MNF Group Annual Report 2020

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FY2020 Annual Report · MNF Group

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MNF Group Limited
Annual Report 2020

ABN 37 118 699 853

Year in brief

Strong business
performance with a
leading position in
a growing market

EBIDTA

$38.2m

Up 26% on FY19

Recurring Revenue

$101.5m

Up 37% on FY19

Phone Numbers

4.5m

Up 17% on FY19

Contents

What we do

Message from our Chairman

Message from our CEO

Market Overview

Use Case: Software

Use Case: Apps & Digital services

Use Case: Global Carriers

Use Case: Resellers & MVNOs

Regions we serve

COVID-19

Business Overview

Commentary: Leadership team

Corporate Social Responsibilities (CSR)

People Experience (PX)

Financial Report

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

What we do

We provide a unique software platform
that allows access to carrier networks
in Australia and New Zealand.

Our strategic priority is to expand this
capability throughout South East Asia.

call routing, fraud
mitigation and regulatory
compliance. These fea-
tures are at the heart of all
worldwide calling, confer-
encing and collaboration
technologies.

Using our platform,
communication provid-
ers can deliver the same
specialised features as
in-country telecom
networks, allowing them to
launch rapidly and scale
infinitely, without telecom
constraints.

Cloud communication
providers rely on our
platform for local phone
and mobile numbers,
domestic and international

About us

MNF Group is a leading provider
of software and services for cloud
communication.

Our customers include some of the world’s largest
software companies and communication providers.
Companies like Zoom, Google, Microsoft and many of
the apps and services you use every day.

We provide software, APIs and infrastructure to enable
cloud communication in Australia and New Zealand.

Message from our Chairman

Message from
our Chairman

Terry Cuthbertson
Chairman,
Non-Executive
Director

Dear Fellow Shareholders,

Delivering on our strategic vision

The 2020 financial year has been another
successful year from MNF Group as we
continued to deliver on our purpose of enabling
our customers to innovate their voice
communications.

Despite the unexpected challenges of the global
pandemic, the company has overall performed
strongly with EBITDA and NPAT finishing at the
top end of guidance - $38.2 million and $11.95
million respectively. Pleasingly the key indicators
for the future growth of the business are very
strong – with 123% net retention rate of the top
10 customers, and 17% organic growth in phone
numbers – both of which drive the high margin
recurring business. Cash conversion in the
second half was very strong, allowing the
company to finish with net cash of $16.2 million
and additional $60.0 million available through
established facilities.

MNF Group is well placed to pursue its long-term
strategic aspirations of becoming the preferred
provider of cloud servicing communications
infrastructure, software and APIs in the Asia-
Pacific region. This will be achieved due to
experience of the leadership team, the financial
strength of the business, the demand for its
products and services from a high quality
customer base, its strong capabilities and the
track record of execution.

MNF Group’s purpose of “Enabling our
customers to innovate their voice communica-
tions” has never been more relatable than during
the COVID-19 pandemic. Our customers have
undergone unprecedented growth as they have
powered the communications revolution through
collaboration, unified communications and
communications platform services. MNF was a
key enabler of consumer, business, enterprise
and governments in Australia and New
Zealand as the countries rapidly pivoted to
working from home during lockdowns. The clear
sense of urgency and purpose united our global
team around the common cause, going above
and beyond our regular routines to keep global
voice services operating in a very challenging
and dynamic environment.

Our key strategic priorities remain:

• Market Share Growth – striving for 20% YoY
organic growth in phone numbers on network
across our domestic networks.

• Global Growth – expanding our footprint

across the Asia-Pacific region with Singapore
a key focus for this financial year.

• Trusted Partnerships – with key wholesale
customers where we integrate deeply with
their business acknowledging that their
success will be our success.

• Software & API – continuing to invest in
resilience, scale and automation, across
everything we do.

The goals we seek are to build a diversified,
long-term high margin business with over 80%
recurring revenues, and to become the preferred
provider of cloud servicing communications infra-
structure, software and APIs across Asia-Pacific.

Message from our Chairman

Board Appointment

Ms Gail Pemberton
Non-Executive Director

In FY21 we are pleased to welcome a new Board
member with the appointment of Gail
Pemberton AO as a Non-Executive Director
effective 1 September 2020.

Prior to pursuing a Non-Executive Director career
in 2008, Gail amassed over 35 years’ experience
in the financial services industry in management
and leadership roles at both Macquarie Bank and
BNP Paribas Securities Services in Australia and
the United Kingdom.

She has extensive experience as a Director of
both ASX listed and global companies and has
participated in several IPOs, numerous
acquisitions and divestments and capital raisings.
Gail’s current Board roles include Non-Executive
Director of Eclipx (ASX: ECX), the Sydney Metro,
Land Services WA and Chair of Prospa (ASX:
PGL).

Gail was awarded the Order of Australia (AO)
in the Australia Day Honours list 2018 for dis-
tinguished service to the finance and banking
industry through a range of roles, as an
advocate for technology, and as a mentor to
women. She was recognised by the Federal
Government with the award of a Centenary
Medal in 2002 for outstanding services to
Australian business. She was also voted CIO of
the Year in 1999 and CIO of the Decade in 2000.

Terry Cuthbertson
Chairman

NRR (Net Retention Rate) is H2/FY20 revenue compared to H2/FY19 revenue of MNF Group’s top 10
customers (excluding those that are minutes trading only). These customers combined represent approximately
20% of FY20 full year revenue.

Message from our CEO

Message from
our CEO

Rene Sugo
Chief Executive
Officer

Dear Fellow Shareholders,

Against the backdrop of what a tumultuous year
2020 has been thus far, MNF Group has
performed with resilience and stability. The
company has found itself to be a beneficiary
of the unfortunate global COVID-19 pandemic.
Businesses and consumers alike have found
themselves changing in so many ways so
quickly, and voice communications has proven to
be the one key ingredient that has allowed it all
to happen. MNF Group’s long-term purpose of
“enabling our customers to innovate their voice
communications” has placed us front and centre
in this global structural change.

Strong Bottom Line Growth
MNF Group has delivered another record result
at the top end of the guidance range EBITDA
rose to $38.2 million, up 26% on prior year, and
NPAT rose to $11.95 million. This year saw
several large one-off expenses relating to
restructuring and integrating the Telcoinabox
business, however underlying NPAT-A grew to
$16.6 million. This led to an underlying EPS-A
rise to 20.7 cents per share. The Company
finished the year in a strong cash position with
$46.1 million in cash, and retains a finance
facility for $60 million of which $30 million is
undrawn.

Managing through the COVID-19 pandemic
I am extremely proud of the way the Company
has handled the COVID-19 pandemic crisis this
year, and in particular the leadership of my
executive team, and all of our companies
dedicated employees.

The entire global work force was pivoted to
“work-from-home” very rapidly and before the
mandated Government lockdowns in various
countries. This was made possible due to exist-
ing Business Continuity Plans, but also with hard
work by the leadership and the global IT team.
Overall the employees were grateful of the speed
of action of the business, and overall employee
engagement, morale and productivity has been
maintained at an all-time high.

The COVID-19 pandemic also had a major
impact on our customers and our network, and
during March we saw a three-fold increase in
the volume of minutes traversing our network.
This caused considerable strain on parts of the
network with some geographic regions
experiencing local congestion. The MNF Group
team worked relentlessly internally and with
our carrier partners to find real-time solutions
as issues emerged – such as redirecting traffic
through alternative cities and even alternative
countries. This allowed us to ensure the highest
level of quality and connectivity was maintained
at the height of the traffic surge.

As the world has settled down into operating
in the “new normal” it has become clear that
the world has undergone rapid and fundamen-
tal structural changes in the way it operates.
Some clear emerging trends will be with us for
the long-term, such as working from home and
online collaboration. These changes are over-
all beneficial to MNF Group’s core business as
it drives demand for our cloud enabled phone
numbers and also the associated call minutes
usage. Our network is still in some cases experi-
encing almost double the pre-pandemic volumes.
However, all parts of the network are now oper-
ating once again at optimal levels. MNF Group
is well positioned to capitalise on further rapid
growth from our existing and new customers for
the remainder of the pandemic, and during the
post-pandemic recovery.

Some other impacts of the COVID-19
pandemic have not been as beneficial for MNF
Group revenues – with small businesses delaying
purchasing decisions, increased adoption of
online collaboration tools driving down the vol-
ume of usage-based audio conferencing, and
the lack of international travel decimating mobile
roaming traffic. These impacts provided a
headwind in Q4 of FY20 and will continue to do
so into FY21. Some of these changes may be
permanent as user behaviours have undergone
permanent changes, while some other changes
may be reversed with the easing of travel
restrictions and economic recovery.

UCaaS - Unified Communications as a Service

CPaaS - Communication Platform as a Service

Message from our CEO

With so much change happening still today, it
will be difficult to predict how each and every
product and segment in MNF performs in FY21.
As businesses and consumers adjust to the new
post-pandemic life, some products and services
in the MNF portfolio may decline.

Overall however MNF is well placed looking
forward into a post COVID-19 pandemic future.
The still nascent industry segments of UCaaS,
CPaaS and collaboration will be here to stay,
stronger than ever now, and these segments will
need more phone numbers and more
connectivity than ever before.

Our cash position is strong with strong EBITDA
performance and excellent cash conversion. Our
bad debts due to COVID-19 have been low
to-date, and reassuringly we are adequately
provisioned going into the new financial year.
MNF has itself not been the recipient of any
Australian Government assistance as our overall
performance has been consistent with pre-pan-
demic levels.

In summary, I consider MNF Group a “net-benefi-
ciary” of the longer term technological and social
changes that will survive COVID-19. Our
long-term post COVID-19 pandemic future is
looking positive.

Strategy Update
Our company purpose is to help our customers
innovate their voice communications. It is
unusual to see situations where an entire
company has felt so compelled and excited by
its purpose. Our four pillar growth strategy is on
track for success in the “new normal” of unified
communications, cloud communications
platforms and online collaboration:

• Market Share Growth – the Company

finished the financial year with 4.45 million
phone numbers – an organic growth of 17%
on the prior year – representing approximate-
ly 5% of the Australian market. This market
share growth was achieved predominantly
from porting phone numbers to our network
on behalf of our wholesale partners in
Australia and New Zealand. We expect this
trend to continue and even accelerate in the
“new normal” as more enterprises and
Governments hasten their cloud adoption
strategies to support remote workers and
resilient location independent voice
communications.

• Global Growth – the planned expansion into
Singapore has faced some delays due to
local carriers delaying their test windows for
our network, however we largely remain on
track to launch our Singapore network later
this year. Buoyed by the strong demand we
are experiencing in Australia and New
Zealand for our products we are excited by
the future of our Singapore business.

• Trusted Partner – one of our key strategies
is to build long-term partnerships with our
customers, ensuring we not only sell them
our products, but we continue to develop
new capabilities to help them with their own
growth. This fundamentally recognises that
our customers’ success is ultimately our suc-
cess. This growth pillar was never more criti-
cal than during the height of the COVID-19
pandemic where our team worked closely
with many key partners to deliver
unprecedented traffic loads and capabilities
literally over-night to meet urgent
communications needs.

• Software & API – our final strategy is to

continue to invest in our software teams and
software platforms. Our target is to deliver
even higher levels of resilience, scalability
and automation, making us the most trusted
partner for our customers globally.

The strategic outcomes we are aiming to achieve
at MNF Group are a globally diversified and
long-term high margin business; and to be the
preferred provider of cloud-based voice
communications infrastructure and software in
the Asia-Pacific market.

Thank-you
On behalf of my fellow directors, I would like to
thank our executive team, and all our employees
for achieving what is a great result in the most
difficult and unusual year. Without the hard work
and dedication of the highly capable team here
at MNF Group we would not be in the strong and
healthy position we find ourselves today.

I also thank all our shareholders for their
continued support, and are all looking forward to
the future with MNF Group.

Rene Sugo
CEO and Executive Director

Market
Overview

Use case: Software

Powering the UCaaS
and CPaaS revolution
The global market for cloud communications software is
estimated at over $70 Billion.* This includes Unified
Communications (UCaaS), video conferencing software,
Communication Platforms (CPaaS), Contact Centre software
(CCaaS) and emerging technologies such as telehealth.

Value proposition for SaaS

Capabilities provided

Our capabilities bridge the gap between the worlds of
software and telecom. By working with us, global
software vendors can scale beyond their home market
and provide fully compliant, localised services in
Australia and New Zealand.

Using our platform, software vendors can allocate
or port phone numbers, provision digital lines (SIP
Trunks) and route calls or messages in and out of
connected regions. These carrier features are at the
heart of all communication and collaboration software.

We handle the complexity of the telecom world – like
regulatory compliance, number porting, toll fraud
monitoring, caller identity pass-through and HD Voice
support – so our customers can focus on building
software.

*Source: Gartner, IDC

Use case: Apps & digital services

Use case: Global carriers

Enabling communication
with a tap or click

Apps and digital services provide an ever-expanding universe
of cloud communication use cases. High profile examples
include ride-sharing apps, online classifieds, virtual answering
services and advertising platforms.

Trusted by:

Value proposition for
Apps & Digital services

To achieve true scale, apps and digital
services must enable any-to-any
communication between a global user
base. This means supporting local phone
and mobile numbers, routing calls and
messages via telecom networks, and
connecting calls regardless of the end
user’s device or location.

By working with us, apps and digital
services can deliver these carrier-level
features without the need to build carrier
infrastructure.

Capabilities provided

We manage the complexities of ANZ
carrier interconnect, infrastructure
scaling, call termination, fraud mitigation
and local compliance.

Apps and digital service providers can
integrate with us directly via API, or
through a CPaaS vendor, who in turn may
rely upon our underlying platform

Managing
long-distance
calling and toll fraud

As legacy networks begin digital
transformation, global carriers are
looking for future-proof ways to
deliver international communication.

Value proposition for Global Carriers

By working with us, global carriers can deliver
long-distance calls and messages without the need for
worldwide infrastructure or complex carrier agreements.
We take care of international call and SMS routing, quality
and cost optimization, and actively monitor for toll fraud and
SPAM.

Capabilities we provide

Our managed international voice service can deliver calls
in 90+ global destinations, using over 14000 routing lines,
with pricing optimised automatically every 55 seconds.

Our fraud management service helps to detect irregular
traffic, typically from hijacked phone numbers and hacked
phone systems or IoT devices. Rapid fraud detection helps
protect both end-customers and service providers and
removes a key funding source for organised crime.

Trusted by:

Use case: Resellers & MVNOs

Helping service providers
add new revenue
Resellers and MVNOs rely on incumbent networks for their
voice, data and mobile services. But incumbents often come
with technical limits and red tape that stifle innovation.

Value proposition for Telecom providers

Capabilities we deliver

By working with us, service providers can sell
modern telecom products to fit the needs of their
consumer, small business or enterprise market.

Instead of having to build products and
back-office systems from scratch, we provide a
turnkey solution that can be easily branded and
launched.

We aggregate a suite of ready-to-sell products,
including mobile (MVNO), internet (NBN),
hosted phone services, VoIP and number
porting. Service providers can then resell these
products using their own branding and their
preferred go-to-market model.

Our solution also includes APIs and software for
telecom billing, customer support and service
management. We are the trusted partner for
hundreds of service providers in Australia.

Trusted by:

Regions we serve

Australia / New Zealand

The MNF Group serves Global Wholesale, Domestic Wholesale
and Direct customers in Australia and New Zealand.

As a key regional partner for UCaaS, CPaaS and Collaboration
providers, we are growing rapidly alongside these disruptive
technologies.

Across Australia and New Zealand, we hold approximately 3% of
the total phone number market – giving us ample room for growth.

Importantly, our growth is fuelled by structural change in the
communications market. Especially the surge in demand for remote
working solutions, plus long-term technology tailwinds, such as the
ISDN switch-off and migration to NBN and UFB.

Singapore

The Singapore voice market is ripe for disruption. 97% of phone
numbers are held by just three carriers, 85% by the dominant
incumbent. These carriers, relying upon legacy voice networks,
cannot support the needs of cloud communication providers. Yet
demand for cloud tools has never been higher.

Entering the Singapore market via the acquisition of Super Internet
Group in 2018, we are executing on our international expansion
strategy. We have built a core voice network, hold FBO (carrier)
accreditation, established a pipeline of customer opportunities, and
plan to launch in late 2020.

Our vision is to expand our Wholesale business into Singapore.
Our value proposition is to take care of technical and regulatory
roadblocks, opening this market for UCaaS, CPaaS and
Collaboration providers.

True to our disruptive pedigree, ours will be the first fixed voice
network to launch in Singapore for almost two decades. We look
forward to the opportunities our Singapore launch will unlock.

COVID-19

The COVID-19 pandemic

The COVID-19 pandemic has demonstrated the critical importance
of communication services in our everyday lives.

MNF has been a net beneficiary of the global shift to remote working.
Although mindful of short-term headwinds, we have a strong balance
sheet and are well positioned for the post-COVID recovery.

People & culture
• Health and safety of staff
remains #1 priority

• Continuity plan and transition

of global business to work from
home successfully executed

• Engagement, morale and

performance at an all time high

Structural tailwinds
• COVID-19 accelerated growth
of strategic UCaaS, CPaaS
and collaboration customers,
driving strong H2 results
Long term structural changes
will benefit MNF in the future
however the environment is
still dynamic

•

Structural headwinds

A shift from audio conferencing
to online collaboration is creating
headwinds in our Direct segment,
however this benefits our
Wholesale segment

Government assistance
• Received zero Government
assistance due to COVID-19
• Overall result is 100% organic

performance

Short term tailwinds (in FY20)

Short term headwinds (into FY21)

Variable revenues in all segments
spiked in March and April:
• Record increases in calling
and conferencing traffic
volume and duration during
initial shutdown

• Most variable revenue streams
had returned to pre-COVID
levels by June

Some revenue streams have been
negatively impacted with a
recovery expected post-COVID:
•

International mobile roaming
decimated due to travel bans

• Small Business sales and

decision making slowing due
to economic uncertainty

Long term COVID structural shifts & trends

Aussies working
from home

4.3M

During COVID-19*

Visits to
workplaces

30%

Vs Pre COVID-19*

SEP
2019

OCT

2019

NOV
2019

DEC
2019

JAN
2020

FEB
2020

MAR

2020

APR
2020

MAY
2020

JUN
2020

JUL
2020

Collaboration

UCaaS

CPaaS

MNF Customer Usage Data (% of baseline) correct as at 18 Aug 2020

Microsoft Teams
meeting minutes

200%

In April Vs March*

Zoom meeting
minutes daily

200m

In March Vs
Dec 19*

Ring Central
Subscriptions
Revenue

32%

Q2 2020 YoY*

E-commerce
online spending

$2.9bn

Vs Pre COVID-19*

*Source: Roy Morgan, Forbes, Microsoft.com, blog.zoom.us, Ring Central, abs.gov.au

Business
Overview

Commentary

Leadership team

Jon Cleaver

Chief Executive
– Wholesale

Andrew Tierney

Executive General
Manager – Global

The Wholesale Business Unit spans
our Domestic Wholesale and Global
Wholesale segments, responsible for
commercialisation of our domestic
networks in Australia, New Zealand,
Singapore, our global collaboration
“As a Service” providers and interna-
tional voice trading under the TNZI
brand.

recurring revenue streams. Symbio
domestic and global drove efficiencies
through automation to support continued
growth projections as the world adopted
these new technologies. Symbio New
Zealand recorded continued success and
further supported our international expan-
sion strategy and our excitement on the
impending Singapore deployment.

Whilst the year will be remembered as
one of unprecedented demand, accel-
eration and adoption of collaboration
platforms due to COVID-19, it is all the
work that was done in prior years and
the first eight months of FY20 which
set MNF Group up for success this
year.

The year began with successfully
completing the acquisition of Telcoina-
box and transitioning the legacy PSTN
businesses to the new generation SIP.
The combination of a highly skilled
Telcoinabox team, along with the
proven MNF Group team, once again
showed how we can successfully
absorb acquisitions whilst remain-
ing focussed and executing on our
strategy.

The Global TNZI business continued
to focus on removing the dependence
on usage products and introduce

Given our well-solidified FY20 strategy
we were extremely well positioned when
the COVID-19 pandemic hit. For us at
MNF it was about the acceleration of our
plans, both in capacity and automation.
We mobilised our entire workforce to work
from home - including operations - without
any customer impact, expanded our net-
work in a matter of weeks to cater for two
years of projected growth we received in
a single day and through strong, estab-
lished industry relationships kept people
connected when it mattered.

While what the new normal looks like may
not yet be established, one thing is for
certain – MNF Group’s strategy remains
both relevant and well-chosen. Combined
with our diverse, high skilled workforce,
we are set to maximise growth in both our
domestic and Global Wholesale Busi-
nesses.

The TNZI brand is part of the Global
Wholesale segment and provides
global connectivity for international
voice minutes across the MNF Group
and continues to be seen as a leader
in international voice trading and has
shown very strong performance in
FY20.

The COVID-19 pandemic delivered
an initial surge in international traffic,
however as things have settled down
it is currently presenting challenges in
the form of a decline in inter-country
voice traffic due to travel restrictions
reducing international roaming. We
do expect a solid recovery to pre-

COVID-19 levels once the world opens
up international travel, especially between
Australia, New Zealand and the Pacific.

Consistent with MNF’s strategy we have
connected many new global customers
in the CPaaS, UCaaS and collaboration
space through the TNZI brand over the
past 12 months. These segments have
not seen the same declines as tradi-
tional telco traffic due to COVID-19 and
continue to perform strongly. This has
been our strategy for the last 18 months
and the recent pandemic has validated
the strength of implementing that strategy,
albeit making us move a little sooner than
we anticipated.

Commentary

Iain Falshaw

Chief Executive – Direct

During the year, Express Virtual Meet-
ings (EVM) successfully consolidated its
many brands into a single coherent brand.
Whilst the conferencing market contin-
ues to be highly competitive, EVM have
performed above expectations, helped in
part by the demand related to COVID-19
along with a growing focus on managed
conferencing business.

This year, we again improved our NPS
score for Direct to a new high of +48, an
increase of +5 points from the previous
year. Similarly, we maintained our strong
customer service performance with 94%
of enquiries being resolved on the first
call. This represents a third year of im-
provement in our customers’ experience
feedback across these key metrics de-
spite the challenges faced with COVID-19
in the latter part of the year. This reflects
positively on our staff’s engagement and
value of our continued investment in
improving customer experience.

The Direct Business Unit includes
all the commercial and operational
elements of MNF Group’s Consumer,
Small Business, Enterprise & Govern-
ment segments, as well as Express
Virtual Meetings, our dedicated audio
and video conferencing business.
Bringing together the business units in
MNF Group that sell direct to the cus-
tomer enables MNF Group to uncover
synergies across these business units
and continue to focus on delivering a
strong customer experience.

Enterprise & Government have contin-
ued to build on the relationship estab-
lished with Cisco and have a growing
base of Webex Calling customers.
Furthermore, the impact of COVID-19
in the latter part of the year has further
supported our growing focus in the
UCaaS market with continued growth
and several good opportunities for
Webex and MS Teams solutions.

Small Business has continued to grow
during the year, despite the impact on
small business customers as a result
of the bushfires and more recently
COVID-19. The re-establishment of
the Connexus brand within the SMB
market has been very positive and is
beginning to show strong results.

In the Consumer space, Pennytel
has been highly competitive and has
continued to grow its base impres-
sively. Once again Pennytel’s custom-
er-focused approach has resonated
well with consumers and the product
continues to be rated highly against its
competitors.

John Boesen

Chief Technology Officer

Ritsa Hime

Chief Product Officer

The Technology Business Unit has
continued our transformation in FY20,
moving supporting workloads into the
cloud, reducing our operating and
carbon footprints and enabling us
to scale these services in a matter
of days compared with the previous
baseline of months.

Our cloud adoption has also posi-
tioned our team to deploy new capa-
bilities faster, reducing the physical
constraints of infrastructure-based
deployment from 6+ months to just
days, while also enabling our software
teams to deploy code faster.

Our networks team completed the
final stages of our Singapore Network
build in FY20 Q3 and our software
team continues to develop the re-
quired regulatory and market specific
features to support a Singapore go
live in FY21.

Our networks division, in parallel, are also
in the final stages of retiring our legacy
voice network as we transition customers
to our new next generation voice network,
capable of supporting voice loads 50x
larger than what we can currently support.

The biggest challenge for the entire
Technology team occurred in FY20 Q4
as a result of COVID-19, generating
unprecedented increases in demand for
our services as well as a need to shift to
a work from home model. Our IT team
completed a work from home transition for
all employees in under a week, enabling
all business units to continue under a new
normal with our Networks team fast track-
ing additional capacity builds at our edge
locations to address increased demand.

The Technology team had a very busy
FY20 but remain focused and energised
on closing out Singapore in FY21.

In November 2019, the Products
Business Unit was formed to lead
the product development and deliv-
ery functions for the Group and take
responsibility for the overall product
experience. This functional centrali-
sation encompasses responsibilities
of Product Management, Delivery,
Customer Experience and Marketing
across all channels.

In the last nine months, our teams
have been actively engaging with
stakeholders both internally and
externally to develop the MNF Group’s
product strategy and roadmap. At the
forefront of our product strategy and
roadmap is the importance we have
placed on understanding the needs
and expectations of our customers.
Coupled with our insights in consumer
behaviours shifts in their use of ap-

plications and technologies both pre and
post the COVID-19 pandemic, regulatory
and compliance changes, market trends
in communications services and our
competitors, to deliver a comprehensive
product roadmap.

Our teams are highly motivated and
passionate to deliver quality products and
services to our customers. Our success is
hinged on our use of a disciplined frame-
work to project delivery, product develop-
ment and the life-cycle management of
existing products and services.

In the year ahead, our teams will be heav-
ily immersed in the delivery and launch of
our strategic Singapore network as well
as other key initiatives to improve auto-
mation and enhance digital experience for
our customers.

The People Experience team has been
instrumental in helping the Company
navigate through the COVID-19 pandem-
ic, providing extensive support in imple-
menting the business continuity plan and
implementing the pivot for all employees
to work from home. The change was per-
formed quickly and efficiently, and overall
staff engagement and productivity has
improved during the period. The People
Experience team continue to monitor the
situation closely and provide guidance to
the Company on keeping our team safe
and productive during these uncertain
times.

Compliance continues to be a priority
area to implement changes and
improvements as required. We seek to
instil a continuous improvement mindset
in everything we do, aimed at developing
operational efficiencies for our team and
colleagues.

Commentary

Chris Last

Chief Financial Officer

Helen Fraser

General Counsel

The Finance Business Unit enables
the business in fulfilling its short and
long-term growth strategies. We
provide the underlying business part-
nering to assist the executive team
in their decision-making processes.
In addition to the core finance teams,
the People Experience function, also
resides within the Finance Business
Unit.

The Finance Business Unit has been
integral in the successful integration
of the Telcoinabox business during
the year, consolidating the finance
function as well as the accounting and
reporting systems into MNF Group’s
common platform.

During the year the finance team has
been focussed on capital manage-
ment and strengthening the balance
sheet. A prime focus this year has
been on debtor’s management, an
area that has been brought into the
focus due to the COVID-19 pandemic.
Together with tight processes and a
dedicated team the Company has
been able to navigate the pandemic
and still improve the overall debtors
position relative to last financial year.

The Legal & Compliance team
provides legal and compliance related
support to all areas of the MNF Group
business globally, as well as the
Board of Directors, and is aimed at
enabling the Group to deliver on its
strategy. We are valued for the
commercially astute advice we give in
line with our company value of
delivering excellence and for our
collaborative and solution-focused
approach.

We partner with the business on
product and business development
initiatives where customer experience
is kept front of mind. We have been
instrumental in the Singapore project,
particularly in relation to compliance
and contract elements.

Corporate Social Responsibility

In FY20 MNF continued its commitment to giving back within the
community in alignment with one of our core values ‘We Care’

MNF Group company values

Honest & Fair

Deliver Excellence

We care

Be brave

Collaborate

Charity support at MNF

We are proud to continue our support for Télécoms
Sans Frontières who provide support for critical
projects during humanitarian crises including recently
in Beirut. We have again supported the Brain Cancer
Collective through sponsorship of the Bike Ride for
Brain Cancer.

This year we launched our payroll giving platform
Good2Give, which has been a resounding success.
We focused on appeals to help charities supporting
Bushfire impacted communities and another to benefit
charities supporting those struggling through the
COVID-19 pandemic.

Pre-tax employee donations plus matched
contributions and additional corporate donations from
the Group have made a substantial difference to:

• The Red Cross
• Foodbank
• WIRES
• NSW Rural Fire Service
• St Vincent de Paul Society NSW

•
Lifeline
• OzHarvest
• KiwiHarvest

Volunteering at MNF

5 events

| 82 employees participated

| 4 charities supported

Ronald McDonald House

| Oz Harvest

| Landcare

| Guide Dogs Victoria

Landcare
We teamed up with Landcare to take part in their
‘Clean Up Sydney Harbour’ initiative.

Ronald McDonald House
Our team spent an afternoon at Ronald McDonald
house in Westmead.

Our team worked hard to remove rubbish along the
coastal land and waters of Bradleys Head (including by
kayak) and worked on restoration of the coastal area.

Duties ranged from cooking up an amazing Mexican
feast, arts and crafts with the children, face painting
and a game of handball.

Educational context was provided on native plants
and land management around Sydney Harbour,
ensuring a meaningful and memorable contribution
was made by all.

The kids were able to smile and forget just for a
moment what they are going through, however the
impact on our employees that helped create those
smiles is unforgettable.

Diversity & Inclusion (D&I)

People Experience (PX)

MNF Group’s D&I committee guides and assists ongoing efforts towards
building and maintaining a diverse and inclusive culture.

People Experience at MNF Group support our global employees and
their Leaders through the full employee lifecycle

Core of pillars of D&I

Culture

| Gender

Indigenous

| Disability & Accessibility

Family & work flexibility

| LGBTIQ+

Generalist Business Partnering

| Learning & Development

| Talent Acquisition

Core centres of excellence

We pride ourselves on holding a range of internal events that brings our employees together and celebrates our
diverse backgrounds. Whether it’s encouraging our employees to bring in food from their cultural backgrounds or
holding interactive panels discussing unconscious bias and flexible working, we strive to foster an environment of
belonging and empowerment in everything we do.

International Women’s Day
Panel Discussion

Mardi Gras
Rainbow Bake sale

Chinese New Year
Fortune cookies

Taste of Harmony
Cultural buffet

STEM
Women and Girls in Science

Me n
5

Leave
Applications

Parental leave
Launched: 1 July 2019

This FY we launched our Paid Parental
Leave, offering 12 weeks’ primary carers
leave and 2 weeks partner/secondary carer
leave at 100% of base pay.

We are proud to report that the
uptake of this benefit by fathers
was 6 times the average.*

We have received feedback from employees
that the impact of this benefit on them and
their families has been resoundingly positive.

11
m en

W o

Talent acquisition
Updates: Ongoing

Employee share plan
Launched: Jan 2020

Building on a solid foundation, several initiatives were
completed this year to improve talent acquisition.

• Framework and risk controls reviewed
•
Job vacancy program integrated
• Employee Referral and Graduate programs

reviewed and relaunched

• Application Tracking System introduced
• Careers website updates

Additional projects to enhance our employer brand will
occur in FY21, including defining our Employee Value
Proposition and improving our onboarding experience.

To thank and recognise individuals for their ongoing
contribution to the success and growth of MNF Group,
employees were invited to participate in the Employee
Share Plan.

$1000 of shares were issued to each employee who
opted to be part of the scheme, with a 96% uptake.

*Source: ABS

Financial Report

For the year ended 30 June 2020

Launchpad
Launched: Dec 2019

Introducing Launchpad, our intranet hub for all employee communications,
recognition, rewards and benefits. It has now become the go to site for employee
communications and resources and comprises:

Our Reward & Recognition (R&R) platform
incorporating the MNF Wall of Stars, access to details of each of our key
employee benefits including a wide range of significant employee discounts and
is used to manage our global annual R&R program.

Our company Newsfeed
Ensures key information and updates can be shared/communicated either
globally or segmented as required. It has proved to be an excellent tool whilst
we’ve been managing our COVID-19 response in ensuring we can get
communications out quickly and provide one location for all key resources.

An intranet hub
for all key PX-related information and a Health & Wellbeing Centre

During the COVID-19 pandemic, Launchpad has proved to be invaluable to provide
a single source of timely and regular communications with employees.

MNF Flex
Launched: Start of FY21

Introducing MNF Flex, our flexible work policy. At MNF Group we are
proud of the diversity of our people and recognise that everyone’s
flexible work requirements will be unique, one size does not fit all.

That’s why we took a thoughtful, and consultative approach to
flexibility. By aligning the policy closely with our culture, we have
created a flexibility policy that will stand the test of time.

Subject to COVID-19 restrictions, we’ll be rolling out these flexible
options as the return to workplace program commences.

Location

Time

Leave

MNF Group Limited
ABN 37 118 699 853

Choice

26
26

Contents

Directors’ report

Directors’ report - audited remuneration 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

1. Corporate information

2. Significant accounting policies

3. Operating segments

4. Revenue and expenses

Income and deferred tax

6. Operating cash flows reconciliation

7. Trade and other receivables

8. Property, plant and equipment

9. Trade and other payables

10. Loans and borrowings

11. Financial instruments

12. Customer deposits

13. Provisions

14. Right-of-use asset

15. Lease liability

16.

Issued capital

17. Staff Share-based payments

18. Restructure costs

19. Commitments and contingencies

20. Events after reporting date

21. Auditor’s remuneration

22. Director and executive disclosures

23. Controlled entities

24. Entities over which control has been lost during the financial year

25. Goodwill and other intangibles

26.

Impairment testing

27. Earnings per share

28. Dividends paid and proposed

29. Parent entity

30. Financial risk management objectives and policies

31. Company details

Directors’ declaration

Auditor’s independence declaration

Independent auditor’s report

ASX additional information

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 2020.

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.

Mr Terry Cuthbertson
Chairman, Non-Executive
Director

Special responsibilities
Chair of the Risk Committee,
Member of the Audit and Nomina-
tion Committees

Interest in:

855,906

Options

100,000

Mr Andy Fung
Non-Executive Director

Mr Rene Sugo
Chief Executive Officer and
Executive Director

Special responsibilities
Member of the Audit, Risk
and Nomination Committees

Special responsibilities
Member of the Risk, Remuneration
and Nomination Committees

Interest in:

Options

13,625,802

100,000

12,034,214

150,000

Qualifications
Bachelor of Business, qualified as a
Chartered Accountant in Australia

Qualifications
Bachelor of Engineering, Master of
Commerce, MAICD

Qualifications
Bachelor of Engineering (Hons),
GAICD

Experience and expertise
Appointed as a Non-Executive
Director in March 2006 and has
been the Group Chairman since
March 2006.

Mr Cuthbertson was previously a
partner of KPMG and has extensive
corporate finance expertise and
knowledge.

Directorships of listed entities
(last 3 years)
Chairman of Austpac Resources
N.L. from 2004
(Director from 2001);
Chairman of South American Iron &
Steel Corporation Ltd from 2009;
Chairman of Malachite Resources
Ltd from 2013 (Director from 2012);
Interim Chairman of Mint Payments
Ltd from January 2020;
Chairman of Australian Whisky
Holdings Ltd from 2003
(resigned on 20 May 2019);
Director of Isentric Ltd from 2010
(resigned on 31 May 2019).

Experience and expertise
Appointed as Non-Executive
Director in March 2012.

Experience and expertise
Appointed as CEO and 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 tele-
communications industry experi-
ence 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

Mr Sugo is a co-founder of MNF
Group Limited. He is a strong
industry advocate, and has been a
director of both the Australian Com-
munications Alliance and the INMS
(Industry Number Management
Services) since 2015.

Mr Sugo sits on various industry
committees locally and overseas,
regularly contributing articles and
opinions on issues affecting the in-
dustry, such as the NBN, regulatory
policy and innovation.

Mr Sugo started his career at
the CSIRO. 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

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities
Directors’ Report

Directors’ Report

Mr Michael Boorne
Non-Executive Director

Mr David Stewart
Non-Executive Director

Ms Catherine Ly
Company Secretary

Special responsibilities
Chair of the Audit Committee

Special responsibilities
Chair of the Remuneration and
Nomination Committees

Qualifications
Bachelor of Business and
Certified Practising Accountant

Interest in:

384,605

Options

100,000

Interest in:

200,000

Options

Qualifications
Diploma in Electronics Engineering

Qualifications
GAICD

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 follow-
ing the expansion of the Group.

Experience and expertise
Appointed as Non-Executive
Director in December 2006.

Experience and expertise
Appointed as Non-Executive
Director on 13 August 2019.

Mr Boorne is a successful
entrepreneur with extensive
experience in combining technical
expertise with commercial and
corporate experience. He has
founded start-up businesses Sprit
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

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
became Managing Director of Net-
comm Limited in 1997, remaining at
the helm of the Company until
December 2016. A year later he
was appointed as a Non-Executive
Director of NetComm Wireless,
a position he held until June 30,
2019. Mr Stewart also joined the
board of Lockbox Technologies in
early 2018 until July 2020.

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).

Board and Committees Meetings
From 1 July 2019 to 30 June 2020, the directors held 15 board meetings, 2 audit committee meetings and 1
remuneration meeting. Each director’s attendance at those meetings is set out in the following table:

Directors

Mr. Terry Cuthbertson
(Board Chairman)

Mr. Michael Boorne
(Audit Committee Chair)

Mr. Andy Fung

Mr. David Stewart
(Remuneration Committee Chair)

Mr. Rene Sugo

Board

Audit

Remuneration

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

During financial year, Mr David Stewart (Chair), Mr Michael Boorne and Mr Rene Sugo are the members of
Remuneration Committee. Mr Andy Fung attended by invitation. In May 2020, a new Nomination Committee and a
new Risk Committee were formed. No meetings were held during the financial year.

Principal activities and significant changes in nature of activities
The principal activity of the MNF Group is providing software and services for voice communication.

The overall nature of the business has not changed during the financial year.

In the financial year the MNF Group derived recurring and variable revenue from the sale of its software and
services in Australia, New Zealand and internationally.

Business segments
Wholesale

The Wholesale business unit provides voice and
communications capabilities including phone numbers,
voice carriage services and telco cloud services.

Domestic Wholesale customers are predominantly
Retail Service Providers (RSPs), Managed Services
Providers (MSPs) and IT companies in Australia or
New Zealand. Domestic Wholesale services are
typically sold through subsidiary brands Symbio
Networks, iBoss and Telcoinabox.

Global Wholesale customers are predominantly
international UCaaS, CPaaS and CCaaS vendors,
software and app developers and global telecom
providers. Global Wholesale services are typically sold
through Symbio Networks and TNZI.

Direct

The Direct business unit provides mobile, conferencing
and collaboration services directly to residential, small
business, enterprise and Government customers,
predominantly in Australia.

Enterprise and Government customers are served
through the MNF Enterprise brand in Australia and
Supernet in Singapore. Small business customers are
served by Connexus and Express Virtual Meetings,
while residential customers are served by Pennytel and
MyNetFone.

Operating Result
Excluding costs associated with acquisitions, earnings before net interest, tax expense, depreciation and
amortisation expense (EBITDA) increased by 40.5% to $38.2m, with net profit after tax (NPAT) increasing by
20.2%* to $11.9m, compared to the prior year.

The total dividend for the full year is 6.1 cents per share (fully franked), with the Company declaring a final
dividend of 3.6 cents per share for the second half of the 2020 financial year. The full year dividend payments
represent 41% of the 2020 full year EPS.

*Restated based on a correction of deferred tax made to the 30 June 2019 financial year. See Note 5 of the consolidated finan-
cial statements for details.

Directors’ Report

MNF Group performance at a glance

Revenue $230.9m

Group recurring margin increase $11.4m

300

250

200

M
$

150

100

161.2

191.8

220.7

215.6

230.9

77.2

100.4

104.0

117.5

118.9

84.0

91.4

116.7

98.1

112.0

FY16 FY17 FY18 FY19 FY20

H1 Revenue

H2 Revenue

M
$

120

100

48.6

58.6

69.0

82.5

96.4

36.7

34.2

31.9

38.5

29.5

19.1

26.7

30.5

48.3

59.7

FY16 FY17 FY18 FY19 FY20

Recurring margin

Variable margin

Margin $96.4m

Phone numbers 4.5m

M
$

120

100

48.6

58.6

69.0

82.5

96.4

51.4

26.2

31.9

34.9

46.7

22.4

26.7

34.1

35.8

45.0

FY16 FY17 FY18 FY19 FY20

H1 Revenue

H2 Revenue

GM%

5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-

2.5

2.8

3.2

3.8

4.5

FY16 FY17 FY18 FY19 FY20

EBITDA $38.2m
# FY19 EBITDA has been adjusted to reflect the impact of AASB 16 Lease
accounting

Underlying NPAT-A $16.6m^

M
$

17.6

22.8

24.5

30.0#

38.2

9.5

13.5

12.9

19.0

21.3

8.1

9.3

11.6

11.0

16.9

FY16 FY17 FY18 FY19 FY20

EBITDA % Revenue

18%

16%

14%

12%

10%

M
$

20.0

15.0

10.0

5.0

10.7

14.3

14.1

14.1*

16.6

5.9

4.8

8.6

6.9

5.7

7.2

9.3

4.8

10.1

6.5

FY16 FY17 FY18 FY19 FY20

EPS 14.88 cents

Underlying EPS-A 20.7 cents^

s
t
n
e
c

25.00

20.00

15.00

10.00

5.00

13.45

17.32

16.25

13.56*

14.88

7.44

10.15

7.88

9.33

10.05

6.01

7.17

8.37

4.23

4.83

25.00

20.00

s
t
n
e
c

15.00

10.00

5.00

15.9

20.6

19.3

19.2*

20.7

12.1

9.7

12.2

8.8

12.7

7.1

8.5

9.6

6.5

8.5

FY16 FY17 FY18 FY19 FY20

^ Underlying NPAT-A & EPS-A exclude acquisition costs, amortisation of acquired customer contracts & acquired software and
tax effected restructure costs only
* Prior year restated based on a correction of deferred tax made to the 30 June 2019 financial year. See Note 5 of the consoli-
dated financial statements for details.

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 $13.9m (16.9%) on the prior year to a record $96.4m (2019: $82.5m). EBITDA of $38.2m was
up 40.5% on the prior year. Net profit after tax (NPAT) for the year was up at $11.9m (2019*: $9.9m) with Earnings
per share (EPS) increasing to 14.88 cents per share (2019*: 13.56 cents per share).

Year ended 30 June 2020

Year ended 30 June 2019

% change

Revenue

Gross profit

EBITDA

NPAT

EPS

$230.9m

$96.4m

$38.2m

$11.9m

$215.6m

$82.5m

$27.2m

$9.9m*

14.88 cents

13.56 cents*

7.1%

16.9%

40.5%

20.2%

9.7%

The current pandemic is creating greater demand for voice and collaboration technology as the working
environment evolves to a more remote working model. The Group has seen a small percentage of customers
struggle in these difficult times and assess each case individually to offer a suitable tailored plan to assist their
circumstance. The Group has ensured allowance for doubtful debts is updated to reflect the change in risk of
default since initial recognition, based on current economic environment.

Reconciliation of NPAT to EBITDA

NPAT

Add back:

Depreciation & Amortisation1

Income tax expense

Net interest

Costs related to acquisition

Discontinued data product

Restructuring costs

Non-cash share option costs

EBITDA

2020
$’000

2019
$’000

11,947

9,943*

16,117

4,703

2,769

1,300

1,377

$38,213

8,973

4,450*

1,744

1,168

500

420

27,198

1 Following the adoption of AASB 16 Leases, depreciation and interest in the current period include amounts accounted for under
the new requirements. Prior period has not been restated. Refer to Note 2 for further details.

* Financial year 2019 numbers have been restated based on a correction of deferred tax made to the 30 June 2019 financial
year. See Note 5 of the 2020 Financial Report.

Cash and debt
The cash balance as at 30 June 2020 was $46.1m (2019: $15.5m). Total debt as at 30 June 2020 is $30.0m
(2019: $55.6m).

During the year, the Group raised $52.1m ($49.7m net) by way of share placement of 10,410,000 shares at $5 per
share. This allowed the Group to repay $25.6m of debt. The Group retains its finance facilities totalling $60.0m
revolving credit facility, of which $30.0m is undrawn at 30 June 2020.

The Group’s balance sheet is well positioned to support future acquisitions with $46.1m in cash and $30.0m of
undrawn facilities.

Directors’ Report

Business outlook
The MNF Group operates with three solid independent segments – Domestic Wholesale, Global Wholesale and
Direct. 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 Group 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 Group grew
recurring revenues by 37% on prior year to $101.5m during the year, with corresponding recurring gross margins
growing 24% to $59.7m during the year (and 62% of overall margin is now off recurring sources).

300.0

250.0

200.0

M
$

150.0

100.0

50.0

0.0

161.2

192.2

220.2

215.6

230.9

129.4

135.8

134.3

155.6

175.8

26.9

36.6

44.4

79.8

101.5

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

41%

38%

54%

56%

61%

39%

46%

44%

59%

62%

FY16 FY17 FY18 FY19 FY20

Recurring revenue

Variable revenue

Recurring margin

Variable margin

MNF Group 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:

cease sale of legacy PSTN/ISDN services,

the NBN Roll out,

the UCaaS, CPaaS and CCaaS communications revolution.

The Company is well positioned to leverage all three tailwinds thanks to its network infrastructure, software assets
and customer relationships.

The COVID-19 Pandemic – Ongoing Business Operations
The Company’s key priorities are the health and safety of its people and the reliable continuity of business
operations, maintaining its high standard of service whilst continuing software development that underpins and
enables critical communications services across the globe.

The Company successfully pivoted all global employees into a working-from-home mode prior to it being
mandated by Governments in many jurisdictions. This was made possible due to pre-existing Business Continuity
Plans, as well as strong leadership from the executive and people experience teams. The Company has
implemented several initiatives to monitor the mental health and well-being of its staff globally. This has been
supplemented by regular staff surveys, manager interviews and deployment of additional training and resources to
support the broader team during what has been a challenging and stressful time. Overall the Company can report
that morale and productivity levels have been maintained at all time high levels for the duration of the pandemic
thus far.

The Company continues to monitor the COVID-19 pandemic closely and continues to provide advice to staff with
regards to ongoing safety and well-being. The corporate offices globally continue to operate only on skeleton
staff where necessary. The Company has conducted extensive return-to-workplace planning in preparation for
an eventual return to the office setting. This includes implementing best-practice policies to ensure the safety
of staff within the office environment for when they are required to return to the offices. The Company has
also accelerated the implementation of its global “MNF Flex” initiative allowing for long-term flexible working
arrangements to support employees globally past the pandemic crisis. MNF Group is confident it can continue
business operations to its usual high standard for the long term should the lock down restrictions continue for a
protracted period.

The COVID-19 Pandemic – Trading Update and Outlook
The COVID-19 pandemic has caused large amounts of economic and social disruption globally. Despite these
disruptions MNF Group has overall been a net beneficiary from the structural changes to the global economy
caused by the pandemic.

The COVID-19 pandemic created a greater demand for voice communications and collaboration technology as
work and school shifted to a work-from-home mode, and the demand for information and connectivity through
technology increased. The demands for voice communications have been from a very broad base of business,
enterprises and Governments, domestically and globally, and underscore the continued importance of real-time
high-quality voice communications to the global economy.

As a key provider of software and services for telecommunications and unified communication technologies, MNF
experienced strong demand for its core products from existing and new customers. Overall the Company has
been able to respond positively to all requests from customers to provide augmentation and additional services.
In order to move quickly, the Company had to divert resources from other projects as well as expend additional
capital expense to ensure sufficient capacity was maintained.

There have however been major disruptions to the Australian Telecommunications industry’s number portability
processes due to other carriers losing their operational capabilities offshore during lockdowns. This disruption
to porting has adversely impacted future growth in recurring revenues in H2 for all MNF Group segments. This
will cause roll-forward knock on effects for recurring revenues into FY21. While number portability services are
now largely restored, it will take up to 6 months to clear the backlog of orders that were accumulated during the
affected period. MNF Group is working closely with its carrier peers to clear the back logged orders as quickly as
possible.

The Domestic Wholesale segment benefitted strongly from the additional demand for domestic voice minutes from
existing and established customers. Sales to new domestic wholesale customers has remained strong during
the pandemic despite the obvious challenges of operating during a lock down. There were some industry wide
disruptions to number portability which are causing some negative impact to recurring revenue growth in this
segment. Backlogs in customer orders remain and normality is not expected to be restored until January 2021.
Overall the Domestic Wholesale business remains in a strong position for growth into the future and will be a net
long-term beneficiary of the structural changes due to the pandemic.

The Global Wholesale segment experienced a positive impact from a surge in usage of collaboration, CPaaS
and UCaaS services, with voice minutes volumes consistently up 80% during most business days in April relative
to February. While there has been some softening in volumes recently, it appears that these segments have
undergone positive structural change, and elevated volumes can be expected to continue into the future. There
were some industry wide disruptions to number portability which are causing some negative impact to recurring
revenue growth in this segment. Backlogs in customer orders remain and normality is not expected to be restored
until January 2021. Overall the Global Wholesale business remains in a very strong position for growth into the
future and will be a net long-term beneficiary of the structural changes due to the pandemic.

MNF’s Direct segment experienced higher than normal usage volumes, given the surge in demand for voice
services from small business, enterprise and Government customers as they seek to remain connected. The
Express Virtual Meetings service, (formerly known as CCI), experienced the strongest demand in this segment
with conferencing minutes in March up 186% from the prior month. As the pandemic and the associated
lockdowns continued, business and enterprise customers adapted quickly to the new normal. This has seen a
greater adoption of “online” collaboration tools and a shift away from traditional tools like audio conferencing. As
such the gains made in MNF’s Direct business should be considered short term. Usage volumes in the direct
business have now restored to pre-pandemic levels and may continue to decline as customers continue to
migrate to online collaboration tools.

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 Domestic Wholesale business generates both MRR and transactional (usage) based revenues. The business
is focussed on growing the MRR which is mostly high margin and very sticky for customers.

Directors’ Report

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 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.

Direct Segment
A portion of our business is selling directly to end customers. Enterprise and Government customers are served
through the MNF Enterprise brand in Australia and Supernet in Singapore. Small business customers are served
by Connexus and Express Virtual Meetings, while residential customers are served by Pennytel and MyNetFone.

a. Residential
Last year the business divested its direct residential 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 residential VoIP customer base, and the Pennytel mobile
customer base.

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, website, 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 with strong prospects for future
growth.

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.

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 to
bid for business tenders as and when they become available matching our product portfolio.

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.

Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.

Events occurring after the end of the financial year
The directors are not aware of any matter or circumstances which have occurred since the end of the 2020
financial year which has significantly affected or could significantly affect the results of Group’s operations or
performance, other than the final dividend for the financial year 2020 and the dividend reinvestment plan (DRP),
as noted below.

Dividends proposed
The dividend as recommended by the Board will be paid subsequent to the balance date. Refer to Note 28 in the
Financial Report for details.

Future developments
The Board is committed to growing the Company organically as well as by way of targeted acquisitions.

The Company 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:

2019 final dividend of 4.0 cents per share paid on 03 October 2019

2020 Interim dividend of 2.5 cents per share paid on 02 April 2020

Dividends recommended (subsequent to year end):

$000

Franking

2,940

2,106

100%

2020 Final dividend of 3.6 cents per share recommended on 25 August 2020

3,035

100%

The 2020 final dividend is to be paid on 1 October 2020 to shareholders registered as at 7 September 2020.

Options

Shares under option or issued on exercise of options pertaining to directors

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

Terry Cuthbertson

Michael Boorne

Andy Fung

Rene Sugo

Date of expiry

Exercise price

Number of options

30 June 2021

$7.15

100,000

150,000

450,000

Shares under option or issued on exercise of options for the Group
At the date of this report, the unissued ordinary shares of MNF Group Limited under options which were granted
as at 30 June 2020 is as follows:

Grant Date

27 October 2016

11 December 2018

Date of expiry

Exercise price

Number of options

30 June 2021

30 June 2022

$7.15

Nil

620,000

120,000

860,000

Audited Remuneration Report

Message from the
Remuneration Committee Chair

Dear fellow Shareholders,

On behalf of your company’s Remuneration Committee, I am pleased to present MNF Group’s
FY20 Remuneration Report.

In May 2020, the MNF Group Remuneration Committee was reconstituted. Prior to this the
functions of the Remuneration Committee were undertaken by the full Board (comprising of Mr
Michael Boorne (Chair), Mr Terry Cuthbertson, Mr Andy Fung, Mr David Stewart and Mr Rene
Sugo). In May 2020, the current Remuneration Committee structure was approved and the
Remuneration Committee Charter by which the committee is governed was refreshed and reap-
proved by the Board in June 2020.

The Remuneration Framework was designed to responsibly reward senior executives through the
components of Fixed Remuneration, Short-Term Incentives (STI) and Long-Term Incentives (LTI).
We benchmark against like companies utilising data compiled by an independent third-party data
provider. STIs are based on achievement of the financial target (Financial KPI) and the key stra-
tegic objectives for the Company (Individual KPI). The LTI scheme is directly linked to Sharehold-
er value creation and designed to only provide benefit to participants when there is share price
growth in the long term and the employee remains engaged by the Group.

During the latter part of the financial year a Steering Committee has reviewed and developed a
revised Senior Executive Incentive plan which is proposed to come into effect from 1 July 2020,
having taking guidance from independent third-party executive remuneration specialists.
This plan aims to deliver a standardised motivational incentive plan that also combines with
securing employee retention and is aligned to acceptable market practice.

We will monitor the effectiveness of our MNF Group remuneration framework, particularly in the
initial stages of implementation and as the Company continues to evolve hence ensuring shared
success amongst our Board, executive team, employees and shareholders.

Sincerely,

David Stewart

Directors’ 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 2020. 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 2020 financial year:

Name

Position

Term as KMP

Non-executive directors

Mr Terry Cuthbertson

Mr Michael Boorne

Mr Andy Fung

Mr David Stewart

Executive director

Mr Rene Sugo

Other KMPs

Mr Matt Gepp(i)

Mr Chris Last(ii)

Non-executive Chairman

Non-executive Director

Full financial year

Non-executive Director

From 13 August 2019

Chief Executive Officer

Full financial year

Chief Financial Officer

Until 11 September 2019

Chief Financial Officer

From 12 September 2019

Ms Catherine Ly

Company Secretary and Treasurer

Full financial year

(i) Mr Matt Gepp ceased as CFO of the Group on 11 September 2019 and his employment ceased on 20 September 2019.
(ii) Mr Chris Last commenced with the Group as CFO on 12 September 2019.

Remuneration Committee
The Remuneration Committee’s purpose is to review and make recommendations to the Board on the level and
composition of remuneration for non-executive directors, the CEO and CFO, and senior executives reporting
directly to the CEO; and to review and make recommendations to the Board in respect of the LTI and STI scheme
available to executives and other employees and to ensure that such remuneration and scheme is appropriate
and not excessive while remaining competitive to attract and retain high quality directors and to attract, retain and
motivate senior executives.

The Committee is also responsible for reviewing and reporting to the Board in respect of whether there is any
gender or other inappropriate bias in remuneration for directors and senior executives; overseeing compliance
with statutory responsibilities in relation to remuneration disclosure; and reviewing and approving the WGEA
reports.

The Remuneration Committee charter and composition was revised in May 2020 and the committee comprises
the following directors:
• Mr David Stewart - Non-executive Director (Committee Chair)
• Mr Michael Boorne - Non-executive Director
• Mr Rene Sugo - Executive Director (CEO)

The Group does not currently engage remuneration consultants to provide a formal remuneration
recommendation, however, it may consider the use of remuneration consultants to provide such a
recommendation in the future as the Group continues to grow. The Board sets the aggregate remuneration of
non-executive directors, which is then subject to shareholder approval. 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.

The 2019 audited remuneration report received positive shareholder support at the 2019 annual general meeting
(AGM) with a vote of 99.30% in favour (2018: 87.87%).

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 the prior year,
and includes a combination of the following components:

Fixed Remuneration

Variable Remuneration

Short-term Incentive (STI)

Long-term Incentive (LTI)

Cash

Equity

• Base salary plus
superannuation.

• Set based on

market benchmarks and
individual performance,
qualifications and
experience

• Eligibility for payment
is dependent on the
Group exceeding
budgeted financial per-
formance metrics such
as EBITDA and 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

KMPs.

• Share options are

linked to share price
performance. It
incentivises KMPs to
create shareholder
wealth, by utilising
their individual skills,
qualifications and
experience.

Fixed remuneration
Fixed remuneration consists of base salary, employer superannuation contributions and non-monetary benefits.
Non-monetary benefits typically comprise 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 2019 to 30 June 2020.

100% of the STI target for financial year 2020 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 FY20 STI plan depends on the Group achieving its budgeted EBITDA and 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.

The Group delivered FY20 EBITDA and FY20 NPAT in line with its guidance to the stock market and exceeded
EBITDA budget as restated for new lease accounting standards. The Board has approved STI payments at 100%
levels for FY20.

Directors’ report - audited remuneration report

The below chart illustrates the structured employee entitlements of eligible KMPs as a percentage of their fixed
remuneration:

16%

84%

16%

84%

14% 73%

18%

76%

FY20

FY19

13%

FY20

FY19

CEO
(Mr R Sugo)

CFO
(Mr C Last)

CFO
(Mr M Gepp)

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 Plans 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 three LTI schemes in place from current and prior years. The first two plans (Share
Plan 1 and Share Plan 2) are share-based option plans aimed at retaining highly skilled directors, KMPs and
employees to appropriately remunerate in line with similar organisations in the market. The third plan (Share Plan
3) is also a share-based option plan but only aimed at directors and KMPs of the Group.

The options granted for Share Plan 1 and 2 have an exercise price of $Nil with a vesting of each tranche being
conditional upon the recipient continuing employment with the Group up until date of vesting. 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. The Share Plan 3 has similar
terms except with the additional inclusion of an exercise price of $7.15 and an expiration date of 30 June 2021.
These options were granted on 27 October 2016. The options granted to directors were approved by shareholders
at the 2016 AGM.

Plan Attributes

Option Grant Date

Number of Tranches

Mr T Cuthbertson

Mr M Boorne

Mr A Fung

Mr D Stewart

Mr R Sugo

Mr C Last

Ms C Ly

Option Exercise Price

Options Vested as of 30 June 2020

Options available

Share Plan 1

Share Plan 2

Share Plan 3

15 September 2016

07 January 2020

27 October 2016

1,500

$ NIL

1,500

30,000

$ NIL

10,000

20,000

100,000

150,000

20,000

$7.15

470,000

Mr Matt Gepp ceased as CFO of the Group on 11 September 2019 and he is still eligible for 50,000 option with an exercise price
of $7.15, which expires on 30 June 2021.

Directors’ report - audited remuneration report

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:

Remuneration details of directors and KMPs for the year ended 30 June 2020
Details of the nature and amount of benefits and payments for each director and KMP of the Company for the
2019 and 2020 financial years are as follows, represented on an accrual basis:

Performance metric

2020

2019

2018

2017

2016

Revenue (‘000)

NPAT (‘000)

Basic EPS (cents)

Dividends paid (‘000)

Dividends declared per share (cents)

Share price (as at 30 June)

Change in share price

Market Capitalisation (as at 30 June)

$230,913

$215,587

$220,728

$191,752

$161,217

$11,947

$9,943*

$11,859^

$12,066^

$8,990^

14.88

$5,046

6.10

$5.63

$1.78

$475m

13.56*

$4,505

6.10

$3.85

($1.40)

$282m

16.25^

$6,417

8.35

$5.25

$0.88

17.32^

$5,099

8.25

$4.37

$0.37

13.45^

$4,512

7.00

$4.00

$0.18

$384m

$318m

$270m

* Restated based on correction of deferred tax made to the 30 June 2019 financial year. See Note 5 for details.
^ Financial years 2016 – 2018 results have not been restated. See Note 5 for details.

Short term benefits

Post-
employment
benefits

Share
based
payments

Total

Cash
salary &
fees (i)

STI/
Bonus
paid(ii)

STI/Bonus
accrued(iii)

Non-
monetary
benefits(iv)

Superannuation

Options(v)
(vi)

Directors

Mr T Cuthbertson

2020

120,000

Mr M Boorne

Mr A Fung

Mr D Stewart(vii)

2019

2020

2019

2020

2019

2020

2019

CEO and Executive Director

Mr R Sugo

Other KMPs

Mr M Gepp(viii)

Mr C Last(ix)

Ms C Ly

2020

2019

2020

2019

2020

2019

2020

2019

120,000

103,000

82,400

65,733

517,025

101,455

344,563

276,548

174,250

169,167

Total

2020

1,440,411

2019

1,336,155

100,000

51,750

8,943

7,340

1,182

4,880

574

11,400

9,785

7,828

6,245

25,000

131,400

112,785

90,228

71,978

650,968

549,365

6,250

64,329

173,216

25,000

30,233

404,676

20,441

49,513

398,826

16,554

16,071

6,730

197,534

7,558

192,796

151,750

10,699

103,503

120,572

1,826,934

12,220

95,084

37,791

1,481,250

(i)
(ii)

Cash salaries paid are reviewed annually.
STI amounts paid in 2020 financial year relate to the achievement of 2020 targets and were accrued for in the 2019

results.

(iii)

STI amounts accrued in the current financial year are in relation to the 2020 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.
The FY20 share-based payments include the Employee Share Plan and the fair value of options granted in the period.
Mr David Stewart commenced his directorship on 13 August 2019.

(iv)
(v)
(vi)
(vii)
(viii) Mr Matt Gepp ceased as CFO of the Group on 11 September 2019 and his employment ceased on 20 September 2019.
(ix)

Mr Chris Last commenced with the Group as CFO on 12 September 2019.

Key terms of employment agreements
The Group 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 or 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

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Directors’ report - audited remuneration report

Directors’ Report

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.
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 C Last

3 months

Ms C Ly

6 months

1 month

6 months’ base
salary

3 months’ base
salary

6 months’ base
salary

Fixed salary package of $542,025,
consisting of base salary and superannu-
ation, reviewed annually by the
Remuneration Committee

Fixed salary package of $370,000,
consisting of base salary and superannu-
ation, reviewed annually by the Remuner-
ation Committee in September

Fixed salary package of $197,735,
consisting of base salary and superannu-
ation, reviewed annually by the
Remuneration Committee 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:

Directors

Mr T Cuthbertson

Mr M Boorne

Mr D Stewart

Mr A Fung

Executive Director

Mr R Sugo

Other KMPs

Mr C Last

Ms C Ly

Total

2020

2019

Shareholding

Options

Shareholding

Options

Shareholding
movement %

855,906

384,605

200,000

100,000

920,906

709,543

100,000

13,625,802

100,000

14,213,185

100,000

-7.1%

-45.8%

100.0%

-4.1%

12,034,214

150,000

11,915,431

150,000

1.0%

10,282

301,476

20,000

299,775

21,500

100%

0.6%

27,412,285

490,000

28,058,840

471,500

In 2019, Mr Matt Gepp held a total of 49,000 shares and 56,000 options. Mr Matt Gepp ceased as CFO of the
Group on 11 September 2019 and he is still eligible for 50,000 option with an exercise price of $7.15, which
expires on 30 June 2021.

This concludes the audited remuneration 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 (2019: $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 55 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.

This directors’ report, incorporating the audited remuneration report, is signed in accordance with a resolution of
the Board of Directors.

Terry Cuthbertson
Chairman

Sydney, 25 August 2020

Rene Sugo
CEO and Executive Director

Consolidated statement of financial position

Consolidated statement of profit or loss and other
comprehensive income

For the year ended 30 June

Continuing operations

Revenue

Cost of sales

Gross profit

Other income

Employee benefits expense

Depreciation and amortisation

Other expenses

Costs related to acquisition

Financing costs

Restructure costs

Profit before income tax

Income tax expense

Profit from continuing operations

Net profit for the year

Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:

Exchange differences on translation of foreign operations

Changes in fair value of cash flow hedges

Total comprehensive income for the year

Earnings per share from continuing operations

- Basic earnings per share (cents)

- Diluted earnings per share (cents)

Consolidated group

Notes

2020

$'000

2019
Restated

$'000

230,913

(134,486)

96,427

215,587

(133,120)

82,467

1,216

2,508

(43,107)

(16,117)

(17,476)

(2,993)

(1,300)

16,650

(38,989)

(8,973)

(19,578)

(1,168)

(1,874)

14,393

(4,703)

(4,450)*

11,947

(214)

(170)

11,777

14.88

14.72

9,943

537

(519)

9,961

13.56*

13.37*

* See Note 5 for details on a correction made to deferred tax balances and opening retained earnings as reflected in the 30 June
2019 and 2020 financial year.

The accompanying notes form part of these consolidated financial statements.

As at 30 June

Assets
Current assets

Cash and cash equivalents

Trade and other receivables

Income tax receivable

Inventories

Total current assets

Non-current assets

Property, plant and equipment

Right-of-use asset

Deferred tax asset

Goodwill and other intangibles

Total non-current assets

Total assets

Liabilities
Current liabilities

Trade and other payables

Customer deposits

Provisions

Lease liability

Income tax payable

Total current liabilities

Non-current liabilities

Loans and borrowings

Financial instruments

Provisions

Lease liability

Deferred tax liability

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Retained earnings

Total equity

Consolidated group

Notes

2020

$'000

2019
Restated

$'000

16a

46,164

42,027

1,906

90,097

30,246

18,209

3,102

93,149

144,706

234,803

27,988

3,938

4,456

3,160

1,643

41,185

30,000

841

1,357

17,776

4,691

54,665

95,850

138,953

101,771

3,138

34,044

138,953

15,481

42,030

853

1,548

59,912

30,776

2,227*

89,785

122,788

182,700

32,158

1,494

3,797

37,449

55,600

628

1,236

5,804*

63,268

100,717

81,983

51,125

1,931

28,927*

81,983

* See Note 5 for details on a correction made to deferred tax balances and opening retained earnings as reflected in the 30 June
2019 and 2020 financial year.

The accompanying notes form part of these consolidated financial statements.

Consolidated statement of changes in equity

Attributable to owners of the Group

Consolidated group

Notes

2020

$'000

2019

$'000

For the year ended 30 June

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Interest paid

Income tax paid

Net cash from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Payment for business acquisitions

Software development costs

Purchase of other intangible assets

Net cash used for investing activities

Cash flows from financing activities

Proceeds from share placement and options
exercised – share placement/SPP

Proceeds from share placement and options
exercised - DRP

Dividends paid

Proceeds from borrowings

Repayment of borrowings

Repayment of finance lease liability

Net cash from financing activities

Net increase/(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

The accompanying notes form part of these consolidated financial statements.

235,147

(199,556)

214

(2,885)

(4,058)

28,862

(6,782)

(8,883)

(15,665)

49,736

910

(5,046)

(25,600)

(2,638)

17,362

30,559

124

15,481

46,164

229,837

(217,219)

167

(1,601)

(5,663)

5,521

(7,334)

(35,070)

(8,283)

(74)

(50,761)

286

618

(4,505)

46,160

(1,250)

(56)

41,253

(3,987)

598

18,870

15,481

Balance at 30 June 2018
(as previously reported)

Net correction of deferred
tax*

Balance at 1 July 2018
(restated)*

Profit for the period*

Other comprehensive
income

Dividends paid

Shares issued - DRP

Shares issued-SPP

Ordinary
share
capital

Share-based
payment
reserve

Translation
reserve

Hedging
reserve

Retained
earnings

Total

$'000

50,221

2,042

(438)

(111)

24,519

76,233

(1,030)

50,221

2,042

(438)

(111)

23,489

75,203

618

286

9,943

537

(519)

9,943

(4,505)

618

286

420

Share-based payments

420

Balance at 30 June 2019
(restated)*

Net correction of deferred
tax*

51,125

2,462

(630)

28,927

81,983

(293)

Balance at 1 July 2019*

51,125

2,462

(630)

28,634

81,690

Adjustment for change
in accounting standard
(Note 2)

Profit for the period

Other comprehensive
income

Dividends paid

Shares issued - DRP

Shares issued - share
placement

910

49,736

Share-based payments

1,377

(1,491)

11,947

(214)

(170)

(5,046)

910

49,736

1,377

Balance at 30 June 2020

101,771

3,839

143

(844)

34,044

138,953

* See Note 5 for details on a correction made to deferred tax balances and opening retained earnings as reflected in the 30 June
2019 and 2020 financial year.

The accompanying notes form part of these consolidated financial statements.

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 2020. The financial statements were
authorised for issue on 25 August 2020 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 29.

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

The accounting policies applied by the Group in this financial report are the same as those applied by the Group
in its consolidated annual financial report as at and for the year ended 30 June 2020, with the exception of the
new accounting policy adopted as disclosed below.

In the current year, the Group has adopted all applicable new and revised Standards and Interpretations issued by
the Australian Accounting Standards Board (AASB) that are effective for the current reporting period and relevant
to the Group. Unless specifically outlined below, the adoption of these amendments has not resulted in any
changes to the Group’s accounting policies and has had no effect on the amounts reported for the current or prior
periods.

as operating expenses is now replaced by depreciation and interest expense. Interest expense is disclosed as
operating activities in the statement of cash flows and the principal portion of the lease payments are separately
disclosed in financing activities.

The Standard AASB 16 had an impact on the current period. The impact of adoption of the standard on opening
retained profits as at 1 July 2019 was:

Operating lease commitments as at 1 July 2019 (AASB 117)

Operating lease commitments discount based on the weighted average incremental borrowing rate of
5% (AASB 16)

Additional minimum lease commitment as at 1 July 2019

Accumulated depreciation as at 1 July 2019 (AASB 16)

Right of use assets (AASB 16)

Lease liabilities - current (AASB 16)

Lease liabilities – non-current (AASB 16)

Tax effect on the above adjustments

Reduction in opening retained profits as at 1 July 2019

1 July 2019
$’000

25,772

(220)

1,264

(5,301)

21,515

(2,705)

(20,804)

598

(1,396)

In addition, the current profit before income tax expense was reduced by $613,000. This included an increased
depreciation and amortisation expense of $3,318,000 and increased finance costs of $895,000, offset by a reduc-
tion in other expenses (reclassification of lease expenses) of $3,600,000. As at 30 June 2020, net current assets
were reduced by $3,160,000 (attributable to current lease liabilities) and net assets were reduced by $2,129,000
(attributable to right-of-use assets, lease liabilities and deferred tax assets).

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 nec-
essary 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 23 to the consolidated financial statements.

AASB 16 Leases (AASB 16)

d. Business combinations

The Group has adopted AASB 16 Leases (the Standard) from 1 July 2019. The Standard replaces AASB 117
Leases and for lessees eliminates the classifications of operating leases and finance lease. The Group has
applied the Standard using a modified retrospective approach with the cumulative effect of initial application
recognised as an adjustment to the opening balance of retained earnings at 1 July 2019 with no restatement
of comparative information. Except for short-term leases and leases of low value assets, right-of-use assets
and corresponding lease liabilities are recognised in the statement of financial position. Depreciation charge for
the right-of-use assets and interest expenses on the lease liabilities replaces the straight-line operating lease
expense.

The adoption will in effect increase expenses in earlier periods of the lease compared to lease expense under
AASB 117. However, EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) results improve

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
common 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.

Notes to the consolidated financial statements

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.
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 are members of a tax consolidated group under Aus-
tralian taxation law. Each entity in the tax consolidated group contributed tax losses to the Group. The Australian
tax group has no tax losses to currently utilise.

(iv) Research & Development (R&D) tax concession
When calculating the income tax provision for the year, the Research & Development tax incentive for the cur-
rent financial year is based on management’s operational knowledge and best estimate at the time, utilising prior
year’s claim as a benchmark. The directors believe the estimate is reasonable and conservative. This may be
subject to change following the finalisation of the Research & Development tax incentive when we finalise our
Australian tax Return.

(v) Determination of cash generating units (CGUs) and their recoverable amount for impairment assessment
Impairment assessment compares the carrying value of identified CGUs with their recoverable amounts.
Management judgement is applied to identify these CGUs and determine the recoverable value. Refer to Note 2p
and Note 26 for further information.

f. Revenue recognition

(i) Revenue from Contracts with Customers
In accordance with AASB 15 Revenue from Contracts (AASB 15), the Group recognises revenue to depict the
transfer of goods and services to customers, in an amount that reflects the consideration to which the Group is
entitled in exchange for those goods and services. Note 4 provides specific information to assist users to under-
stand 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 it-
self, 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 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.

g. Leases

The Group as lessee has applied the standard using a modified retrospective approach with the cumulative effect
of initial application recognised as an adjustment to the opening balance of retained earnings at 1 July 2019 with
no restatement of comparative information.

Except for short-term leases and leases of low value assets, the Group applies a single recognition and measure-
ment approach for all leases representing the right to use the underlying asset: right-of-use assets recognised at
the commencement date of the lease and corresponding lease liabilities measured at the present value of lease
payments over the lease term are recognised in the statement of financial position. Depreciation charges for the
right-of-use assets and interest expenses on the lease liabilities replaces the straight-line operating lease
expense.

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. See Note 7 for further details.

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.

n. Property, plant and equipment

(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.

(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 realized, 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 Aus-
tralian 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 each separate
entity and the tax values applying under Australian taxation Law.

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.

Members of MNF tax consolidated group have entered into a tax sharing agreement.

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.

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.

(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.

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.

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)

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indef-
inite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite
life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or loss-
es recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference
between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of
finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life
are accounted for prospectively by changing the amortisation method or period.

At the end of each reporting period, goodwill, Indefinite life intangibles and intangibles not ready for use are tested
for impairment irrespective of whether there are indications of impairment. Intangibles with definite useful lives are
only tested for impairment if there is any indication of impairment. 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 val-
ue 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.

Notes to the consolidated financial statements

Recognition and measurement:

Goodwill

Brands

Software
Development

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated im-
pairment losses. Goodwill assets are not subject to amortisation and are tested for impair-
ment annually, 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
annually, 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 develop-
ment 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 amortisation and any accumulated impairment losses. The carrying value of
an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not yet available for use or more frequently when an indication of impair-
ment arises during the reporting period.

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 amorti-
sation 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

Software and software development costs

Customer relationships

5 to 20 years

3 to 10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.

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

3. Operating segments

The MNF Group operates two Business Units, Wholesale and Direct. The Wholesale Business Unit is managed
as two segments, Domestic Wholesale and Global Wholesale, reflecting the different markets and product suites
of each segment.

Domestic Wholesale
Domestic Wholesale customers are predominantly Retail Service Providers (RSPs), Managed Services Providers
(MSPs) and IT companies in Australia or New Zealand. Key products include:
• Australian and New Zealand phone numbers with number portability
• Terminating calls in Australia / New Zealand (CTS)
• Software for telecom billing and compliance management
• Whitelabel cloud phone systems and mobile services (MVNO)

Domestic Wholesale services are typically sold through subsidiary brands Symbio Networks, iBoss and
Telcoinabox.

Global Wholesale
Global Wholesale customers are predominantly international UCaaS, CPaaS and CCaaS vendors, software and
app developers and global telecom providers. Key products include:

• Australian and New Zealand phone numbers with number portability
• Terminating calls in Australia / New Zealand (CTS)
•
International toll-free phone numbers (ITFS)
• Management of international routing with toll fraud mitigation

Global Wholesale services are typically sold through Symbio Networks and TNZI.

Direct
Direct customers are small and medium businesses and households in Australia, as well as Enterprise and
Government organisations in Australia, New Zealand and Singapore. Key products include:

• Australian and New Zealand phone numbers with number portability
• Enterprise UCaaS: Cisco Webex and Microsoft Teams
• SMB cloud phone systems, audio and video conferencing
• Residential home phone and mobile services

Enterprise and Government customers are served through the MNF Enterprise brand in Australia and Supernet
in Singapore. Small business customers are served by Connexus and Express Virtual Meetings, while residential
customers are served by Pennytel and MyNetFone.

Notes to the consolidated financial statements

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).

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.

Notes to the consolidated financial statements

The information is consistent with the results presented for internal management reporting purposes, measured at
gross margin level. The accounting policies used by the Group in reporting segment information internally, are the
same as those contained in Note 2 to the 2020 financial statements.

Disaggregation of revenue from contracts with customers
The disaggregation of the Group’s revenue based on the nature and timing of transfer of goods and services
is set out below:

2020

External revenue

Inter-segment revenue

Segment revenue

Segment margin

2019

External revenue

Inter-segment revenue

Segment revenue

Segment margin

For the year ended 30 June

4. Revenue and expenses

a. Revenue and other income

Rendering of services and sale of goods

Interest on bank deposits

Bargain purchase gain on acquisition

Other income

Domestic
Wholesale

$'000

Global
Wholesale

$'000

Direct

$'000

Total

$'000

89,741

10,285

100,026

41,212

67,851

10,081

77,932

33,414

107,268

6,393

113,661

32,462

111,322

4,671

115,993

27,047

33,904

22,753

36,414

22,006

230,913

16,678

247,591

96,427

215,587

14,752

230,339

82,467

2020

$'000

2019

$'000

230,913

215,587

224

992

1,216

130

1,317

1,061

2,508

Revenue type

Revenue
recognition

External revenue

Over time

Inter-segment
revenue

Total

Over time

Revenue type

Revenue
recognition

External revenue

Over time

Inter-segment
revenue

Total

Over time

2020

Domestic
Wholesale
$’000

Global
Wholesale
$’000

Direct
$’000

Total
$’000

89,741

10,285

107,268

33,904

230,913

6,393

16,678

100,026

113,661

33,904

247,591

2019

Domestic
Wholesale
$’000

Global
Wholesale
$’000

Direct
$’000

Total
$’000

67,851

10,081

77,932

111,322

36,414

215,587

4,671

14,752

115,993

36,414

230,339

Disaggregation of revenue is presented in line with the Operating Segment reporting as included in Note 3.
Revenue disaggregated to geographical market and customer type allows for consideration on how economic
factors could affect the Group’s revenue streams.

For the year ended 30 June

b. Employee benefits expense

Wages and salaries

Superannuation

Share based payments expense

Other employee benefits expense

c. Depreciation and amortisation

Depreciation of fixed assets

Depreciation of leases1

Amortisation of intangible assets

2020

$'000

2019

$'000

35,457

2,810

1,377

3,463

43,107

7,230

3,318

5,569

16,117

31,841

3,678

420

3,050

38,989

5,597

3,376

8,973

1 Following the adoption of AASB 16 Leases, amounts accounted for under the new requirements and prior period comparatives
have not been restated. Refer to note 2 for further details.

Notes to the consolidated financial statements

2020

$'000

2019

$'000

For the year ended 30 June

2020

$'000

2019

$'000

For the year ended 30 June

d. Other expenses

Marketing

Managed service

Property1

Technology and support

Accounting and audit

Legal and consulting

Insurance

Unrealised Foreign exchange loss/(gain)

Bank and transaction costs

Other administrative expenses

e. Financing costs

Finance charges on bank loan

Finance charges on lease liability1

Finance charges related to hedge instrument

926

3,602

1,173

5,050

671

650

754

429

4,153

17,476

1,821

894

278

2,993

1,744

3,321

4,397

3,790

603

447

680

(302)

388

4,510

19,578

1,874

2,878

(210)

326

1,456

4,450

1 Following the adoption of AASB 16 Leases, amounts accounted for under the new requirements and prior period
comparatives have not been restated. Refer to note 2 for further details.

5. Income and deferred 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

- as previously reported

- correction of deferred tax*

5,117

(414)

4,703

*For further details on the correction of deferred tax balances, see the Note 5(d).

b. Reconciliation between tax expense and the accounting profit

Profit before income tax

16,650

14,393

At the Group’s statutory rate of 30% (2019: 30%)

Tax incentives

Effect of tax rates in foreign jurisdictions

Non-temporary differences

Adjustment in respect of prior year

Correction of deferred tax*

Effective income tax rate

4,995

(183)

(57)

362

(414)

4,703

28%

4,318

(1,541)

128

299

(210)

1,456

4,450

31%

*For further details on the correction of deferred tax balances, see the Note 5(d).

c. Movement in deferred tax balances
The movement in the Deferred Tax Account is shown below.

Deferred tax balances at 1 July

Deferred tax asset

Deferred tax liability

Overall deferred tax balance at 1 July

2,227

(6,097)

(3,870)

1,040

(2,379)

(1,339)

Recognised in profit & loss

2,281

(2,238)

Deferred tax balance at 30 June

Deferred tax asset

Deferred tax liability

Overall deferred tax balance at 30 June

3,102

(4,691)

(1,589)

2,227

(5,804)

(3,577)

There has been a restatement of the 2019 opening and closing balances and 2020 opening balances for deferred
tax due to a correction of deferred tax balances carried out in 2020. For further details on the correction of
deferred tax balances, see the Note 5(d).

For the year ended 30 June

2020

$'000

d. Deferred Tax Asset and Deferred Tax Liability arise from the following:

Deferred Tax Asset
Temporary differences relating to

Allowance for doubtful debt

Employee leave entitlements provision

Other

Unrealised gains and losses

Lease accounting

Deferred Tax Liability
Temporary differences relating to

Fixed assets

Intangible assets

Software development costs

Other receivables, prepayments and other assets

Losses carried forward

767

1,470

637

182

3,102

(732)

(2,695)

(1,147)

(68)

(49)

(4,691)

Deferred Tax Correction
During the financial year ended 30 June 2020, MNF Group increased its focus on tax governance and has
adopted a formal Tax Risk Governance Framework along with associated tax management policies to ensure
we are both compliant with, and are able to, meet our obligations and additionally have appropriate internal tax
management procedures in place. In parallel and aligned with the Group’s increasing scale, the Group recognised
the need to expand the depth and breadth of in-house tax resource with the appointment of a full time Group
Tax Manager. A result of these process improvements and after a comprehensive internal review, a correction
has been made to the Deferred Tax Balances as previously reported at 30 June 2019. The correction has been
applied prospectively from the earliest date in the comparative period where practicable, and at 1 July 2019 in the
current year for a portion of the restatement where it was impracticable to do so. It should be noted that all historic
ATO tax payments are up to date and correct, and all other ATO compliance obligations have been satisfied.

Notes to the consolidated financial statements

e. The Company 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.

the COVID-19 impacts, management has updated the methodology used to reflect the change in risk of default
since initial recognition. Bad debts are written off when it is determined the debt is irrecoverable. These amounts
have been included in other expenses.

For the year ended 30 June

2020

$'000

2019

$'000

8. Property, plant and equipment

6. Operating cash flows reconciliation

a. Cash and cash equivalents

Cash at bank and on hand

46,164

15,481

b. Reconciliation of net profit after tax to net cash flows from/(used for) operating activities

Profit for the year

Add/(subtract) non-cash items

Depreciation and amortisation

Share based payments expense

Gain on acquisition

Loss on disposal of property, plant and equipment

Lease depreciation

Cash movements in operating assets and liabilities

(Increase)/decrease in trade and other receivables

Increase in inventory

(Increase)/decrease in deferred tax assets

Decrease in trade and other payables

Decrease in current tax liabilities

Increase/(decrease) in customer deposits

Increase/(decrease) in deferred tax liabilities

Increase in provisions and employee benefits

11,947

11,399

12,799

1,377

3,318

17,517

(429)

(360)

(85)

(4,152)

(1,105)

2,445

2,370

714

(602)

8,973

420

(1,317)

8,076

10,344

(850)

259

(21,192)

(2,888)

(923)

(36)

1,332

(13,954)

Net cash flows from/(used for) operating activities

28,862

5,521

7. Trade and other receivables

Trade receivables

Doubtful debts provision

Other receivables, prepayments and other assets

38,592

(3,171)

6,606

42,027

37,499

(1,508)

6,039

42,030

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 (using the expected credit loss model and prior write-off movements)
and management’s assessment of general economic conditions.

As a result of the current pandemic, which has impacted the global economic environment which our customers
operate in, the Group has undertaken stringent review of our allowance for doubtful debt. With consideration for

Office
furniture &
equipment

Leasehold
improvements

Network
infrastructure
& equipment

Work in
progress

Total

$’000

4,165

5,075

32,631

41,959

a. Reconciliation of carrying amount

Cost:

At 1 July 2018

Acquisition

Additions

Disposals

Transfers from work in progress

Effect of movement in exchange rates

2,883

698

(66)

331

(956)

3,741

6,677

(14)

2,303

592

At 30 June 2019

7,696

4,472

45,930

At 1 July 2019

Acquisitions

Additions

Disposals

Reclassify asset category

Transfer to Software, and other assets

Effect of movement in exchange rates

723

(582)

1,315

(164)

(7)

4,793

(5)

(12)

At 30 June 2020

7,839

5,616

50,736

2,211

(2,303)

8,838

7,757

(1,036)

631

58,149

(12)

(51)

6,836

(763)

(51)

64,196

7,696

4,472

45,930

58,149

Accumulated depreciation:

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)

(9)

(2)

(603)

990

(12)

(1,622)

(4,074)

(323)

(3,680)

(5,597)

1,063

(344)

At 30 June 2019

(4,984)

(1,141)

(21,248)

(27,373)

At 1 July 2019

Depreciation expense

Disposals

Effect of movement in exchange rates

(4,984)

(1,141)

(21,248)

(27,373)

(1,038)

559

(1)

(733)

164

(5,459)

(75)

(7,230)

728

(75)

At 30 June 2020

(5,464)

(1,709)

(26,777)

(33,950)

Net Book Value:

At 30 June 2019

At 30 June 2020

2,712

3,331

24,682

30,776

2,375

3,907

23,959

30,246

b. Disposals
Asset disposals mostly 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.

For the year ended 30 June

9. Trade and other payables

Trade payables

Other creditors and accruals

Security deposits held

10. Loans and borrowings

Non-current liabilities

Secured bank loan

2020

$'000

2019

$'000

16,877

10,729

382

27,988

30,000

18,434

13,318

406

32,158

55,600

The Group’s finance facilities consist of $60.0m (2019: $60.0m) in revolving credit facilities and a $3.0m (2019:
$3.0m) revolving multi-option credit facility.

In December 2019, the Group paid down the loan payable amount to $30m to further reduce the borrowing cost.

A total of $45.0m in facilities have a maturity date of 16 May 2022 and a $15.0m facility has a maturity date of 16
May 2024. Facilities are interest only and principal is repayable on termination.

$2.5m of the revolving multi-option credit facility has been utilised as 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 30.

For the year ended 30 June

11. Financial instruments

Non-current liabilities

Interest rate swap contract - cash flow hedge

2020

$'000

2019

$'000

841

628

Notes to the consolidated financial statements

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. In April 2019, the Group rolled into a new interest rate swap
contract to protect the loan facility from exposure to increasing interest rates, with swap balance of $30m. 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 fixed rate of 1.835% (2019: 1.835%) per annum. The swap
covers 100% (2019: 54%) 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.

12. Customer deposits

For the year ended 30 June

2020

$'000

2019

$'000

Pre-paid accounts

3,938

1,494

Customer deposits mostly relate to cash received in advance from customers with respect to prepaid customer
accounts. The balance represents the unused call credits as at balance date.

13. Provisions

As at 1 July 2019

Arising during the year

Utilised during the year

Movement due to change in foreign currency
translation rates

As at 30 June 2020

Current

Non-current

Annual
leave

$’000

Long service
leave

Make good
provision

$’000

Total

$’000

2,659

2,997

(2,408)

3,267

1,393

302

(285)

981

183

(22)

(6)

1,410

1,136

1,116

294

1,063

5,033

3,482

(2,715)

5,813

4,456

1,357

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.

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

14. Right-of-use asset

For the year ended 30 June

Land and buildings – right-of-use

Less: Accumulated depreciation

Effect of movement in exchange rate in Accumulated depreciation

The right-of-use assets during the full year were $21,515,000.

2020

$'000

2019

$'000

21,515

(3,318)

18,209

The Group leases buildings for its offices with agreements between three to seven years and in some cases with
options to extend. On renewal, the terms of the leases are renegotiated.

The Group also leases office equipment but these are either short term or low value and have been expensed as
incurred, not capitalised as right-of-use assets.

15. Lease liability

For the year ended 30 June

Current

Non-current

16. Issued capital

For the year ended 30 June

a. Ordinary shares

Issued capital

3,160

17,776

20,936

2020

$'000

2020

$'000

2019

$'000

2019

$'000

101,771

51,125

2020

2019

Movements in ordinary
shares on issue:

At 1 July

Exercise of share options (i)

Issued for cash (ii)

Issued from DRP participation (iii)

Issued from SPP participation

Issued for Staff Share Plan (iv)

Number of shares

$'000

Number of shares

$'000

73,410,315

51,125

73,117,908

50,221

210,000

10,410,000

214,799

66,330

49,736

910

86,000

140,738

65,669

618

286

At 30 June

84,311,444

101,771

73,410,315

51,125

In 2020, 210,000 options were exercised with an exercise price of $Nil (2019: 86,000 options).
Shares issued as a result of share placement at a price of $5.

(i)
(ii)
(iii) Shares issued as a result of participation in the MNF Group dividend reinvestment plan (at an issue price of $4.75 and

$3.05, 2019: $4.63 and $3.81).

(iv) Shares issued under Staff Share Plan to all eligible staff at $Nil.

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 ordinary
shares on issue:

Outstanding at 1 July

Granted during the year

Exercised during the year

Expired during the year

Outstanding at 30 June

Exercisable

2020

2019

Number

WAEP $

Number

WAEP $

1,070,000

4.14

(210,000)

860,000

5.15

800,000

360,000

(86,000)

(4,000)

1,070,000

5.54

4.14

The outstanding options balance as at 30 June 2020, 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. Two tranches of options at 120,000 each were issued to employees with an exercise price
of $Nil and expiry dates of 30 June 2021 and 30 June 2022 respectively.

For the year ended 30 June

17. Staff share-based payments

Outstanding options

Employee option plan

Options granted to directors

Total

a. Employee option plan (EOP)

2020

Number

2019

Number

410,000

450,000

860,000

620,000

450,000

1,070,000

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 prior to the 2019 financial year. The following table illustrates the
number and weighted average exercise prices (WAEP) of movements of share options held by directors during
the year:

2020

2019

Number

WAEP $

Number

WAEP $

Outstanding as at 1 July

450,000

7.15

450,000

Granted during the year

Exercised during the year

Outstanding as at 30 June

450,000

7.15

450,000

7.15

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

18. Restructure costs

In September 2019, the Group underwent reassessment of the internal personnel structure; this assessment is
not associated with the ongoing activities of the entity. The restructuring costs charged to profit or loss consist of
the following:

For the year ended 30 June

Redundancy costs

19. Commitments and contingencies

Commitments
There were no commitments as at 30 June 2020.

2020

$'000

2019

$'000

1,300

Guarantees
There were no new guarantees as at 30 June 2020. 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.

Other matters
From time to time, the Group is subject to legal claims and commercial disputes. The majority of these are
subsequently proven to be without merit and resolved with no cash outflow.

20. 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.

21. Auditor’s remuneration

The auditor of the Group is MNSA Pty Ltd Chartered Accountants.

For the year ended 30 June

2020

$'000

2019

$'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

Non-audit services

Other Auditors

Audit and review of financial statements

322

415

377

426

Notes to the consolidated financial statements

22. Director and executive disclosures

a. Details of Key Management Personnel (KMP)

Mr Terry Cuthbertson

Chairman and Non-executive Director

Mr Michael Boorne

Non-executive Director

Mr Andy Fung

Non-executive Director

Mr David Stewart(i)

Non-executive Director

Mr Rene Sugo

Mr Matt Gepp(ii)

Mr Chris Last(ii)

Director & Chief Executive Officer

Chief Financial Officer

Ms Catherine Ly

Company Secretary

Mr David Stewart commenced his appointment on 13 August 2019;

(i)
(ii) Mr Matt Gepp resigned as CFO of the Group on 11 September 2019. His final day at the Group was 20 September 2019.

Mr Chris Last commenced with the Group as CFO on 12 September 2019.

b. Compensation of KMPs
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

Directors

Other KMPs

Year

Balance at the
beginning of period

Acquired/
(disposed)
during the year

Options
exercised

Balance at
end of period

2020

2019

2020

2019

27,759,065

27,679,270

348,775

338,676

(658,538)

79,795

2,599

27,500

7,500

27,100,527

27,759,065

376,290

348,775

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

Options
forfeited*

Balance at
end of period

Directors

Other KMPs

2020

2019

2020

2019

450,000

77,500

85,000

450,000

40,000

(27,500)

(50,000)

40,000

(7,500)

77,500

* Mr Matt Gepp ceased as CFO of the Group on 11 September 2019 and he is still eligible for 50,000 option with an exercise
price of $7.15, which expires on 30 June 2021.

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

23. Controlled entities

Notes to the consolidated financial statements

25. Goodwill and other intangibles

The consolidated financial statements include the financial statements of MNF Group Limited and the subsidiaries
listed in the following table:

Name

Country of incorporation

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

Superinternet Access Pte Limited

Telcoinabox Operations Pty Limited

IVox Pty Limited

Neural Networks Pty Limited

Symmetry Networks Pty Limited (ii)

Mobile Service Solutions Pty Limited

Australia

Singapore

Australia

USA

New Zealand

Australia

United Kingdom

Singapore

New Zealand

Australia

Singapore

Australia

Ownership interest

2020

100%

2019

100%

(i)

(ii)

Mobile Enablement Australia Pty Ltd was officially de-registered on 21 August 2019.

On 1 December 2019, the MNF group completed the sale of Symmetry Networks Pty Ltd.

Goodwill#

Brands#

Customer
contracts#

Software
development
costs

Software
and other
assets#

$’000

Total

$’000

Cost

Balance at 1 July 2018

30,789

4,823

2,933

3,779

12,180

54,504

Additions

Acquisition of TIAB

Balance at 1 July 2019

Additions

Transfer from Work in
Progress

15,493

46,282

596

5,419

5,518

8,451

8,283

8,357

14,444

36,051

12,062

26,698

98,912

8,817

8,882

Balance at 30 June 2020

46,282

5,419

8,451

20,879

26,814

107,845

Accumulated Amortisation

Balance at 1 July 2018

(1,358)

Amortisation

(971)

Balance at 1 July 2019

(2,329)

(427)

(378)

(805)

(3,965)

(2,028)

(5,993)

(5,750)

(3,377)

(9,127)

Amortisation

Balance at 30 June 2020

(1,110)

(3,439)

(1,823)

(2,636)

(5,569)

(2,628)

(8,629)

(14,696)

Net Book Value

At 30 June 2019

At 30 June 2020

46,282

5,419

6,122

5,012

11,257

20,705

89,785

18,251

18,185

93,149

# Acquired externally or purchased as part of a business combination

26. Impairment testing

Impairment tests for intangible assets with definite useful lives
For the purpose of annual impairment testing, indefinite life intangible assets are allocated to the Group’s CGUs.
As at 30 June 2020, the Group had three CGUs, being Domestic Wholesale, Global Wholesale and Direct.

Carrying amount of Goodwill have been allocated to the following CGUs:

24. Entities over which control has been lost during the financial year

For the year ended 30 June

Symmetry Networks Pty Ltd, a subsidiary of the Group was sold for a total consideration of $300,000.

Name

Symmetry Networks Pty Ltd

Date of ownership ceased

1 December 2019

CGUs

Domestic Wholesale

Global wholesale

Direct

Total goodwill

2020

$'000

2019

$'000

21,579

5,376

19,327

46,282

21,579

5,376

19,327

46,282

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

Carrying amount of Brands have been allocated to the following CGUs:

For the year ended 30 June

CGUs

Domestic Wholesale

Global Wholesale

Direct

Total Brands

2020

$'000

2019

$'000

596

1,823

3,000

5,419

596

1,823

3,000

5,419

The recoverable amount of the Group’s indefinite life intangible assets have 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.

Key assumptions used

The following describes the key assumptions on which the Group has based its cash flow projections when
determining value in use relating to the cash-generating units:

Discount rate (Post tax)

Terminal value Growth rate

Domestic
Wholesale

Global
Wholesale

Direct

2020

2.5%

2019

10%

2.5%

2020

10%

2.5%

2019

14%

2.5%

2020

2.5%

2019

10%

2.5%

The discount rate is based on the Group’s weighted average costs of capital adjusted to reflect an estimate of
specific risks assumed in the cashflow projections

The Terminal value growth rate is based on the Group’s expectation of long term performance of the CGUs in line
with industry expectations. This is used to extrapolate cashflows beyond the five year period.

Other key assumptions used in the value-in-use calculations include:
• Gross profit is based on expected customer growth rates and direct costs to deliver the services.

Management have used assumptions based on historical trends and expected trends within market
expectations.

• Overheads were forecast based on current expenditure adjusted for inflationary increases.
• Capital expenditure forecast based on requirement to maintain and expand network infrastructure to support

the future growth assumed in profit projections

Based on the results of the impairment testing and evaluation, no impairment identified for the CGUs.

Sensitivity analysis

For all CGUs, any reasonable change in the key assumptions such as the terminal value growth rate and discount
rate on which the recoverable amount is based would not cause any of the CGU’s carrying amount to exceed its
recoverable amount.

27. Earnings per share
Earnings and weighted average number of ordinary shares used in calculating basic and diluted earnings per
share are:

For the year ended 30 June

2020

$'000

2019
Restated*

$'000

Net profit attributable to ordinary equity holders of the Company

11,947

9,943

* Restated based on correction of deferred tax made to the 30 June 2019 financial year. See Note 5 for details.

For the year ended 30 June

Weighted average number of shares:

2020

'000

2019

'000

Weighted average number of ordinary shares for basic earnings per share

80,282

73,316

Add effect of dilution:

- Share options

Weighted average number of ordinary shares for diluted earnings per share

860

81,142

1,070

74,386

28. Dividends paid and proposed

Recognised amounts:

2019 fully franked final dividend declared and paid

2020 fully franked interim dividend declared and paid

Unrecognised amounts:

Cents per share

$'000

Date of payment

4.00

2.50

2,940

2,106

4-Oct-19

2-Apr-20

2020 fully franked final dividend declared(i)

3.60

3,035

1-Oct-20

(i) The final dividend was declared on 25 August 2020. The amount has not been recognised as a liability in the 2020 financial
year and will be brought to account in the 2021 financial year.

The proposed payment date of the 2020 final dividend is 1 October 2020.

The amount of franking credits available for future reporting periods is $11,625.833 (2019: $9,069,796).

The tax rate at which paid dividends have been franked is 30% (2019: 30%). Dividends proposed will be franked
at the rate of 30%.

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

(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.

At the end of reporting period, the Group has $22,000,000 short term deposits due within 91-279 days, detailed
schedule is as per below:

For the year ended 30 June

Term deposit

Not later than 1 month

Later than 1 and not later than 3 months

Later than 3 and not longer than 12 months

Longer than 1 year

Total

2020

$'000

2019

$'000

8,000

14,000

22,000

(iv) Credit risk
The Group has considered the impact of COVID-19 on its current economic environment and how this has
affected our 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. Management has undertaken a
stringent review of this process as a direct result of the current pandemic. Receivable balances are monitored on
an ongoing basis so that our exposure to bad debts is not significant. Refer to Note 7 for further information.

29. Parent entity
Key financial information relating to the parent entity is summarised below:

For the year ended 30 June

2020

$'000

2019

$'000

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

(6,857)

(214)

( 7,071)

29,822

111,629

(17,129)

(56,505)

67,817

106,585

2,997

(41,765)

67,817

(3,732)

(593)

(4,325)

3,852

100,301

(6,461)

(61,598)

36,094

55,936

1,393

(21,235)

36,094

30. 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 2020 would impact the profit or loss by less than $138k
(30 June 2019: $445k). 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 allows for up to 100% 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.

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Notes to the consolidated financial statements

Directors’ declaration

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

Directors’ declaration
In accordance with a resolution of the directors of MNF Group Limited, the directors of the Company declare that:

For the year ended 30 June

2020

2019

1. The consolidated financial statements and notes, as set out on pages 27 to 78, are in accordance with the

Financial assets

Cash

Weighted average effective interest rate 0.3% (2019: 1.2%)

Carrying
amount

Fair value

Carrying
amount

Fair value

$'000

Corporations Act 2001 and:

a. 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

22,164

14,481

b. give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year

ended on that date of the Group;

Short-term Term Deposit

22,000

Weighted average effective interest rate 0.69% (2019: Nil)

Cash at call

2,000

1,000

Weighted average effective interest rate 1.5% (2019: 2.0%)

Trade and other receivables

42,027

42,030

Financial liabilities

On statement of financial position

Trade payables

27,988

32,158

Loans and borrowings

30,000

55,600

Weighted average effective interest rate 3.23% (2019: 4.7%)

Interest rate swap contract – cash flow hedge

841

628

31. Company details

The registered office and principal place of business of MNF Group Limited is:
Level 4, 580 George Street, Sydney, NSW, 2000, Australia

2. 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

3. 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, 25 August 2020

Rene Sugo
CEO and Executive Director

For the year ended 30 June 2020For the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesMNF Group Limited | ABN 37 118 699 853 and controlled entities

Auditor’s independence declaration

Independent auditor’s report

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
MNF GROUP LIMITED and Controlled Entities

ii.

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

any applicable code of professional conduct in relation to the audit.

ii.

MNSA PTY LTD

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

ii.

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

Report on the Audit of the Financial Report

Opinion

any applicable code of professional conduct in relation to the audit.

We have audited the financial report of MNF Group Limited (the Group), which comprises the consolidated
statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies and the directors’ declaration.

MNSA PTY LTD

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

giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
performance for the year then ended; and

ii.

complying with Australian Accounting Standards and the Corporations Regulations 2001.

Allan Facey
Director

Basis for Opinion

Dated in Sydney this 25th day of August 2020

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

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

Key Audit Matters

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

Independent auditor’s report

Revenue recognition

Key Audit Matter

How Our Audit Addressed the Key Audit Matter

Carrying Value of Goodwill

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

MNF Group Limited has goodwill of $46.3m
contained within three Cash Generating Units.

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

entry of the billing system reports to the
financial accounting records.

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

any applicable code of professional conduct in relation to the audit.

For the Cash Generating Units, the
determination of recoverable amount, being the
value-in-use, requires judgement on the part of
management in both identifying and then
valuing the relevant Cash Generating Units.
Recoverable amounts are based on future
financial forecasts and Management’s view of a
range of variables such as business and
economic conditions including operating
performance and the most appropriate growth
and discount rates.

ii.

Refer to Note 2 of the Financial Statements,
Significant accounting policies.

MNSA PTY LTD

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

We evaluated the appropriateness of
Management’s identification of the Group’s
Cash Generating Units and tested the
effectiveness of the impairment assessment
process, including indicators of impairment,
noting no significant exceptions.

Our procedures included challenging
Management on the suitability of the
impairment model, and the reasonableness of
the assumptions, with particular attention to the
business segments, by performing the following:

•

assessing MNF Group’s key
market-related assumptions in
Management’s valuation models with
industry comparators and with
assumptions made in the prior years
including revenue and margin trends,
capital expenditure on assets, market
share, foreign exchange rates and
discount rates, against external data
where available;
testing the mathematical accuracy of the
cash flow models and agreeing relevant
data to Board approved long range
plans;
assessing the reliability of
Management’s forecast through a
review of actual performance against
previous forecasts;and
consideration of COVID-19 impacts to
managements assumptions and
forecasts.

We validated the appropriateness of the related
disclosures in Note 25 and Note 26 to the
Financial Statements, including the sensitivities
provided with respect to acquisitions.

Based on our procedures, we noted no issues of
concern, and consider Management’s key
assumptions to be within a reasonable range.

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

Revenue represents a material balance
consisting of a high volume of individually low
value transactions and we have identified the
following types of transactions and assertions
related to revenue recognition which give rise to
key risks:

the accuracy and completeness of
revenue recorded as a result of reliance
on the output of billing systems; and

•

In responding to these matters, our audit
approach included testing of systems and
controls, in particular procedures covering:

•

segments, products, billing systems,
cash collection and other relevant
support systems around the recognition
of material revenue streams;
the reconciliation of billing systems to
the general ledger, including validation
of material journals processed between
the billing system and general ledger;
the accuracy and completeness of
recording customer bills;
reconciliation of cash receipts from
customers with the receivable’s ledger;
and
consideration of COVID-19 impacts to
collection of receivables and related
provisions.

ii.

MNSA PTY LTD

Capitalisation of Software Development and
asset lives

Allan Facey
Director

There are a number of areas where management
judgement impacts the carrying value of
intangible assets and their respective
Dated in Sydney this 25th day of August 2020
amortisation profiles. These include:

•

the decision to capitalise or expense
costs; and
the review of the annual asset life
including the impact of changes in the
Group’s strategy.

Based on our work, we noted no significant
issues on the accuracy of revenue recorded in
the year.

We evaluated the appropriateness of
capitalisation policies, performed tests on costs
capitalised and assessed the timeliness of the
transfer of assets in the course of development.
There were no exceptions noted from our
testing.

Our testing on the application of the asset life
review identified no issues.

In performing these procedures, we considered
the judgements made by management including:

•

the nature of underlying costs
capitalised as part of the cost of the
software billing and delivery platforms;
the appropriateness of asset lives
applied in the calculation of
amortisation;
assessing the need for accelerated
amortisation; and
changes in development activities due
to COVID-19 business environment.

No significant issues were noted from our
testing.

Independent auditor’s report

Taxation – Deferred tax assets/ liabilities and
income tax expense

During the year the management undertook a
review of its taxation policies and recalculated
existing tax bases across the group.

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

In conducting our audit, we considered the
updated tax policies of the group and
evaluated the recalculated tax base.

As a result of this review, corrections from prior
periods were identified by management and have
resulted in the restatement of prior period balances.

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES
Our procedures included challenging
Management on the suitability of the
updated tax policies of the group, and the
accuracy and reasonableness of the
recalculated tax base, by performing the
following:

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:
Refer to Note 5 of the Financial Statements,
Income and deferred tax.

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

Information Other than the Financial Report and Auditor’s Report Thereon

The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2020, but does not include the financial
report and our auditor’s report thereon.

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

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

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:

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

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

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

ii.

any applicable code of professional conduct in relation to the audit.

ii.

any applicable code of professional conduct in relation to the audit.

Responsibility of the Directors for the Financial Report

MNSA PTY LTD

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

•

assessing tax calculations of the tax
base going forward;

• questioning management and its
external taxation advisor on the
accuracy of the corrected figures
and quantifying the identified
corrections from prior periods; and
considered management judgements
and external advice received timing
of the corrections and disclosure
requirements in line with the
Australian Accounting Standards.

•

Based on our procedures, we noted no issues
of concern, and consider Management’s key
assumptions and disclosures to be
reasonable.

There were no restrictions on our reporting of Key Audit Matters.

The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.

MNSA PTY LTD

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

Auditor’s Responsibilities for the Audit of the Financial Report

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

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

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

•

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.

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

estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern.

Independent auditor’s report

If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities
modify our opinion.

• Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
However, future events or conditions may cause the Group to cease to continue as a going concern.
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES
• Evaluate the overall presentation, structure and content of the financial report, including the

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

disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for
the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
our audit opinion.
audit; and

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

any applicable code of professional conduct in relation to the audit.

ii.

Report on the Remuneration Report

Opinion on the Remuneration Report

MNF GROUP LIMITED ABN 37 118 699 853 and Controlled Entities

We have audited the Remuneration Report included in pages 13 to 19 of the Directors’ report for the year
ended 30 June 2020.

39 to 44

AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF MNF GROUP LIMITED AND CONTROLLED ENTITIES

In our opinion the Remuneration Report of MNF Group Limited for the year ended 30 June 2020, complies
with section 300A of the Corporations Act 2001.

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2020 there have been
no contraventions of:

Responsibilities

The directors of the company are responsible for the preparation and presentation of the remuneration report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and

ii.

any applicable code of professional conduct in relation to the audit.

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

MNSA PTY LTD

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

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

MNSA PTY LTD

Allan Facey
Director

Dated in Sydney this 25th day of August 2020

ASX additional information

Additional information required by ASX Ltd and not shown elsewhere in this report is as follows.
The information is current as at 13 August 2020.

ASX additional information

(a) Distribution of equity securities

(i) Ordinary share capital

84,311,444 fully paid ordinary shares are held by 4,061 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.

(ii) Options

860,000 unlisted options are held by 29 individual option holders.
Options do not carry a right to vote.

The numbers of shareholders, by size of holding, in each class are:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

Fully paid ordinary shares

1,998

1,205

365

463

4,061

The number of security investors holding less than a marketable parcel of ordinary shares is 201.

(b) Substantial shareholders

Ordinary shareholders

Mr Andy Fung and related parties

Mr Rene Sugo and related parties

NAOS Asset Management Ltd

Fully paid

Number

13,625,802

12,034,214

5,626,276

Percentage

16.17

14.28

6.67

National Nominees Limited

Mr Andy Kam Kan Fung & Ms My Van Monique Ly

HSBC Custody Nominees (Australia) Limited

Avondale Innovations Pty Ltd

J P Morgan Nominees Australia Pty Limited

Citicorp Nominees Pty Limited

RACS SMSF Pty Ltd

BNP Paribas Nominees Pty Ltd

Boorne Gregg Investments Pty Ltd

Kore Management Services Pty Ltd

Boorne Superannuation Fund Pty Ltd

Neweconomy Com AU Nominees Pty Limited

L & C Pty Ltd

Sandhurst Trustees Ltd

G & E Properties Pty Ltd

Lee Superfund Mgmt Pty Limited

Mr Michael John Boorne

Ms Le Quan Catherine Ly

Endan Pty Ltd

UBS Nominees Pty Ltd

(d) On-Market Buy Back

There is currently no on-market buy back.

Fully paid

Number

14,062,813

13,417,448

11,749,517

10,838,955

3,998,428

2,015,307

1,195,259

985,734

901,234

855,906

811,226

769,017

700,000

649,980

529,247

385,000

371,199

301,275

273,951

255,483

Percentage

16.68

15.92

13.93

12.86

4.74

2.39

1.42

1.17

1.07

1.02

0.96

0.91

0.83

0.77

0.63

0.46

0.44

0.36

0.32

0.30

65,066,979

77.18

www.mnfgroup.limitedMNF Group Limited | ABN 37 118 699 853 and controlled entitiesFor the year ended 30 June 2020MNF Group Limited | ABN 37 118 699 853 and controlled entitiesCorporate Information

Principal Place of Business
Level 4, 580 George Street
Sydney NSW 2000
Australia
Phone: 61 2 8008 8000

Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Phone: 61 2 8280 7100

Auditors
MNSA Pty Ltd
Chartered Accountants
Level 1, 283 George Street
Sydney NSW 2000
Australia

Directors
Terry Cuthbertson (Chairman)
Michael Boorne
Andy Fung
David Stewart
Rene Sugo (CEO)
Gail Pemberton

Company Secretary
Catherine Ly

Chief Financial Officer
Chris Last

Registered Office
Level 4, 580 George Street
Sydney NSW 2000
Australia

Bankers
Westpac Banking Corporation
Westpac Place
Sydney NSW 2000
Australia

HSBC Bank Australia Limited,
Head Office,
Sydney NSW 2000,
Australia

This annual report covers both MNF Group Limited as an individual entity and the consolidated group comprising
MNF Group Limited and its subsidiaries.

The Group’s functional and presentation currency is AUD. The Company is listed on the Australian Securities
Exchange under the code MNF.

Annual Report
Copies of the 2020 Annual Report with the Financial Statements can be downloaded from:
www.mnfgroup.limited/investors/annual-reports

MNF Group Limited | ABN 37 118 699 853 and controlled entitieswww.mnfgroup.limited

MNF Group Limited Annual Report 2020