding Limited from November 2017
Director of Netcomm Wireless Limited from 1997 (resigned on 30 June 2019)
Special responsibilities
Member of the Audit and Remuneration Committees
Interest in shares
Interest in options
None
None
Rene Sugo
Chief Executive Officer and Executive Director
Qualifications
Bachelor of Engineering (Hons), GAICD
Experience and
expertise
Appointed as CEO and Executive Director in March 2012.
Mr Sugo is a co-founder of MNF Group Limited. He is a strong industry advocate,
representing both the interests of MNF Group and the telecommunications industry.
He has been a director of the Australian Communications Alliance and the INMS
(Industry Number Management Services) since 2015.
Mr Sugo sits on various industry committees locally and overseas including the ITW
Global Leaders Forum (GLF), and regularly contributes articles and opinions on
issues affecting the industry, such as the NBN, regulatory policy and innovation.
Mr Sugo started his career at the CSIRO - Australia’s premier Research and
Development organisation. Prior to making the move into the Communications
industry, Mr Sugo worked at Lucent Technologies Bell Labs in Australia, the USA
and Asia.
Directorships of listed
entities (last 3 years)
None
Special responsibilities
Member of the Audit and Remuneration Committees
Interest in shares
11,915,431
Interest in options
150,000
Catherine Ly
Company Secretary
Qualifications
Bachelor of Business and Certified Practising Accountant
Experience and expertise
Ms Ly joined the MNF Group in April 2006 as CFO and Company Secretary, and
has focused on the role of Company Secretary and Treasurer since August 2013
following the expansion of the Group.
30
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
Board and Committee Meetings
From 1 July 2018 to 30 June 2019, the directors held 17 board meetings and 2 audit committee meetings.
Each director’s attendance at those meetings is set out in the following table:
Directors
Eligible to attend
Attended
Eligible to attend
Attended
Board
Audit
Mr. Terry Cuthbertson
Mr. Michael Boorne
Mr. Andy Fung
Mr. Rene Sugo
17
17
17
17
17
16
17
17
2
2
2
2
2
2
2
2
Principal activities and significant changes in nature of activities
The principal activity of the MNF Group is providing voice, data, and cloud based communication and
communication enablement services to residential, business, government and wholesale customers in Australia
and internationally.
In the financial year the MNF Group derived revenue from the sale of the above-mentioned communications
services. These fees consist of recurring charges for access to facilities and capabilities, as well as consumption
charges for variable usage of those facilities. Revenue was also derived from the sale of hardware, equipment
and consulting services to support the primary products of the business.
The Group operates in three main segments:
• Domestic Retail - based on the original MyNetFone brand and other retail acquisitions, focussing on selling
directly to residential, small business, enterprise and government customers;
• Domestic Wholesale - based on the original Symbio Networks brand and also the Telcoinabox brand from
FY19, focussing on selling to Australian & New Zealand domestic carriers, carriage service providers (CSP),
cloud providers and application providers; and
• Global Wholesale - based on the TNZI acquisition and pre-existing global customers, focussing on selling to
global carriers, carriage service providers (CSP), cloud providers and application providers.
The overall nature of the business has not changed during the financial year.
Operating Result
Excluding costs associated with acquisitions, earnings before net interest, tax expense, depreciation and
amortisation expense (EBITDA) increased by 11% to $27.2 million, with net profit after tax (NPAT) decreasing by
3.9% to $11.4 million, compared to the prior year.
The Group issued updated guidance in February 2019. EBITDA of $27.2 million is consistent with that guidance
and NPAT of $11.4 million is 3.6% above that guidance. NPAT includes $1.2 million of acquisition costs incurred in
the year in relation to the Telcoinabox and SuperInternet acquisitions.
The total dividend for the full year is 6.1 cents per share (fully franked), with the company declaring a final
dividend of 4.0 cents per share for the second half of the 2019 financial year. The full year dividend payments
represent 39% of the 2019 full year EPS.
31
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
MNF Group performance at a glance
REVENUE $215.6 million
250
200
150
100
50
85.7
191.8
161.2
220.7
215.6
WHOLESALE SAME CUSTOMER
MRC HOH GROWTH
FY18
FY19
M
$
7.0
6.0
5.0
4.0
3.0
2.0
1.0
4.9
3.7
4.0
6.2
FY15 FY16 FY17 FY18 FY19
H1 H2
MARGIN $82.5 million
Margin %
PHONE NUMBERS 3.8m
YoY % increase
90
80
70
60
50
40
30
20
10
82.5
69.0
48.6
58.6
31.8
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
M
2.8
3.2
3.8
2.2
2.5
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
FY15 FY16 FY17 FY18 FY19
FY15 FY16 FY17 FY18 FY19
EBITDA $27.2 million
EBITDA margin %
30
25
20
15
10
5
12.3
22.8
17.6
24.5
27.2
UNDERLYING NPAT-A $15.9 million^
^ excludes amortisation and cost of acquisitions
14.3
14.1
15.9
10.7
8.0
18
16
14
12
10
8
6
4
2
M
$
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY15 FY16 FY17 FY18 FY19
FY15 FY16 FY17 FY18 FY19
EPS 15.55 cents
UNDERLYING EPS-A 21.70 cents^
^ excludes amortisation and cost of acquisitions
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
13.45
11.49
17.32
16.25
15.55
25
20
15
10
5
s
t
n
e
c
12.8
20.6
15.9
19.3
21.7
FY15 FY16 FY17 FY18 FY19
FY15 FY16 FY17 FY18 FY19
M
$
M
$
M
$
s
t
n
e
c
32
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
Review of operations
A review of the operations of the Group during the financial year and the results of those operations are as
follows:
Record Margin and EBITDA
Margin increased $13.5m (20%) on the prior year to a record $82.5m (2018: $69.0m). EBITDA of $27.2m was up
11% on the prior year. Net profit after tax (NPAT) for the year was slightly down at $11.4m (2018: $11.9m) with
Earnings per share (EPS) decreasing to 15.55 cents per share (2018: 16.25 cents per share).
Year ended 30 June 2019
Year ended 30 June 2018
% change
Revenue
Gross profit
EBITDA
NPAT
EPS
$215.6m
$82.5m
$27.2m
$11.4m
$220.7m
$69.0m
$24.6m
$11.9m
15.55 cents
16.25 cents
-2%
20%
11%
-4%
-4%
Reconciliation of NPAT to EBITDA
NPAT
Add back
Depreciation & Amortisation
Interest expense
Income tax expense
Acquisition costs
Discontinued Data product
EBITDA
Non-cash share option costs
Interest revenue
Reported EBITDA
2019
$’000
2018
$’000
2017
$’000
11,399
11,859
12,066
8,973
1,874
2,994
1,168
500
26,908
420
(130)
27,198
6,310
1,270
4,894
262
-
24,595
396
(576)
24,415
5,083
1,790
4,444
498
-
23,881
293
(1,350)
22,824
Prior to 2018 MNF Group had reported EBITDA without excluding non-cash share option costs and interest
revenue, which have been for the most part immaterial. The above table demonstrates the methodology to
calculate the previously reported EBITDA and the EBITDA after removing interest revenue and option costs.
Cash and debt
The closing cash balance as at 30 June 2019 was $15.5m (Dec 18: $10.5m / June 18: $18.9m).
Total Debt as at 30 June 2019 is $55.6m. The Group has net debt of $40.1m as at the year end.
The business has seen strong operating cash flow in H2 with positive operating cash flow for the full year as well.
This is following a number of years that saw cash decrease year on year and negative operating cash flows as a
result of the unwinding of the large novated creditor that came onto the balance sheet in 2016, a process which
completed in FY19 H1.
33
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
These historical movements and subsequent improvement in cash were anticipated by management and the
paying down of this creditor will bring the cash closer to a normalised balance for the business moving forward.
The business refinanced its debt facility in May 2019. This significantly improved the strength of the balance
sheet. Details of the new arrangements can be found in Note 10 of the Financial Statements.
Business outlook
The MNF Group operates with three solid independent segments – Domestic Wholesale, Global Wholesale and
Domestic Retail. Inside each segment are multiple product lines with excellent diversity of customers and profit
contribution. All segments operate in our core area of specialisation, being enabling new and disruptive voice
communications through software development and network deployment. Each segment has a well-defined
strategy for investment and growth.
The business is focussed on growing Monthly Recurring Revenue (MRR) across all three segments. These
recurring revenue streams tend to be high gross margin and very sticky for customers. There is a transition away
from transactional (or usage) based revenues which tend to be low margin and dynamic in nature. The business
grew recurring revenues by 86% on prior year to $74m during the year, with corresponding recurring gross
margins growing 60% to $49m during the year.
250
200
150
100
50
M
$
e
u
n
e
v
e
R
220.7
215.6
191.8
161.2
134.3
181.1
158.6
26.9
33.2
39.6
141.9
73.7
90
80
70
60
50
40
30
20
10
)
M
$
(
i
n
g
r
a
m
s
s
o
r
G
69.0
38.1
58.6
31.9
26.7
30.9
48.6
29.5
19.1
82.5
33.1
49.4
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
FY16 FY17 FY18 FY19
FY16 FY17 FY18 FY19
Recurring revenue
Transactional revenue
Recurring gross margin
Transactional gross margin
The business is confident of long-term sustainable organic Monthly Recurring Revenue (MRR) and gross margin
growth across all three segments.
Trio of Industry Tailwinds
The company is experiencing strong organic growth in its core product areas – being hosting of next generation
voice services in the cloud. This growth is being driven by strong structured tailwinds in the industry comprising of:
a)
b)
c)
cease sale of legacy PSTN/ISDN services,
the NBN Roll out,
the UCaaS, CPaaS and CCaaS revolution.
The company is well positioned to leverage all three tailwinds thanks to its network infrastructure, software assets
and customer relationships.
Additionally, the business has shown an ability to find value accretive acquisitions and integrate them quickly and
effectively to improve the overall performance of the business. With a discerning and conservative approach,
the Board of MNF Group will continue to actively search for further acquisition opportunities; whilst the business
remains totally committed to driving organic growth and overall financial performance within the business.
Domestic Wholesale Segment
Operating under the Symbio brand, the domestic wholesale segment offers a complete range of wholesale
telecommunications products, services and capabilities to small Carriage Service Providers (CSP) in Australia and
New Zealand.
The business finalised the acquisition of the wholesale assets of Inabox Group in December 2018. This business
is highly complementary and synergistic with the Symbio wholesale business. The integration of the business
34
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities
Directors’ report
is well under way with most operational teams completing integration within the next few months, and network
integration expected to be completed by the end of 2020. The financial results include 7 months of contribution
from the Inabox Group business which is operating as expected.
The domestic wholesale customer base is currently sitting at 613 unique CSP, up 104% on prior year, including
customers transitioning from the Inabox Group acquisition.
The Domestic Wholesale business generates both Monthly Recurring Revenues (MRR) and transactional (usage)
based revenues. The business is focussed on growing the MRR which is mostly high margin and very sticky for
customers. The domestic wholesale business is undergoing strong organic growth with organic gross margin
contribution growing by $5.3m during the year, up 30% on prior year. The company expects this trend to continue.
Global Wholesale Segment
The global wholesale segment offers a complete A-Z service for global voice minutes termination under the
globally recognised TNZI brand. Additionally, the segment offers access to the next generation Symbio brand of
services for next generation global companies.
This segment is strategic to the group and has the biggest potential for long term organic growth through
leveraging its global market reach to sell the company’s high margin products. Initial focus for global growth is the
Asia-Pacific region where the opportunity for the company is strongest.
The TNZI brand operates high quality voice termination to all countries around the globe through direct and
indirect partnerships. TNZI is globally recognised as a “Tier 1” quality brand, having been an innovator and
pioneer of global minutes trading for over 25 years. The TNZI organisation is a member of many exclusive global
infrastructure organisations and committees, including the ITW Global Leaders Forum (GLF), Pacific Islands
Telecommunications Association (PITA), the i3 Forum standards organisation and the Pacific Telecommunications
Council (PTC).
The Symbio brand offers access to the Australian, New Zealand and soon Singapore markets for global software
and telecommunications companies to deliver their product value proposition locally without having to build
extensive in-country infrastructure. This component of the global wholesale segment is undergoing strong organic
growth with organic gross margin contribution up by $2.8m during the year, up 23% on prior year. The company
expects this trend to continue.
Domestic Retail Segment
This segment is based on the original MyNetFone brand and other retail acquisitions, focussing on selling directly
to residential, small business, enterprise & government, and conferencing customers.
a. Residential
This year the business divested its direct consumer DSL and NBN customer base in May 2019. This decision
to divest this asset was driven by the customer base being sub-scale in a highly regulated and competitive
market. The company maintains its original MyNetFone consumer VoIP customer base, and the PennyTel mobile
customer base.
The PennyTel brand is focussed on the over-55 post-paid consumer located in regional Australia. The company
has identified this as a niche demographic that is currently underserviced by the other mobile brands in the
market. The PennyTel customer base continues to grow strongly with subscriber numbers passing 10,000 SIO in
July 2019, up 553% on prior year. The business remains confident that the PennyTel subscriber base will continue
to grow strongly in the foreseeable future.
The MyNetFone VoIP base dropped slightly due to the transfer of some voice customers who were attached to an
NBN or DSL service. The VoIP customer base is currently sitting at 76,117, a drop of 10.3% on prior year.
b. Small Business
The Small Business sub-segment consists of selling business grade MyNetFone Virtual PBX and SIP trunks, as
well as business grade DSL, NBN and Ethernet broadband services within Australia. The sub-segment operates
under the brands MyNetFone, Connexus and CallStream. Each brand has its own value proposition, web site, and
product range; however, all brands are operated across the same network and same operations team, providing a
high level of synergy. The small business market sub-segment is strategic to MNF Group with strong prospects for
future growth.
35
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
The company has some leading products in the market and continues to innovate. The NBN roll out will provide
additional growth impetus to this segment when the NBN reaches more centralised business areas, as it will force
customers to move off legacy copper PSTN services and find new alternatives for telephony.
The Virtual PBX and SIP trunk products, which are the core product in this segment, grew by 11% to 4,141 SIO.
The revenue in this segment is typically MRR with high margins.
c. Enterprise & Government
The Enterprise & Government sub-segment consists of selling enterprise grade telecommunications solutions
such as SIP Trunks, Microsoft Skype for Business, Cisco BroadSoft/BroadCloud and other solutions within
Australia, New Zealand and Singapore. The sub-segment operates under the MNF Enterprise brand, holding
unique partnerships with Cisco and Microsoft.
MNF Group maintains purchasing panel arrangements with the Singapore Government, New Zealand
Government, NSW Government, Victorian Government, Tasmanian Government, the Municipal Association of
Victoria, and the West Australian Association of Local Government. These panel arrangements allow for MNF
Group to bid for business tenders as and when they become available matching our product portfolio.
The Enterprise & Government segment currently has approximately 1,000 SIO, up significantly on prior year. The
revenue in this segment is typically MRR on multi-year contracts with high margins.
d. Conferencing & Collaboration
The conferencing and collaboration business provides audio, video and desktop sharing services for small to
medium, enterprise and government customers in Australia and New Zealand. This segment is undergoing
transformation from traditional voice collaboration to multi-media voice, video and desktop sharing. MNF has
recently launched various multi-media services to evolve and grow its offering.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
After balance date events
Dividends proposed
The dividend as recommended by the Board will be paid subsequent to the balance date.
Future developments
The Board is committed to growing the Company organically as well as by way of targeted acquisitions.
The Group has a strict policy around the evaluation of acquisition targets and will continue to look to build through
leveraging synergies, adding products and services through the acquisition of intellectual property and avoiding
companies that are pure re-sellers of other networks.
Environmental issues
The Group’s operations are not regulated by any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
Dividends paid or recommended
Fully franked dividends paid or declared for payment during the financial year are as follows:
Dividends paid during the year:
$000
Franking
2018 Final dividend of 4.05 cents per share paid on 04 October 2018
2019 Interim dividend of 2.10 cents per share paid on 04 April 2019
2,964
1,541
100%
100%
Dividends recommended (subsequent to year end):
2019 Final dividend of 4.00 cents per share recommended on 27
August 2019
2,936
100%
The 2019 final dividend is to be paid on 3 October 2019 to shareholders registered as at 9 September 2019.
36
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
Options
Shares under option or issued on exercise of options
The Directors did not acquire any shares through the exercise of options during the year.
On 25 October 2016 at the Annual General Meeting, shareholders voted in favour of granting 450,000 options to
Directors. The details of those options are detailed in the table below:
Director
Date of expiry
Exercise price
Number of options
Terry Cuthbertson
Michael Boorne
Andy Fung
Rene Sugo
30 June 2021
30 June 2021
30 June 2021
30 June 2021
$7.15
$7.15
$7.15
$7.15
100,000
100,000
100,000
150,000
450,000
At the date of this report, the unissued ordinary shares of MNF Group Limited under options which were granted
during the 2019 financial year is as follows:
Grant Date
Date of expiry
Exercise price
Number of options
15 September 2016
27 October 2016
11 December 2018
11 December 2018
11 December 2018
30 June 2020
30 June 2021
30 June 2020
30 June 2021
30 June 2022
Nil
$7.15
Nil
Nil
Nil
90,000
620,000
120,000
120,000
120,000
1,070,000
37
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
Audited Remuneration Report
This report details the remuneration structures and outcomes for key management personnel (KMP) of the Group
for the year ended 30 June 2019. This report forms part of the directors’ report and has been prepared and
audited in accordance with section 300A of the Corporations Act 2001.
For the purposes of this report, KMP is defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Company and the Group, directly or indirectly, and includes
directors (whether executive or otherwise) of the Company, the Chief Executive Officer (CEO), the Chief Financial
Officer (CFO) and other senior executives of the Group.
The table below outlines the KMPs of the Group and their movements during the 2019 financial year:
Name
Position
Term as KMP
Non-executive directors
Mr Terry Cuthbertson
Non-executive Chairman
Full financial year
Mr Michael Boorne
Non-executive Director
Full financial year
Mr Andy Fung
Non-executive Director
Full financial year
Executive director
Mr Rene Sugo
Other KMPs
Chief Executive Officer
Full financial year
Mr Matthew Gepp
Chief Financial Officer
Full financial year
Ms Catherine Ly
Company Secretary and Treasurer
Full financial year
There were no changes to KMPs between the reporting date and date the financial report was authorised for
issue.
Remuneration Committee
Due to the size of the Group, the functions of the Remuneration Committee are undertaken by the full Board. Mr
Boorne chairs the Remuneration Committee.
The Board is responsible for the remuneration arrangements of the CEO and other senior executives and all
awards made under short and long-term incentive plans. The Group does not currently engage remuneration
consultants, however may consider the use of remuneration consultants in the future as the Group continues to
grow.
The Board also sets the aggregate remuneration of non-executive directors, which is then subject to shareholder
approval.
The 2018 audited remuneration report received positive shareholder support at the 2018 annual general meeting
(AGM) with a vote of 87.87% in favour (2017: 91.45%)
The current aggregate maximum amount of non-executive directors’ fees of $500,000 per annum (inclusive of
superannuation guarantee charge contribution) was approved by shareholders at the 2014 AGM.
38
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
Executive remuneration arrangements
Remuneration principles and strategy
Remuneration levels for KMPs of the Group are designed to attract and retain appropriately qualified and
experienced directors and executives. The Group aims to reward executives based on their position and
responsibility whilst maintaining comparability with other companies in the sector of similar revenue, market
capitalisation and earnings levels. The executive remuneration structure remains unchanged from prior year, and
includes a combination of the following components:
Fixed Remuneration
Short-term Incentive (STI)
Long-term Incentive (LTI)
Variable Remuneration
Cash
Equity
• Base salary plus
superannuation
• Set based on mar-
ket benchmarks and
individual performance,
qualifications and
experience
• Eligibility for payment
is dependent on the
Group exceeding
budgeted NPAT
• Paid within the quarter
following financial
year-end
• Share options to vest
after each successive
tranche, conditional
upon continuation of
employment
• Aimed to retain key
staff
• Share options are
linked to share price
performance at $7.15
strike price. It incen-
tivises KMPs to create
shareholder wealth,
based on individual
skills, qualifications
and experience, to
expire on 30 June
2021
Fixed remuneration
Fixed remuneration consists of base salary, employer superannuation contributions and non-monetary benefits.
Non-monetary benefits are typically benefits such as access to car-parking and leave entitlements. It is market
competitive and set to attract, motivate and retain highly skilled personnel.
Details of the short-term incentive plan
The objective of the STI plan is to link the Group’s financial and operational targets with the remuneration received
by senior managers charged with meeting those targets. As part of their respective employment agreements the
CEO, CFO and other senior managers are eligible for a cash bonus subject to the attainment of these clearly
defined objectives. The STI plan applies to the period from 1 July 2018 to 30 June 2019.
100% of the STI target for financial year 2019 was linked to the Group achieving its annual financial targets. The
determination and agreement of these targets are set at the start of each financial year and align with the Group’s
longer-term strategic goals.
The current financial year’s STI plan depends on the Group achieving its budgeted net profit after tax (NPAT)
target after provisioning for the STI, as set by the Board. The Board believes that the objective being set is
challenging for the executives and senior managers. It will be paid out annually in the quarter following financial
year-end should the target be met, subject to Board approval, as they have ultimate discretion.
Original NPAT guidance provided at the 2018 AGM was $12.8m, this guidance was downgraded on 26 February
to a range of $11m to $12m, as such the STI is not payable and is not accrued in the 2019 financial report.
39
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
The below chart illustrates the structured employee entitlements of eligible KMPs as a percentage of their fixed
remuneration:
KMP Remuneration Structure
16%
16%
6%
6%
18%
18%
84%
84%
76%
76%
FY19
FY18
FY19
FY18
CEO
CFO
Fixed Remuneration STI LTI
Non-executive directors are not eligible for an STI.
Details of long-term incentive plans
LTI plans are offered under the Company’s Employee Option Plan to align remuneration with the creation of
shareholder value over the long term. As such, LTI awards are only made to executives and other key employees
who have an impact on the Group’s performance.
Currently, the Group has two LTI plans in place. The first plan is a share-based option plan aimed at retaining
highly skilled directors and KMPs to appropriately remunerate in line with similar organisations in the market:
Plan attributes
Detail
Participants
Allocation
Mr M Gepp, Ms C Ly
The allocation of the options granted is separated into four tranches, each vesting to the
KMPs as detailed below:
Vesting date
Mr M Gepp
Ms C Ly
Number of options
1 Sep 2016
1 Sep 2017
1 Sep 2018
1 Sep 2019
2,000
6,000
6,000
6,000
500
1,500
1,500
1,500
Value
Vesting
Alignment/objective
Forfeiture
The options granted have an exercise price of $Nil.
Vesting of each successive tranche is conditional upon the recipient continuing
employment with the Group up until date of vesting.
Incentive package in accordance with remuneration policy focussing on long-term
retention of key staff within the Group. The objective is to retain highly skilled employees
for the long-term, whose contributions are key to the success of the Group.
Subject to the Board’s discretion should the employee resign, be terminated by the Group
for any reason, or be terminated from the plan for any reason, the options granted prior to
vesting date will be forfeited.
40
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
The second plan is also a share-based option plan aimed at directors, executives and KMPs of the Group, to align
their long-term remuneration with the performance of the long-term share price:
Plan attributes
Detail
Participants
Allocation
The Group’s directors and KMPs
The allocation of the options granted to each director and senior manager is as below:
Mr T Cuthbertson
100,000
Mr M Boorne
Mr A Fung
Mr R Sugo
Mr M Gepp
Ms C Ly
100,000
100,000
150,000
50,000
20,000
These options were granted on 27 October 2016. The options granted to directors were
approved by shareholders at the 2016 AGM.
Conditions
Options have an exercise price of $7.15, and expire on 30 June 2021.
Alignment/objective
The Board believes that LTI hurdles based on achieving or exceeding a share price of
$7.15 targeted in the Group’s Total Shareholder Return (TSR) performance is a
challenging objective. This incentive directly aligns the financial interests of directors,
KMPs and executives with shareholders by linking their reward to the Group's share price
performance.
Forfeiture
Should the participant resign, be terminated by the Group for any reason, or be terminated
from the plan for any reason, the options granted prior to vesting date will be forfeited.
Shareholders returns
KMP remuneration is rewarded with consideration of the Group’s earnings and performance. The following table
sets out MNF Group’s key financial results and shareholder wealth generation over the past five years:
Performance metric
2019
2018
2017
2016
2015
Revenue (‘000)
NPAT (‘000)
$215,587
$220,728
$191,752
$161,217
$85,675
$11,399
$11,859
$12,066
$8,990
$7,184
Basic EPS (cents)
15.55
16.25
17.32
13.45
11.49
Dividends paid (‘000)
$4,505
$6,417
$5,099
$4,512
$3,128
Dividends declared per share (cents)
Share price (as at 30 June)
Change in share price
6.10
$3.85
($1.40)
8.35
$5.25
$0.88
8.25
$4.37
$0.37
7.00
5.75
$4.00
$0.18
$3.82
$1.40
Market Capitalisation
$282m
$384m
$318m
$270m
$240m
41
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
Remuneration details of directors and KMPs for the year ended 30 June 2019
Details of the nature and amount of benefits and payments for each director and KMP of the company for the
2018 and 2019 financial years are as follows, represented on an accrual basis:
Short term benefits
Cash
salary &
fees (i)
$
STI/
Bonus
paid(ii)
$
STI/
Bonus
accrued(iii)
$
Non-
monetary
benefits(iv)
$
Post
employment
benefits
Superannuation
Shared
based
pay-
ments
Options
(v)
Total
$
$
$
Non-executive
Directors
Mr T
Cuthbertson
Mr M
Boorne
2019
120,000
2018
120,000
2019
103,000
2018
100,000
Mr A Fung
2019
82,400
2018
80,000
Executive Director
Mr R Sugo
2019
517,025
-
-
-
-
-
-
-
2018
517,025
135,013
Other KMPs
Mr M Gepp
2019
344,563
-
2018
337,719
97,805
Ms C Ly
2019
169,167
2018
164,167
Total
2019
1,336,155
-
-
-
2018
1,318,911
232,818
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,340
6,930
4,880
4,470
-
-
12,220
11,400
11,400
11,400
9,785
9,500
7,828
7,600
25,000
25,000
-
-
-
-
-
-
-
-
131,400
131,400
112,785
109,500
90,228
87,600
549,365
683,968
25,000
30,233
404,676
25,000
29,067
494,061
16,071
7,558
192,796
15,675
7,267
187,109
95,084
37,791
1,481,250
94,175
36,334
1,693,638
(i)
(ii)
(iii)
(iv)
(v)
Cash salaries paid are reviewed annually.
STI amounts paid in the 2018 financial year relate to the achievement of 2017 targets and were accrued for in the 2017 results.
STI amounts accrued in the current financial year are in relation to the 2018 financial year and would be paid in the subsequent financial
year when applicable.
The category “Non-monetary benefits” represent other benefits such as car parking.
Black-Scholes model is used to value options issued.
Key terms of employment agreements
The Company has entered into an executive employment agreement with the CEO. The remuneration and
terms of employment for other key executives are also set out in written agreements. Each of these employment
agreements are unlimited in term but may be terminated by written notice by either party and by the Company
making payment in lieu of notice.
Each of these agreements sets out the arrangements for total fixed remuneration, performance-related cash
bonus opportunities, superannuation, termination rights and obligations and eligibility to participate in the
employee equity-based incentive scheme. Executive salaries are reviewed annually. The executive employment
agreements do not require the Company to increase base salary, incentive bonuses or to continue the
participants’ participation in equity-based incentive programs. Payment of any STI is at the Board’s discretion.
42
TBCTBCFor the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report - audited remuneration report
The Company may terminate the employment of the key executives without notice and without payment in lieu of
notice in some circumstances. These include if the executive:
• Commits an act of serious misconduct;
• Commits a material breach of the executive employment agreement;
• Denigrates or engages in any behaviour that may materially damage the reputation of, or otherwise bring
the Group into disrepute; or is convicted of any criminal offence which would in the reasonable opinion of the
Board of Directors adversely affect the carrying out of the executive’s duties.
The Company may terminate the employment of the key executive at any time by giving the executive notice
of termination or payment in lieu of such notice. The amount of notice required from the Company in these
circumstances is set out in the following table:
KMP
Company
notice period
Employee
notice
period
Termination
provision
Details
Mr R Sugo
6 months
1 month
Mr M Gepp
3 months
3 months
Ms C Ly
6 months
1 month
6 months’ base
salary
Fixed salary package of $542,025,
consisting of base salary and
superannuation, reviewed annually by
the Board
3 months’ base
salary
Fixed salary package of $369,563,
consisting of base salary and
superannuation, reviewed annually by
the Board in September
6 months’ base
salary
Fixed salary package of $186,150,
consisting of base salary and
superannuation, reviewed annually by
the Board in September
Directors’ interests in shares and options of the Company
At the date of this report, the particulars of shares and options held by the directors and other KMPs of the
Company in the Company or in related bodies corporate which are required to be declared in the register of
directors’ share holdings are as follows:
2019
2018
Shareholding
Options
Shareholding
Options
Non-executive
Directors
Mr T Cuthbertson
920,906
100,000
920,906
100,000
Shareholding
movement %
0%
0%
Mr M Boorne
Mr A Fung
Executive Director
709,543
100,000
709,543
100,000
14,213,185
100,000
14,151,954
100,000
0.43%
Mr R Sugo
11,915,431
150,000
11,896,867
150,000
0.16%
Other KMPs
Mr M Gepp
Ms C Ly
Total
49,000
299,775
56,000
21,500
43,000
62,000
295,676
23,000
14%
1%
28,107,840
527,500
28,017,946
535,000
This concludes the audited remuneration report.
43
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities
Directors’ report
Directors’ benefits
No director has received or has become entitled to receive, during or since the financial year, a benefit because of
a contract made by the company, controlled entity or related body corporate with a director, a firm which a director
is a member or an entity in which a director has a substantial financial interest.
Indemnifying officers or auditor
The Group has in place a contract insuring the directors, the company secretary and all executive officers of the
Group and any related body corporate, against a liability incurred by a director, company secretary or executive
officers to the extent permitted by the Corporations Act 2001.
The Group has indemnified the directors, the company secretary and all executive officers of the Group for costs
incurred, in their capacity as officers of the Group, for which they may be held personally liable, except where
there is a lack of good faith.
Details of the amount of the premium paid in respect of the insurance policies are not disclosed as such
disclosure is prohibited under the terms of the contract.
No indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or
since the end of the financial year, to the auditors of the Group or any related entities against a liability incurred by
the auditors.
Proceedings on behalf of the company
No person has applied for leave of a Court to bring proceedings on behalf of the Group or intervene in any
proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or
any part of those proceedings. The Group was not a party to any such proceedings during the year.
Non-audit services
During the current and prior year MNSA Pty Ltd Chartered Accountants, the Group’s auditor, did not provide any
non-audit services.
The total amount received by MNSA Pty Ltd Chartered Accountants for non-audit services was $Nil (2018: $Nil).
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001
has been received and can be found on page 82 of the financial report.
Rounding off
MNF Group Limited is a company of the kind referred to in ASIC Legislative Instrument (Rounding in Financial/
Directors’ Reports) 2016/191 and in accordance with that Instrument, amounts in the Directors’ report and the
consolidated financial statements are rounded to the nearest thousand dollars, except where otherwise indicated.
44
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Directors’ report
This directors’ report, incorporating the audited remuneration report, is signed in accordance with a resolution of
the Board of Directors.
Terry Cuthbertson
Chairman
Sydney, 27 August 2019
Rene Sugo
CEO and Executive Director
45
For the year ended 30 June 2019MNF Group Limited | ABN 37 118 699 853 and controlled entities Consolidated financial
statements 2019
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June
Continuing operations
Notes
Consolidated group
2019
$’000
2018
$’000
Revenue
Cost of sales
Gross profit
Other income
Employee benefits expense
Depreciation and amortisation
Other expenses
Costs related to acquisition
Financing costs
Profit before income tax
4a
215,587
220,728
(133,120)
(151,683)
82,467
69,045
4a
4b
4c
4d
4e
2,508
1,128
(38,989)
(8,973)
(19,578)
(1,168)
(1,874)
14,393
(31,713)
(6,310)
(13,865)
(262)
(1,270)
16,753
Income tax expense
5a, 5b
(2,994)
(4,894)
Profit from continuing operations
11,399
11,859
Net profit for the year
11,399
11,859
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
537
475
Changes in fair value of cash flow hedges
(519)
352
18
827
Total comprehensive income for the year
11,417
12,686
Earnings per share from continuing operations
- Basic earnings per share (cents)
- Diluted earnings per share (cents)
24
24
15.55
15.32
16.25
16.08
The accompanying notes form part of these consolidated financial statements.
47
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Consolidated statement of financial position
As at 30 June
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax asset
Goodwill and other intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Deferred revenue
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Financial instruments
Provisions
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes
6a
7
8a
5c
21
9
10
12
13
10
11
13
5d
14a
Consolidated group
2019
$’000
2018
$’000
15,481
42,030
853
1,548
59,912
30,776
2,052
89,785
122,613
182,525
18,870
33,450
-
650
52,970
23,144
1,040
48,754
72,938
125,908
32,158
30,120
-
1,494
-
3,797
37,449
55,600
628
1,236
3,143
60,607
98,056
84,469
51,125
1,931
31,413
84,469
2,500
1,763
1,996
1,801
38,180
8,190
80
1,876
1,349
11,495
49,675
76,233
50,221
1,493
24,519
76,233
The accompanying notes form part of these consolidated financial statements.
48
MNF Group Limited | ABN 37 118 699 853 and controlled entities Consolidated statement of cash flows
For the year ended 30 June
Cash flows from operating activities
Notes
Receipts from customers
Payments to suppliers and employees
Settlement of financial asset
Settlement of financial liability
Interest received
Interest paid
Income tax paid
Net cash from/(used for) operating activities
6b
Cash flows from investing activities
Purchase of property, plant and equipment
Payment for business acquisitions
Payment in advance for business acquisitions
Software development costs
Purchase of other intangible assets
Consolidated group
2019
$’000
2018
$’000
229,837
231,224
(217,219)
(242,907)
-
-
167
(1,601)
(5,663)
5,521
(7,334)
(35,070)
-
(8,283)
(74)
603
(694)
836
(759)
(4,599)
(16,296)
(8,101)
-
(646)
(2,350)
(704)
Net cash used for investing activities
(50,761)
(11,801)
Cash flows from financing activities
Proceeds from share placement and options exercised - SPP
Proceeds from share placement and options exercised - DRP
Proceeds from share placement and options exercised
Dividends paid
Proceeds from borrowings
Repayment of borrowings
286
618
-
(4,505)
46,160
(1,250)
-
-
1,221
(6,417)
2,000
(2,500)
Repayment of finance lease liability
(56)
-
Net cash from/(used for) financing activities
41,253
(5,696)
Net decrease in cash and cash equivalents
Impact of FX on cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
6a
The accompanying notes form part of these consolidated financial statements.
(3,987)
598
18,870
15,481
(33,793)
305
52,358
18,870
49
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Consolidated statement of changes in equity
Attributable to owners of the Group
Ordinary
share
capital
Share-
based
payment
reserve
Translation
reserve
Hedging
reserve
Retained
earnings
Total
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 30 June 2017
49,000
1,646
(913)
(463)
19,077
68,347
Profit for the period
Other comprehensive income
Dividends paid
-
-
-
Shares issued - DRP
1,221
-
-
-
-
Share-based payments
-
396
-
475
-
-
-
-
11,859
11,859
352
-
827
-
-
-
(6,417)
(6,417)
-
-
1,221
396
Balance at 30 June 2018
50,221
2,042
(438)
(111)
24,519
76,233
Profit for the period
Other comprehensive income
Dividends paid
Shares issued - DRP
Shares issued - SPP
-
-
-
618
286
-
-
-
-
-
Share-based payments
420
-
537
-
-
-
-
-
11,399
11,399
(519)
-
18
-
-
-
-
(4,505)
(4,505)
-
-
-
618
286
420
Balance at 30 June 2019
51,125
2,462
99
(630)
31,413
84,469
The accompanying notes form part of these consolidated financial statements.
50
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
1. Corporate information
These consolidated financial statements and notes represent those of MNF Group Limited (the Company) and
its controlled entities (collectively, the Group) for the year ended 30 June 2019. The financial statements were
authorised for issue on 27 August 2019 in accordance with a resolution by the directors of the Company.
MNF Group Limited is a for-profit entity limited by shares and incorporated and domiciled in Australia. Shares are
publicly traded on the Australian Securities Exchange (ASX). The nature of the operations and principal activities
of the Group are described in the Directors’ report.
The separate financial statements of the MNF Group Limited, the parent entity of the Group, have not been
presented within this financial report as permitted by the Corporations Act 2001. The financial information of the
Company has been disclosed in Note 26.
2. Significant accounting policies
a. Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in the
financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
(IASB). Material accounting policies adopted in the preparation of these financial statements are presented below
and have been consistently applied unless otherwise stated.
The financial statements have been prepared on an accruals basis and are based on historical costs, modified,
where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial
liabilities.
b. New and amended accounting policies adopted by the Group and New Accounting Standards for
application in future periods
Accounting Standards and Interpretations issued by the AASB that are applicable to the Group, together with an
assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are
discussed below:
AASB 16 Leases (AASB 16)
AASB 16 was issued in January 2016 and it replaces AASB 117 Leases and will almost result in all leases being
recognised in the statement of financial position as a “right of use” (ROU) asset with a corresponding lease
liability to reflect future lease payments. Straight-line operating lease expense recognition will be replaced with a
depreciation charge for the ROU asset and an interest expense on the recognised lease liability.
There are two exemptions to this standard for lessees – lease of low value assets and short-term leases.
The accounting for lessors will not significantly change with this standard and will continue to carry forward the
requirements of AASB 117.
AASB 16 is applicable for annual reporting periods beginning on or after 1 January 2019. The Group will adopt the
standard from 1 July 2019 and will apply the standard using a modified retrospective approach whereby the ROU
asset will equal to the lease liability and no restatement of comparative information.
The Group has a number of long term property leases for office buildings which will have a material impact when
recognised in the statement of financial position. Based on the preliminary assessment performed by the Group
during the year, it is estimated that lease assets and financial liabilities on the balance sheet will both increase by
approximately $23m (subject to change once the Group finalises the assessment).
51
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
Due to the adoption of AASB 16, the Group’s operating profit will improve while its interest expense will increase:
• The equity reported in next financial year will reduce because the carrying amount of the lease assets will
reduce more quickly than the carrying amount of the lease liabilities
• EBIT in the statement of profit or loss and other comprehensive income will be higher as the interest in the
lease payments will be presented as part of finance costs rather than operating expenses
• Operating cash outflows will be higher as financing cashflows will be higher as the principal repayments
on the lease liabilities will now be included in financing activities rather than operating activities. Interest
repayments will also be included in financing activities
c. Principles of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by the
Company at the end of the reporting period. A controlled entity is any entity over which MNF Group Limited has
the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s activi-
ties. Control will generally exist when the Company owns, directly or indirectly through subsidiaries, more than half
of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual
and potential voting rights are also considered.
In preparing the consolidated financial statements, all inter-group balances and transactions between entities
in the consolidated group have been eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with those adopted by the parent entity.
Where controlled entities have entered or left the Group during the year, the financial performance of those enti-
ties are included only for the period of the year that they were controlled. A list of controlled entities is contained in
Note 20 to the consolidated financial statements.
d. Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses and results in the
consolidation of its assets and liabilities. All business combinations, including those involving entities under com-
mon control, are accounted for by applying the acquisition method.
Consideration transferred for the acquisition comprises the fair value of the assets transferred, liability incurred
and the equity interests issued by the acquirer. Identifiable assets acquired and liabilities and contingent liabili-
ties assumed in a business combination are, with limited exceptions, measured initially at their fair values at the
acquisition date. Any deferred consideration payable is discounted to present value using the entity’s incremental
borrowing rate. Acquisition-related costs are expensed as incurred.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the
sum of fair value of consideration transferred, over the acquisition-date fair values of identifiable net assets. See
Note 2p for further details regarding impairment testing.
e. Critical accounting estimates and judgments
The Directors evaluate estimates and judgments incorporated into the consolidated financial statements based on
historical knowledge and best available current information. Estimates assure a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the Group. Key
estimates that have a significant risk of causing adjustments to the carrying amounts of certain assets and liabili-
ties within the next annual reporting period are:
(i) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by an independent valuer
using the Black-Scholes model. The accounting estimates and assumptions relating to equity-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but
may have impact on profit or loss and equity.
(ii) Useful lives of property, plant and equipment
The Group reviews the estimated useful lives of property, plant and equipment at the end of each financial year.
52
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
The Group adjusts the remaining effective useful life of its assets to better reflect their actual usage and future
economic benefit.
(iii) Utilisation of tax losses
The Company and its wholly-owned Australian subsidiaries elected to join as members of a tax consolidated
group under Australian taxation law as of 1 July 2011. Each entity in the tax consolidated group contributed tax
losses to the Group. The Group has no tax losses to currently utilize.
(iv) Research & Development (R&D) tax concession
When calculating the income tax provision for the year, the Research & Development tax concession for the
current financial year is based on management’s operational knowledge and best estimate at the time, utilitising
prior year’s claim as a benchmark. The directors believe the estimate is reasonable and conservative. This may be
subject to change following the approval of the R&D tax concession application from AusIndustry in due course.
f. Revenue recognition
(i) Revenue from Contracts with Customers
The Group has adopted the AASB 15 Revenue from Contracts with Customers for the current reporting period,
including presentation of prior year comparatives on the same basis. In accordance with the Standard, the Group
recognises revenue to depict the transfer of goods and services to customers, in an amount that reflects the con-
sideration to which the Group is entitled in exchange for those goods and services. Note 4 provides specific infor-
mation to assist users to understand the nature, timing and uncertainty of revenues and cash flows from contracts
with customers. All reported revenue for the consolidated Group, apart from interest revenue and other income, is
generated from Contracts with Customers.
The Group provides telecommunication services, including data and voice services and provision of low value
hardware as part of total business communication solutions. Accordingly, performance obligations for contracts
with customers are generally satisfied over time, and revenue is recognised accordingly. Where hardware is pur-
chased outright by a customer, revenue is recognised at the time of purchase. This does not represent a material
level of revenue for the Group.
Where payment is received by the Group in advance of a performance obligation being satisfied, a contract
liability is recognised in the balance sheet. Where a performance obligation has been satisfied and the Group is
yet to issue an invoice to the customer, a contract asset is recognised in the balance sheet. Where a performance
obligation has been satisfied and an invoice has been issued to a customer but not yet paid, a trade receivable is
recognised in the balance sheet.
Transaction prices for provision of goods and services are agreed within Contracts with Customers. The Group
determines its transaction prices based on the cost to the Group in acquiring or supplying the good or service
itself, plus a margin to cover operating costs and return requirements of the Group. The Group may offer discounts
to customers for bulk supply of particular goods or services. Discounts are recognised in line with corresponding
revenue recognition.
The cost to the Group in fulfilling return, refund and warranty obligations is negligible. The majority of the Group’s
revenue is generated from the provision of voice services and call connections that do not have enduring obliga-
tions.
Impairment of contract assets and trade receivables for Contracts with Customers is assessed by the Group on an
ongoing basis and allowed for within the Group’s provisions for doubtful debts calculation (refer to Note 7).
Costs incurred in obtaining contracts with customers are not material at the Group level, and the Group does not
recognise any assets in relation to costs to obtain or fulfil contracts with customers, outside of contract assets as
identified above.
(ii) Interest income
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is
the rate inherent in the instrument.
53
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
g. Leases
The Group as a lessee - lease payments for operating leases, where substantially all the risks and benefits remain
with the lessor, are charged as expenses in the period in which they are incurred. Lease incentives under
operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.
h. Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and in hand
and short-term deposits with an original maturity 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.
For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and
cash equivalents as defined above, net of outstanding bank overdrafts.
i. Trade and other receivables
Trade and other receivables are non-interest bearing financial assets with fixed or determinable payments that
are not quoted on an active market. The balance is recognised and carried at original invoice amount net of any
provision for doubtful debts.
A provision for doubtful debts is estimated based on analysis made by the Group regarding the collectability of the
debt with reference to the counterparty’s current financial situation. Bad debts are written off when it is determined
the debt is irrecoverable. These amounts have been included in other expenses.
j. Foreign currency transactions and balances
(i) Functional and presentation currency
The functional currency of each group entity is measured using the currency of the primary consolidated environ-
ment in which the entity operates. The consolidated financial statements are presented in Australian dollars which
is the Company’s functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retrans-
lated at the rate of exchange ruling at the balance sheet date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
(iii) Group Companies
The financial results and position of foreign operations whose functional currency is different from the Group’s
presentation currency are translated as follows:
• Assets and liabilities are translated at year end exchange rates prevailing at the reporting date.
•
• Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Income and expenses are translated at average exchange rates for the period.
On consolidation, assets and liabilities have been translated into Australian dollars at the closing rate at the
reporting date. Income and expenses have been translated into the Group’s presentation currency at the average
rate over the reporting period. The exchange differences are taken to other comprehensive income (OCI) in the
consolidated statement of profit or loss and other comprehensive income.
k. Income tax
(i) Current tax
Current income tax expense charged to the profit or loss is the tax payable on taxable income, calculated using
applicable income tax rates enacted as at reporting date. Current tax liabilities are measured at the amounts
expected to be paid to the relevant taxation authority.
54
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
(ii) Deferred tax
Deferred taxes arise due to temporary timing differences between accounting and tax treatments of income and
expenses. They are calculated at the tax rates expected to apply to the period when the asset is realised or the
liability is settled.
Deferred tax assets relating to unused tax losses are recognised only to the extent that it is probable that future
taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Except for busi-
ness combinations, no deferred tax is recognised from the initial recognition of an asset or liability where there is
no effect on accounting or taxable profit or loss.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur.
(iii) Tax consolidation
MNF Group Limited and its wholly-owned Australian subsidiaries are part of a tax consolidation group under
Australian taxation law. MNF Group Limited is the head entity in the tax consolidation group. Tax expense,
deferred tax liabilities and deferred tax assets arise from temporary differences of the members of the
tax-consolidation group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts
in the separate financial statements of each entity and the tax values applying under tax consolidation.
MNF Group Limited, as the head entity in the tax consolidated group, recognises the current tax liabilities and
assets and deferred tax assets arising from unused tax losses and tax credits of all entities in Australia.
l. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
m. Inventories
Costs of purchased inventory are determined after deducting rebates and discounts. Inventories are measured at
the lower of cost and net realisable value. Cost of inventories are determined on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of com-
pletion and the estimated costs necessary to make the sale.
n. Property, plant and equipment
(i) Carrying amount
Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed
annually by directors to ensure it is not more than the recoverable amount from these assets.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to the statement of profit or
loss and other comprehensive income during the financial period in which they are incurred.
(ii) Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the
consolidated group commencing from the time the asset is held ready for use.
55
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
The depreciation rates used for each class of depreciable assets are:
Furniture & fittings
Office equipment
Leasehold improvements
6 to 10 years
3 to 5 years
3 to 9 years
Network infrastructure and IT systems
2 to 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate at the end of each reporting
period.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and
losses are included in the consolidated statement of profit or loss and other comprehensive income. When re-val-
ued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained
earnings.
o. Financial instruments
Non-derivative financial assets and financial liabilities are recognised when the entity becomes a party to the con-
tractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits
itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is
classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss imme-
diately.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market and are subsequently measured at amortised cost.
Loans and receivables are included in current assets, except for those which are not expected to mature within 12
months after the end of the reporting period (all other loans and receivables are classified as non-current assets).
(ii) Investments in subsidiaries held by the parent
Investments in subsidiaries held by the parent entity are recognised and subsequently measured at cost in the
separate financial statements of the company, less any impairment.
(iii) Derivative financial instruments and hedge accounting
The group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the host contract and accounted for separately if certain criteria are
met.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exer-
cised, or the designation is revoked, then the hedge accounting is discontinued prospectively. If the forecast trans-
action is no longer expected to occur, then the amount accumulated in reserves is reclassified to profit or loss.
Derivatives are initially recognised at fair value; any directly attributable transaction costs are recognised in profit
or loss as incurred.
Cash flow hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair val-
ue of the derivative is recognised in other comprehensive income (OCI) and accumulated in the hedging reserve.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
The amount accumulated in equity is retained in OCI and reclassified to profit or loss in the same period or peri-
ods during which the hedged item affects profit or loss.
56
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
Fair value hedges
When a derivative is designated as a fair value hedging instrument, the hedged item is re-measured to take into
account the gain or loss attributable to the hedged risk, with the gains or losses arising recognised in profit or loss.
This offsets the gain or loss arising on the hedging instrument which is measured at fair value through profit or
loss. Changes in fair value of the derivative instrument are recognised in profit or loss.
p. Intangible assets and goodwill (impairment testing)
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of information including
dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition
profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s
carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement
of profit or loss and other comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recov-
erable amount of the cash-generating unit to which the asset belongs.
Recognition and measurement:
Goodwill
Brands
Research and
development
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
impairment losses. Goodwill assets are not subject to amortisation and are tested for
impairment on an annual basis, or whenever an indication of impairment exists.
Brands identified on acquisitions are measured and recorded at valuation less accumulated
impairment losses. Brands are not subject to amortisation and are tested for impairment on an
annual basis, or whenever an indication of impairment exists.
Expenditure on research is recognised in profit or loss as incurred.
Development expenditure is capitalised only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are
probable and the Group intends to and has sufficient resources to complete development and
to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to
initial recognition, development expenditure is measured at cost less accumulated amortisa-
tion and any accumulated impairment losses.
Other intangible
assets
Other intangible assets, including customer contracts, patents and trademarks and software
acquired by the Group that have finite lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less their residual values using the straight-line
method over their estimated useful life, and is generally recognised in profit or loss. Goodwill is not amortised.
The estimate useful life of intangibles is as follows:
Patents and trademarks
5 to 20 years
Software and software development costs
5 to 10 years
Customer relationships
3 to 10 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
57
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
q. Trade and other payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and
services received by the Group during the reporting period which remains unpaid. The balance is recognised as a
current liability with the amount being normally paid within 30 days of recognition of the liability.
r. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the consolidated statement of profit or loss and other compre-
hensive income net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the statement of financial position date. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks
specific to the liability.
s. Employee leave benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees
to balance date. Employee benefits that are expected to be settled within one year have been measured at the
amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have
been measured at the present value of the estimated future cash outflows to be made for those benefits. In deter-
mining the liability, consideration is given to employee wages increases and the probability that the employee may
satisfy vesting requirements. Those cash outflows are discounted using market yields on national government
bonds with terms to maturity that match the expected timing of cash flows.
t. Contributed capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or op-
tions are shown in equity as a deduction, net of tax, from the proceeds.
u. Earnings per share
Basic earnings per share is determined as net profit/(loss) attributable to members of the group, adjusted to
exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary
shares.
Diluted earnings per share include options outstanding that will have the potential to convert to ordinary shares
and dilute the basic earnings per share.
v. De-recognition of financial assets and financial liabilities
Financial assets are de-recognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the risks
and benefits associated with the asset. Financial liabilities are de-recognised where the related obligations are
either discharged, cancelled or expired. The difference between the carrying value of the financial liability extin-
guished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash
assets or liabilities assumed, is recognised in profit or loss.
w. Share-based payment transactions
The Group provides benefits to its employees and directors (including KMPs) in the form of share-based pay-
ments, whereby employees render services in exchange for shares or rights over shares (equity-settled transac-
tions).
58
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
The cost of these equity-settled transactions with employees and directors is measured by reference to the fair
value of the equity instruments at the date at which they are granted. The fair value is determined by an external
valuer using the Black-Scholes model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on
which the relevant employees and directors become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the consolidated statement of profit or
loss and other comprehensive income is the product of:
(i)
(ii)
the grant date fair value of the award;
the current best estimate of the number of awards that will vest, taking into account such factors as the
likelihood of employee turnover during the vesting period and the likelihood of non-market performance
conditions being met; and
(iii)
the expired portion of the vesting period.
The charge to the consolidated statement of profit or loss and other comprehensive income for the period is the
cumulative amount as calculated above less the amounts already charged in previous periods. There is a corre-
sponding credit to equity.
59
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
3. Operating segments
The Group operates in three segments, which are based on internal management reporting that is used by
the executive management team (chief operating decision makers) in assessing performance and allocating
resources.
(i) The Australian domestic retail segment, which consists of:
• The core MyNetFone brand, services Residential, SMB (Small to Medium Business), Enterprise and
Government customers in Australia
• The Conference Call International Pty Limited (CCI) brand, offers complete, end-to-end audio and web
conferencing solutions for SMBs and
• Other brands of the Group, marketed under Connexus, Callstream, Pennytel and theBuzz
• Key products in this segment include:
o VoIP, Internet, Virtual PBX and SIP trunking
o Conferencing, toll free numbers and number porting
(ii) The Australia/New Zealand domestic wholesale segment, which includes:
• The core Symbio and iBoss brands aimed at servicing wholesale customers based in Australia and New
Zealand.
• Key products in this segment include:
o Call termination, pre-select, SIP trunking, inbound numbers, virtual numbers and porting
o Wholesale aggregation, data enablement and MVNO
• Other brands in this segment include Telcoinabox and iVox providing end to end white labelled
telecommunications wholesale solutions to Retail Service Providers who predominantly service small to
medium sized businesses.
o Key products include: Fixed wire, mobile, data services and hosted voice
(iii) The global wholesale segment, which is made up of:
• The TNZI Brand which services the global wholesale market within the Group, and
• The TollShield and OpenCA brand, which aims to prevent toll fraud.
• Key products in this segment include:
o Voice carriage and International Toll Free Services (ITFS)
o Toll Fraud prevention
o Class 4 Softswitch and billing services
The accounting policies used by the Group in reporting segment information internally are the same as those
contained in Note 2 to the 2019 Financial Statements.
Australian
Domestic Retail
Australia/New
Zealand Domestic
Wholesale
Global
Wholesale
Total
$’000
$’000
$’000
$’000
2019
External revenue
Inter-segment revenue
Segment revenue
Segment margin
2018
External revenue
Inter-segment revenue
Segment revenue
Segment margin
60
36,414
-
36,414
22,006
35,382
-
35,382
22,968
67,851
10,081
77,932
33,414
33,758
4,565
38,323
17,703
111,322
4,671
115,993
27,047
151,588
4,942
156,530
28,374
215,587
14,752
230,339
82,467
220,728
9,507
230,235
69,045
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
4. Revenue and expenses
a. Revenue and other income
2019
$’000
2018
$’000
Rendering of services and sale of goods
215,587
220,728
Interest on bank deposits
Bargain purchase gain on acquisition (note 23)
Other income
130
1,317
1,061
2,508
576
-
552
1,128
Disaggregation of revenue from contracts with customers
Adoption of ASSB 15 does not affect 2018 comparative revenue figures.
The disaggregation of the Group’s revenue is set out below:
2019
Revenue type
Revenue
recognition
Australian Domestic
Retail $’000
Aust/ NZ Domestic
Wholesale $’000
Global Wholesale
$’000
TOTAL
External revenue
Over time
36,414
Inter-segment
revenue
Over time
-
67,851
10,081
111,322
215,587
4,671
14,752
Total
2018
36,414
77,932
115,993
230,339
Revenue type
Revenue
recognition
Australian Domestic
Retail $’000
Aust/ NZ Domestic
Wholesale $’000
Global Wholesale
$’000
TOTAL
External revenue
Over time
35,382
Over time
-
33,758
4,565
151,588
220,728
4,942
9,507
35,382
38,323
156,530
230,235
Inter-segment
revenue
Total
Disaggregation of revenue is presented in line with the Operating Segment reporting as included in Note 3.
External revenue above represents revenue from contracts with customers, inter-segment revenue represents
inter-company transactions (inter-company revenue is eliminated in the revenue figure included in the consolidat-
ed statement of profit or loss).
Revenue generated from contracts with customers give rise to contract assets. This arises when performance
obligations are satisfied not through the passing of time. Across all segments, services are invoiced on a monthly
basis, with payment terms between 14 - 30 days. All contract assets are disclosed under Note 7. Contract liabili-
ties identify receipts received in advance of satisfaction of performance obligations within contracts with custom-
ers. Contract liabilities are disclosed under Note 12.
61
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
2019
$’000
2018
$’000
31, 841
3,678
420
3,050
38,989
5,597
3,376
8,973
1,744
4,397
3,790
3,321
695
603
447
388
4,193
19,578
-
1,874
1,829
26,857
2,447
396
2,013
31,713
4,313
1,997
6,310
1,760
2,898
2,195
866
464
435
219
404
4,624
13,865
508
762
1,270
b. Employee benefits expense
Wages and salaries
Superannuation
Share based payments expense
Other employee benefits expense
c. Depreciation and amortisation
Depreciation of fixed assets
Amortisation of intangible assets
d. Other expenses
Marketing
Property
Technology & support
Business process outsourcing
Distribution
Tax and audit
Legal & consulting
Bank and transaction costs
Other administrative expenses
e. Financing costs
Finance charges related to hedge instrument
Finance charges payable on bank loan
62
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
5. Income tax
a. Income tax expense
The major components of income tax expense are as follows:
Current tax
Adjustment in respect of prior year tax
Origination and reversal of temporary differences
2019
$’000
2018
$’000
2,878
(210)
326
2,994
5,361
(564)
97
4,894
b. Reconciliation between tax expense and the accounting profit
Profit before income tax
14,393
16,753
At the Group’s statutory rate of 30% (2018: 30%)
4,318
5,026
Tax incentives
Effect of tax rates in foreign jurisdictions
Non-temporary differences
Adjustment in respect of prior year
(1,541)
128
299
(210)
2,994
(289)
(124)
845
(564)
4,894
Effective income tax rate
21%
29%
c. Deferred tax asset
Relating to temporary differences
d. Deferred tax liability
Relating to temporary differences
2,052
2,052
3,143
3,143
1,040
1,040
1,349
1,349
e. The Group and its wholly-owned Australian entities are members of a tax consolidated group. Transactions
within the tax consolidated group have been eliminated in full on consolidation. The Australian tax consolidated
group is treated as a single entity for income tax purposes.
63
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
6. Operating cash flows reconciliation
a. Cash and cash equivalents
Cash at bank and on hand
2019
$’000
2018
$’000
15,481
18,870
b. Reconciliation of net profit after tax to net cash flows from/(used for) operating activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Share based payments expense
Gain on acquisition
Tax expense
Changes in assets and liabilities, net of the effects of acquisitions:
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in other financial assets
Change in deferred revenue
Change in provisions and employee benefits
Cash from/(used for) operating activities
Tax paid
Net cash flows from/(used for) operating activities
7. Trade and other receivables
Trade receivables
Doubtful debts provision
Other receivables
11,399
11,859
8,973
420
(1,317)
2,994
10,344
(850)
(21,188)
-
(923)
1,332
11,184
(5,663)
5,521
37,499
(1,508)
6,039
42,030
6,310
396
-
4,894
1,047
19
(36,018)
(591)
152
235
(11,697)
(4,599)
(16,296)
30,671
(1,010)
3,789
33,450
Trade receivables balance is mostly made up of contractual agreements with customers. Generally, the terms and
conditions of these contracts require settlement between 14 to 30 days from the date of invoice.
Allowance for doubtful debts
The Group applies professional judgement to estimate the allowance for doubtful debts for our trade receivables.
Assessment is based on historical trends and management’s assessment of general economic conditions. Credit
risks, insolvency risk and incapacity to pay a legally recoverable debt are taken into consideration when applying
this allowance.
64
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
8. Property, plant and equipment
Office
Leasehold
Network
furniture &
improvements
infrastructure
equipment
& equipment
Work in
progress
Total
$’000
$’000
$’000
$’000
$’000
a. Reconciliation of carrying amount
Cost:
At 1 July 2017
Additions
Disposals
3,196
1,559
24,876
3,399
33,030
965
3,100
4,702
88
8,855
(5)
-
(113)
-
(118)
Transfers from work in progress
-
402
2,997
(3,399)
-
Effect of movement in exchange rates
9
14
169
-
192
At 30 June 2018
4,165
5,075
32,631
88
41,959
4,165
5,075
32,631
88
41,959
At 1 July 2018
Acquisitions
Additions
Disposals
Transfers from work in progress
Effect of movement in exchange rates
2,883
698
(66)
-
16
3
331
(956)
-
19
3,741
6,677
(14)
2,303
592
2,211
51
-
(2,303)
4
51
8,838
7,757
(1,036)
-
631
58,149
At 30 June 2019
7,696
4,472
45,930
Accumulated depreciation:
At 1 July 2017
(1,524)
(869)
(11,974)
-
(14,367)
Depreciation expense
(529)
(639)
(3,145)
-
(4,313)
Disposals
1
-
84
-
85
Effect of movement in exchange rates
(6)
(6)
(208)
-
(220)
At 30 June 2018
(2,058)
(1,514)
(15,243)
-
(18,815)
At 1 July 2018
Acquisitions
Depreciation expense
Disposals
Effect of movement in exchange rates
(2,058)
(1,514)
(15,243)
-
(18,815)
(2,056)
(920)
59
(9)
(2)
(603)
990
(12)
(1,622)
(4,074)
14
(323)
-
-
-
-
(3,680)
(5,597)
1,063
(344)
At 30 June 2019
(4,984)
(1,141)
(21,248)
-
(27,373)
Net Book Value:
At 30 June 2018
At 30 June 2019
2,107
3,561
17,388
88
23,144
2,712
3,331
24,682
51
30,776
b. Disposals
Asset disposals relate to equipment that is fully written down to net book value $Nil and is no longer in use. There
was no material impact to the profit or loss account in relation to these disposals.
65
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
2019
$’000
2018
$’000
9. Trade and other payables
Trade payables
Other creditors and accruals
Security deposits held
10. Loans and borrowings
Current liabilities
Secured bank loan
Non-current liabilities
Secured bank loan
18,434
13,318
406
32,158
10,264
19,797
59
30,120
-
2,500
55,600
55,600
8,190
10,690
The Group’s finance facilities consist of a $60.0m (2018: $27.0m) revolving credit facility and a $3.0m (2018:
$2.1m) revolving multi-option credit facility.
In December 2018 the Group increased its existing finance facility by $28.0m to fund the acquisition of the
Wholesale and Enablement Business from Inabox Group Limited. The Group subsequently refinanced its facilities
across two lenders in May 2019.
A total of $45.0m of the facilities has a maturity date of 16 May 2022 and $15.0m has a maturity date of 16 May
2024. The facilities are interest only, there are no compulsory principal repayments.
$2.5m (2018: $1.8m) of the revolving multi-option credit facility has been utilised for bank guarantees for property
leases and supplier securities as required.
Facilities are secured by a fixed and floating charge over the assets of the Group. Interest rates payable under
the bank facilities are based on BBSY rates plus a variable margin based on the net leverage ratio of the Group
(calculated quarterly). For more information about the Group’s exposure to interest rate and foreign currency risk,
see Note 27.
66
MNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
For the year ended 30 June
11. Financial instruments
Non-current liabilities
Interest rate swap contract - cash flow hedge
2019
$’000
2018
$’000
628
628
80
80
Interest rate swap contract - cash flow hedge
The Group’s bank facility is a variable interest rate facility. It is the Group’s policy to protect a portion of the bank
facility from exposure to fluctuations in interest rates. On 23 April 2015, the Group entered into an interest rate
swap agreement (which was rolled into a new contract in April 2019) to protect the loan facility from exposure
to increasing interest rates. A hedge relationship was designated on this date. Under this interest rate swap, the
Group is obliged to receive interest at a variable rate and pay interest starting April 2019 at a fixed rate of 1.385%
(2018: 2.85%) per annum. The swap covers 54.0% (2018: 88.3%) of the floating rate exposure under the Facility.
The contract requires settlement of the net interest receivable or payable each 90 days which coincides with the
dates on which interest is payable on the underlying facility making it highly effective.
The gain or loss from remeasuring the hedging instrument at fair value is recognised in other comprehensive
income and deferred in equity in the hedge reserve. It is reclassified into profit or loss when the hedged interest
expense is recognised.
67
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
12. Customer deposits
Pre-paid accounts
2019
$’000
2018
$’000
1,494
1,763
Customer deposits mostly relates to cash received in advance from customers with respect to pre-paid VoIP
accounts. The balance represents the unused call credits as at balance date.
13. Provisions
As at 1 July 2018
Arising from acquisition
Arising during the year
Utilised during the year
As at 30 June 2019
Current
Non-current
Annual leave
Long service
leave
Makegood
provision
Total
$’000
$’000
$’000
$’000
1,708
632
2,983
(2,664)
2,659
2,659
-
974
464
132
(177)
1,393
1,138
255
995
-
178
(192)
981
-
981
3,677
1,096
3,293
(3,033)
5,033
3,797
1,236
A provision has been recognised for employee entitlements relating to long service leave. In calculating the
present value of future cash flows in respect of long service leave, the probability of long service leave being
taken is based on historical data. The measurement and recognition criteria relating to employee benefits have
been included in Note 2.
68
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
For the year ended 30 June
14. Issued capital
a. Ordinary shares
Issued capital
2019
$’000
2018
$’000
51,125
50,221
2019
2018
Movements in ordinary
shares on issue:
Number of
shares
$’000
Number of
shares
$’000
At 1 July
73,117,908
50,221
72,778,264
49,000
Exercise of share options (i)
Issued from DRP participation (ii)
Issued from SPP participation (iii)
86,000
140,738
65,669
-
618
286
89,250
-
250,394
1,221
-
-
At 30 June
73,410,315
51,125
73,117,908
50,221
(i) In 2019, 86,000 options were exercised with an exercise price of $Nil (2018: 89,250 options).
(ii) Shares issued as a result of participation in the MNF Group dividend reinvestment plan (at an issue price of
$4.63 and $3.81, 2018: $4.73 and $5.07).
(iii) Shares issued as a result of participation in the MNF Group Share Purchase Plan at a price of $4.40.
Share capital movements above are presented net of transaction costs.
Ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the
Company.
b. Share options
Movements in share options on issue:
Number
WAEP $
Number
WAEP $
2019
2018
Outstanding at 1 July
Granted during the year
Exercised during the year
Expired during the year
Outstanding at 30 June
Exercisable
800,000
360,000
(86,000)
(4,000)
1,070,000
1,070,000
5.54
890,000
4.98
-
-
-
4.14
4.14
-
(89,250)
(750)
800,000
800,000
-
-
-
5.54
5.54
The outstanding options balance as at 30 June 2019, issued under the share-based payment option scheme to
directors and executives is represented by 620,000 options with an exercise price of $7.15 each and an expiry
date of 30 June 2021. 90,000 options were issued to employees with an exercise price of $Nil and expiry date of
30 June 2020. Three tranches of options at 120,000 each were issued to employees with an exercise price of $Nil
with expiry dates of 30 June 2020, 30 June 2021 and 30 June 2022 respectively.
69
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
For the year ended 30 June
15. Share-based payments
Outstanding options
Employee option plan
Options granted to directors
Total
a. Employee option plan (EOP)
2019
Number
2018
Number
620,000
450,000
1,070,000
350,000
450,000
800,000
The Board may issue options under the EOP to any employee of the Group, including executive directors and
non-executive directors. Options will be issued free of charge, unless the Board determines otherwise. Each
option is to subscribe for one share and when issued, the shares will rank equally with other shares. Unless the
terms on which an option was offered specify otherwise, an option may be exercised at any time after one year
from the date it is granted, provided the employee is still employed by the company.
An option may also be exercised in special circumstances, that is, at any time within six months after the
employee’s death, total and permanent disablement, or retrenchment. An option lapses upon the termination of
the employee’s employment by the company and, unless the terms of the offer of the option specify otherwise,
lapses three years after the date upon which it was granted.
The maximum number of options on issue under the EOP must not at any time exceed 5% of the total number of
shares on issue at that time.
b. Share options granted to directors
450,000 options were granted to directors in the prior year. The following table illustrates the number and
weighted average exercise prices (WAEP) of movements of share options held by directors during the year:
2019
2018
Number
WAEP $
Number
WAEP $
Outstanding as at 1 July
450,000
7.15
450,000
7.15
Granted during the year
Exercised during the year
-
-
-
-
-
-
-
-
Outstanding as at 30 June
450,000
7.15
450,000
7.15
70
MNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
16. Commitments and contingencies
Operating lease commitments
Operating leases relate to premises with lease terms remaining between one and eight years. The Group entity
does not have an option to purchase the leased assets at the expiry of the lease terms. The operating leases
generally contain escalation clauses, which are fixed increases between three and four percent per annum.
In the current year, the existing Sydney office leases were extended by a further 2 years and 7 months term.
Future minimum lease payments under non-cancellable operating leases not recorded in the financial statements
as at 30 June 2019 are as follows:
Within one year
After one year, not more than five years
More than five years
2019
$’000
2018
$’000
3,570
13,755
8,447
25,772
2,447
9,232
2,305
13,984
Commitments
There were no commitments as at 30 June 2019. At 30 June 2019, the Group had no commitments relating to the
fit-out of leasehold properties.
Guarantees
There were no new guarantees as at 30 June 2019. The Company has a guarantee to Telstra Corporation
Limited. This guarantee covers all primary obligations including any debts of its wholly owned subsidiaries. It does
not impose any greater liability of the Company than is already in place for the subsidiaries collectively.
17. Events after reporting date
Dividends
The dividend as recommended by the Board will be paid subsequent to the balance date.
There are no other events after reporting date.
18. Auditor’s remuneration
The auditor of the Group is MNSA Pty Ltd Chartered Accountants.
2019
$’000
2018
$’000
Auditors of the Group
Amounts received or due and receivable by MNSA Pty Ltd Chartered Accountants for:
Audit and review of the annual report of the entity
Other Auditors
Audit and review of financial statements
377
49
426
308
89
397
71
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
19. Director and executive disclosures
a. Details of Key Management Personnel (KMP)
Personnel
Mr Terry Cuthbertson
Mr Michael Boorne
Mr Andy Fung
Mr Rene Sugo
Mr Matthew Gepp
Ms Catherine Ly
b. Compensation of KMPs
Position
Chairman and non-executive director
Non-executive director
Non-executive director
Director & Chief Executive Officer
Chief Financial Officer
Company Secretary
The Group has applied the exemption under Corporations Amendments Regulation 2006 No 4 which exempts
listed companies from providing remuneration disclosures in relation to their key management personnel in their
annual financial reports as required by AASB 124 Related Party Disclosures. These disclosures are provided in
the directors’ report designated as audited.
c. Shareholdings of KMPs
Year
Balance at the
beginning of period
Acquired/ (disposed)
during the year
Options
exercised
Balance at end
of period
Directors
Other KMPs
2019
2018
2019
2018
27,679,270
79,795
28,852,993
(1,173,723)
338,676
340,926
2,599
(9,750)
-
-
7,500
7,500
27,759,065
27,679,270
348,775
338,676
The above shareholdings are held directly and indirectly through controlled entities.
d. Share options of KMPs
Year
Balance at the
beginning of period
Granted
Options
exercised
Balance at end
of period
Directors
Other KMPs
2019
2018
2019
2018
450,000
450,000
85,000
92,500
-
-
-
-
-
-
(7,500)
(7,500)
450,000
450,000
77,500
85,000
72
MNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
20. Controlled entities
The consolidated financial statements include the financial statements of MNF Group Limited and the subsidiaries
listed in the following table:
Name
Country of incorporation
Ownership interest
2019
2018
My Net Fone Australia Pty Limited
Symbio Networks Pty Limited
Symbio Wholesale Pty Limited
Internex Australia Pty Limited
Pennytel Australia Pty Limited
Mobile Enablement Australia Pty Limited (i)
Symbio Wholesale (Singapore) Pte Limited
TNZI International Pty Limited
TNZI USA LLC
TNZI New Zealand Limited
TNZI Australia Pty Limited
TNZI UK Limited
TNZI Singapore Pte Limited
Symbio Wholesale NZ Pty Limited
Conference Call International Pty Limited
Express Virtual Meetings Pty Limited
Eureka Teleconferencing Pty Limited
Conference Call Asia Pty Limited
Ozlink Conferencing Pty Limited
Superinternet (S) Pte Limited (ii)
Superinternet Access Pte Limited (ii)
Telcoinabox Operations Pty Limited (iii)
IVox Pty Limited (iii)
Neural Networks Pty Limited (iii)
Symmetry Networks Pty Limited (iii)
Mobile Service Solutions Pty Limited (iii)
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
USA
New Zealand
Australia
United Kingdom
Singapore
New Zealand
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
(i) On 19 June 2019, Numbering Services Australia Pty Limited applied for voluntary de-registration.
(ii) On 6 July 2018, MNF Group completed the acquisition of Superinternet (S) Pte Limited and its subsidiary Superinternet
Access Pte Limited.
(iii) On 12 December 2018, MNF Group completed the purchase of the Wholesale and Enablement Business of Inabox Group
Limited.
73
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
21. Goodwill and other intangibles.
Goodwill
Brands
Customer
contracts
Software
development
costs
Software,
and other
assets#
Total
Cost
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2017
30,789
4,823
2,933
1,429
11,476
51,450
Additions
-
-
-
2,350
704
3,054
Balance at 1 July 2018
30,789
4,823
2,933
3,779
12,180
54,504
-
8,283
74
8,357
Additions
Acquisition of TIAB
-
15,493
-
596
Balance at 30 June 2019
46,282
5,419
Accumulated Amortisation
Balance at 1 July 2017
-
-
Amortisation
-
-
5,518
8,451
(771)
(587)
Balance at 1 July 2018
-
-
(1,358)
Amortisation
-
-
(971)
Balance at 30 June 2019
-
-
(2,329)
Net Book Value
-
14,444
36,501
12,062
26,698
98,912
(192)
(235)
(427)
(378)
(805)
(2,790)
(3,753)
(1,175)
(1,997)
(3,965)
(5,750)
(2,028)
(3,377)
(5,993)
(9,127)
At 30 June 2018
30,789
4,823
1,575
3,352
8,215
48,754
At 30 June 2019
46,282
5,419
6,122
11,257
20,705
89,785
# Acquired externally or purchased as part of a business combination
74
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
22. Impairment testing
For the purpose of undertaking impairment testing, MNF Group Limited identifies cash generating units (CGUs).
CGUs are determined according to the smallest group of assets that generates cash flows that are separately
identifiable.
The carrying amount of goodwill broken out into CGUs is detailed below:
For the year ended 30 June
CGUs
Australia/New Zealand Domestic Wholesale
Australian domestic retail
Global Wholesale
Total goodwill
2019
$’000
2018
$’000
21,579
19,327
5,376
46,282
6,086
19,327
5,376
30,789
Goodwill assets are not subject to amortisation and are tested for impairment on an annual basis, or whenever an
indication of impairment exists.
The Goodwill (and other intangible assets) that were recognised on the acquisition of the Wholesale and
Enablement Business from Inabox Group Limited were independently valued during the year. This valuation has
been relied upon for the purposes of determining that the goodwill on acquisition is not impaired.
The recoverable amount of the cash generating units has been determined based on value-in-use calculations
using cash flow projections based on five-year financial forecasts and assumptions that represent management’s
best estimate of the range of business and economic conditions at the time. Calculations are reviewed and
approved by the Board of Directors.
Value-in-use represents the present value of the future net cash flow arising from the assets continued use
and subsequent disposal. Any reduction in the carrying value is recognised as an expense in the consolidated
statement of profit or loss and other comprehensive income in the reporting period in which the impairment loss is
incurred.
In determining value in use, management apply their best judgement in establishing forecasts of future operating
performance, as well as a selection of growth rates, terminal rates and discount rates. These judgements are
applied based on management’s understanding of historical information and expectation of future performance.
Management consider that, as the domestic wholesale, domestic retail and global wholesale CGUs operate
in the Telecommunications Industry in Australia servicing the same markets, the risks specific to each unit are
comparable and therefore a discount rate of 9.9% (2018: 10.5%) is applicable to all domestic CGUs. The
long-term growth rate used to extrapolate the cash flows beyond five years (the Terminal Value) for each CGU is
2.5% (2018: 2.5%). The International CGU has been assessed using a discount rate of 14.0% (2018: 14.0%) and
a Terminal Value of 2.0% (2018: 2.0%)
Based on the results of the tests undertaken no impairment losses were recognised in relation to goodwill.
75
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
23. Business combinations
SuperInternet Group
On 21 June 2018, MNF Group Limited announced the purchase of Superinternet (S) Pte Ltd and its subsidiary,
Superinternet Access Pte Ltd for SGD $2.0m. The acquisition completed on 6 July 2018.
SuperInternet has a fully interconnected voice network infrastructure in Singapore.
The acquisition of SuperInternet has been recognised in the accounts as follows:
Purchase consideration paid
1,993
1,993
2019 Consolidated provisional
2019 Consolidated final
$’000
$’000
Less cash acquired
Net cash paid
Less fair value of identifiable net assets
Bargain purchase
Identifiable net assets acquired:
Trade receivables
Doubtful debts provision
Other debtors
Deferred tax asset
Fixed Assets
Accumulated Depreciation
Trade creditors
Other creditors
Fair value of identifiable net assets
(43)
(43)
1,950
(1,950)
-
1,950
(3,267)
(1,317)
277
277
(30)
(30)
224
224
418
418
3,081
(569)
(564)
(887)
1,950
4,398
(569)
(564)
(887)
3,267
The fair value of the acquired fixed assets has been independently valued and the above accounting reflects the
final purchase price allocation adopted by the Directors.
76
MNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
23. Business combinations (continued)
Wholesale and Enablement business from Inabox Group
On 8 October 2018, The Company announced the purchase of the Wholesale and Enablement business of Inabox
Group for $34.5m. In June 2019, Inabox Group settled a dispute raised by the Company and as result released
$500,000 from escrow account to the Company. This amount has reduced the purchase price to $34.0m.
The acquisition included Telcoinabox Operations Pty Ltd, Ivox Pty Ltd, Neural Networks Pty Ltd, Symmetry
Networks Pty Ltd and Mobile Service Solutions Pty Ltd. The acquisition completed on 12 December 2018 with
effective date 1 December 2018.
The Inabox Group performs a leading role in the Australian wholesale telecommunications market and brings
considerable volume and scale to the MNF Group.
Goodwill arising from the acquisition has been recognised as follows:
2019 Consolidated provisional
2019 Consolidated final
$’000
$’000
Purchase consideration paid
34,470
33,970
Less cash acquired
Net cash paid
(200)
(200)
34,270
33,770
Less fair value of identifiable net assets
(18,346)
(18,277)
Goodwill
15,924
15,493
Identifiable net assets acquired:
Trade receivables
Doubtful debts provision
Other debtors
Deferred tax asset
Fixed assets
Accumulated depreciation
Customer contracts
Brand names
Software
Deferred tax liability
Trade creditors
Other creditors
Provisions
Customer deposits
6,691
6,691
(1,073)
(1,455)
1,644
1,510
370
828
4,528
4,440
(3,165)
(3,079)
3,000
5,518
2,000
596
15,000
14,444
(1,500)
(1,834)
(5,359)
(5,304)
(2,249)
(2,236)
(1,123)
(1,124)
(418)
(718)
Fair value of identifiable net assets
18,346
18,277
The fair value of the acquired intangible assets (brand name, customer bases and software assets) has been
independently valued and the above accounting reflects the final purchase price allocation adopted by the
Directors.
77
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities Notes to the consolidated financial statements
24. Earnings per share
Earnings and weighted average number of ordinary shares used in calculating basic and diluted earnings per
share are:
2019
$’000
2019
$’000
2018
$’000
11,399
11,859
2018
$’000
73,316
72,974
1,070
800
74,386
73,774
Net profit attributable to ordinary equity holders of the
Company
Weighted average number of shares:
Weighted average number of ordinary shares for basic earnings
per share
Add effect of dilution:
- Share options
Weighted average number of ordinary shares for diluted
earnings per share
25. Dividends paid and proposed
Recognised amounts:
Cents per share
$’000
Date of payment
2018 fully franked final dividend declared and paid
2019 fully franked interim dividend declared and paid
4.05
2.10
2,964
1,541
4-Oct-18
5-Apr-19
Unrecognised amounts:
2019 fully franked final dividend declared (i)
4.00
2,936
3-Oct-19
(i) The final dividend was declared on 27 August 2019. The amount has not been recognised as a liability in the
2019 financial year and will be brought to account in the 2020 financial year.
The proposed payment date of the 2019 final dividend is 3 October 2019.
The amount of franking credits available for future reporting periods is $9,069,796 (2018: $8,552,247).
The tax rate at which paid dividends have been franked is 30% (2018: 30%). Dividends proposed will be franked
at the rate of 30%.
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MNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
26. Parent entity
Key financial information relating to the parent entity is summarised below:
Statement of profit or loss and other comprehensive income
Loss attributable to the owners of the company
Other comprehensive (loss)/gain
Total comprehensive loss attributable to the owners of the company
Statement of financial position
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Net assets
Issued Capital
Reserves
Retained earnings
Total equity
2019
$’000
2018
$’000
(3,732)
(593)
(4,325)
3,852
100,301
(6,461)
(61,598)
36,094
55,936
1,393
(21,235)
36,094
(2,777)
60
(2,717)
1,812
62,008
(6,554)
(13,676)
43,590
55,036
1,962
(13,408)
43,590
27. Financial risk management objectives and policies
The Group’s principal financial instruments as at year end comprise cash at bank, trade and other receivables,
trade payables, forward foreign exchange contract and a loan facility.
The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, liquidity
risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below:
(i) Foreign currency risk
The Group is exposed to foreign exchange risks arising from various currency exposures, primarily with respect
to the United States Dollar (USD) and the New Zealand Dollar (NZD). Much of the USD exposure is subject to a
natural hedge, as the buy and sell side of most foreign currency transactions are in USD. Any unhedged foreign
exchange positions associated with our transactional exposures will directly affect profit or loss as a result of
foreign currency movements. The Group’s objective is to manage its foreign exchange risk against its functional
currency and to hedge firm commitments and highly probable and material forecast transactions over varying time
horizons using forward exchange contracts. Contracts are in place with all major creditworthy financial institutions.
Sensitivity to foreign currency movements:
A movement of 10% in the Australian dollar at 30 June 2019 would impact the profit or loss by less than $445k
(30 June 2018: $270k). This analysis assumes a movement in the Australian dollar across all currencies and only
includes the effect of foreign exchange movements on monetary financial instruments.
(ii) Interest rate risk
The Group’s interest rate exposure relates to short term cash and long-term loans, both are subject to the floating
interest rate. The Group’s objective is to minimise the cost of net borrowings and to minimise the impact of
interest rate movements on the Group’s interest expense and net earnings. The Group policy is to maintain at
79
www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entities
Notes to the consolidated financial statements
least 50% of its long-term loan at fixed rates using interest rate swaps whereby the Group agrees to exchange at
defined periods the net difference between fixed and floating interest rates based on an agreed notional principal
amount. This interest rate swap is designated into a hedge relationship and satisfies the requirements for hedge
accounting.
(iii) Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations as they fall due. The Group’s
objective is to maintain a balance between continuity of funding and flexibility through the use of current accounts,
short term deposits, long-term borrowings, preference shares, finance leases and a revolving multi-option credit
facility. The Group has access to a sufficient variety of sources of funding to adequately mitigate liquidity risks.
(iv) Credit risk
The company has no significant exposure to credit risk. For credit sales the Group only trades with recognised
creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject
to credit verification procedures. Ageing analysis and ongoing credit evaluation are performed on the financial
condition of our customers and, where appropriate, an allowance for doubtful debts is raised. In addition,
receivable balances are monitored on an ongoing basis so that our exposure to bad debts is not significant.
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial
instruments recognised in the financial statements.
2019
2018
Carrying
amount
Fair value
Carrying
amount
Fair value
Financial assets
$’000
$’000
$’000
$’000
Cash
Weighted average effective interest rate
1.2% (2018: 1.5%)
Cash at call
Weighted average effective interest rate
2.0% (2018: 3.5%)
14,581
14,581
15,201
15,201
1,000
1,000
3,669
3,669
Trade and other receivables
42,030
42,030
33,450
33,450
Financial liabilities
On statement of financial position
Trade payables
Loans and borrowings
Weighted average effective interest rate
4.7% (2017: 4.8%)
Interest rate swap contract – cash flow
hedge
28. Company details
32,158
55,600
32,158
55,600
30,120
10,690
30,120
10,690
628
628
80
80
The registered office and principal place of business of MNF Group Limited is:
Level 4, 580 George Street, Sydney, NSW, 2000, Australia
80
MNF Group Limited | ABN 37 118 699 853 and controlled entities
MNF Group Limited
Directors’ Declaration
In accordance with a resolution of the directors of MNF Group Limited, the directors of the Company declare that:
1.
The consolidated financial statements and notes, as set out on pages 46 to 80, are in accordance with the
Corporations Act 2001 and:
a.
b.
comply with Australian Accounting Standards, which, as stated in accounting policy Note 2 to the financial
statements, constitutes compliance with International Financial Reporting Standards (IFRS); and
give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year
ended on that date of the Group;
2.
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable; and
the directors have been given the declarations required by s295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer.
On behalf of the Board
Terry Cuthbertson
Chairman
Sydney, 27 August 2019
Rene Sugo
CEO and Executive Director
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www.mnfgroup.limited 82
83
84
85
86
87
88
88
Sydney
Melbourne
Canberra
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 38 to 43 of the Directors' report for the year
ended 30 June 2019.
In our opinion the Remuneration Repo1t of MNF Group Limited for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
Responsibililies
The directors of the company are responsible for the preparation and presentation of the remuneration report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the remuneration repo1t, based on our audit conducted in accordance with Australian Auditing Standards.
MNSA PTY LTD
Mark Schiliro
Director
Dated in Sydney this 27th day of August 2019
MNSA Pty Ltd
ABN 59 1 33 605 400
Level 1, 283 George St
Sydney NSW 2000
Tel
Fax
(02) 9299 0901
(02) 9299 81 04
GPO Box 2943 Sydney 2001
Email admin@mnsa.com.au
Page 63
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