SPIRIT'S
ANNUAL
REPORT
2020
The birth of the Modern Telco.
Spirit Telecom Limited
Internet & IT
2
2020, the birth of the
Modern Telco.
SPIRIT 2020 ANNUAL REPORT Contents
Contents
Letter from the Chair
Letter from the Managing Director
Highlights of the Year
The Modern Telco
Board of Directors
Directors' Report
Auditor’s Independence Declaration
Statement of Profit or Loss
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
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SPIRIT 2020 ANNUAL REPORT L E T T E R F R O M T H E C H A I R
Dear Shareholders,
I am delighted to present Spirit’s 2020 Annual Report.
This transformational year has been marked
by significant growth as we build a modern
telecommunications company of scale for small to
medium-sized businesses (SMBs). We are fast reaching
our goal of becoming Australia’s leading provider of
Information Technology & Telecommunications (IT&T)
services.
Modern SMBs have modern requirements. They operate
their businesses via the cloud, rather than internal IT
servers, so they require more solutions. They need fast
Internet and tools to migrate to the cloud for online
activities and management of many types of devices.
Major telcos are ill-equipped to help SMBs transition to
this new work environment. Spirit is filling this gap.
We are now the "one-stop-shop" for businesses.
Pursuing this strategy has required another year of
significant corporate activity, with seven acquisitions
and the successful completion of a capital raise. We have
taken a disciplined approach to acquisitions, paying fair
value, ensuring the right strategic fit and integrating
expertly and quickly. I am pleased to welcome several
new and important business leaders to Spirit by way of
these acquisitions.
Our acquisitions of managed IT businesses includes
Cloud Business Technology. Its product offering of cloud
and security services has significant product
cross-sell opportunity into the expanding Spirit
customer base nationally. The acquisition provides
growth and expansion of Internet, cloud and managed
IT services in Sydney and regional NSW.
We acquired large managed services providers Trident
and Neptune Group (TBG), entering a new high-growth
vertical offering cloud, security and IT solutions. This
transaction provides Spirit with further additional
revenue opportunities by cross-selling the Spirit
Sky-Speed data network into TBG's client base. The
highly strategic move has also seen Spirit expand
its product sets and offerings. Trident is focused on
delivering custom-designed cloud-based IT and Internet
solutions for high growth verticals such as Schools,
Hospitals, Aged Care and Medium Sized Businesses.
In late June this year, Spirit entered an agreement to
acquire VPD Group, marking our most transformational
transaction to date. VPD Group is an established voice,
data and cloud services provider across Qld and NSW.
This will see Spirit create a new wholesale channel, Spirit
Partners, to focus on distributing its range of services
via channel partners across Australia. Through the
acquisition, Spirit will build and strengthen its cloud,
security, data and managed IT services capabilities
whilst providing entry into Qld and NSW for verticals
such as Mining, Industrials and Aged Care.
As part of this new strategy, we re-branded to Spirit
Internet & IT, and our new digital sales platform Spirit
X has become the pillar for organic growth. Spirit X
5
was rolled out in December and is now the largest
digital aggregator of Internet products to Australian
businesses. It provides a platform to purchase their ideal
Internet plan online, within three clicks and qualifies
available services in seconds. We will now add our entire
suite of products to this platform and create a central
marketplace for our distribution partners and customers.
We have welcomed several new institutional investors
to the register and have had strong support across the
market. We have strengthened our balance sheet with
equity and debt funding. This will be used to drive the
accelerated acquisition strategy and growth of the Spirit
X digital platform, and the expansion of our wholesaler
dealer network, Spirit Solution Partners.
As we set out on our journey last year, we could not
have foreseen the impact that the COVID-19 pandemic
would have on the economy and the lives of people
and businesses around Australia. We have proven to
be a resilient business, continuing to deliver growth
despite the economic uncertainty arising from the
pandemic. We have also shown that we can deliver
essential support to help businesses quickly adapt –
from the launch of new work-from-home products, to
helping our education customers rapidly scale up their
networks for a shift to remote schooling. We have again
demonstrated the essence of what has endeared Spirit
to our growing base of business customers.
We welcomed Sol Lukatsky as Managing Director
of Spirit this financial year. Sol has been vital in the
development and execution of our growth strategy, both
organically and across our large volume of M&A activities
this year. We also welcomed Paul Miller as Chief Financial
Officer as we reorganised our executive team and our
new growth strategy began to take form.
Also, joining the Board of Directors are two highly
esteemed new members, Inese Kingsmill and Greg
Ridder. Inese is recognised as one of Australia's most
effective customer-focused business leaders, with
more than 20 years of marketing experience with major
brands and with a focus on the SMB sector.
Greg is the current Chairman of Kogan.com and is
experienced in leading businesses in multiple countries,
cultures, economic circumstances and market
conditions. He brings invaluable ecommerce experience
to the Board.
Spirit has experienced transformational growth in FY20
against the backdrop of the COVID-19 pandemic and
associated economic downturn. Our momentum is
increasing as we grow both organically and through
acquisitions. We are excited about the growth
opportunities before us as we enter FY21.
On behalf of the Board and the team at Spirit, I thank
you, our shareholders, for your ongoing support.
James Joughin | Chair
SPIRIT 2020 ANNUAL REPORT
A W O R D F R O M T H E
M A N A G I N G D I R E C T O R
Dear Shareholders,
Acquisitions: Core to our strategy
7
I would like to start by thanking you for your support
during Financial Year 2020, my first year as Managing
Director of the company and a year of transformation at
Spirit Telecom.
We entered this year with a clear vision: to become THE
destination for Australian businesses to meet all of their
IT and telecommunication needs, not just
high-speed Internet. We set out to give Aussie
businesses the service they deserve along with an
integrated product suite, one monthly bill and one
provider to manage their needs from managed IT
services, cloud migration, high-speed data and cyber
security.
While the premise is simple, putting this all together isn’t
easy. That’s why Spirit has been able to fill a major gap
in the market where the big players have fallen short.
We also haven't been afraid to leverage our challenger
brand status and talk to our customers in a language
they understand. We have responded to the pain points
that left them feeling underwhelmed and underserviced
by the big end of town.
We have created a truly modern telco business.
Our focus over the past year was to:
• Create the product stack and deliver it with
outstanding service;
• Achieve scale via M&A and organic growth;
• Grow our B2B recurring revenue with a focus on the
essential services industries (Healthcare, Aged Care
and Education).
I’m pleased that this effort has delivered results.
Revenue for the year was $34.9 million, representing an
impressive 100% increase on the previous year (FY19:
$17.4 million). This revenue growth demonstrates the
strong customer demand for our products, contribution
from our acquisition strategy and the efficient
integration of our newly acquired companies and
associated synergies. It also demonstrates the resilience
of the business and the value of our recurring revenue
streams as we successfully navigate the COVID-19
pandemic.
B2B revenue has grown strongly this year and now
accounts for 90% of Spirit’s revenue. This growth
has come through managed IT services and data,
via acquisition and organic growth. Our recurring
contractual revenue has grown strongly, up 48% this
year.
Gross profit followed the trajectory of our revenue,
growing 70% to $21.7 million and now represents 63% of
sales revenue.
Underlying EBITDA was $3.73 million, representing an
88% increase on FY19. Full year EBIDTA contributions
flowing from the recent Cloud BT, Trident and Neptune
Group acquisitions are yet to fully vest, as they're only
included from February 2020 onwards.
Over the past 12 months (to June 30, 2020), we have
acquired seven businesses. As noted in the Chair’s
report, the acquisition of businesses, including Trident
and Neptune Group and Cloud Business Technology,
have enabled us to broaden our product offering,
expand into new geographies and build our business
customer base.
We’ve taken a disciplined approach to M&A, acquiring
only right-fit, right-price businesses that align with our
strategic roadmap. Importantly, we have integrated
quickly and skillfully, enabling us to leverage the
significant cross-sell opportunities that have been
created.
These acquisitions have enabled us to create a company
of scale that can service the IT&T needs of Australian
businesses. Our ability to bundle these services and
provide a seamless product and outstanding customer
service has underpinned our organic growth, particularly
during COVID-19.
We are excited about our most recent acquisition of
VPD, which will allow us to expand our Spirit Solution
Partners network nationally for the reselling our
products. This has created a strong platform for further
growth, both organic and acquisitive, as we go into FY21.
Spirit X: A platform for organic growth
Our Spirit X platform has provided us a fundamental
channel for sales generation and organic growth.
We saw an immediate impact on new sales when it
launched in December. This continued throughout
FY20, with 12,000 unique address qualifications coming
through the platform in H2 FY20 alone. We recently
added NBN Enterprise Ethernet (NBN EE) to the
platform, expanding the market opportunity for Spirit X
to cover 80% of Australian businesses.
As we expand our wholesale distribution network, we
envisage that Spirit X will be a central platform for our
dealers and customers to connect and find the right
products and service providers quickly.
Building a national brand
In line with our expanding geographic footprint, we
are leveraging our expertise in sales and marketing to
build a national brand. We have taken advantage of
historically low media-buy rates during COVID-19 to
launch our first national advertising campaign. This
campaign has contributed to record high levels of
visitors to the Spirit website. Lead generation conversion
rates show continual improvement.
During the year, we delivered on both of our regional
fixed wireless broadband contracts with the Victorian
Government and launched high-speed Internet
to regional areas of Horsham and Morwell. These
developments bridge the divide between regional
Victoria and Melbourne, and regional businesses now
enjoy speeds comparable to those in major cities. They
are now able to compete on a national and global stage.
SPIRIT 2020 ANNUAL REPORT 8
A healthy balance sheet
We continued to strengthen our balance sheet this year, positioning us well for further growth in FY21. This was
achieved in a number of ways:
L E T T E R F R O M T H E
M A N A G I N G D I R E C T O R
• Raised $9.2 million via placement;
• Expanded CBA debt facility to $10.9 million to pursue acquisitions;
• Healthy balance sheet with $14M of cash and available debt as of June 30 (VPD settled 1 July with $6.0 million
drawdown).
In closing, I would like to thank my fellow Board members and the entire Spirit team for their energy, commitment
and contribution to achieving our vision. The tremendous growth we have seen this year could not have been possible
without our people.
During the year, the shape of our organisation has changed dramatically – through multiple acquisitions – and against
a backdrop of the COVID-19 pandemic which has created a very challenging environment. Through all of this, our team
has been strong, and our expanded Spirit family has come together to support each other and our customers.
To our shareholders, thank you for your support of the company. We look forward to sharing the next phase of our
growth with you.
Sol Lukatsky | Managing Director
SPIRIT 2020 ANNUAL REPORT
9
SPIRIT 2020 ANNUAL REPORT 10
HIGHLIGHTS
HIGHLIGHTS
OF THE YEAR
OF THE YEAR
JULY 2019
Joined forces with Bigscreensound Pty Ltd, trading as Arinda IT
JULY 2019
Joined forces with Phoenix Austec Group Pty Ltd (Phoenix)
OCTOBER 2019
Built and launched Horsham's regional Sky-Speed Internet network
SPIRIT X
PARTNER LAUNCH
NOVEMBER 2019
Spirit X launched to Spirit Dealer & Wholesale Partners
SPIRIT X
END-CUSTOMER
LAUNCH
DECEMBER 2019
Spirit X launches for all Australian businesses to use
FEBRUARY 2020
Joined forces with Cloud Business Technology, trading as Cloud BT
Joined forces with Trident Computer Services Pty Ltd and Neptune
Managed Services Pty Ltd (Trident Business Group)
ACQUIRED CAPTIAL
APRIL 2020
Spirit raised $9.2m in a placement to institutional investors and expanded
the CBA debt facility to $10.9m to pursue acquisitions
MAY 2020
Built and launched Morwell's regional Sky-Speed Internet network
JULY 2020
Joined forces with Now IT Solutions Pty Ltd, Live Call Pty Ltd and Voice
Print and Data Australia Pty Ltd (VPD Group)
SPIRIT 2020 ANNUAL REPORT 11
SPIRIT 2020 ANNUAL REPORT 12
THE MODERN
THE MODERN
TELCO
is needed now more than ever...
MODERN BUSINESSES HAVE
MODERN REQUIREMENTS
Distributed workforce
High-speed Internet
Migrating to cloud-based digital
tools
Conduct all activities online
(support, sales, digital store-
fronts, cloud-based software)
Integrate and manage many
device types
The problems we're solving:
▶ Major telcos are not equipped to help SMBs transition to this new work environment
▶ Business owners have to go to multiple service providers to create a single solution
▶ No service provider is accountable if issues arise with the business solution
▶ A significant gap exists for a modern telco to be a ‘one-stop-shop’ for businesses in the
current market
SPIRIT 2020 ANNUAL REPORT 13
We are filling the gap in a
$49B Australian industry.
SPIRIT TELECOM
Australia’s leading provider of bundled IT&T services to SMBs
and Essential Service Providers
Spirit has completed seven acquisitions in the last 12 months to build the Modern Telco
THE MODERN TELCO
IN-DEMAND SERVICES
LARGE SERVICE & BRAND REACH
High-speed Internet
Spirit X Digital Aggregation Platform
Managed IT Support
Wholesale Dealer Network
Cyber Security
Challenger Brand - 'Taking on the major Telcos'
Voice/Telephone
Cloud Storage
▶ Modern Telco solution for businesses with distributed workers requiring the next
generation of digital services
▶ The Modern Telco is proactive and helpful to Australian businesses - a stark contrast to
the traditional major Telcos
▶ Ability to bundle essential technology requirements under one roof
▶ Single solution provider, single monthly bill, superior support
▶ Generates ‘stickier’ recurring revenues than a simple ISP
SPIRIT 2020 ANNUAL REPORT 14
COMBINING THE OPPORTUNITIES OF
TELCO & IT MARKETS
High-growth
opportunity
$49B
Combined IT Services
& Business Telco markets
High-speed Internet
IT Support
Cyber Security
Voice/Telephone
Cloud Storage
$15B
Business
Telco
FY19 Spirit
Category
$34B
IT Services
FY20 Spirit Acquired
Capability
High-growth areas:
▶ Cloud Services
▶ Cyber Security
▶ Managed Services
SPIRIT 2020 ANNUAL REPORT 15
THE OPPORTUNITY: OWNING THE
CUSTOMER JOURNEY
A traditional Internet Service Provider model is like owning a road. But customers on the road use
many other services that the toll provider does not share in. Spirit adds more toll gates on the
“tolled road” and increases share of wallet by inserting itself into the customer journey.
Spirit Modern Telco
High-value service bundles & Managed IT services =
$3,000-$40,000 per month, high demand, sticky and recurring
High-Speed
Internet
IT Support
Security
Managed
Wi-Fi
Cloud
Storage
Traditional ISP
High cost of infrastructure, low margin for providing basic service = $500 per month, high churn
SPIRIT 2020 ANNUAL REPORT 16
BOOSTING VALUE BY TARGETING
INDUSTRY SECTORS
MODERN TELCO OFFERING
~90% of
ST1 revenue
is now B2B
High-speed
Internet
IT Support
Cyber
Security
Voice/
Telephone
Cloud
Storage
More in-demand
services +
large industry
clients
=
High-value
recurring
revenue with
long tenure
Spirit IT&T
NEW TTS & VPD ACQUISITIONS
Historical Markets
Newly Acquired Markets & Geographies in Qld & NSW
Industrial
Parks
Office
Education
Industrial
Health
Mining
Aged
Care
SPIRIT 2020 ANNUAL REPORT 17
OUTLOOK Q1 & Q2 EXECUTION:
SPIRIT X REACHING SCALE QUICKLY
+300 hungry wholesale telco dealer
network by December 2020...
SpiritX digital service aggregation
platform…
▶ Spirit has a growing
network of Telco
& IT dealers
▶ Historically only
supplied basic
Telco services
▶ Access to the Spirit suite
of services
▶ Powered by Spirit X
for online sales
▶ Digital fulfilment =
happy partners &
customers
…with new services to offer their existing
client base via a digital platform
…with instant provisioning of services to
customers in Q3-Q4
SPIRIT 2020 ANNUAL REPORT 18
SPIRIT 2020 ANNUAL REPORT 19
BOARD OF
BOARD OF
DIRECTORS
DIRECTORS
JAMES JOUGHIN
CHAIRMAN
James Joughin brings over 30 years of general corporate experience, having been a senior partner
of Ernst & Young until 2013. He was a partner of the firm for 17 years and headed the Mergers and
Acquisitions division in Melbourne.
James is an experienced company director and holds non-executive directorships of a number of
private companies and a public company. He was previously chair of a private engineering and
planning group, and chair of the finance and risk committee at both private and not for profit
organisations.
For most of his career, James has been providing advice to Boards in relation to growth strategies,
improving shareholder value, mergers and acquisitions, funding (both debt and equity) and IPOs.
SPIRIT 2020 ANNUAL REPORT 20
SOL LUKATSKY
MANAGING DIRECTOR
Sol is a C-Suite Executive experienced with
multiple company transactions across ASX
and private equity backed companies. He has
over 15 years in senior leadership roles covering
marketing, sales management, digital, customer
experience, big data, capital markets, innovation
and operations. He has worked with blue
chip organisations such as Dun & Bradstreet,
Challenger Financial Services and NAB.
In addition, as CEO he has led two private equity
backed companies in the online services and
digital technology markets (GLS and Workstar).
Responsibilities included Global P&L, plus over
650 team members across offices in Australia,
Asia and Europe.
Sol was educated at Harvard, Melbourne Business
School, RMIT and awarded a Fellowship by
Leadership Victoria.
MARK DIOGUARDI
COO & EXECUTIVE
DIRECTOR
Mark is an experienced CTO and COO with over
30 years’ experience, predominantly in Tier 1
and 2 Telco operators in Australia and Asia. A
qualified engineer, Mark commenced his career
in engineering and engineering construction
management with Telstra. He went on to build his
corporate career as CTO at Maxis, where he led
1,350 engineers and managed a USD $600 million
budget to grow their network.
Mark then moved into a Chief Operating Officer
role at Maxis before returning to Australia to join
iiNet as Chief Technology Officer. Mark joined
Spirit as Chief Operating Officer in November
2018 to develop and lead Spirit’s network growth
and drive operational excellence across the
business. He is also an Executive Director of Spirit
and a Non-Executive Director of TIME dotCom.
SPIRIT 2020 ANNUAL REPORT
21
INESE KINGSMILL
NON-EXECUTIVE DIRECTOR
Inese brings over 20 years of experience in
major corporations and is recognised as one
of Australia’s most effective customer-focused
business leaders. Her wealth of experience has
seen Inese drive growth and transform brands
and culture across large enterprises, including
Microsoft, Telstra and Virgin Australia. Inese is
currently a Non-Executive Director of ASX-listed IT
Professional Services company, Rhipe Limited.
Inese spent 16 years leading various functions at
Microsoft, including oversight of marketing, the
SMB customer segment and partner channel. She
has held multiple senior roles with Telstra, driving
enterprise-wide transformation of the business,
culture and brand. More recently, Inese held
the position of Chief Marketing Officer at Virgin
Australia where she was accountable for growth
of the digital channel as well as marketing.
She is a graduate of Western Sydney University,
with a BA in Marketing, and is a member of the
Australian Institute of Company Directors.
GREG RIDDER
NON-EXECUTIVE DIRECTOR
Greg is currently the Chairman of Kogan.com.
Formerly Asia Pacific Regional President at
NYSE-listed Owens-Illinois, Greg led growth and
diversification from its traditional Australian base
through joint ventures and acquisitions in China
and Southeast Asia. Recently he has focused
on intensive business improvement, acting as
CEO at the Australian Institute of Architects,
CEO at Phoenix Australia and as CFO at World
Vision Australia. Greg is experienced in leading
businesses in multiple countries, cultures,
economic circumstances and market conditions.
SPIRIT 2020 ANNUAL REPORT 22
DIRECTORS'
REPORT
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 23
The directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the 'Consolidated Entity') consisting of Spirit Telecom Limited (referred to hereafter as the
'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2020.
Directors
The following persons were directors of Spirit Telecom Limited during the whole of the financial year and up to
the date of this report, unless otherwise stated:
Mr James Joughin (Non-Executive Chairman)
Mr Sol Lukatsky (Managing Director) (appointed as Executive Director 21 June 2019, becoming Managing
Director on 2 September 2019)
Mr Mark Dioguardi (Executive Director)
Mr Gregory Ridder (Non-Executive Director) (appointed on 21 November 2019)
Ms Inese Kingsmill (Non-Executive Director) (appointed on 1 July 2020)
Mr Terence Gray (Non-Executive Director) (resigned on 7 July 2020)
Mr Geoff Neate (Managing Director) (resigned on 2 September 2019)
Mr Luke Waldren (Non-Executive Director) (resigned 3 July 2019)
Principal activities
During the financial year the principal activities of the Consolidated Entity consisted of the provision of IT&T
services. This included the provision of Telecommunication services, Cloud services, Managed IT services and
Cyber Security services to small and medium size businesses.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the Consolidated Entity after providing for income tax amounted to $1,514,501 (30 June 2019:
$823,742).
Total revenue and other income for the Consolidated Entity for the financial year ended 30 June 2020 was
$34,873,578 (30 June 2019: $17,452,445).
The following table summarises key financial metrics for the period:
2020
$
2019
$
Change
$
Change
%
34,428,845 17,365,108 17,063,737
357,396
444,733
87,337
2,182,364
639,711
426,368
478,651
1,545,661
236,892
-
200,523
636,703
402,819
426,368
278,128
98%
409%
41%
170%
100%
139%
3,727,094
1,983,076
1,744,018
87.9%
Sales revenue
Other income
Earnings before interest, taxes, depreciation &
amortisation (EBITDA) **
Business acquisition & integration costs
Business restructuring costs
Share based payments
Underlying EBITDA* excluding business acquisition
& integration costs, Share based payments &
Restructuring costs **
2
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
24 D I R E C T o R S ' RE P o R T
30 June 2020
*EBITDA is a financial measure which is not prescribed by Australian Accounting Standard (‘AAS’) and
represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is
EBITDA adjusted to exclude business acquisition & integration costs, business restructuring costs and share
based payments.
**AASB 16 Leases was adopted for the first time requiring capitalisation and amortisation of the company’s
Right of Use Assets, as outlined in note 2 of the financial statements. The modified retrospective approach was
used and as such the comparatives have not been restated in the financial statements. However, the 2019
EBITDA and Underlying EBITDA comparative in the table above has been restated to reflect the notional AASB
16 adjustment had it been effected during that year. Had the Consolidated Entity early adopted AASB 16 from
1 July 2018, $354,373 in lease rental expenses would have been reversed and replaced by depreciation and
interest totalling $397,489.
The net assets of the Consolidated Entity increased by $16,009,428 to $38,064,084 as at 30 June 2020 (30
June 2019: $22,054,656).
During the period the Consolidated Entity continued deployment and expansion of its Superfast Internet and
extended its portfolio of services to progress the strategy to be a leading provider of IT&T services to Small &
Medium Sized Businesses (SMB’s).
Over the course of the financial year Spirit has evolved to become a Modern Telco, from solely being focused
on Superfast internet to now providing a complete offering across Telecommunications, Internet, Cloud, IT
Managed Services and Cyber Security. As part of the evolution to a Modern Telco, our proprietary Spirit X digital
sales platform will continue to become an effective driver of lead generation and source of organic growth. As
announced on 27 May 2020, the NBN Enterprise Ethernet range was added to the platform, expanding the
market opportunity for Spirit X to cover 80% of Australian business premises.
Spirit accelerated its acquisition strategy to enable the Consolidated Entity to create a truly contemporary and
customer relevant Telco & IT company for Australian businesses.
Significant changes in the state of affairs
On 2 July 2019, the Consolidated Entity announced that it had entered into an agreement to acquire 100% of
Bigscreensound Pty Ltd, trading as Arinda IT, effective 1 July 2019 for upfront consideration of $2.7 million, with
the consideration payable 80% in cash and 20% in script.
The Consolidated Entity completed the acquisition on 12 July 2019 and issued 2,380,952 fully paid ordinary
shares (subject to voluntary escrow until 11 July 2020), at a fair value issue price of $0.255 (25.5 cents) per
share.
On 4 July 2019, the Consolidated Entity issued 1,508,509 fully paid ordinary shares at an issue price of $0.19688
(19.688 cents) per share pursuant to the exercise of listed options.
On 10 July 2019, the Consolidated Entity issued 13,326,593 fully paid ordinary shares at an issue price of
$0.19688 (19.688 cents) per share pursuant to the exercise of listed options.
On 16 July 2019, the Consolidated Entity issued 3,233,587 fully paid ordinary shares at an issue price of
$0.19688 (19.688 cents) per share pursuant to the exercise of listed options.
On 17 July 2019, the Consolidated Entity issued 1,250,000 fully paid ordinary shares at an issue price of $0.19
(19 cents) per share pursuant to the exercise of unlisted options.
On 24 July 2019, the Consolidated Entity announced that it had entered into an agreement to acquire 100% of
Phoenix Austec Group Pty Ltd, effective 1 July 2019 for upfront consideration of $1.6 million, with the
consideration payable 80% in cash and 20% in script.
On 29 July 2019, the Consolidated Entity announced the completion of acquisition of Phoenix Austec Group
and issued 1,333,333 fully paid ordinary shares at a deemed issue price of $0.24 (24 cents) per share to the
vendor. The shares issued were subject to voluntary escrow until 29 July 2020.
3
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
*EBITDA is a financial measure which is not prescribed by Australian Accounting Standard (‘AAS’) and
represents the profit under AAS adjusted for depreciation, amortisation, interest and tax. Underlying EBITDA is
EBITDA adjusted to exclude business acquisition & integration costs, business restructuring costs and share
based payments.
**AASB 16 Leases was adopted for the first time requiring capitalisation and amortisation of the company’s
Right of Use Assets, as outlined in note 2 of the financial statements. The modified retrospective approach was
used and as such the comparatives have not been restated in the financial statements. However, the 2019
EBITDA and Underlying EBITDA comparative in the table above has been restated to reflect the notional AASB
16 adjustment had it been effected during that year. Had the Consolidated Entity early adopted AASB 16 from
1 July 2018, $354,373 in lease rental expenses would have been reversed and replaced by depreciation and
interest totalling $397,489.
June 2019: $22,054,656).
The net assets of the Consolidated Entity increased by $16,009,428 to $38,064,084 as at 30 June 2020 (30
During the period the Consolidated Entity continued deployment and expansion of its Superfast Internet and
extended its portfolio of services to progress the strategy to be a leading provider of IT&T services to Small &
Medium Sized Businesses (SMB’s).
Over the course of the financial year Spirit has evolved to become a Modern Telco, from solely being focused
on Superfast internet to now providing a complete offering across Telecommunications, Internet, Cloud, IT
Managed Services and Cyber Security. As part of the evolution to a Modern Telco, our proprietary Spirit X digital
sales platform will continue to become an effective driver of lead generation and source of organic growth. As
announced on 27 May 2020, the NBN Enterprise Ethernet range was added to the platform, expanding the
market opportunity for Spirit X to cover 80% of Australian business premises.
Spirit accelerated its acquisition strategy to enable the Consolidated Entity to create a truly contemporary and
customer relevant Telco & IT company for Australian businesses.
Significant changes in the state of affairs
On 2 July 2019, the Consolidated Entity announced that it had entered into an agreement to acquire 100% of
Bigscreensound Pty Ltd, trading as Arinda IT, effective 1 July 2019 for upfront consideration of $2.7 million, with
the consideration payable 80% in cash and 20% in script.
The Consolidated Entity completed the acquisition on 12 July 2019 and issued 2,380,952 fully paid ordinary
shares (subject to voluntary escrow until 11 July 2020), at a fair value issue price of $0.255 (25.5 cents) per
share.
On 4 July 2019, the Consolidated Entity issued 1,508,509 fully paid ordinary shares at an issue price of $0.19688
(19.688 cents) per share pursuant to the exercise of listed options.
On 10 July 2019, the Consolidated Entity issued 13,326,593 fully paid ordinary shares at an issue price of
$0.19688 (19.688 cents) per share pursuant to the exercise of listed options.
On 16 July 2019, the Consolidated Entity issued 3,233,587 fully paid ordinary shares at an issue price of
$0.19688 (19.688 cents) per share pursuant to the exercise of listed options.
Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 25
On 25 July 2019, the Consolidated Entity issued 742,906 fully paid ordinary shares at an issue price of $0.19688
(19.688 cents) per share pursuant to the exercise of listed options.
On 26 July 2019, the Consolidated Entity issued 158,806 fully paid ordinary shares at an issue price of $0.19688
(19.688 cents) per share pursuant to the exercise of listed options.
On 2 August 2019, the Consolidated Entity issued 8,137,215 fully paid ordinary shares at an issue price of
$0.19688 (19.688 cents) per share pursuant to the exercise of listed options.
On 9 August 2019, the Consolidated Entity issued 1,624,640 fully paid ordinary shares pursuant to the
underwriting arrangement for the listed options at an issue price of $0.19688 (19.688 cents) per share.
On 2 September 2019, Mr Geoff Neate (Managing Director) tendered his resignation, effective the same date.
Sol Lukatsky was appointed as Managing Director.
On 16 September 2019 the Consolidated Entity issued 88,480 fully paid ordinary shares with a deemed issue
price of $0.226 per share to incentivise employees of the Company (non-directors).
On 22 November 2019, the Consolidated Entity issued 1,250,000 fully paid ordinary shares at an issue price of
$0.19 (19 cents) per share pursuant to the exercise of unlisted options.
On 20 December 2019, the Consolidated Entity issued 332,084 fully paid ordinary shares, upon conversion of
vested performance rights.
On 28 January 2020, the Consolidated Entity announced the acquisition of Sydney based cloud & managed IT
services business assets, Cloud Business Technology, for $700,000 with the consideration payable 80% in
cash and 20% in script.
The acquisition was completed on 3 February 2020 and 700,000 fully paid ordinary shares were issued (subject
to voluntary escrow until 3 February 2021), at a fair value issue price of $0.185 (18.5 cents) per share.
On 14 February 2020, the Consolidated Entity announced the acquisition of Trident & Neptune Group ("TBG"),
including Trident Computer Services Pty Ltd (Trident) and Neptune Managed Services Pty Ltd (Neptune), an
established managed IT services and security business. The total purchase price of up to $6.9 million, which
includes an earnout component, will be paid as a combination of cash and Spirit equity being a split of 75%
cash and 25% Spirit shares if hurdles are met in CY2020 and FY2021.
The acquisition was completed on 18 February 2020 and 5,818,750 fully paid ordinary shares were issued
(subject to voluntary escrow until 18 February 2021), at a fair value issue price of $0.21 (21 cents) per share.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a
pandemic, which continues to spread globally as well as in Australia. The spread of COVID-19 has caused
significant volatility in Australian and international markets. There is significant uncertainty around the breadth
and duration of business disruptions related to COVID-19 and therefore the Company has taken precautionary
measures by temporarily closing the Company’s offices (for all but essential services) and having arranged for
its the employees to work remotely, as well as curtailing travel. At the date of this report, the impact of these
measures is not expected to significantly affect Spirit’s business operations. The Board and management
continue to monitor and manage the operations in view of the dynamic nature of the events and will update the
market if our outlook changes.
On 17 July 2019, the Consolidated Entity issued 1,250,000 fully paid ordinary shares at an issue price of $0.19
(19 cents) per share pursuant to the exercise of unlisted options.
On 15 April 2020, the Consolidated Entity announced that:
On 24 July 2019, the Consolidated Entity announced that it had entered into an agreement to acquire 100% of
Phoenix Austec Group Pty Ltd, effective 1 July 2019 for upfront consideration of $1.6 million, with the
consideration payable 80% in cash and 20% in script.
On 29 July 2019, the Consolidated Entity announced the completion of acquisition of Phoenix Austec Group
and issued 1,333,333 fully paid ordinary shares at a deemed issue price of $0.24 (24 cents) per share to the
vendor. The shares issued were subject to voluntary escrow until 29 July 2020.
●
it successfully raised $9.2M in a strongly supported capital raising, which comprised an unconditional
placement of approximately $8.662M to professional and sophisticated Investors (tranche 1) and
Conditional Placement to Directors, Founders and Employees (tranche 2) of approximately $0.5M (subject
to shareholder approval). The shares in relation to the tranche 1 placement were issued on 20 April 2020
and the shares in relation to the tranche 2 placement were issued 1 June 2020 (post Shareholder approval).
● CBA (the Group’s banker) had expanded the Spirit Telecom Limited debt facility based on business
performance to $10.9M.
3
4
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
26 D I R E C T o R S ' RE P o R T
30 June 2020
The additional capital raised was deployed to drive the accelerated acquisition strategy and growth of the Spirit
X digital platform.
On 22 April 2020, the Consolidated Entity issued 653,943 performance rights to employees pursuant to the
terms of the Spirit Telecom Employee Incentive Plan, vesting on satisfaction of certain performance hurdles
over a three-year performance period, expiring on or before 22 April 2023.
On 26 June 2020, the Consolidated Entity announced the acquisition of the VPD Group (comprising Now IT
Solutions Pty Ltd, Live Call Pty Ltd and Voice Print and Data Australia Pty Ltd) an established Voice, Data and
Cloud Services provider across Queensland and NSW. The acquisition will see Spirit create a new wholesale
business, Spirit Partners, to focus on distributing its range of products via channel partners across Australia.
The upfront purchase price of $14.0M was settled by a combination of cash & equity being $7.0M cash (gross
of a $1M cash retention to allow for any completion adjustments) and $5.8M Spirit shares (equity component
adjusted after net debt adjustment on completion). The Share Purchase Agreement includes an earnout
component comprised of Tranches 2 and 3 future payments payable where EBITDA performance exceeds
performance targets for FY21 & FY22 respectively with payment at 5x any over-achievement. Total maximum
purchase price is $27.5M.
The acquisition of the VPD Group was completed on 1 July 2020 and its contribution will therefore only be
included in the forthcoming (FY 2021) financial year.
There were no other significant changes in the state of affairs of the Consolidated Entity during the financial
year.
Matters subsequent to the end of the financial year
The acquisition of the VPD Group was completed on 1 July 2020 and 29,000,000 fully paid ordinary shares
were issued (subject to voluntary escrow until 1 July 2021), at a deemed issue price of $0.20 (20 cents) per
share. As at the date of preparation of this financial report the initial accounting of the business combination for
the VPD Group is incomplete.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated
Entity's state of affairs in future financial years.
Likely developments and expected results of operations
The Consolidated Entity is well placed to continue its recent growth trajectory in FY21 as it accelerates the
integration of recent acquisitions and leverages its ability to provide end to end IT&T solutions across the
expanded customer base.
Environmental regulation
The Consolidated Entity is not subject to any significant environmental regulation under Australian
Commonwealth or State law.
5
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
X digital platform.
The additional capital raised was deployed to drive the accelerated acquisition strategy and growth of the Spirit
On 22 April 2020, the Consolidated Entity issued 653,943 performance rights to employees pursuant to the
terms of the Spirit Telecom Employee Incentive Plan, vesting on satisfaction of certain performance hurdles
over a three-year performance period, expiring on or before 22 April 2023.
On 26 June 2020, the Consolidated Entity announced the acquisition of the VPD Group (comprising Now IT
Solutions Pty Ltd, Live Call Pty Ltd and Voice Print and Data Australia Pty Ltd) an established Voice, Data and
Cloud Services provider across Queensland and NSW. The acquisition will see Spirit create a new wholesale
business, Spirit Partners, to focus on distributing its range of products via channel partners across Australia.
The upfront purchase price of $14.0M was settled by a combination of cash & equity being $7.0M cash (gross
of a $1M cash retention to allow for any completion adjustments) and $5.8M Spirit shares (equity component
adjusted after net debt adjustment on completion). The Share Purchase Agreement includes an earnout
component comprised of Tranches 2 and 3 future payments payable where EBITDA performance exceeds
performance targets for FY21 & FY22 respectively with payment at 5x any over-achievement. Total maximum
purchase price is $27.5M.
The acquisition of the VPD Group was completed on 1 July 2020 and its contribution will therefore only be
included in the forthcoming (FY 2021) financial year.
There were no other significant changes in the state of affairs of the Consolidated Entity during the financial
year.
Matters subsequent to the end of the financial year
The acquisition of the VPD Group was completed on 1 July 2020 and 29,000,000 fully paid ordinary shares
were issued (subject to voluntary escrow until 1 July 2021), at a deemed issue price of $0.20 (20 cents) per
share. As at the date of preparation of this financial report the initial accounting of the business combination for
the VPD Group is incomplete.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated
Entity's state of affairs in future financial years.
Likely developments and expected results of operations
The Consolidated Entity is well placed to continue its recent growth trajectory in FY21 as it accelerates the
integration of recent acquisitions and leverages its ability to provide end to end IT&T solutions across the
expanded customer base.
Environmental regulation
Commonwealth or State law.
The Consolidated Entity is not subject to any significant environmental regulation under Australian
Spirit Telecom Limited
Directors' report
30 June 2020
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
Interests in rights:
D I R E C T o R S ' R E P o R T 27
Mr James Joughin
Non-Executive Chairman
Bachelor of Business, CPA, GAIDC
James Joughin brings over 30 years of general corporate experience, having
been a senior partner of Ernst & Young until 2013. He was a partner of that
firm for 17 years and headed the Mergers and Acquisitions division in
Melbourne. James is also an experienced company director and holds non-
executive directorships of a number of private companies and a public
company. He has wide business experience and has previously held the
position of Chair of a private company and currently Chair of a number of Risk
and Audit Committees. For most of his career, James has been providing
advice to Boards in relation to growth strategies, improving shareholder value,
mergers and acquisitions, funding (both debt and equity) and IPO’s.
None
None
Member, Audit and Risk Committee,
Member, Nomination and Remuneration Committee
4,045,455 fully paid ordinary shares
Nil
Nil
Mr Sol Lukatsky
Managing Director (appointed as Executive Director 21 June 2019, becoming
Managing Director on 2 September 2019)
Masters of Marketing, Bachelor of Business (Marketing)
Mr Lukatsky is a C-Suite Executive with multiple company transactions
across: ASX and Private Equity backed companies. He has over 15 years in
senior leadership roles covering: marketing, sales management, digital,
customer experience, big data, capital markets, innovation and operations
within blue chip organisations including: Dun & Bradstreet, Challenger
Financial Services and NAB. In addition, as CEO he has led two Private Equity
backed companies in the online services and digital technology markets (GLS
& Workstar). This included, Global P&L responsibilities, +650 team members
with offices across Australia, Asia and Europe. Educated at Harvard,
Melbourne Business School, RMIT and awarded a Fellowship by Leadership
Victoria.
None
None
2,957,755 fully paid ordinary shares
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.15 (15
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.18 (18
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.215
(21.5 cents) per option, expiring 1 July 2023.
247,059 performance rights
5
6
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
28 D I R E C T o R S ' RE P o R T
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Mr Mark Dioguardi
Executive Director (appointed 21 June 2019)
Master of Business Administration, Bachelor of Engineering Hons
Mr Dioguardi is an experienced CTO and COO with over 25 years’ experience
predominantly in Tier 1 and 2 Telco operators in Australia and Asia. A qualified
engineer, Mark commenced his career in engineering and engineering
construction management in Telstra before building his corporate career as
CTO at Maxis, where he led 1350 engineers and managed a USD600mil
budget to grow their network. He then moved into a Chief Operating Officer
role at Maxis before returning to Australia to join iiNet as Chief Technology
Officer. Mark joined Spirit as Chief Operating Officer in November 2018 to
develop and lead Spirit’s network growth and drive operational excellence
across the business. He is also an Executive Director of Spirit and a Non-
Executive Director of TimedotCom (a listed Malaysia telecommunications
company).
TimedotCom
None
1,287,878 fully paid ordinary shares
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.15 (15
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.18 (18
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.215
(21.5 cents) per option, expiring 1 July 2023;
520,000 performance rights
Mr Gregory Ridder
Non-Executive Director (appointed 21 November 2019)
BBus (Acc), Grad Dip (Mktg), GAICD, CPA
Mr Ridder is currently the Chairman of Kogan.com. Formerly Asia Pacific
Regional President at NYSE listed Owens-Illinois, Greg led growth and
diversification from its traditional Australian base through joint ventures and
acquisitions in China and Southeast Asia. Recently he has focused on
intensive business improvement, acting as CEO at the Australian Institute of
Architects, CEO at Phoenix Australia and as CFO at World Vision Australia.
Greg is experienced in leading businesses in multiple countries, cultures,
economic circumstances and market conditions.
Chairman, Kogan.com Limited (ASX: KGN)
Nil
Chair, Nomination and Remuneration Committee; Member, Nomination and
Remuneration Committee from 15 July 2020
Member, Audit and Risk Committee; Chair, Audit and Risk Committee from 15
July 2020
1,000,000 fully paid ordinary shares
Nil
Nil
7
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Mr Mark Dioguardi
Executive Director (appointed 21 June 2019)
Master of Business Administration, Bachelor of Engineering Hons
Experience and expertise:
Mr Dioguardi is an experienced CTO and COO with over 25 years’ experience
predominantly in Tier 1 and 2 Telco operators in Australia and Asia. A qualified
engineer, Mark commenced his career in engineering and engineering
construction management in Telstra before building his corporate career as
CTO at Maxis, where he led 1350 engineers and managed a USD600mil
budget to grow their network. He then moved into a Chief Operating Officer
role at Maxis before returning to Australia to join iiNet as Chief Technology
Officer. Mark joined Spirit as Chief Operating Officer in November 2018 to
develop and lead Spirit’s network growth and drive operational excellence
across the business. He is also an Executive Director of Spirit and a Non-
Executive Director of TimedotCom (a listed Malaysia telecommunications
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
company).
TimedotCom
None
1,287,878 fully paid ordinary shares
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.15 (15
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.18 (18
cents) per option, expiring 1 July 2023;
3,000,000 unlisted options, vesting on 1 July 2022, exercisable at $0.215
(21.5 cents) per option, expiring 1 July 2023;
Interests in rights:
520,000 performance rights
Name:
Title:
Qualifications:
Mr Gregory Ridder
Non-Executive Director (appointed 21 November 2019)
BBus (Acc), Grad Dip (Mktg), GAICD, CPA
Experience and expertise:
Mr Ridder is currently the Chairman of Kogan.com. Formerly Asia Pacific
Regional President at NYSE listed Owens-Illinois, Greg led growth and
diversification from its traditional Australian base through joint ventures and
acquisitions in China and Southeast Asia. Recently he has focused on
intensive business improvement, acting as CEO at the Australian Institute of
Architects, CEO at Phoenix Australia and as CFO at World Vision Australia.
Greg is experienced in leading businesses in multiple countries, cultures,
economic circumstances and market conditions.
Chairman, Kogan.com Limited (ASX: KGN)
Other current directorships:
Former directorships (last 3
Nil
years):
Special responsibilities:
Chair, Nomination and Remuneration Committee; Member, Nomination and
Remuneration Committee from 15 July 2020
Member, Audit and Risk Committee; Chair, Audit and Risk Committee from 15
Interests in shares:
Interests in options:
Interests in rights:
1,000,000 fully paid ordinary shares
July 2020
Nil
Nil
Spirit Telecom Limited
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
D I R E C T o R S ' R E P o R T 29
Ms Inese Kingsmill
Non-Executive Director (appointed 1 July 2020)
B. Bus in Marketing, MAICD
Inese brings over 20 years of experience in major corporations and is
recognised as one of Australia’s most effective customer-focused business
leaders. Her wealth of experience saw Inese drive growth and transform
brands and culture across large enterprises including Microsoft, Telstra, Virgin
Australia and is currently a Non-Executive Director of ASX listed IT
Professional Services company, Rhipe Limited.
Inese spent 16 years leading various functions at Microsoft, including
oversight of marketing, the SMB customer segment and partner channel. She
has held multiple senior roles with Telstra, driving enterprise wide
transformation of the business, culture and brand. More recently, Inese held
the position of Chief Marketing Officer at Virgin Australia where she was
accountable for growth of the digital channel as well as marketing.
Non-Executive Director, Rhipe Limited (ASX: RHP)
None
Chair, Nomination and Remuneration Committee from 15 July 2020
Member, Audit and Risk Committee from 15 July 2020
Nil
Nil
Nil
Mr Luke Waldren
Non-Executive Director (resigned 3 July 2019)
Mr Waldren has over 30 years' experience in Advertising, Communications
and Marketing, having held senior roles in Australia and USA. Previous roles
include several agency roles, culminating as Chief Executive Officer of Grey
Group Australia (WPP). Experience in senior roles include General Manager,
Marketing at Sportsbet and Executive General Manager with TABCorp.
None
None
Chair, Remuneration and Nomination Committee
Member, Audit and Risk Committee.
108,917 fully paid ordinary shares (on the date of resignation)
Nil
Nil
7
8
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 D I R E C T o R S ' RE P o R T
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Mr Terence Gray
Non-Executive Director (resigned on 7 July 2020)
B.Bus, Grad Dip App Fin
Terence is a corporate consultant to Lodge Partners Pty Ltd offering
investment management and corporate advisory services. He has over 20
years’ financial markets experience including funds management and
corporate finance. Terence has held roles as Head of Equities at ANZ Funds
Management, Chief Investment Officer at Allianz Equity Management, Head
of Research with Allianz Dresdner Asset Management and Director of
Corporate Finance with Grange Securities. He has deep knowledge of funds
management and the Australian equity market. His grounding as an
institutional investor running large investment teams and as a corporate
advisor to junior companies provides insight and expertise in company
valuation, corporate fund raising and M&A activity.
None
None
Chair, Audit and Risk Committee
Member, Nomination and Remuneration Committee
1,825,360 fully paid ordinary shares (on the date of resignation)
Nil
Nil
Mr Geoff Neate
Managing Director (resigned on 2 September 2019)
Bachelor of Business (Monash), Master of Marketing (Melb)
Geoff is a co-founder of Spirit Telecom, starting the business in 2005. Geoff
has been a senior executive with several established organisations such as
Primus Telecom, RACV, Telstra and Lend Lease Corporate Services. His
three years at Primus Telecom as General Manager of the Consumer Division
included managing nearly 500 staff, an $8 million marketing spend and $47
million in operational expenses. With over 20 years’ experience in
telecommunications, he has witnessed the industry transform and has shaped
Spirit’s activities accordingly.
None
None
None
34,616,586 fully paid ordinary shares (on the date of resignation)
Nil
1,282,820 performance rights (on the date of resignation)
'Other current directorships' quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
9
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Mr Terence Gray
Non-Executive Director (resigned on 7 July 2020)
B.Bus, Grad Dip App Fin
Experience and expertise:
Terence is a corporate consultant to Lodge Partners Pty Ltd offering
investment management and corporate advisory services. He has over 20
years’ financial markets experience including funds management and
corporate finance. Terence has held roles as Head of Equities at ANZ Funds
Management, Chief Investment Officer at Allianz Equity Management, Head
of Research with Allianz Dresdner Asset Management and Director of
Corporate Finance with Grange Securities. He has deep knowledge of funds
management and the Australian equity market. His grounding as an
institutional investor running large investment teams and as a corporate
advisor to junior companies provides insight and expertise in company
valuation, corporate fund raising and M&A activity.
Other current directorships:
Former directorships (last 3
None
None
years):
Special responsibilities:
Chair, Audit and Risk Committee
Member, Nomination and Remuneration Committee
1,825,360 fully paid ordinary shares (on the date of resignation)
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Nil
Nil
Mr Geoff Neate
Experience and expertise:
Geoff is a co-founder of Spirit Telecom, starting the business in 2005. Geoff
Managing Director (resigned on 2 September 2019)
Bachelor of Business (Monash), Master of Marketing (Melb)
has been a senior executive with several established organisations such as
Primus Telecom, RACV, Telstra and Lend Lease Corporate Services. His
three years at Primus Telecom as General Manager of the Consumer Division
included managing nearly 500 staff, an $8 million marketing spend and $47
million in operational expenses. With over 20 years’ experience in
telecommunications, he has witnessed the industry transform and has shaped
Spirit’s activities accordingly.
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
None
None
None
Nil
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
Spirit Telecom Limited
Directors' report
30 June 2020
Company secretary
Ms Melanie Leydin, BBus (Acc. Corp Law) CA FGIA
D I R E C T o R S ' R E P o R T 31
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of
the Institute of Chartered Accountants, Fellow of the Governance Institute of Australia and is a Registered
Company Auditor. She graduated from Swinburne University in 1997, became a Chartered Accountant in 1999
and since February 2000 has been the principal of Leydin Freyer. The practice provides outsourced company
secretarial and accounting services to public and private companies across a host of industries including but
not limited to the resources, technology, bioscience, biotechnology and health sectors.
Melanie has over 25 years’ experience in the accounting profession and over 15 years as a Company
Secretary. She has extensive experience in relation to public company responsibilities, including ASX and ASIC
compliance, control and implementation of corporate governance, statutory financial reporting, reorganisation
of Companies and shareholder relations.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board Committee held
during the year ended 30 June 2020, and the number of meetings attended by each director were:
Full Board
Remuneration Committee Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Nomination and
Mr James Joughin
Mr Sol Lukatsky
Mr Mark Dioguardi
Mr Gregory Ridder
Mr Terence Gray
Mr Geoff Neate
14
14
14
8
13
3
14
14
14
8
14
3
3
-
-
2
3
-
3
-
-
2
3
-
3
-
-
1
3
-
3
-
-
2
3
-
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
* Mr Luke Waldren resigned from the Board on 3 July 2019. No Board meeting was held from the start of the
financial year to the date of his resignation.
34,616,586 fully paid ordinary shares (on the date of resignation)
1,282,820 performance rights (on the date of resignation)
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the
Consolidated Entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
'Other current directorships' quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly, including all directors.
Principles used to determine the nature and amount of remuneration
The remuneration report is set out under the following main headings:
●
● Details of remuneration
Service agreements
●
Share-based compensation
●
Additional information
●
Additional disclosures relating to key management personnel
●
9
10
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
32 D I R E C T o R S ' RE P o R T
30 June 2020
Principles used to determine the nature and amount of remuneration
The objective of the Consolidated Entity's executive reward framework is to ensure reward for performance is
competitive and appropriate for the results delivered. The framework aligns executive reward with the
achievement of strategic objectives and the creation of value for shareholders and it is considered to conform
to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive
reward satisfies the following key criteria for good reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and
executives. The performance of the Consolidated Entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders' interests. The Board have
considered that it should seek to enhance shareholders' interests by:
having economic profit as a core component of plan design
●
focusing on sustained growth in shareholder wealth, particularly growth in share price, and delivering
●
constant or increasing return on capital as well as focusing the executive on key non-financial drivers of
value
attracting and retaining high calibre executives
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive
director remuneration is separate.
Non-executive directors’ remuneration
The non-executive Directors’ fees for the financial year are $80,000 per annum payable to the Chairman, and
$60,000 per annum payable to each other non-executive Director.
Under the Constitution the Directors decide the total amount paid to each Director as remuneration for their
services. Under ASX Listing Rules, the total amount paid to all non-executive Directors must not exceed in total
in any financial year the amount fixed at the general meeting of the Company held on 23 November 2017, which
is presently $300,000. Remuneration must not include a commission on, or a percentage of, the profits or
income of the Company.
Non-executive directors' fees and payments are reviewed annually by the Board. The Board may, from time to
time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and
payments are appropriate and in line with the market. No advice was sought during the course of the financial
year. The Chairman's fees are determined independently of the fees of other non-executive directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to the
determination of his own remuneration.
Directors may also be reimbursed for travel and other expenses incurred in attending to the Company's affairs.
Non-executive Directors may be paid such additional or special remuneration as the Directors decide is
appropriate where a Director performs extra work or services which are not in the capacity as a Director of the
Company.
There are no retirement benefit schemes for Directors other than statutory superannuation contributions.
Executive remuneration
The Consolidated Entity aims to reward executives based on their position and responsibility with a level and
mix of remuneration which has both fixed and variable components.
11
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 33
●
●
●
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
The objective of the Consolidated Entity's executive reward framework is to ensure reward for performance is
competitive and appropriate for the results delivered. The framework aligns executive reward with the
achievement of strategic objectives and the creation of value for shareholders and it is considered to conform
to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive
reward satisfies the following key criteria for good reward governance practices:
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and
executives. The performance of the Consolidated Entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders' interests. The Board have
considered that it should seek to enhance shareholders' interests by:
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, particularly growth in share price, and delivering
constant or increasing return on capital as well as focusing the executive on key non-financial drivers of
value
●
attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives' interests by:
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive
director remuneration is separate.
Non-executive directors’ remuneration
The non-executive Directors’ fees for the financial year are $80,000 per annum payable to the Chairman, and
$60,000 per annum payable to each other non-executive Director.
Under the Constitution the Directors decide the total amount paid to each Director as remuneration for their
services. Under ASX Listing Rules, the total amount paid to all non-executive Directors must not exceed in total
in any financial year the amount fixed at the general meeting of the Company held on 23 November 2017, which
is presently $300,000. Remuneration must not include a commission on, or a percentage of, the profits or
income of the Company.
Non-executive directors' fees and payments are reviewed annually by the Board. The Board may, from time to
time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and
payments are appropriate and in line with the market. No advice was sought during the course of the financial
year. The Chairman's fees are determined independently of the fees of other non-executive directors based on
comparative roles in the external market. The Chairman is not present at any discussions relating to the
determination of his own remuneration.
Directors may also be reimbursed for travel and other expenses incurred in attending to the Company's affairs.
Non-executive Directors may be paid such additional or special remuneration as the Directors decide is
appropriate where a Director performs extra work or services which are not in the capacity as a Director of the
Company.
Executive remuneration
There are no retirement benefit schemes for Directors other than statutory superannuation contributions.
The Consolidated Entity aims to reward executives based on their position and responsibility with a level and
mix of remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
long term incentives in the form of share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration consisting of base salary, superannuation and non-monetary benefits, are reviewed
annually by the Nomination and Remuneration Committee based on individual and business unit performance,
the overall performance of the Consolidated Entity and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor
vehicle benefits) where it does not create any additional costs to the Consolidated Entity and provides additional
value to the executive.
Consolidated Entity performance and link to remuneration
As many of the executive joined during the course of the financial year, remuneration for certain individuals is
not currently directly linked to performance of the Consolidated Entity. An individual member of staff’s
performance assessment is carried out by reference to their contribution to the Company’s overall operational
achievements.
Voting and comments made at the Company's 20 November 2019 Annual General Meeting ('AGM')
At the 20 November 2019 AGM, 99.94% of the votes received supported the adoption of the remuneration report
for the year ended 30 June 2019. The Company did not receive any specific feedback at the AGM regarding its
remuneration practices.
Details of remuneration
The key management personnel of the Consolidated Entity consisted of the following directors and executives
of Spirit Telecom Limited:
●
●
James Joughin, Non-Executive Chairman
Sol Lukatsky, Managing Director (appointed as Executive Director 21 June 2019, becoming Managing
Director on 2 September 2019)
● Mark Dioguardi, Executive Director
● Gregory Ridder, Non-Executive Director (appointed on 21 November 2019)
Inese Kingsmill, Non-Executive Director (appointed 1 July 2020)
●
●
Terence Gray, Non-Executive Director (resigned 7 July 2020)
● Geoff Neate, Managing Director (resigned on 2 September 2019)
Luke Waldren, Non-Executive Director (resigned 3 July 2019)
●
●
Paul Miller, Chief Financial Officer (appointed on 25 November 2019)
● Donovan Newton, Chief Financial Officer (resigned on 30 August 2019)
Amounts of remuneration
Details of the remuneration of key management personnel of the Consolidated Entity are set out in the following
tables.
11
12
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
34 D I R E C T o R S ' RE P o R T
30 June 2020
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
2020 (****)
Non-Executive Directors:
James Joughin
Terence Gray*
Gregory Ridder
Executive Directors:
Sol Lukatsky **
Mark Dioguardi***
Geoff Neate
Other Key Management
Personnel:
Paul Miller
Donovan Newton***
Cash
salary
and fees
$
73,357
59,000
35,500
277,577
250,667
311,934
90,000
20,000
-
131,827
93,812
1,233,674
-
27,864
137,864
-
-
-
-
-
-
-
-
-
5,336
-
-
-
-
-
-
-
-
78,693
59,000
35,500
27,758
27,067
21,270
5,068
2,376
-
211,731
218,006
34,320
612,134
518,116
367,524
13,183
10,836
105,450
440
-
7,884
3,314
-
148,764
132,512
467,371 1,952,243
* Mr Terence Gray resigned from the Board on 7 July 2020.
** Mr Sol Lukatsky was awarded a cash bonus in respect of his FY20 performance, determined and payable
in FY21.
*** Mr Mark Dioguardi and Mr Donovan Newton were awarded cash bonuses in respect of their FY19
performance, determined and paid in FY20.
**** Following the outbreak of COVID-19 in March 2020, the Directors elected to take a short term 10% pay
reduction whilst the Company assessed the impacts. As outlined, there has not been a material impact to
business operations and accordingly the pay reduction was only applied for a two-month period.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
-
-
-
-
-
-
2019
Non-Executive Directors:
James Joughin
Terence Gray
Luke Waldren*
Executive Directors:
Geoff Neate***
Sol Lukatsky**
Mark Dioguardi**
Other Key Management
Personnel:
Donovan Newton***
Cash
salary
and fees
$
80,000
60,000
60,000
317,613
205,961
157,500
30,000
-
-
240,541
1,121,615
21,000
51,000
13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,390
8,390
-
88,390
68,390
60,000
34,761
20,596
15,750
5,006
-
-
53,670
35,892
32,484
441,050
262,449
205,734
26,154
97,261
-
5,006
23,412
311,107
162,238 1,437,120
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 35
Short-term benefits
benefits
benefits
payments
Post-
employment
Long-term
Share-
based
Cash
bonus
$
Non-
Super-
monetary
annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
* Mr Luke Waldren resigned from the Board on 3 July 2019.
** Mr Sol Lukatsky and Mr Mark Dioguardi were appointed as Executive Directors on 21 June 2019. The
remuneration information included above relates to the period subsequent to commencing their executive
roles with the Company.
*** Mr Geoff Neate and Mr Donovan Newton were awarded cash bonuses in respect of their FY18
performance, determined and paid in FY19.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
James Joughin
Terence Gray
Gregory Ridder
Luke Waldren*
Executive Directors:
Geoff Neate
Sol Lukatsky
Mark Dioguardi
Other Key Management
Personnel:
Paul Miller
Donovan Newton
Fixed remuneration
2019
2020
At risk - STI
At risk - LTI
2020
2019
2020
2019
100%
100%
100%
-
91%
51%
54%
91%
88%
-
100%
81%
86%
84%
-
-
-
-
-
15%
4%
98%
79%
-
92%
-
21%
-
-
-
-
7%
-
-
-
-
-
-
-
-
9%
34%
42%
9%
12%
-
-
12%
14%
16%
2%
-
-
8%
*** Mr Mark Dioguardi and Mr Donovan Newton were awarded cash bonuses in respect of their FY19
* Mr Luke Waldren resigned from the Board on 3 July 2019. No remuneration was awarded in 2020 financial
year.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Sol Lukatsky
Managing Director
23 April 2018; terms revised on 27 July 2020
No fixed term. Ongoing until terminated by either party with three months
written notice.
Effective 1 July 2020, fixed remuneration of $400,000 per annum, plus 10%
superannuation. In 2021 financial year Mr Lukatsky will be entitled to a
potential short-term incentive (STI) of up to $200,000, representing 50% of his
base remuneration (excluding superannuation), with KPI’s to be determined
no later than September 30, 2020. Mr Lukatsky will also be entitled to a
potential long-term incentive (LTI) of up to $200,000, representing 50% of his
base remuneration (excluding superannuation) subject to shareholder
approval. The performance measures will be determined no later than
September 30, 2020.
Spirit Telecom Limited
Directors' report
30 June 2020
2020 (****)
Non-Executive Directors:
James Joughin
Terence Gray*
Gregory Ridder
Executive Directors:
Sol Lukatsky **
Mark Dioguardi***
Geoff Neate
Other Key Management
Personnel:
Paul Miller
Donovan Newton***
Cash
salary
and fees
$
73,357
59,000
35,500
5,336
-
-
-
-
-
78,693
59,000
35,500
277,577
250,667
311,934
90,000
20,000
27,758
27,067
21,270
5,068
2,376
211,731
218,006
34,320
612,134
518,116
367,524
131,827
93,812
1,233,674
27,864
137,864
13,183
10,836
105,450
440
3,314
-
148,764
132,512
7,884
467,371 1,952,243
* Mr Terence Gray resigned from the Board on 7 July 2020.
** Mr Sol Lukatsky was awarded a cash bonus in respect of his FY20 performance, determined and payable
in FY21.
performance, determined and paid in FY20.
**** Following the outbreak of COVID-19 in March 2020, the Directors elected to take a short term 10% pay
reduction whilst the Company assessed the impacts. As outlined, there has not been a material impact to
business operations and accordingly the pay reduction was only applied for a two-month period.
Cash
salary
and fees
$
80,000
60,000
60,000
317,613
205,961
157,500
2019
Non-Executive Directors:
James Joughin
Terence Gray
Luke Waldren*
Executive Directors:
Geoff Neate***
Sol Lukatsky**
Mark Dioguardi**
Other Key Management
Personnel:
Donovan Newton***
Short-term benefits
benefits
benefits
payments
Post-
employment
Long-term
Share-
based
Cash
bonus
$
Non-
Super-
monetary
annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
-
-
-
8,390
8,390
-
88,390
68,390
60,000
30,000
34,761
20,596
15,750
5,006
53,670
35,892
32,484
441,050
262,449
205,734
240,541
1,121,615
21,000
51,000
26,154
97,261
23,412
311,107
5,006
162,238 1,437,120
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
14
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
36 D I R E C T o R S ' RE P o R T
30 June 2020
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Mr Mark Dioguardi
Executive Director and Chief Operating Officer
7 November 2018, terms revised on 27 July 2020
No fixed term. Ongoing until terminated by either party with three months
written notice.
Effective 1 July 2020, fixed remuneration of $330,000 per annum, plus 10%
superannuation. In 2021 financial year Mr Dioguardi will be entitled to a
potential short-term incentive (STI) of up to $110,000, representing 33.3% of
his base remuneration (excluding superannuation), with KPI’s to be
determined no later than September 30, 2020. Mr Dioguardi will also be
entitled to a potential long-term incentive (LTI) of up to $110,000, representing
33.3% of his base remuneration (excluding superannuation) subject to
shareholder approval. The performance measures will be determined no later
than September 30, 2020.
Geoff Neate
Managing Director (resigned on 2 September 2019)
24 June 2016
No fixed term. The Company may terminate the agreement by giving six
months' notice. The Company may make payment in lieu of part or all of the
notice period. Mr Neate may terminate his employment agreement by
providing the Company with 3 months written notice.
Fixed remuneration of $320,341 per annum, plus statutory superannuation
contributions. Mr Neate was eligible to receive a short-term incentive from the
Company (STI) which was structured as a cash payment subject to
achievement of relevant key financial and non-financial milestones. Mr
Neate’s maximum entitlement to receive an STI is 30% of his Base Salary with
the key milestones to be achieved by no later than 30 June 2019. Mr Neate
was also eligible to receive a long-term incentive subject to shareholder and
all other regulatory approvals.
Mr Paul Miller
Chief Financial Officer (appointed 25 November 2019)
25 November 2019
No fixed term. Ongoing until terminated by either party with three months
written notice.
Fixed remuneration of $225,000 per annum, plus $25,000 statutory
superannuation contributions. Mr Miller will be invited to participate in the Spirit
Short Term Incentive program (STI). The STI plan is paid at the discretion of
Spirit with target potential 25% of fixed base pay. Mr Miller is eligible to
participate in the Spirit Long Term Incentive program (LTI).
Donovan Newton
Chief Financial Officer (resigned on 30 August 2019)
3 July 2017
No fixed term. The Company may terminate the agreement by giving two
months' notice. The Company may make payment in lieu of part or all of the
notice period. Mr Newton may terminate his employment agreement by
providing the Company with two months written notice.
Fixed remuneration of $241,500 per annum, plus statutory superannuation
contributions. Mr Newton was eligible to receive a short-term incentive from
the Company (STI) which was structured as a cash payment subject to
achievement of relevant key financial and non-financial milestones. Mr
Newton’s maximum entitlement to receive an STI is 25% of his Base Salary
with the key milestones to be achieved by no later than 30 June 2019. Mr
Newton was also eligible to receive a long-term incentive subject to
shareholder and all other regulatory approvals.
Key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
15
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Name:
Title:
Details:
Agreement commenced:
Term of agreement:
Name:
Title:
Agreement commenced:
Term of agreement:
Geoff Neate
24 June 2016
Managing Director (resigned on 2 September 2019)
Mr Mark Dioguardi
Executive Director and Chief Operating Officer
7 November 2018, terms revised on 27 July 2020
No fixed term. Ongoing until terminated by either party with three months
written notice.
Effective 1 July 2020, fixed remuneration of $330,000 per annum, plus 10%
superannuation. In 2021 financial year Mr Dioguardi will be entitled to a
potential short-term incentive (STI) of up to $110,000, representing 33.3% of
his base remuneration (excluding superannuation), with KPI’s to be
determined no later than September 30, 2020. Mr Dioguardi will also be
entitled to a potential long-term incentive (LTI) of up to $110,000, representing
33.3% of his base remuneration (excluding superannuation) subject to
shareholder approval. The performance measures will be determined no later
than September 30, 2020.
No fixed term. The Company may terminate the agreement by giving six
months' notice. The Company may make payment in lieu of part or all of the
notice period. Mr Neate may terminate his employment agreement by
providing the Company with 3 months written notice.
Fixed remuneration of $320,341 per annum, plus statutory superannuation
contributions. Mr Neate was eligible to receive a short-term incentive from the
Company (STI) which was structured as a cash payment subject to
achievement of relevant key financial and non-financial milestones. Mr
Neate’s maximum entitlement to receive an STI is 30% of his Base Salary with
the key milestones to be achieved by no later than 30 June 2019. Mr Neate
was also eligible to receive a long-term incentive subject to shareholder and
all other regulatory approvals.
Name:
Title:
Details:
Agreement commenced:
Term of agreement:
Mr Paul Miller
25 November 2019
written notice.
Chief Financial Officer (appointed 25 November 2019)
No fixed term. Ongoing until terminated by either party with three months
Fixed remuneration of $225,000 per annum, plus $25,000 statutory
superannuation contributions. Mr Miller will be invited to participate in the Spirit
Short Term Incentive program (STI). The STI plan is paid at the discretion of
Spirit with target potential 25% of fixed base pay. Mr Miller is eligible to
participate in the Spirit Long Term Incentive program (LTI).
Name:
Title:
Agreement commenced:
Term of agreement:
Donovan Newton
3 July 2017
Chief Financial Officer (resigned on 30 August 2019)
No fixed term. The Company may terminate the agreement by giving two
months' notice. The Company may make payment in lieu of part or all of the
notice period. Mr Newton may terminate his employment agreement by
providing the Company with two months written notice.
Fixed remuneration of $241,500 per annum, plus statutory superannuation
contributions. Mr Newton was eligible to receive a short-term incentive from
the Company (STI) which was structured as a cash payment subject to
achievement of relevant key financial and non-financial milestones. Mr
Newton’s maximum entitlement to receive an STI is 25% of his Base Salary
with the key milestones to be achieved by no later than 30 June 2019. Mr
Newton was also eligible to receive a long-term incentive subject to
shareholder and all other regulatory approvals.
Key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
Details:
Details:
Spirit Telecom Limited
Directors' report
30 June 2020
Share-based compensation
D I R E C T o R S ' R E P o R T 37
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during
the year ended 30 June 2020.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and
other key management personnel in this financial year or future reporting years are as follows:
Grant date
14 May 2019
14 May 2019
14 May 2019
Name
Sol Lukatsky
Sol Lukatsky
Sol Lukatsky
Mark Dioguardi
Mark Dioguardi
Mark Dioguardi
Vesting date and
exercisable date
1 July 2022
1 July 2022
1 July 2022
Expiry date
1 July 2023
1 July 2023
1 July 2023
Number of
options
granted Grant date
Vesting date
and exercisable
date
3,000,000 14 May 2019
3,000,000 14 May 2019
3,000,000 14 May 2019
3,000,000 14 May 2019
3,000,000 14 May 2019
3,000,000 14 May 2019
1 July 2022
1 July 2022
1 July 2022
1 July 2022
1 July 2022
1 July 2022
Expiry date
1 July 2023
1 July 2023
1 July 2023
1 July 2023
1 July 2023
1 July 2023
Exercise
price
Fair value
per option at
grant date
$0.150
$0.180
$0.215
$0.0780
$0.0690
$0.0600
Fair value
Exercise
price
per option at
grant date
$0.150
$0.180
$0.215
$0.150
$0.180
$0.215
$0.0780
$0.0690
$0.0600
$0.0780
$0.0690
$0.0600
Options granted carry no dividend or voting rights.
There were no options over ordinary shares granted to or vested by directors and other key management
personnel as part of compensation during the year ended 30 June 2020.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of
directors and other key management personnel in this financial year or future reporting years are as follows:
Grant date
12 September 2018
12 September 2018
20 November 2018
20 November 2018
18 February 2019
18 February 2019
22 April 2020
22 April 2020
Vesting date and
exercisable date
1 July 2021
1 July 2021
1 July 2020
1 July 2020
1 July 2021
1 July 2021
1 July 2022
1 July 2022
Expiry date
12 September 2021
12 September 2021
20 November 2020
20 November 2020
18 February 2022
18 February 2022
22 April 2023
22 April 2023
Share price Fair value
per right
hurdle for
at grant date
vesting
-
-
-
-
-
-
-
-
$0.1692
$0.2000
$0.1194
$0.1600
$0.0355
$0.1400
$0.1084
$0.1250
15
16
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
38 D I R E C T o R S ' RE P o R T
30 June 2020
Number of
rights
granted Grant date
Vesting date and
exercisable date Expiry date
Share
price
hurdle
for
Fair value
per right
vesting at grant date
123,530 12 September 2018 1 July 2021
123,529 12 September 2018 1 July 2021
278,654 12 September 2018 1 July 2021
278,654 12 September 2018 1 July 2021
1 July 2020
256,410 20 November 2018
1 July 2020
256,410 20 November 2018
1 July 2021
260,000 18 February 2019
1 July 2021
260,000 18 February 2019
1 July 2022
164,634 22 April 2020
1 July 2022
164,634 22 April 2020
12 September 2021
12 September 2021
12 September 2021
12 September 2021
20 November 2020
20 November 2020
18 February 2022
18 February 2022
22 April 2023
22 April 2023
-
-
-
-
-
-
-
-
-
-
$0.1692
$0.2000
$0.1692
$0.2000
$0.1194
$0.1600
$0.0355
$0.1400
$0.1084
$0.1250
Name
Sol Lukatsky
Sol Lukatsky
Donovan Newton
Donovan Newton
Geoff Neate
Geoff Neate
Mark Dioguardi
Mark Dioguardi
Paul Miller
Paul Miller
Performance rights granted carry no dividend or voting rights.
The Performance Rights were issued for $Nil consideration, and the vesting of the rights is contingent on the
Company achieving certain hurdles over a two or three year performance period.
The number of Performance Rights which vest is determined by assessing the performance of the Company,
as measured by Total Shareholder Return (TSR) at the Performance Date relative to a comparator group of
companies. The VWAP of the Shares in the one-month preceding the Performance Date compared to the VWAP
of the Shares in the one-month preceding the grant date, will be used in calculating the TSR over the three year
period. The TSR incorporate capital returns as well as dividends notionally reinvested and is considered the
most appropriate means of measuring the Company’s performance.
The performance hurdles will be split 50% subject to meeting the TSR, and 50% for exceeding the budgeted
Return on Invested Capital (ROIC).
For the Performance Rights granted during FY20, 30% of the maximum amount of Performance Rights that
may vest are at risk, if appropriate behaviours, as measured by a 360-degree feedback review are not met. An
overall 75% of agreed or strongly agreed needs to be achieved in the 360-degree feedback result.
Each year the Board will determine the budgeted ROIC. This budgeted ROIC will be the hurdle return used to
calculate the 3 years series return. The Board may exercise its discretion in determining if the rights holder has
met the ROIC hurdle at the end of the 3 Years Series Return.
In relation to the 50% portion meeting the TSR, the Performance Rights will only convert to shares subject to
the Performance Period being met and subject to the Company's TSR being at least equal to the median of the
comparator group performance. The entire annual allocation will convert if the Company's TSR is at the 75th
percentile or higher than the comparator group performance. The detailed breakdown of the relationship
between the Company's performance and the conversion of Performance Rights is:
●
●
●
0% converting if the Company TSR performance is below the median performance of the comparator group.
Straight line Pro-rata conversion if the Company TSR performance is at or above the median performance
of the comparator group, but below the 75th percentile performance of the comparator group.
100% converting if the Company TSR performance is at or above the 75th percentile performance of the
comparator group.
17
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Number of
rights
Vesting date and
Name
granted Grant date
exercisable date Expiry date
Share
price
hurdle
Fair value
for
per right
vesting at grant date
Sol Lukatsky
Sol Lukatsky
Donovan Newton
Donovan Newton
Geoff Neate
Geoff Neate
Mark Dioguardi
Mark Dioguardi
Paul Miller
Paul Miller
123,530 12 September 2018 1 July 2021
123,529 12 September 2018 1 July 2021
278,654 12 September 2018 1 July 2021
278,654 12 September 2018 1 July 2021
256,410 20 November 2018
256,410 20 November 2018
260,000 18 February 2019
260,000 18 February 2019
164,634 22 April 2020
164,634 22 April 2020
1 July 2020
1 July 2020
1 July 2021
1 July 2021
1 July 2022
1 July 2022
12 September 2021
12 September 2021
12 September 2021
12 September 2021
20 November 2020
20 November 2020
18 February 2022
18 February 2022
22 April 2023
22 April 2023
-
-
-
-
-
-
-
-
-
-
$0.1692
$0.2000
$0.1692
$0.2000
$0.1194
$0.1600
$0.0355
$0.1400
$0.1084
$0.1250
The Performance Rights were issued for $Nil consideration, and the vesting of the rights is contingent on the
Company achieving certain hurdles over a two or three year performance period.
The number of Performance Rights which vest is determined by assessing the performance of the Company,
as measured by Total Shareholder Return (TSR) at the Performance Date relative to a comparator group of
companies. The VWAP of the Shares in the one-month preceding the Performance Date compared to the VWAP
of the Shares in the one-month preceding the grant date, will be used in calculating the TSR over the three year
period. The TSR incorporate capital returns as well as dividends notionally reinvested and is considered the
most appropriate means of measuring the Company’s performance.
The performance hurdles will be split 50% subject to meeting the TSR, and 50% for exceeding the budgeted
Return on Invested Capital (ROIC).
For the Performance Rights granted during FY20, 30% of the maximum amount of Performance Rights that
may vest are at risk, if appropriate behaviours, as measured by a 360-degree feedback review are not met. An
overall 75% of agreed or strongly agreed needs to be achieved in the 360-degree feedback result.
Each year the Board will determine the budgeted ROIC. This budgeted ROIC will be the hurdle return used to
calculate the 3 years series return. The Board may exercise its discretion in determining if the rights holder has
met the ROIC hurdle at the end of the 3 Years Series Return.
In relation to the 50% portion meeting the TSR, the Performance Rights will only convert to shares subject to
the Performance Period being met and subject to the Company's TSR being at least equal to the median of the
comparator group performance. The entire annual allocation will convert if the Company's TSR is at the 75th
percentile or higher than the comparator group performance. The detailed breakdown of the relationship
between the Company's performance and the conversion of Performance Rights is:
●
●
●
0% converting if the Company TSR performance is below the median performance of the comparator group.
Straight line Pro-rata conversion if the Company TSR performance is at or above the median performance
of the comparator group, but below the 75th percentile performance of the comparator group.
100% converting if the Company TSR performance is at or above the 75th percentile performance of the
comparator group.
Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 39
The number of performance rights over ordinary shares granted to and vested by directors and other key
management personnel as part of compensation during the year ended 30 June 2020 are set out below:
Name
Sol Lukatsky
Donovan Newton*
Geoff Neate
Mark Dioguardi
Paul Miller
Number of Number of Number of Number of
rights
granted
during the
year
2020
rights
granted
during the
year
2019
rights
vested
during the
year
2020
rights
vested
during the
year
2019
-
-
-
-
329,268
247,059
557,308
512,820
520,000
-
-
-
-
-
-
-
-
-
-
-
Performance rights granted carry no dividend or voting rights.
were forfeited.
* Mr Donovan Newton resigned on 30 August 2019. The performance rights issued in 2019 financial year
Additional information
The earnings of the Consolidated Entity for the five years to 30 June 2020 are summarised below:
2020
$
2019
$
2018
$
2017
$
2016
$
Revenue and other income
Net profit/(loss) before tax
Net profit/(loss) after tax
34,873,578 17,452,445 16,299,985 11,539,129
829,452
(2,042,398)
468,392
(1,514,501)
(1,009,484)
(823,742)
1,031,166
570,605
8,855,488
(2,858,066)
(2,336,065)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director of the Company and other
members of key management personnel of the Consolidated Entity, including their personally related parties, is
set out below:
Ordinary shares
James Joughin
Sol Lukatsky
Terence Gray
Mark Dioguardi
Gregory Ridder
Geoff Neate*
Luke Waldren**
Paul Miller
Balance at
the start of
the year
2,185,189
2,145,633
1,662,676
833,333
-
34,616,586
108,917
-
41,552,334
Balance
on the date
of
appointment Additions
Balance at
Disposals/
other
the end of
the year
-
-
-
-
200,000
-
-
-
200,000
812,122
1,412,684
454,545
800,000
1,860,266 -
-
(1,250,000)
-
-
- (34,616,586)
(108,917)
-
-
121,213
4,045,455
2,957,755
1,825,360
1,287,878
1,000,000
-
-
121,213
5,460,830 (35,975,503) 11,237,661
* Mr Geoff Neate resigned from the Board on 2 September 2019. The balance disclosed in "Disposals/other"
column represents his shareholding on the date of resignation.
** Mr Luke Waldren resigned from the Board on 3 July 2019. The balance disclosed in "Disposals/other"
column represents his shareholding on the date of resignation.
17
18
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
40 D I R E C T o R S ' RE P o R T
30 June 2020
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and
other members of key management personnel of the Consolidated Entity, including their personally related
parties, is set out below:
Options over ordinary shares
Geoff Neate
Terence Gray
James Joughin
Sol Lukatsky
Mark Dioguardi
Balance at
the start of
the year
10,698,786
1,412,684
1,250,000
9,000,000
9,000,000
31,361,470
Granted
Exercised
Expired/
forfeited/
other*
Balance at
the end of
the year
-
-
-
-
-
-
(1,412,684)
(1,250,000)
-
-
-
-
-
9,000,000
9,000,000
(2,662,684) (10,698,786) 18,000,000
- (10,698,786)
-
-
-
-
*
The Board agreed to permit Mr Geoff Neate to trade his Listed Options in the normal blackout paid.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each
director and other members of key management personnel of the Consolidated Entity, including their personally
related parties, is set out below:
Performance rights over ordinary shares
Geoff Neate
Sol Lukatsky
Mark Dioguardi
Paul Miller
Balance at
the start of
the year
1,282,820
247,059
520,000
-
2,049,879
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
329,268
329,268
(332,084)
-
-
-
(332,084)
(437,916)
-
-
-
(437,916)
512,820
247,059
520,000
329,268
1,609,147
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Spirit Telecom Limited under option at the date of this report are as follows:
Description
Unlisted options
Unlisted options
Unlisted options
Expiry date
1 July 2023
1 July 2023
1 July 2023
Exercise
price
Number
under option
$0.150
$0.180
$0.215
6,000,000
6,000,000
6,000,000
18,000,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share
issue of the Company or of any other body corporate.
19
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
30 June 2020
Option holding
parties, is set out below:
Options over ordinary shares
Geoff Neate
Terence Gray
James Joughin
Sol Lukatsky
Mark Dioguardi
Performance rights over ordinary shares
Geoff Neate
Sol Lukatsky
Mark Dioguardi
Paul Miller
Balance at
the start of
the year
10,698,786
1,412,684
1,250,000
9,000,000
9,000,000
31,361,470
Balance at
the start of
the year
1,282,820
247,059
520,000
-
2,049,879
Granted
Exercised
Expired/
forfeited/
other*
Balance at
the end of
the year
- (10,698,786)
(1,412,684)
(1,250,000)
-
-
-
9,000,000
9,000,000
(2,662,684) (10,698,786) 18,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
(332,084)
(437,916)
329,268
329,268
(332,084)
(437,916)
1,609,147
512,820
247,059
520,000
329,268
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Spirit Telecom Limited under option at the date of this report are as follows:
Description
Unlisted options
Unlisted options
Unlisted options
Expiry date
1 July 2023
1 July 2023
1 July 2023
Exercise
Number
price
under option
$0.150
$0.180
$0.215
6,000,000
6,000,000
6,000,000
18,000,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share
issue of the Company or of any other body corporate.
The number of options over ordinary shares in the Company held during the financial year by each director and
other members of key management personnel of the Consolidated Entity, including their personally related
Shares under performance rights
Unissued ordinary shares of Spirit Telecom Limited under performance rights at the date of this report are as
follows:
Spirit Telecom Limited
Directors' report
30 June 2020
D I R E C T o R S ' R E P o R T 41
Grant date
12 September 2018
20 November 2018
18 February 2019
22 April 2020
Expiry date
12 September 2021
20 November 2020
18 February 2023
22 April 2023
Number
under rights
247,059
512,820
520,000
653,943
1,933,822
*
The Board agreed to permit Mr Geoff Neate to trade his Listed Options in the normal blackout paid.
The number of performance rights over ordinary shares in the Company held during the financial year by each
director and other members of key management personnel of the Consolidated Entity, including their personally
Performance rights holding
related parties, is set out below:
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to
participate in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
The following ordinary shares of Spirit Telecom Limited were issued during the year ended 30 June 2020 and
up to the date of this report on the exercise of options granted:
Date options granted
August 2014
28 November 2016
Exercise Number of
price
shares
issued
$0.196
$0.190
28,732,256
2,500,000
31,232,256
Shares issued on the exercise of performance rights
The following ordinary shares of Spirit Telecom Limited were issued during the year ended 30 June 2020 and
up to the date of this report on the exercise of performance rights granted:
Date performance rights granted
24 November 2016
Conversion Number of
price
shares
issued
-
332,084
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred in their capacity
as a director or executive, for which they may be held personally liable, except where there is a lack of good
faith.
During the financial year the Company paid a premium in respect of a contract to insure the directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not during or since the end of the financial year indemnified or agreed to indemnify the auditor
of the Company or any related entity against a liability incurred by the auditor.
During the financial year the Company has not paid a premium in respect of a contract to insure the auditor of
the Company or any related entity.
19
20
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' report
42 D I R E C T o R S ' RE P o R T
30 June 2020
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year
by the auditor are outlined in note 29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor's behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not
compromise the external auditor's independence requirements of the Corporations Act 2001 for the following
reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor's own work, acting in a management or
decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic
risks and rewards.
●
Officers of the Company who are former partners of PKF Melbourne Audit & Assurance Pty Ltd
There are no officers of the Company who are former partners of PKF Melbourne Audit & Assurance Pty Ltd.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
is set out immediately after this directors' report.
Auditor
PKF Melbourne Audit & Assurance Pty Ltd continues in office in accordance with section 327 of the Corporations
Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations
Act 2001.
On behalf of the directors
___________________________
James Joughin
Non-Executive Chairman
17 August 2020
21
SPIRIT 2020 ANNUAL REPORT
D I R E C T o R ' S R E P o R T 43
Spirit Telecom Limited
Directors' report
30 June 2020
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year
by the auditor are outlined in note 29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor's behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not
compromise the external auditor's independence requirements of the Corporations Act 2001 for the following
reasons:
●
●
objectivity of the auditor; and
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor's own work, acting in a management or
decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic
risks and rewards.
Officers of the Company who are former partners of PKF Melbourne Audit & Assurance Pty Ltd
There are no officers of the Company who are former partners of PKF Melbourne Audit & Assurance Pty Ltd.
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
Auditor's independence declaration
is set out immediately after this directors' report.
PKF Melbourne Audit & Assurance Pty Ltd continues in office in accordance with section 327 of the Corporations
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations
Auditor
Act 2001.
Act 2001.
On behalf of the directors
___________________________
James Joughin
Non-Executive Chairman
17 August 2020
21
SPIRIT 2020 ANNUAL REPORT
44
A U D I T O R ' S
AUDITOR'S
INDEPENDENCE
I N D E P E N D E N C E
DECLARATION
D E C L A R A T I O N
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF SPIRIT TELECOM LIMITED
In relation to our audit of the financial report of Spirit Telecom Limited for the year ended 30 June 2020, I declare to the
best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
(b) no contraventions of any applicable code of professional conduct.
PKF
Melbourne, 17 August 2020
Steven Bradby
Partner
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
22
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
SPIRIT 2020 ANNUAL REPORT
A u D I T oR ' S I N D E P E N D E N C E D E C L A R A T I oN 45
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF SPIRIT TELECOM LIMITED
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
In relation to our audit of the financial report of Spirit Telecom Limited for the year ended 30 June 2020, I declare to the
TO THE DIRECTORS OF SPIRIT TELECOM LIMITED
best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
In relation to our audit of the financial report of Spirit Telecom Limited for the year ended 30 June 2020, I declare to the
(b) no contraventions of any applicable code of professional conduct.
best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
(b) no contraventions of any applicable code of professional conduct.
PKF
Melbourne, 17 August 2020
PKF
Melbourne, 17 August 2020
Steven Bradby
Partner
Steven Bradby
Partner
22
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
Level 12, 440 Collins Street, Melbourne, Victoria 3000
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
22
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
SPIRIT 2020 ANNUAL REPORT
46
Statement of
PROFIT OR LOSS
and other comprehensive income
report
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
S T A T E M E N T o F P R o F I T o R L o S S A N D o T H E R C o M P R E H E N S I V E I N C o M E 47
Revenue
Other income
Cost of sales
Expenses
Depreciation and amortisation expense
Share based payments
Administration
Business acquisition & integration costs
Selling
Marketing
Finance costs
Loss before income tax benefit
Income tax benefit
Consolidated
Note
2020
$
2019
$
5
6
7
7
8
34,428,845 17,365,108
444,733
(12,701,210)
87,337
(4,556,004)
(3,854,663)
(478,651)
(16,389,757)
(639,711)
(1,590,580)
(891,305)
(370,099)
(1,929,333)
(200,523)
(9,439,940)
(236,892)
(832,457)
(995,341)
(271,439)
(2,042,398)
(1,009,484)
527,897
185,742
Loss after income tax benefit for the year attributable to the owners of
Spirit Telecom Limited
(1,514,501)
(823,742)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Adjustment to opening retained earnings on adoption of AASB 15 Revenue
from Contract with Customers
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Spirit Telecom Limited
Basic earnings per share
Diluted earnings per share
-
-
(202,480)
(202,480)
(1,514,501)
(1,026,222)
Cents
Cents
37
37
(0.42)
(0.42)
(0.32)
(0.29)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
23
SPIRIT 2020 ANNUAL REPORT 48
Statement of
FINANCIAL
POSITION
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Contingent consideration
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Contingent consideration
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
S T A T E M E N T o F F I N A N C I A L P o S I T I o N 49
Consolidated
Note
2020
$
2019
$
9
10
11
12
13
14
15
16
17
18
19
33
20
21
22
33
23
6,400,303
4,404,229
948,845
843,827
12,597,204
3,376,663
456,411
998,286
853,551
5,684,911
234,294
1,562,536
127,697
13,821,495 10,549,758
-
25,359,870 13,257,188
751,388
42,457,350 24,686,031
1,479,155
55,054,554 30,370,942
7,432,048
19,715
815,866
950,995
997,500
10,216,124
2,221,767
1,200,000
-
349,636
-
3,771,403
3,267,807
787,156
165,191
997,500
1,556,692
6,774,346
3,000,000
-
13,959
-
1,530,924
4,544,883
16,990,470
8,316,286
38,064,084 22,054,656
24
25
42,852,381 25,511,726
475,834
(3,932,904)
567,100
(5,355,397)
38,064,084 22,054,656
The above statement of financial position should be read in conjunction with the accompanying notes
24
SPIRIT 2020 ANNUAL REPORT 50
Statement of
CHANGES IN
EQUITY
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
S T A T E M E N T o F C H A N G E S I N E q u I T Y 51
Issued
capital
$
Reserves
$
Accumulate
Accumulated
d losses
losses
$
Total equity
$
Balance at 1 July 2018
18,140,872
275,311
(2,906,682) 15,509,501
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
-
-
(823,742)
(202,480)
(823,742)
(202,480)
(1,026,222)
(1,026,222)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note
24)
Share-based payments (note 38)
7,370,854
-
-
200,523
-
-
7,370,854
200,523
Balance at 30 June 2019
25,511,726
475,834
(3,932,904) 22,054,656
Consolidated
Issued
capital
$
Reserves
$
Accumulate
Accumulated
d losses
losses
$
Total equity
$
Balance at 1 July 2019
25,511,726
475,834
(3,932,904) 22,054,656
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
-
-
(1,514,501)
-
(1,514,501)
-
(1,514,501)
(1,514,501)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note
24)
Share-based payments (note 38)
Transfers
Issue of shares to the vendor as part consideration in
relation to the Arinda IT acquisition
Issue of shares to the vendor as part consideration in
relation to the Phoenix Austec Group acquisition
Issue of shares to the vendor as part consideration in
relation to the Cloud Business Technology acquisition
Issue of shares to the vendor as part consideration in
relation to the Trident & Neptune Group acquisition
14,766,697
19,996
275,381
-
458,655
(367,389)
- 14,766,697
478,651
-
-
92,008
607,143
320,000
129,500
1,221,938
-
-
-
-
-
-
-
-
607,143
320,000
129,500
1,221,938
Balance at 30 June 2020
42,852,381
567,100
(5,355,397) 38,064,084
The above statement of changes in equity should be read in conjunction with the accompanying notes
25
SPIRIT 2020 ANNUAL REPORT 52
Statement of
CASH FLOWS
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Government grants received
Payments to suppliers and employees (inclusive of GST)
Deposits refunded
Interest received
Interest and other finance costs paid
Income taxes paid
S T A T E M E N T o F C A S H F L o W S 53
Consolidated
Note
2020
$
2019
$
991,986
41,890,455 20,825,519
-
(38,856,814) (18,210,361)
-
59,368
(271,440)
(76,259)
82,927
26,496
(285,271)
(144,559)
Net cash from operating activities
36
3,705,220
2,326,827
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Cash payments to acquire businesses, net of cash acquired
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Repayment of borrowings
Repayment of lease liabilities
Net cash from financing activities
33
24
(5,825,783)
(1,103,736)
(6,778,828)
125,303
(4,208,003)
(142,108)
(3,949,750)
5,000
(13,583,044)
(8,294,861)
15,267,296
(690,678)
(932,193)
(742,961)
5,523,332
(209,654)
(600,000)
-
12,901,464
4,713,678
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
3,023,640
3,376,663
(1,254,356)
4,631,019
Cash and cash equivalents at the end of the financial year
9
6,400,303
3,376,663
The above statement of cash flows should be read in conjunction with the accompanying notes
26
SPIRIT 2020 ANNUAL REPORT 54
Notes to the
FINANCIAL
STATEMENTS
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 1. General information
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 55
The financial statements cover Spirit Telecom Limited as a Consolidated Entity consisting of Spirit Telecom
Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in
Australian dollars which is Spirit Telecom Limited's functional and presentation currency.
Spirit Telecom Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business are:
Registered office
Principal place of business
Level 4, 100 Albert Road
South Melbourne Victoria 3205
Level 2, 19-25 Raglan Street
South Melbourne Victoria 3205
A description of the nature of the Consolidated Entity's operations and its principal activities are included in the
directors' report which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 17 August
2020. The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Consolidated Entity's accounting
policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and
estimates are significant to the financial statements are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Consolidated
Entity only. Supplementary information about the parent entity is disclosed in note 32.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Spirit Telecom
Limited ('Company' or 'parent entity') as at 30 June 2020 and the results of all subsidiaries for the year then
ended. Spirit Telecom Limited and its subsidiaries together are referred to in these financial statements as the
'Consolidated Entity'.
Subsidiaries are all those entities over which the Consolidated Entity has control. The Consolidated Entity
controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated
Entity. They are de-consolidated from the date that control ceases.
27
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
56 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 2. Significant accounting policies (continued)
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
Revenue recognition
Revenue is recognised and measured in accordance with the principles of AASB 15 Revenue from contracts
with customers at the fair value of the consideration received or receivable, after taking into account any trade
discounts and volume rebates allowed, to the extent that it is probable that economic benefit will flow to the
Consolidated Entity and the revenue can be reliably measured.
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected
to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer,
the Consolidated Entity: identifies the contract with a customer; identifies the performance obligations in the
contract; determines the transaction price which takes into account estimates of variable consideration and the
time value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods
or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are recognised as a refund liability.
Recurring revenue
Internet access, equipment rentals, line rentals and managed IT services are recognised in the period in which
the service is provided. Where Income for services is invoiced in advance, the amount is recorded as Unearned
Income and recognition in the income statement is delayed until the service has been provided.
Non-recurring revenue
Call charges, hardware sales and set-up charges are recognised in the period in which the services or goods
are delivered.
Grants
Grants received on the condition that specified services are delivered, or conditions are fulfilled, are initially
recognised as a liability, and revenue is recognised as services are performed or conditions fulfilled. Grants
related to assets are presented in the statement of financial position either as deferred income or by deducting
the relevant amount in determining the carrying amount of the asset.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
28
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 57
Note 2. Significant accounting policies (continued)
Note 2. Significant accounting policies (continued)
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
Revenue recognition
Revenue is recognised and measured in accordance with the principles of AASB 15 Revenue from contracts
with customers at the fair value of the consideration received or receivable, after taking into account any trade
discounts and volume rebates allowed, to the extent that it is probable that economic benefit will flow to the
Consolidated Entity and the revenue can be reliably measured.
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected
to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer,
the Consolidated Entity: identifies the contract with a customer; identifies the performance obligations in the
contract; determines the transaction price which takes into account estimates of variable consideration and the
time value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods
or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such
as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle
are recognised as a refund liability.
Recurring revenue
Internet access, equipment rentals, line rentals and managed IT services are recognised in the period in which
the service is provided. Where Income for services is invoiced in advance, the amount is recorded as Unearned
Income and recognition in the income statement is delayed until the service has been provided.
Call charges, hardware sales and set-up charges are recognised in the period in which the services or goods
Grants received on the condition that specified services are delivered, or conditions are fulfilled, are initially
recognised as a liability, and revenue is recognised as services are performed or conditions fulfilled. Grants
related to assets are presented in the statement of financial position either as deferred income or by deducting
the relevant amount in determining the carrying amount of the asset.
Non-recurring revenue
are delivered.
Grants
Interest
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in
the Consolidated Entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to
be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other
assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Consolidated Entity's normal
operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the
reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months
after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value, less any provision for impairment. Trade receivables are
generally due for settlement within 30 days.
The Consolidated Entity has applied the simplified approach to measuring expected credit losses, which uses
a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been
grouped based on days overdue.
28
29
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
58 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 2. Significant accounting policies (continued)
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as
part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are
subsequently measured at either amortised cost or fair value depending on their classification. Classification is
determined based on both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the Consolidated Entity has transferred substantially all the risks and rewards of ownership. When there is
no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within
a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the
contractual terms of the financial asset represent contractual cash flows that are solely payments of principal
and interest.
Impairment of financial assets
The Consolidated Entity recognises a loss allowance for expected credit losses on financial assets which are
either measured at amortised cost or fair value through other comprehensive income. The measurement of the
loss allowance depends upon the Consolidated Entity's assessment at the end of each reporting period as to
whether the financial instrument's credit risk has increased significantly since initial recognition, based on
reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised
is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of
the instrument discounted at the original effective interest rate.
For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance
is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other
cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or
loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items. Depreciation commences from
the time the asset is available for its intended use.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the
estimated useful lives of the improvements.
30
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 59
Note 2. Significant accounting policies (continued)
Note 2. Significant accounting policies (continued)
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery
costs, net of rebates and discounts received or receivable.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as
part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are
subsequently measured at either amortised cost or fair value depending on their classification. Classification is
determined based on both the business model within which such assets are held and the contractual cash flow
characteristics of the financial asset unless an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred
and the Consolidated Entity has transferred substantially all the risks and rewards of ownership. When there is
no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Plant and equipment*
Motor vehicles
Furniture and fixtures
Right of use assets
7 – 10 years
2 – 10 years
4 – 5 years
2 – 10 years
1 – 5 years
* Plant and equipment includes network and customer infrastructure.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date to ensure it is not in excess of the assets recoverable amount. The recoverable amount is
assessed on the basis of the expected net cash flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have not been discounted in determining recoverable
amounts.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within
a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the
contractual terms of the financial asset represent contractual cash flows that are solely payments of principal
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Consolidated Entity. Gains and losses between the carrying amount and the disposal proceeds
are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly
to retained profits.
and interest.
Impairment of financial assets
The Consolidated Entity recognises a loss allowance for expected credit losses on financial assets which are
either measured at amortised cost or fair value through other comprehensive income. The measurement of the
loss allowance depends upon the Consolidated Entity's assessment at the end of each reporting period as to
whether the financial instrument's credit risk has increased significantly since initial recognition, based on
reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised
is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of
the instrument discounted at the original effective interest rate.
For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance
is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other
cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or
loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items. Depreciation commences from
the time the asset is available for its intended use.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the Consolidated Entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains
or losses recognised in profit or loss arising from the de-recognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset. The method and
useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption
or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill is recorded at the amount by which the purchase price for a business combination exceeds the fair
value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities
acquired at date of acquisition.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the
estimated useful lives of the improvements.
Goodwill is subsequently measured at cost less any impairment losses.
Goodwill is subject to impairment testing on an annual basis. Impairment losses are calculated based on the
director’s assessment of the business’s recoverable amount. Recoverable amount is assessed on the basis of
the expected net cash flows that will be received from the asset’s employment and subsequent disposal.
Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business
sold.
30
31
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
60 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 2. Significant accounting policies (continued)
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of
their expected benefit being their finite life of 3-5 years.
Other intangible assets
Other intangible assets that are acquired by the Consolidated Entity and have finite lives are stated at cost less
accumulated amortisation and any accumulated impairment losses.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end
of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Consolidated Entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss
if the carrying amount of the right-of-use asset is fully written down.
Provisions
Provisions are recognised when the Consolidated Entity has a present (legal or constructive) obligation as a
result of a past event, it is probable the Consolidated Entity will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation at the reporting date, taking into account the risks
and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted
using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of
time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to
be paid when the liabilities are settled.
Non-accumulating sick leave is expensed to profit or loss when incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured at the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on high quality corporate bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
32
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Software
Other intangible assets
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of
their expected benefit being their finite life of 3-5 years.
Other intangible assets that are acquired by the Consolidated Entity and have finite lives are stated at cost less
accumulated amortisation and any accumulated impairment losses.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end
of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
Borrowings
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Consolidated Entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss
if the carrying amount of the right-of-use asset is fully written down.
Provisions
Provisions are recognised when the Consolidated Entity has a present (legal or constructive) obligation as a
result of a past event, it is probable the Consolidated Entity will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation at the reporting date, taking into account the risks
and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted
using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of
time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to
be paid when the liabilities are settled.
Non-accumulating sick leave is expensed to profit or loss when incurred.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured at the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on high quality corporate bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Note 2. Significant accounting policies (continued)
Note 2. Significant accounting policies (continued)
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 61
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are
incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of
services, where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine whether the Consolidated Entity receives the services that
entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided
all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Consolidated Entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the Consolidated Entity or
employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over
the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled
award, the cancelled and new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability assuming they act in their economic best interests. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value are used, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
32
33
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
62 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 2. Significant accounting policies (continued)
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any
non-controlling interest in the acquiree. For each business combination the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets.
All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business the Consolidated Entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
conditions, the Consolidated Entity's operating or accounting policies and other pertinent conditions in existence
at the acquisition-date.
Where the business combination is achieved in stages, the Consolidated Entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and
the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to
the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity
interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition-
date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii)
when the acquirer receives all the information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Spirit Telecom Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from or payable to the tax authority is included in other receivables or other payables in the
statement of financial position.
34
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 63
Note 2. Significant accounting policies (continued)
Note 2. Significant accounting policies (continued)
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any
non-controlling interest in the acquiree. For each business combination the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets.
All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business the Consolidated Entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
conditions, the Consolidated Entity's operating or accounting policies and other pertinent conditions in existence
at the acquisition-date.
Where the business combination is achieved in stages, the Consolidated Entity remeasures its previously held
equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and
the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to
the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity
interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts
the provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition-
date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii)
when the acquirer receives all the information possible to determine fair value.
Earnings per share
Basic earnings per share
financial year.
Diluted earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Spirit Telecom Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from or payable to the tax authority are presented as operating cash
flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from or payable to the tax
authority.
New Accounting Standards and Interpretations mandatorily adopted or available for early adoption
The Consolidated Entity's assessment of the impact of those new or amended Accounting Standards and
Interpretations, most relevant to the Consolidated Entity, are set out below.
AASB 16 Leases
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and
for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases
and leases of low value assets, right-of-use assets (ROUA) and corresponding lease liabilities are recognised
in the statement of financial position. Straight-line operating lease expense recognition is replaced with a
depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the
recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses
associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within
the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of
the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does
not substantially change how a lessor accounts for leases.
Impact on application
The consolidated entity has adopted AASB 16 using the modified retrospective approach whereby the
consolidated entity has recognised the cumulative effect of initially applying this standard as an adjustment to
the opening balance of equity as at 1 July 2019. Accordingly, the consolidated entity has not restated
comparative balances in this set of financial statements.
On adoption of AASB 16, the Consolidated Entity recognised lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were
measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate as of 1 July 2019. The weighted average incremental borrowing rate applied to the lease liabilities
on 1 July 2019 was 5.27%. The consolidated entity has elected to adopt the modified retrospective approach
(with the application of practical expedients), which equates the ‘right-of-use’ asset (ROUA) with the value of
the lease liability, therefore there is no requirement to restate either retained earnings or prior period
comparatives. The provisions recognised in respect of onerous lease contracts were netted off against the
associated right-of-use assets at the date of transition. $1,649,837 of ROUA and lease liability were recognised
on adoption.
Operating lease commitments at 30 June 2019 as disclosed under AASB 117 in the Group's
consolidated financial statements
Additional Right of Use Assets identified on adoption date
Lease liability recognised at 1 July 2019
Transitional
impact at 1
July 2019
$
1,402,181
247,656
1,649,837
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from or payable to the tax authority is included in other receivables or other payables in the
Right-of-use assets
statement of financial position.
34
35
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
64 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 2. Significant accounting policies (continued)
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss
if the carrying amount of the right-of-use asset is fully written down.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates its
judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on various other
factors, including expectations of future events management believes to be reasonable under
the
circumstances. Where relevant, current assessment incorporated a consideration of uncertainties associated
with COVID-19. The resulting accounting judgements and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based
on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an
overall expected credit loss rate for each company. These assumptions include recent sales experience and
historical collection rates.
Estimation of useful lives of assets
The Consolidated Entity determines the estimated useful lives and related depreciation and amortisation
charges for its property, plant and equipment and finite life intangible assets. The useful lives could change
significantly as a result of technical innovations or other events. The depreciation and amortisation charge will
increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic
assets that have been abandoned or sold will be written off or impaired.
36
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 65
Note 2. Significant accounting policies (continued)
Note 3. Critical accounting judgements, estimates and assumptions (continued)
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at
cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain
ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at
the present value of the lease payments to be made over the term of the lease, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental
borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a
lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss
if the carrying amount of the right-of-use asset is fully written down.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually evaluates its
judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions on historical experience and on various other
factors, including expectations of future events management believes to be reasonable under
the
circumstances. Where relevant, current assessment incorporated a consideration of uncertainties associated
with COVID-19. The resulting accounting judgements and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Allowance for expected credit losses
historical collection rates.
Estimation of useful lives of assets
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based
on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an
overall expected credit loss rate for each company. These assumptions include recent sales experience and
The Consolidated Entity determines the estimated useful lives and related depreciation and amortisation
charges for its property, plant and equipment and finite life intangible assets. The useful lives could change
significantly as a result of technical innovations or other events. The depreciation and amortisation charge will
increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic
assets that have been abandoned or sold will be written off or impaired.
Goodwill and other indefinite life intangible assets
The Consolidated Entity tests annually, or more frequently if events or changes in circumstances indicate
impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in
accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have
been determined based on value-in-use calculations. These calculations require the use of assumptions,
including estimated discount rates based on the current cost of capital and growth rates of the estimated future
cash flows.
Impairment of property, plant and equipment
The Consolidated Entity assesses impairment of property, plant and equipment at each reporting date by
evaluating conditions specific to the Consolidated Entity and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Consolidated Entity
considers it is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value
of assets acquired, liabilities and contingent liabilities assumed, and consideration payable are initially estimated
by the Consolidated Entity taking into consideration all available information at the reporting date. Fair value
adjustments on the finalisation of the business combination accounting is retrospective where applicable, to the
period the combination occurred and may have an impact on the assets and liabilities, depreciation and
amortisation reported.
Note 4. Operating segments
Identification of reportable operating segments
The Consolidated Entity is organised into one operating segment, being the provision of IT&T services. This
included the provision of Telecommunication services, Cloud services, Managed IT services and Cyber Security
services to small and medium size businesses.
Major customers
During the year ended 30 June 2020 there are no individual customers which accounted for 5% or more of
sales.
Note 5. Revenue
Sales revenue
Consolidated
2020
$
2019
$
34,428,845 17,365,108
36
37
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
66 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 5. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major product lines
Internet and data services
Voice services
Managed services
Other
Geographical regions
Australia
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Note 6. Other income
Government grants
Interest income
Profit on sale of assets
Miscellaneous income
Other income
Consolidated
2020
$
2019
$
15,695,752 12,708,085
3,124,923
-
1,532,100
4,024,307
14,018,114
690,672
34,428,845 17,365,108
34,428,845 17,365,108
10,771,576
723,724
23,657,269 16,641,384
34,428,845 17,365,108
Consolidated
2020
$
2019
$
399,861
26,496
1,965
16,411
37,584
49,753
-
-
444,733
87,337
38
SPIRIT 2020 ANNUAL REPORT The disaggregation of revenue from contracts with customers is as follows:
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 5. Revenue (continued)
Disaggregation of revenue
Major product lines
Internet and data services
Voice services
Managed services
Other
Geographical regions
Australia
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Note 6. Other income
Government grants
Interest income
Profit on sale of assets
Miscellaneous income
Other income
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 7. Expenses
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 67
Consolidated
2020
$
2019
$
15,695,752 12,708,085
4,024,307
3,124,923
14,018,114
-
690,672
1,532,100
34,428,845 17,365,108
34,428,845 17,365,108
10,771,576
723,724
23,657,269 16,641,384
34,428,845 17,365,108
Consolidated
2020
$
2019
$
399,861
26,496
1,965
16,411
37,584
49,753
-
-
444,733
87,337
Loss before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Furniture and fixtures
Total depreciation
Amortisation
Right-of-use assets
Software and projects
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable on:
Borrowings
Finance leases
Superannuation expense
Defined contribution superannuation expense
Employee benefits expense excluding superannuation
Employee benefits expense excluding superannuation
Impairment of receivables
Bad debts*
Consolidated
2020
$
2019
$
4,208
2,644,601
51,964
48,921
-
1,695,091
34,358
(29,442)
2,749,694
1,700,007
691,471
413,498
-
229,326
1,104,969
229,326
3,854,663
1,929,333
285,271
84,828
271,439
-
370,099
271,439
912,988
472,583
10,095,399
4,871,494
279,634
80,902
*The Consolidated Entity has recognised a loss of $279,634 in profit or loss in respect of impairment of
receivables for the year ended 30 June 2020 (2019: $80,902), which amounts include additions to and releases
from the allowance for expected credit losses (Note 10).
38
39
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
68 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 8. Income tax benefit
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable
income:
Acquisition related
Share options and employee shares scheme
Other balances and permanent differences
Income tax benefit
Note 9. Current assets - cash and cash equivalents
Cash at bank
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Consolidated
2020
$
2019
$
(2,042,398)
(1,009,484)
(561,659)
(277,608)
50,261
131,629
(148,128)
12,272
55,144
24,450
(527,897)
(185,742)
Consolidated
2020
$
2019
$
6,400,303
3,376,663
Consolidated
2020
$
2019
$
4,580,552
(176,323)
522,258
(65,847)
4,404,229
456,411
Allowance for expected credit losses
The Consolidated Entity retains a provision of $176,323 in respect of impairment of receivables for the year
ended 30 June 2020 (2019: $65,847).
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
2020
$
2019
$
98,428
77,895
16,333
49,514
176,323
65,847
3 to 6 months overdue
Over 6 months overdue
40
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 69
Note 10. Current assets - trade and other receivables (continued)
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additions and releases
Closing balance
Note 11. Current assets - inventories
Stock on hand - at cost
Less: Provision for impairment
Note 12. Current assets - other
Accrued revenue
Prepayments
Other current assets
Consolidated
2020
$
2019
$
65,847
110,476
91,862
(26,015)
176,323
65,847
Consolidated
2020
$
2019
$
1,003,840
(54,995)
998,286
-
948,845
998,286
Consolidated
2020
$
2019
$
244,375
588,174
11,278
217,058
636,493
-
843,827
853,551
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 8. Income tax benefit
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax effect amounts which are not deductible/(taxable) in calculating taxable
Tax at the statutory tax rate of 27.5%
income:
Acquisition related
Share options and employee shares scheme
Other balances and permanent differences
Income tax benefit
Note 9. Current assets - cash and cash equivalents
Cash at bank
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Allowance for expected credit losses
ended 30 June 2020 (2019: $65,847).
The Consolidated Entity retains a provision of $176,323 in respect of impairment of receivables for the year
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
3 to 6 months overdue
Over 6 months overdue
Consolidated
2020
$
2019
$
(2,042,398)
(1,009,484)
(561,659)
(277,608)
50,261
131,629
(148,128)
12,272
55,144
24,450
(527,897)
(185,742)
Consolidated
2020
$
2019
$
6,400,303
3,376,663
Consolidated
2020
$
2019
$
4,580,552
(176,323)
522,258
(65,847)
4,404,229
456,411
Consolidated
2020
$
2019
$
98,428
77,895
16,333
49,514
176,323
65,847
40
41
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
70 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Furniture & Fixtures at Cost
Less: Accumulated depreciation
Work in progress
Consolidated
2020
$
2019
$
103,195
(80,188)
23,007
-
-
-
21,027,471 13,975,194
(4,527,792)
(7,538,479)
9,447,402
13,488,992
293,781
(232,030)
61,751
592,311
(353,316)
238,995
141,101
(56,121)
84,980
301,988
(68,512)
233,476
8,750
783,900
13,821,495 10,549,758
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
Consolidated
Balance at 1 July 2018
Additions/transfers
Additions through business
combinations (note 33)
Disposals
Depreciation expense
Balance at 30 June 2019
Additions/transfers
Additions through business
combinations (note 33)
Disposals
Depreciation expense
Leasehold
improvements
$
Plant and
equipment
$
Motor
vehicles
$
Furniture &
Fixtures
$
Work in
progress
$
Total
$
27
-
6,074,004
3,539,446
62,338
-
308,189
(124,155)
-
783,900
6,444,558
4,199,191
-
(27)
-
1,529,043
-
(1,695,091)
57,000
-
(34,358)
20,000
-
29,442
-
-
-
1,606,043
(27)
(1,700,007)
-
4,464
9,447,402
6,453,968
84,980
16,567
233,476
125,934
783,900 10,549,758
5,825,783
(775,150)
22,751
-
(4,208)
264,341
(32,118)
(2,644,601)
35,200
(23,032)
(51,964)
28,506
(100,000)
(48,921)
-
-
-
350,798
(155,150)
(2,749,694)
Balance at 30 June 2020
23,007 13,488,992
61,751
238,995
8,750 13,821,495
42
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 71
Note 13. Non-current assets - property, plant and equipment
Note 14. Non-current assets - right-of-use assets
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Furniture & Fixtures at Cost
Less: Accumulated depreciation
Work in progress
Reconciliations
are set out below:
Consolidated
Balance at 1 July 2018
Additions/transfers
Additions through business
combinations (note 33)
Disposals
Depreciation expense
Balance at 30 June 2019
Additions/transfers
Additions through business
combinations (note 33)
Disposals
Depreciation expense
Consolidated
2020
$
2019
$
103,195
(80,188)
23,007
-
-
-
21,027,471 13,975,194
(7,538,479)
(4,527,792)
13,488,992
9,447,402
293,781
(232,030)
61,751
592,311
(353,316)
238,995
141,101
(56,121)
84,980
301,988
(68,512)
233,476
8,750
783,900
Right-of-use assets
Less: Accumulated amortisation
Note 15. Non-current assets - intangibles
Goodwill - at cost
Software
Less: Accumulated amortisation
Reconciliations of the written down values at the beginning and end of the current and previous financial year
13,821,495 10,549,758
Other intangible assets
Consolidated
2020
$
2019
$
2,254,007
(691,471)
1,562,536
-
-
-
Consolidated
2020
$
2019
$
23,974,241 10,557,157
2,125,320
(739,691)
1,385,629
1,021,582
(326,191)
695,391
- 2,004,640
25,359,870 13,257,188
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year
are set out below:
27
6,074,004
3,539,446
62,338
308,189
(124,155)
783,900
6,444,558
4,199,191
Consolidated
Balance at 1 July 2018
Additions
Additions through business combinations (note 33)
Amortisation expense
Goodwill
at cost
$
6,196,853
-
4,360,304
-
Software &
projects
at cost
$
Indefinite life
intangibles
at cost
$
Total
$
770,609
142,108
12,000
(229,326)
2,003,390
1,250
-
-
8,970,852
143,358
4,372,304
(229,326)
Balance at 30 June 2019
Reclassification
Additions
Additions through business combinations (note 33)
Amortisation expense
10,557,157
2,004,640
-
11,412,444
-
695,391
-
1,103,736
-
(413,498)
2,004,640 13,257,188
(2,004,640)
-
1,103,736
-
- 11,412,444
(413,498)
-
Leasehold
improvements
Plant and
equipment
$
$
Motor
vehicles
$
Furniture &
Fixtures
Work in
progress
$
$
Total
$
-
-
-
-
-
-
-
4,464
22,751
1,529,043
57,000
20,000
(27)
-
-
(1,695,091)
(34,358)
29,442
1,606,043
(27)
(1,700,007)
9,447,402
6,453,968
84,980
16,567
233,476
125,934
783,900 10,549,758
(775,150)
5,825,783
264,341
(32,118)
35,200
(23,032)
(51,964)
28,506
(100,000)
(48,921)
(4,208)
(2,644,601)
350,798
(155,150)
(2,749,694)
-
-
-
-
-
-
-
Balance at 30 June 2020
23,007 13,488,992
61,751
238,995
8,750 13,821,495
Balance at 30 June 2020
23,974,241
1,385,629
- 25,359,870
Goodwill & Intangible Assets with Indefinite Lives
Goodwill and other indefinite life intangibles, including those acquired during the year, have been allocated to a
single cash-generating unit (CGU), that being the Consolidated Entity’s single reportable operating segment,
providing Information Technology and Telecommunications (IT&T) services.
42
43
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
72 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 15. Non-current assets - intangibles (continued)
Intangible assets that have indefinite useful lives are tested annually for impairment. The recoverable amount
of the CGU to which those indefinite life intangibles are allocated is determined based on value-in-use
calculations. These calculations use cash flow projections prepared by Management based on the Board
approved financial budget for the 12 months immediately following the reporting date, with earnings beyond the
budget period extrapolated through a 5-year outlook utilising annual growth rates based on current and forecast
trading conditions and the growth objectives of business plans, and a terminal value growth rate of 3%.
A pre-tax discount rate of 14.0% (2019: 15.7%) has been used in discounting the projected cashflows, based
on the Consolidated Entity’s weighted average cost of capital adjusted to reflect an estimate of specific risks
assumed in the cashflow projections.
The Board has reviewed and is comfortable with the significant assumptions determined by Management and
utilised in the value-in-use calculations.
Impairment conclusion
As a result of the impairment testing and evaluation, it has been determined that the carrying value of goodwill
and indefinite life intangibles does not exceed their value-in-use, and no impairment charge is required.
Testing the sensitivity of key assumptions
Sensitivity analysis on the key assumptions employed in the value-in-use calculations has been performed by
Management. The sensitivities applied were decreasing sales and associated cost of goods sold by 10%
throughout the model period (whilst holding operating costs stable), increasing the post-tax discount rate by 2-
3% percentage points and reducing the terminal value growth rate by half.
These sensitivity tests did not result in the CGU’s carrying amounts exceeding their recoverable amount, giving
rise to impairment.
Note 16. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Expenses deductible in future periods
Other provisions/accruals
Tax credits from tax losses
Deferred tax asset
Consolidated
2020
$
2019
$
318,382
293,539
445,786
421,448
99,989
138,643
225,138
287,618
1,479,155
751,388
44
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 73
Note 15. Non-current assets - intangibles (continued)
Note 17. Current liabilities - trade and other payables
Intangible assets that have indefinite useful lives are tested annually for impairment. The recoverable amount
of the CGU to which those indefinite life intangibles are allocated is determined based on value-in-use
calculations. These calculations use cash flow projections prepared by Management based on the Board
approved financial budget for the 12 months immediately following the reporting date, with earnings beyond the
budget period extrapolated through a 5-year outlook utilising annual growth rates based on current and forecast
trading conditions and the growth objectives of business plans, and a terminal value growth rate of 3%.
A pre-tax discount rate of 14.0% (2019: 15.7%) has been used in discounting the projected cashflows, based
on the Consolidated Entity’s weighted average cost of capital adjusted to reflect an estimate of specific risks
assumed in the cashflow projections.
utilised in the value-in-use calculations.
Impairment conclusion
As a result of the impairment testing and evaluation, it has been determined that the carrying value of goodwill
and indefinite life intangibles does not exceed their value-in-use, and no impairment charge is required.
Testing the sensitivity of key assumptions
Sensitivity analysis on the key assumptions employed in the value-in-use calculations has been performed by
Management. The sensitivities applied were decreasing sales and associated cost of goods sold by 10%
throughout the model period (whilst holding operating costs stable), increasing the post-tax discount rate by 2-
3% percentage points and reducing the terminal value growth rate by half.
rise to impairment.
Note 16. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits
Expenses deductible in future periods
Other provisions/accruals
Tax credits from tax losses
Deferred tax asset
Consolidated
2020
$
2019
$
318,382
293,539
445,786
421,448
99,989
138,643
225,138
287,618
1,479,155
751,388
The Board has reviewed and is comfortable with the significant assumptions determined by Management and
Refer to note 27 for further information on financial instruments.
Trade payables
Unearned revenue
GST payable
Other payables
Note 18. Current liabilities - lease liabilities
Lease liability
Refer to note 27 for further information on financial instruments.
These sensitivity tests did not result in the CGU’s carrying amounts exceeding their recoverable amount, giving
Note 19. Current liabilities - provisions
Annual leave
Long service leave
Provision for income tax
Note 20. Non-current liabilities - borrowings
Bank loans
Refer to note 27 for further information on financial instruments.
44
45
Consolidated
2020
$
2019
$
4,047,946
1,775,442
318,808
1,289,852
1,055,934
467,358
80,153
618,322
7,432,048
2,221,767
Consolidated
2020
$
2019
$
815,866
-
Consolidated
2020
$
2019
$
667,944
249,198
33,853
178,737
170,899
-
950,995
349,636
Consolidated
2020
$
2019
$
3,267,807
3,000,000
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
74 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 20. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Hire purchase
Consolidated
2020
$
2019
$
3,267,807
19,715
4,200,000
-
3,287,522
4,200,000
Assets pledged as security
The bank loan of $3,267,807 (2019: $4,200,000) is secured first over the assets and undertakings of Spirit
Telecom Limited and its wholly owned subsidiaries.
Note 21. Non-current liabilities - lease liabilities
Lease liability
Refer to note 27 for further information on financial instruments.
Note 22. Non-current liabilities - provisions
Long service leave
Note 23. Non-current liabilities - other
Unearned revenue – deferred grant income
Other non-current liabilities
Note 24. Equity - issued capital
Consolidated
2020
$
2019
$
787,156
-
Consolidated
2020
$
2019
$
165,191
13,959
Consolidated
2020
$
2019
$
1,556,692
-
1,506,339
24,585
1,556,692
1,530,924
Ordinary shares - fully paid
430,909,320
305,723,988 42,852,381 25,511,726
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
46
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 20. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Hire purchase
Assets pledged as security
The bank loan of $3,267,807 (2019: $4,200,000) is secured first over the assets and undertakings of Spirit
Telecom Limited and its wholly owned subsidiaries.
Note 21. Non-current liabilities - lease liabilities
Lease liability
Refer to note 27 for further information on financial instruments.
Note 22. Non-current liabilities - provisions
Long service leave
Note 23. Non-current liabilities - other
Unearned revenue – deferred grant income
Other non-current liabilities
Note 24. Equity - issued capital
Ordinary shares - fully paid
430,909,320
305,723,988 42,852,381 25,511,726
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
Consolidated
2020
$
2019
$
3,267,807
4,200,000
19,715
-
3,287,522
4,200,000
Consolidated
2020
$
2019
$
787,156
-
Consolidated
2020
$
2019
$
165,191
13,959
Consolidated
2020
$
2019
$
1,556,692
1,506,339
-
24,585
1,556,692
1,530,924
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 24. Equity - issued capital (continued)
Movements in ordinary share capital
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 75
Details
Date
Shares
Issue price
$
Balance
Shares issued on conversion of vested
performance rights
Shares issued to incentivise employees
Placement
Issue of shares to the vendors as part
consideration in relation to the LinkOne Group
acquisition
Issue of shares
Placement
Issue of shares to the vendors as consideration
in relation to the Building Connect acquisition
Issue of shares as part of the additional
placement
Issue of shares as part of the additional
placement
Costs of capital raising
Balance
Exercise of ST1O listed options
Exercise of ST1O listed options
Issue of shares to the vendor as part
consideration in relation to the Arinda IT
acquisition
Exercise of ST1O listed options
Exercise of unlisted options
Exercise of ST1O listed options
Exercise of ST1O listed options
Issue of shares to the vendor as part
consideration in relation to the Phoenix Austec
Group acquisition
Exercise of ST1O listed options
Issue of shares pursuant to the underwriting
arrangement for ST1O listed options
Issue of shares to incentivise employees
Exercise of unlisted options
Conversion of vested performance rights
Issue of shares to the vendor as part
consideration in relation to the Cloud Business
Technology acquisition
Issue of shares to the vendor as part
consideration in relation to the Trident &
Neptune Group acquisition
Issue of Tranche 1 Placement shares
Issue of Tranche 2 Placement shares
Transfer from option reserve
Cost of capital raising
1 July 2018
243,759,535
18,140,872
6 July 2018
20 November 2018
10 April 2019
1,200,600
81,020
32,500,000
$0.000
$0.247
$0.120
-
20,000
3,900,000
1 May 2019
9 May 2019
9 May 2019
13,076,923
8,333,378
2,500,000
$0.130
$0.120
$0.120
1,700,000
1,000,005
300,000
20 May 2019
1,772,533
$0.150
265,880
7 June 2019
833,333
$0.120
100,000
17 June 2019
1,666,666
-
$0.120
-
200,000
(115,031)
30 June 2019
4 July 2019
10 July 2019
305,723,988
1,508,509
13,326,593
$0.196
$0.196
25,511,726
296,995
2,623,740
11 July 2019
16 July 2019
17 July 2019
25 July 2019
26 July 2019
29 July 2019
2 August 2019
9 August 2019
16 September 2019
22 November 2019
20 December 2019
2,380,952
3,233,587
1,250,000
742,906
158,806
1,333,333
8,137,215
1,624,640
88,480
1,250,000
332,084
$0.255
$0.196
$0.190
$0.196
$0.196
607,143
636,629
237,500
146,263
31,266
$0.240
$0.196
320,000
1,602,055
$0.196
$0.226
$0.190
-
319,859
19,996
237,500
-
3 February 2020
700,000
$0.185
129,500
18 February 2020
20 April 2020
1 June 2020
5,818,750
78,754,022
4,545,455
-
-
$0.210
$0.110
$0.110
-
-
1,221,938
8,662,942
500,000
275,381
(528,052)
Balance
30 June 2020
430,909,320
42,852,381
46
47
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
76 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 24. Equity - issued capital (continued)
Movements in listed options
Details
Balance
Balance
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Balance
Movements in unquoted options
Details
Balance
Issue of unlisted options
Balance
Exercise of unlisted options
Exercise of unlisted options
Balance
Date
Listed
options
$
1 July 2018
28,732,256
30 June 2019
4 July 2019
10 July 2019
16 July 2019
25 July 2019
26 July 2019
2 August 2019
9 August 2019
28,732,256
(1,508,509)
(13,326,593)
(3,233,587)
(742,906)
(158,806)
(8,137,215)
(1,624,640)
30 June 2020
-
Date
Options
$
1 July 2018
14 May 2019
30 June 2019
17 July 2019
22 November 2019
2,500,000
18,000,000
20,500,000
(1,250,000)
(1,250,000)
30 June 2020
18,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company
in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
All issued shares carrying voting rights on a one-for-one basis.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Consolidated Entity's objectives when managing capital is to safeguard its ability to continue as a going
concern so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an
optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Consolidated Entity may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Consolidated Entity would look to raise capital when an opportunity to invest in a business or company was
seen as value adding relative to the Company's current share price at the time of the investment.
48
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 24. Equity - issued capital (continued)
Movements in listed options
Details
Balance
Balance
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Movements in unquoted options
Balance
Details
Balance
Balance
Balance
Issue of unlisted options
Exercise of unlisted options
Exercise of unlisted options
Date
Listed
options
$
1 July 2018
28,732,256
30 June 2019
4 July 2019
10 July 2019
16 July 2019
25 July 2019
26 July 2019
2 August 2019
9 August 2019
28,732,256
(1,508,509)
(13,326,593)
(3,233,587)
(742,906)
(158,806)
(8,137,215)
(1,624,640)
30 June 2020
-
Date
Options
$
1 July 2018
14 May 2019
30 June 2019
17 July 2019
22 November 2019
2,500,000
18,000,000
20,500,000
(1,250,000)
(1,250,000)
30 June 2020
18,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 24. Equity - issued capital (continued)
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 77
The Consolidated Entity is subject to certain financing arrangements covenants and meeting these is given
priority in all capital risk management decisions. There have been no events of default on the financing
arrangements during the financial year.
The capital risk management policy remains unchanged from the 30 June 2019 Annual Report.
Note 25. Equity - reserves
Share based payments reserve (Note 38)
Capital reserve
Consolidated
2020
$
2019
$
560,904
6,196
469,638
6,196
567,100
475,834
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of
their remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company
in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
All issued shares carrying voting rights on a one-for-one basis.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
Consolidated
Balance at 1 July 2018
Share based payments expense
Balance at 30 June 2019
Share based payments expense
Transfers
Balance at 30 June 2020
Note 26. Equity - dividends
Capital
reserve
$
Share based
payments
reserve
$
Total
$
6,196
-
6,196
-
-
269,115
200,523
275,311
200,523
469,638
458,655
(367,389)
475,834
458,655
(367,389)
6,196
560,904
567,100
The Consolidated Entity's objectives when managing capital is to safeguard its ability to continue as a going
concern so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an
optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Consolidated Entity may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Consolidated Entity would look to raise capital when an opportunity to invest in a business or company was
seen as value adding relative to the Company's current share price at the time of the investment.
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 27. Financial instruments
Financial risk management objectives
The Consolidated Entity's activities expose it to a variety of financial risks as set out below.
Risk management is carried out by senior finance executives ('finance') under the guidance of the Board of
Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Consolidated
Entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and if required, hedges
financial risks within the Consolidated Entity's business. Finance reports to the Board on a monthly basis.
48
49
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
78 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 27. Financial instruments (continued)
Market risk
Foreign currency risk
The Consolidated Entity undertakes minimal transactions denominated in foreign currencies and therefore has
nominal exposure to foreign currency risk. Offshore Customer Care, Service delivery and Finance teams are
located in Manilla and cost around $11,000 USD per week. Payments are made monthly and conversion is at
the applicable exchange rate at the time the transaction is authorised. No hedging activity is undertaken to
minimise currency fluctuations.
Price risk
The Consolidated Entity is not exposed to any significant price risk.
Interest rate risk
The Consolidated Entity's main interest rate risk arises from long-term borrowings. Borrowings obtained at
variable rates expose the Consolidated Entity to interest rate risk. Borrowings obtained at fixed rates expose
the Consolidated Entity to fair value interest rate risk. The entire Facility is exposed to variable interest rates.
The Consolidated Entity paid $285,271 in interest during the 2020 financial year (2019: $271,439).
As at the reporting date the Consolidated Entity had the following variable rate borrowings BBSY plus 3.6%.
Consolidated
Bank loan
2020
2019
Weighted
average
interest
rate
%
Balance
$
Weighted
average
interest
rate
%
Balance
$
4.99%
3,267,807
5.57%
4,200,000
Net exposure to cash flow interest rate risk
3,267,807
4,200,000
An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below.
For the Consolidated Entity the bank loans outstanding, totalling $3.3m (2019: $4.2m), are interest bearing
loans. As announced to the market on 15 April 2020 the debt facility was increased to $10.9m and further
amendments were agreed to remove the quarterly amortisation of the principal and amend the Gross Leverage
ratio for the life of the facility.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Consolidated Entity. The Consolidated Entity has a strict code of credit and follows a rigorous
collection process. The maximum exposure to credit risk at the reporting date to recognised financial assets is
the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of
financial position and notes to the financial statements. The Consolidated Entity does not hold any collateral.
The Consolidated Entity has adopted a lifetime expected loss allowance in estimating expected credit losses to
trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. The credit
loss model takes into consideration the industry dynamics and exposures of the customer base.
With regards to trade receivables, amounts older than 90 days owing are reviewed and where appropriate
impaired. As at 30 June 2020 $176,323 was recognised as an allowance for impairment and expected credit
losses against the total amount owed by debtors. There are no guarantees against this receivable but
management closely monitors the receivable balance on a monthly basis and is in regular contact with its
customers to mitigate risk.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of
this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to
make contractual payments for a period greater than 1 year.
50
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 27. Financial instruments (continued)
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 79
Liquidity risk
Vigilant liquidity risk management requires the Consolidated Entity to maintain sufficient liquid assets (mainly
cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become
due and payable.
The Consolidated Entity manages liquidity risk by maintaining adequate cash reserves and available borrowing
facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial
assets and liabilities.
Remaining contractual maturities
The following tables detail the Consolidated Entity's remaining contractual maturity for its financial instrument
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest date on which the financial liabilities are required to be paid.
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contingent consideration
Interest-bearing - variable
Bank loan
Lease Liability
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
-
-
-
4,047,946
1,289,852
997,500
-
-
997,500
-
-
-
4.99%
5.27%
-
815,866
3,267,807
518,500
-
268,656
Remaining
contractual
maturities
$
-
-
-
-
-
4,047,946
1,289,852
1,995,000
3,267,807
1,603,022
Total non-derivatives
7,151,164
4,783,807
268,656
- 12,203,627
Remaining
contractual
maturities
$
-
-
-
-
1,055,934
629,722
4,200,000
5,885,656
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
-
-
1,055,934
629,722
-
-
Interest-bearing - variable
Bank loan
5.57%
1,200,000
3,000,000
Total non-derivatives
2,885,656
3,000,000
-
-
-
-
Fair value of financial instruments
Unless otherwise stated the carrying amounts of financial instruments reflect their fair value.
51
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
80 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 28. Key management personnel disclosures
Directors
The following persons were directors of Spirit Telecom Limited during the financial year:
Mr James Joughin (Non-Executive Chairman)
Mr Sol Lukatsky (Managing Director) (appointed as Executive Director 21 June 2019,
becoming Managing Director on 2 September 2019)
Mr Mark Dioguardi (Executive Director)
Mr Gregory Ridder (Non-Executive Director) (appointed on 21 November 2019)
Ms Inese Kingsmill (Non-Executive Director) (appointed on 1 July 2020)
Mr Terence Gray (Non-Executive Director) (resigned on 7 July 2020)
Mr Geoff Neate (Managing Director) (resigned on 2 September 2019)
Mr Luke Waldren (Non-Executive Director) (resigned 3 July 2019)
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major
activities of the Consolidated Entity, directly or indirectly, during the financial year:
Paul Miller (Chief Financial Officer) (appointed on 25 November 2019)
Donovan Newton (Chief Financial Officer) (resigned on 30 August 2019)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the
Consolidated Entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2020
$
2019
$
1,371,538
105,450
7,884
467,371
1,172,615
97,261
5,006
162,238
1,952,243
1,437,120
Note 29. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PKF Melbourne Audit
& Assurance Pty Ltd, the auditor of the Company:
Consolidated
2020
$
2019
$
90,000
53,000
53,500
21,000
143,500
74,000
Audit services - PKF Melbourne Audit & Assurance Pty Ltd
Audit or review of the financial statements
Other services - PKF Melbourne Audit & Assurance Pty Ltd
Income tax compliance and consulting services
Note 30. Contingent liabilities
There were no contingent liabilities at 30 June 2020 and 30 June 2019.
52
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 28. Key management personnel disclosures
Directors
The following persons were directors of Spirit Telecom Limited during the financial year:
Mr James Joughin (Non-Executive Chairman)
Mr Sol Lukatsky (Managing Director) (appointed as Executive Director 21 June 2019,
becoming Managing Director on 2 September 2019)
Mr Mark Dioguardi (Executive Director)
Mr Gregory Ridder (Non-Executive Director) (appointed on 21 November 2019)
Ms Inese Kingsmill (Non-Executive Director) (appointed on 1 July 2020)
Mr Terence Gray (Non-Executive Director) (resigned on 7 July 2020)
Mr Geoff Neate (Managing Director) (resigned on 2 September 2019)
Mr Luke Waldren (Non-Executive Director) (resigned 3 July 2019)
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major
activities of the Consolidated Entity, directly or indirectly, during the financial year:
Paul Miller (Chief Financial Officer) (appointed on 25 November 2019)
Donovan Newton (Chief Financial Officer) (resigned on 30 August 2019)
Compensation
Consolidated Entity is set out below:
The aggregate compensation made to directors and other members of key management personnel of the
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 29. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PKF Melbourne Audit
& Assurance Pty Ltd, the auditor of the Company:
Consolidated
2020
$
2019
$
1,371,538
1,172,615
105,450
7,884
467,371
97,261
5,006
162,238
1,952,243
1,437,120
Consolidated
2020
$
2019
$
90,000
53,000
53,500
21,000
143,500
74,000
Audit services - PKF Melbourne Audit & Assurance Pty Ltd
Audit or review of the financial statements
Other services - PKF Melbourne Audit & Assurance Pty Ltd
Income tax compliance and consulting services
Note 30. Contingent liabilities
There were no contingent liabilities at 30 June 2020 and 30 June 2019.
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 31. Related party transactions
Parent entity
Spirit Telecom Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 34.
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 81
Key management personnel
Disclosures relating to key management personnel are set out in note 28 and the remuneration report included
in the directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Consolidated
2020
$
2019
$
Payment for other expenses:
Tegis Pty Ltd (a related party of Mr Terence Gray)
Wages paid to Jennifer Neate in relation to casual employment (a related party of
Mr Geoff Neate)
-
10,000
6,799
25,002
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting
date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
Unless otherwise noted, all transactions were made on normal commercial terms and conditions and at market
rates.
Note 32. Legal parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Parent
2020
$
2019
$
94,182
40,254
94,182
40,254
52
53
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
82 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 32. Legal parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves (Note 25)
Accumulated losses
Total equity
Parent
2020
$
2019
$
5,114,722
2,625,846
48,409,094 27,266,704
1,043,875
1,241,898
6,114,501
2,498,214
42,852,381 25,511,726
475,834
(1,219,070)
567,100
(1,124,888)
42,294,593 24,768,490
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The bank loan of $3,267,807 is secured first over the assets and undertakings of Spirit Telecom Limited and its
wholly owned subsidiaries.
The parent entity had no other guarantees in relation to the debts of its subsidiaries as at 30 June 2020 and 30
June 2019.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30
June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Consolidated Entity, as disclosed in
note 2, except for the following:
●
● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
may be an indicator of an impairment of the investment.
54
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves (Note 25)
Accumulated losses
Total equity
wholly owned subsidiaries.
June 2019.
Contingent liabilities
Parent
2020
$
2019
$
5,114,722
2,625,846
48,409,094 27,266,704
1,043,875
1,241,898
6,114,501
2,498,214
42,852,381 25,511,726
567,100
475,834
(1,124,888)
(1,219,070)
42,294,593 24,768,490
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The bank loan of $3,267,807 is secured first over the assets and undertakings of Spirit Telecom Limited and its
The parent entity had no other guarantees in relation to the debts of its subsidiaries as at 30 June 2020 and 30
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
June 2019.
Significant accounting policies
note 2, except for the following:
The accounting policies of the parent entity are consistent with those of the Consolidated Entity, as disclosed in
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
Note 32. Legal parent entity information (continued)
Note 33. Business combinations
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 83
Acquisition of Arinda IT
Spirit Telecom Ltd acquired 100% of Bigscreensound Pty Ltd, trading as Arinda IT, with effective control on 1
July 2019. The acquisition has been accounted as a Business Combination under AASB 3. Arinda IT was a
long-term partner of Spirit’s having worked together on mutual customers and the acquisition was undertaken
by the Company to expand its product offering and the flagship entry into the Managed Service Provider (MSP)
sector
The fair values of the identifiable net assets acquired are detailed below:
Cash and cash equivalents
Trade receivables
Prepayments
Deposits
Property, plant and equipment
Trade and other payables
Provision for income tax
Employee benefits
Unearned revenue
Finance leases
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30
Net cash used
Fair value
$
163,089
415,132
128,568
12,980
33,000
(354,852)
(40,044)
(66,157)
(171,424)
(26,863)
93,429
2,732,221
2,825,650
2,825,650
(607,143)
2,218,507
i. Consideration transferred
Acquisition-related costs amounting to $40,766 are not included as part of the consideration for the acquisition
and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
The fair value of the trade receivables acquired as part of the business combination amounted to $415,132. As
of the acquisition date, the Company’s best estimate is that all cash will be collected.
iii. Goodwill
Goodwill of $2,732,221 was primarily related to the Company’s growth expectations through customer
expansion.
The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T cash
generating unit as at acquisition date. The goodwill that arose from this business combination is not deductible
for tax purposes.
iv. Contribution to the Consolidated Entity’s results
Arinda IT’s operations were fully absorbed into Spirit Telecom (Australia) Pty Ltd during the course of the 2020
financial year. Accordingly, separate disclosure of revenues and EBITDA directly attributable to this operation
as a stand alone entity is not achievable.
54
55
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
84 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 33. Business combinations (continued)
Acquisition of Phoenix Austec Group Pty Ltd
Spirit Telecom Ltd acquired 100% of Phoenix Austec Group Pty Ltd, trading as 'Phoenix Austec' (Phoenix), with
effective control on 1 July 2019 for upfront consideration of $1.5 million. The acquisition has been accounted as
a Business Combination under AASB 3. Phoenix has been operating since 2007 providing Small-Medium
Enterprise's (SME) with managed IT support, IT security and consulting services. The acquisition was
undertaken by the Company to expand and strengthen Spirit's entry into the Managed Service Provider (MSP)
sector for SMEs.
The fair values of the identifiable net assets acquired are detailed below:
Cash and cash equivalents
Trade receivables
Trade and other payables
Provision for income tax
Employee benefits
Net liabilities acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Net cash used
Fair value
$
170,866
74,575
(218,539)
(47,482)
(67,031)
(87,611)
1,633,658
1,546,047
1,546,047
(320,000)
1,226,047
i. Consideration transferred
Acquisition-related costs amounting to $38,772 are not included as part of the consideration for the acquisition
and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
The fair value of the trade receivables acquired as part of the business combination amounted to $74,575. As
of the acquisition date, the Company’s best estimate is that all cash will be collected.
iii. Goodwill
Goodwill of $1,633,658 was primarily related to the Company’s growth expectations through customer
expansion. The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T
cash generating unit as at acquisition date. The goodwill that arose from this business combination is not
deductible for tax purposes.
iv. Contribution to the Consolidated Entity’s results
Phoenix’s operations were fully absorbed into Spirit Telecom (Australia) Pty Ltd during the course of the 2020
financial year. Accordingly, separate disclosure of revenues and EBITDA directly attributable to this operation
as a stand alone entity is not achievable.
56
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
Acquisition of Phoenix Austec Group Pty Ltd
Spirit Telecom Ltd acquired 100% of Phoenix Austec Group Pty Ltd, trading as 'Phoenix Austec' (Phoenix), with
effective control on 1 July 2019 for upfront consideration of $1.5 million. The acquisition has been accounted as
a Business Combination under AASB 3. Phoenix has been operating since 2007 providing Small-Medium
Enterprise's (SME) with managed IT support, IT security and consulting services. The acquisition was
undertaken by the Company to expand and strengthen Spirit's entry into the Managed Service Provider (MSP)
sector for SMEs.
The fair values of the identifiable net assets acquired are detailed below:
Fair value
$
170,866
74,575
(218,539)
(47,482)
(67,031)
(87,611)
1,633,658
1,546,047
1,546,047
(320,000)
1,226,047
Cash and cash equivalents
Trade receivables
Trade and other payables
Provision for income tax
Employee benefits
Net liabilities acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Net cash used
i. Consideration transferred
Acquisition-related costs amounting to $38,772 are not included as part of the consideration for the acquisition
and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
The fair value of the trade receivables acquired as part of the business combination amounted to $74,575. As
of the acquisition date, the Company’s best estimate is that all cash will be collected.
iii. Goodwill
Goodwill of $1,633,658 was primarily related to the Company’s growth expectations through customer
expansion. The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T
cash generating unit as at acquisition date. The goodwill that arose from this business combination is not
deductible for tax purposes.
iv. Contribution to the Consolidated Entity’s results
Phoenix’s operations were fully absorbed into Spirit Telecom (Australia) Pty Ltd during the course of the 2020
financial year. Accordingly, separate disclosure of revenues and EBITDA directly attributable to this operation
as a stand alone entity is not achievable.
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 85
Acquisition of Cloud Business Technology
Spirit Telecom Ltd acquired the business assets and liabilities of Cloud Business Technology ("Cloud BT"), with
effective control on 1 February 2020. The acquisition has been accounted as a Business Combination under
AASB 3. This acquisition provides growth and expansion of Internet, Cloud and managed IT services in the
Sydney market.
The fair values of the identifiable net assets acquired are detailed below:
Employee benefits
Net liabilities acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: shares issued by Company as part of consideration
Net cash used
Fair value
$
(26,013)
(26,013)
689,500
663,487
663,487
(129,500)
533,987
i. Consideration transferred
Acquisition-related legal costs amounting to $15,277 are not included as part of the consideration for the
acquisition and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
As of the acquisition date, the Company acquired only the employee benefits.
iii. Goodwill
Goodwill of $689,500 was primarily related to the Company’s growth expectations through customer expansion.
The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T cash
generating unit as at acquisition date. The goodwill that arose from this business combination is not deductible
for tax purposes.
iv. Contribution to the Consolidated Entity’s results
Cloud BT’s operations were fully absorbed into Spirit Telecom (Australia) Pty Ltd from the date of acquisition.
Accordingly, separate disclosure of revenues and EBITDA directly attributable to this operation as a stand alone
operation is not achievable.
56
57
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
86 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 33. Business combinations (continued)
Acquisition of Trident & Neptune Group
Spirit Telecom Ltd acquired 100% of Trident Computer Services Pty Ltd and Neptune Managed Services Pty
Ltd referred to as ("TBG"), with effective control on 1 February 2020. The acquisition has been accounted as a
Business Combination under AASB 3. TBG is an established managed IT services and security business. This
highly strategic move created a new business division, Trident IT Solutions. Spirit’s new division will focus on
delivering custom designed cloud-based IT & Internet solutions for high growth verticals such as Schools,
Hospitals, Aged Care and Medium sized businesses. These types of clients are moving through a major
generational technology change as they migrate to the cloud and require high speed Internet and specialised
IT services which Spirit can now provide nationally.
The provisional fair values of the identifiable net assets acquired are detailed below:
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments
Deposits
Inventories
Property, plant and equipment
Trade and other payables
GST payables
Unearned revenue
Provision for income tax
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: contingent consideration
Less: shares issued by Company as part of consideration
Net cash used
Fair value
$
103,872
7,470,324
5,293
64,363
45,302
900,063
317,798
(7,122,324)
(414,016)
(619,166)
(89,787)
(544,028)
117,694
6,356,440
6,474,134
6,474,134
(1,995,000)
(1,221,938)
3,257,196
i. Consideration transferred
Acquisition-related legal costs amounting to $58,228 are not included as part of the consideration for the
acquisition and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
The fair value of the trade receivables acquired as part of the business combination amounted to $7,470,324.
As of the acquisition date, the Company’s best estimate is that all cash will be collected.
iii. Goodwill
Goodwill of $6,356,440 was primarily related to the Company’s growth expectations through customer
expansion. The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T
cash generating unit as at acquisition date. The goodwill that arose from this business combination is not
deductible for tax purposes.
58
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
Acquisition of Trident & Neptune Group
Spirit Telecom Ltd acquired 100% of Trident Computer Services Pty Ltd and Neptune Managed Services Pty
Ltd referred to as ("TBG"), with effective control on 1 February 2020. The acquisition has been accounted as a
Business Combination under AASB 3. TBG is an established managed IT services and security business. This
highly strategic move created a new business division, Trident IT Solutions. Spirit’s new division will focus on
delivering custom designed cloud-based IT & Internet solutions for high growth verticals such as Schools,
Hospitals, Aged Care and Medium sized businesses. These types of clients are moving through a major
generational technology change as they migrate to the cloud and require high speed Internet and specialised
IT services which Spirit can now provide nationally.
The provisional fair values of the identifiable net assets acquired are detailed below:
Fair value
$
103,872
7,470,324
5,293
64,363
45,302
900,063
317,798
(7,122,324)
(414,016)
(619,166)
(89,787)
(544,028)
117,694
6,356,440
6,474,134
6,474,134
(1,995,000)
(1,221,938)
3,257,196
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments
Deposits
Inventories
Property, plant and equipment
Trade and other payables
GST payables
Unearned revenue
Provision for income tax
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: contingent consideration
Less: shares issued by Company as part of consideration
Net cash used
i. Consideration transferred
Acquisition-related legal costs amounting to $58,228 are not included as part of the consideration for the
acquisition and have been recognised as transaction costs in the profit and loss statement.
ii. Identifiable net assets
The fair value of the trade receivables acquired as part of the business combination amounted to $7,470,324.
As of the acquisition date, the Company’s best estimate is that all cash will be collected.
iii. Goodwill
Goodwill of $6,356,440 was primarily related to the Company’s growth expectations through customer
expansion. The consolidated entity operates as one operating segment and goodwill was allocated to the IT&T
cash generating unit as at acquisition date. The goodwill that arose from this business combination is not
deductible for tax purposes.
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 33. Business combinations (continued)
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 87
iv. Contingent consideration
The acquisition of TBG included a contingent consideration element whereby 30% of the total consideration has
been agreed to be applied to an earn-out structure in equal proportion based upon EBITDA performance over
a 12 month period ended 30 November 2020 (CY20) and the Financial Year ended 30 June 2021 (FY21).The
earnout consideration is to be split in the same proportion of cash (75%) and equity (25%) as the upfront
consideration.
The earn-out structure facilitates a scaled achievement of the CY20 and FY21 targets whereby the contingent
consideration is payable in a range of 80% - 110% achievement for CY20 and in a range of 90% - 115%
achievement for FY21. At the date of acquisition, the Board and management have assessed the likelihood of
achieving the relevant EBITDA performance targets at the 100% level for both periods with the CY20 hurdle
consideration of $997,500 (classified as current) and the FY21 hurdle consideration of $997,500 (classified as
non-current).
v. Contribution to the Consolidated Entity’s results
TBG contributed revenues of $9,856,515 to the Consolidated Entity from the date of the acquisition to 30 June
2020. TBG does not receive any allocations of acquisition costs, corporate overhead, listing, finance, or other
overhead costs which is all absorbed by Spirit’s core operations. Spirit’s business growth generates increased
revenue opportunities across the entire Spirit network which are also reflected in the revenue performance of
TBG.
Acquisition of Voice Print Data Group
Spirit Telecom Ltd acquired 100% of Voice Print Data Group ("VPD"), with effective control on 1 July 2020. VPD
becomes the new Wholesale Business arm for Spirit selling a range of Cloud, Internet and Voice services via
its channel partners.
The upfront purchase price was of $14.0M settled by a combination of cash & equity being $7.0M cash (gross
of a $1M cash retention to allow for any completion adjustments) and $5.8M Spirit shares (equity component
adjusted after net debt adjustment on completion). The Share Purchase Agreement includes an earnout
component being comprised of Tranches 2 and 3 future payments payable where EBITDA performance exceeds
performance targets for FY21 & FY22 with payment at 5x any over-achievement. Total maximum purchase price
of up to $27.5M.
The acquisition will be accounted for as a Business Combination under AASB 3.
As at the date of preparation of this financial report the initial accounting of the business combination for the
VPD Group is incomplete.
58
59
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
88 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 33. Business combinations (continued)
Acquisition of LinkOne Group during the previous financial year
Spirit Telecom Limited acquired 100% of LinkOne Group of companies ("LinkOne") including Anttel
Communications Group Pty Ltd, LinkOne Pty Ltd, Ignite Broadband Pty Ltd and Wells Research Pty Ltd, with
effective control 1 April 2019. The acquisition has been accounted as a Business Combination under AASB 3.
LinkOne is a licensed telecommunications carrier operating a predominantly Fixed Wireless network via 44 points
of presence (PoPs), including 25 in Brisbane, 9 in Sydney and 10 in Melbourne. This enabled immediate
geographic expansion into the target markets of Brisbane and Sydney with the launch of Spirit's Sky Speed range
of B2B data and voice services on the LinkOne network.
The fair values of the identifiable net assets acquired are detailed below:
Cash and cash equivalents
Trade receivables
Inventories
Other
Property, plant and equipment
Trade and other payables
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: shares issued by Company as part of consideration
Net cash used
Fair value
$
346,440
83,652
113,481
31,710
1,390,300
(463,559)
1,502,024
4,197,976
5,700,000
5,700,000
(346,440)
(1,700,000)
3,653,560
Goodwill acquired was primarily related to the Company’s growth expectations through network and customer
expansion. The acquiree’s operations were merged with those of Spirit to expand one operating segment and
goodwill was allocated to the IT&T cash generating unit as at acquisition date.
LinkOne contributed revenues of $696,956, $286,976 of EBITDA and net profit before tax of $232,686 to the
Consolidated Entity from the date of the acquisition to 30 June 2019.
60
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 89
Note 33. Business combinations (continued)
Note 33. Business combinations (continued)
Acquisition of LinkOne Group during the previous financial year
Spirit Telecom Limited acquired 100% of LinkOne Group of companies ("LinkOne") including Anttel
Communications Group Pty Ltd, LinkOne Pty Ltd, Ignite Broadband Pty Ltd and Wells Research Pty Ltd, with
effective control 1 April 2019. The acquisition has been accounted as a Business Combination under AASB 3.
LinkOne is a licensed telecommunications carrier operating a predominantly Fixed Wireless network via 44 points
of presence (PoPs), including 25 in Brisbane, 9 in Sydney and 10 in Melbourne. This enabled immediate
geographic expansion into the target markets of Brisbane and Sydney with the launch of Spirit's Sky Speed range
of B2B data and voice services on the LinkOne network.
The fair values of the identifiable net assets acquired are detailed below:
Acquisition of Building Connect Pty Ltd during the previous financial year
Spirit Telecom Limited acquired 100% of Building Connect Pty Ltd, with effective control on 1 April 2019. The
acquisition has been accounted as a Business Combination under AASB 3. This acquisition provides significant
opportunity for Spirit to expand its fixed wireless network in Sydney, enabling more businesses in Australia’s
fastest growing economic region of Western Sydney to access its high-speed Sky-Speed Internet range.
Building Connect extends Spirit’s network across 31 buildings/business parks, servicing 200 business
customers and provides immediate geographic expansion into Western Sydney.
The fair values of the identifiable net assets acquired are detailed below:
Cash and cash equivalents
Trade receivables
Inventories
Other
Property, plant and equipment
Trade and other payables
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: shares issued by Company as part of consideration
Net cash used
Fair value
$
346,440
83,652
113,481
31,710
1,390,300
(463,559)
1,502,024
4,197,976
5,700,000
5,700,000
(346,440)
(1,700,000)
3,653,560
Cash and cash equivalents
Trade receivables
Inventory
Other
Property, plant and equipment
Trade and other payables
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: shares issued by Company as consideration
Net cash received
Fair value
$
3,957
9,813
4,500
5,246
215,743
(101,587)
137,672
162,328
300,000
300,000
(3,957)
(300,000)
(3,957)
Goodwill acquired was primarily related to the Company’s growth expectations through network and customer
expansion. The acquiree’s operations were merged with those of Spirit to expand one operating segment and
goodwill was allocated to the IT&T cash generating unit as at acquisition date.
LinkOne contributed revenues of $696,956, $286,976 of EBITDA and net profit before tax of $232,686 to the
Consolidated Entity from the date of the acquisition to 30 June 2019.
Goodwill acquired was primarily related to the Company’s growth expectations through network and customer
expansion. The acquiree’s operations were merged with those of Spirit to expand one operating segment and
goodwill was allocated to the IT&T cash generating unit as at acquisition date.
Building Connect contributed revenues of $122,730, $42,661 of EBITDA and net profit before tax of $32,750
to the Consolidated Entity from the date of the acquisition to 30 June 2019.
60
61
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
90 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Ownership interest
2019
2020
%
%
Spirit Telecom (Australia) Pty Ltd
Phone Name Marketing Australia Pty Ltd
World Without Wires Pty Ltd
Anttel Communications Group Pty Ltd
Ignite Broadband Pty Ltd
LinkOne Pty Ltd
Wells Research Pty Ltd
Building Connect Pty Ltd
Bigscreensound Pty Ltd, trading as Arinda IT
Phoenix Austec Group Pty Ltd
Trident Computer Services Pty Ltd
Neptune Managed Services Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
For the purposes of this note the parent entity has been deemed as the legal parent entity Spirit Telecom Limited.
Note 35. Events after the reporting period
The acquisition of the VPD Group was completed on 1 July 2020 and 29,000,000 fully paid ordinary shares
were issued (subject to voluntary escrow until 1 July 2021), at a deemed issue price of $0.20 (20 cents) per
share. As at the date of preparation of this financial report the initial accounting of the business combination for
the VPD Group is incomplete.
Management and the Directors note the dynamic nature of the COVID-19 outbreak and measures taken in
response, particularly the Melbourne-wide Stage 4 restrictions and regional Victoria Stage 3 restrictions that
took effect from 2 August 2020. Consistent with the Company’s assessment of COVID-19 impacts on the
business through the reporting date, at the date of this report, the recent events are not expected to significantly
affect Spirit’s business operations.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated
Entity's state of affairs in future financial years.
62
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 2:
Principal place of business /
Country of incorporation
2020
%
2019
%
Ownership interest
Name
Spirit Telecom (Australia) Pty Ltd
Phone Name Marketing Australia Pty Ltd
World Without Wires Pty Ltd
Anttel Communications Group Pty Ltd
Ignite Broadband Pty Ltd
LinkOne Pty Ltd
Wells Research Pty Ltd
Building Connect Pty Ltd
Bigscreensound Pty Ltd, trading as Arinda IT
Phoenix Austec Group Pty Ltd
Trident Computer Services Pty Ltd
Neptune Managed Services Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
For the purposes of this note the parent entity has been deemed as the legal parent entity Spirit Telecom Limited.
Note 35. Events after the reporting period
The acquisition of the VPD Group was completed on 1 July 2020 and 29,000,000 fully paid ordinary shares
were issued (subject to voluntary escrow until 1 July 2021), at a deemed issue price of $0.20 (20 cents) per
share. As at the date of preparation of this financial report the initial accounting of the business combination for
the VPD Group is incomplete.
Management and the Directors note the dynamic nature of the COVID-19 outbreak and measures taken in
response, particularly the Melbourne-wide Stage 4 restrictions and regional Victoria Stage 3 restrictions that
took effect from 2 August 2020. Consistent with the Company’s assessment of COVID-19 impacts on the
business through the reporting date, at the date of this report, the recent events are not expected to significantly
affect Spirit’s business operations.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated
Entity's state of affairs in future financial years.
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 91
Note 36. Reconciliation of loss after income tax to net cash from operating activities
Consolidated
2020
$
2019
$
Loss after income tax benefit for the year
(1,514,501)
(823,742)
Adjustments for:
Depreciation and amortisation
Net gain on disposal of property, plant and equipment
Share-based payments
Capital raise fees tax impact
Interest and other finance costs included in financing activities
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in deferred tax assets
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Increase/(decrease) in employee benefits
Other
Net cash from operating activities
Note 37. Earnings per share
3,854,663
(1,965)
478,651
189,937
84,828
1,929,333
-
200,523
57,000
271,439
3,998,012
949,503
(727,767)
173,841
(3,616,704)
(127,951)
(35,327)
(57,601)
(582,525)
(271,556)
(250,899)
927,989
42,623
884,243
3,705,220
2,326,827
Consolidated
2020
$
2019
$
Loss after income tax attributable to the owners of Spirit Telecom Limited
(1,514,501)
(823,742)
Weighted average number of ordinary shares used in calculating basic earnings
per share
Adjustments for calculation of diluted earnings per share:
Dilutive potential ordinary shares
357,066,698
256,206,001
-
31,232,256
Weighted average number of ordinary shares used in calculating diluted earnings
per share
357,066,698
287,438,257
Number
Number
Basic earnings per share
Diluted earnings per share
Note 38. Share-based payments
Cents
Cents
(0.42)
(0.42)
(0.32)
(0.29)
During the financial year ended 30 June 2020, a total of 653,943 performance rights were granted to certain
employees which have a 2-year term and are subject to certain performance hurdles being met in order for them
to vest which are split 50% subject to meeting the Total Shareholder Return (TSR) and 50% for exceeding the
budgeted return on capital.
62
63
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
92 N o T E S T o T H E F I N A N C I A L S T A T E M E N T S
30 June 2020
Note 38. Share-based payments (continued)
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine whether the Consolidated Entity receives the services that
entitle the employees to receive payment. No account is taken of any other vesting conditions.
Set out below are summaries of options granted under the Spirit Telecom Long Term Incentive Plan:
2020
Grant date
Expiry date
24/11/2016
14/05/2019
14/05/2019
14/05/2019
24/11/2019
01/07/2023
01/07/2023
01/07/2023
Exercise
price
$0.190
$0.150
$0.180
$0.215
Balance at
the start of
the year
2,500,000
6,000,000
6,000,000
6,000,000
20,500,000
Weighted average exercise price
$0.183
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
(2,500,000)
-
-
-
(2,500,000)
-
-
6,000,000
-
6,000,000
-
6,000,000
-
- 18,000,000
$0.190
-
$0.182
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
2019
Grant date
Expiry date
24/11/2016
14/05/2019
14/05/2019
14/05/2019
24/11/2019
01/07/2023
01/07/2023
01/07/2023
$0.190
$0.150
$0.180
$0.215
2,500,000
-
-
-
-
6,000,000
6,000,000
6,000,000
2,500,000 18,000,000
Weighted average exercise price
$0.190
$0.182
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
24/11/2016
24/11/2019
Set out below are summaries of performance rights granted under the plan:
2020
Grant date
Expiry date
24/11/2016
12/09/2018
20/11/2018
18/02/2019
22/04/2020
24/11/2019
12/09/2021
20/11/2020
18/02/2023
22/04/2023
Balance at
the start of
the year
770,000
1,239,598
512,820
520,000
-
3,042,418
64
-
-
-
-
-
-
2020
Number
2,500,000
-
6,000,000
-
6,000,000
-
6,000,000
-
- 20,500,000
-
-
-
$0.183
2019
Number
2,500,000
2,500,000
Balance at
the end of
the year
Granted
Exercised
Forfeited
-
-
-
-
653,943
653,943
(332,084)
-
-
-
-
(332,084)
(437,916)
(992,539)
-
-
-
(1,430,455)
-
247,059
512,820
520,000
653,943
1,933,822
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Notes to the financial statements
30 June 2020
Spirit Telecom Limited
Notes to the financial statements
30 June 2020
N o T E S T o T H E F I N A N C I A L S T A T E M E N T S 93
Note 38. Share-based payments (continued)
Note 38. Share-based payments (continued)
2019
Grant date
Expiry date
24/11/2016
12/09/2018
20/11/2018
18/02/2019
24/11/2019
12/09/2021
20/11/2020
18/02/2023
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
1,970,600
-
-
-
1,970,600
-
1,642,798
512,820
520,000
2,675,618
(1,200,600)
-
-
-
(1,200,600)
-
(403,200)
-
-
(403,200)
770,000
1,239,598
512,820
520,000
3,042,418
Set out below are the performance rights exercisable at the end of the financial year:
Grant date
Expiry date
24/11/2016
24/11/2019
2020
Number
2019
Number
-
-
770,000
770,000
For the options granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date, are as follows:
Grant date
Expiry date
Share price
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
14/05/2019
14/05/2019
14/05/2019
01/07/2023
01/07/2023
01/07/2023
$0.165
$0.165
$0.165
$0.150
$0.180
$0.215
52.50%
52.50%
52.50%
-
-
-
1.32%
1.32%
1.32%
$0.0780
$0.0690
$0.0600
For the performance rights granted during the current financial year, the valuation model inputs used to
determine the fair value at the grant date, are as follows:
Grant date
Expiry date
Share price Expected
volatility
at grant date
Dividend
yield
Risk-free
Fair value
interest rate at grant date
12/09/2018
12/09/2018
20/11/2018
20/11/2018
18/02/2019
18/02/2019
22/04/2020
22/04/2020
12/09/2021
12/09/2021
20/11/2020
20/11/2020
18/02/2022
18/02/2022
22/04/2023
22/04/2023
$0.200
$0.200
$0.160
$0.160
$0.145
$0.145
$0.125
$0.125
107.94%
107.94%
70.00%
70.00%
52.50%
52.50%
60.00%
60.00%
-
-
-
-
-
-
-
-
Grant date
Expiry date
Granted
Exercised
Forfeited
the year
(332,084)
(437,916)
(992,539)
Share based payments expense reconciliation
Issue of share options to directors and employees under incentive option scheme
Issue of performance rights to directors and employees under performance rights
plan
Issue of shares to employees
653,943
653,943
(332,084)
(1,430,455)
1,933,822
Total share-based payments expense reconciliation
24/11/2016
12/09/2018
20/11/2018
18/02/2019
22/04/2020
24/11/2019
12/09/2021
20/11/2020
18/02/2023
22/04/2023
65
Balance at
the start of
the year
770,000
1,239,598
512,820
520,000
3,042,418
-
64
2.02%
2.02%
2.04%
2.04%
1.69%
1.69%
0.27%
0.27%
$0.1692
$0.2000
$0.1194
$0.1600
$0.1400
$0.0355
$0.1084
$0.1250
Consolidated
2020
$
2019
$
397,353
100,660
61,302
19,996
79,863
20,000
478,651
200,523
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine whether the Consolidated Entity receives the services that
entitle the employees to receive payment. No account is taken of any other vesting conditions.
Set out below are summaries of options granted under the Spirit Telecom Long Term Incentive Plan:
Grant date
Expiry date
Granted
Exercised
24/11/2016
14/05/2019
14/05/2019
14/05/2019
24/11/2019
01/07/2023
01/07/2023
01/07/2023
Exercise
price
$0.190
$0.150
$0.180
$0.215
Balance at
the start of
the year
2,500,000
6,000,000
6,000,000
6,000,000
20,500,000
(2,500,000)
Expired/
forfeited/
other
Balance at
the end of
the year
-
6,000,000
6,000,000
6,000,000
(2,500,000)
- 18,000,000
Weighted average exercise price
$0.183
$0.190
$0.182
Grant date
Expiry date
Granted
Exercised
24/11/2016
14/05/2019
14/05/2019
14/05/2019
24/11/2019
01/07/2023
01/07/2023
01/07/2023
Balance at
the start of
the year
2,500,000
Exercise
price
$0.190
$0.150
$0.180
$0.215
-
-
-
6,000,000
6,000,000
6,000,000
2,500,000 18,000,000
Weighted average exercise price
$0.190
$0.182
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
24/11/2016
24/11/2019
Set out below are summaries of performance rights granted under the plan:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Expired/
forfeited/
other
Balance at
the end of
the year
2,500,000
6,000,000
6,000,000
6,000,000
- 20,500,000
$0.183
2020
Number
2019
Number
2,500,000
2,500,000
Balance at
the end of
-
247,059
512,820
520,000
653,943
-
-
-
-
-
-
-
-
-
-
-
-
-
2020
2019
2020
SPIRIT 2020 ANNUAL REPORT 94
DIRECTORS'
DECLARATION
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Directors' declaration
30 June 2020
In the directors' opinion:
D I R E C T oR S ' DE C L A R A T I oN 95
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Consolidated Entity's financial
position as at 30 June 2020 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
James Joughin
Non-Executive Chairman
17 August 2020
66
SPIRIT 2020 ANNUAL REPORT
96
INDEPENDENT
AUDITOR'S REPORT
To the Members of Spirit Telecom
Limited
S P I R I T 2 0 1 9 A N N U A L R E P O R T
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPIRIT TELECOM LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Spirit Telecom Limited (the Company), 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, notes comprising a summary of significant accounting policies and other explanatory
information, and the Directors’ Declaration of the Company and the consolidated entity comprising the Company and
the entities it controlled at the year’s end or from time to time during the financial year.
In our opinion, the financial report of Spirit Telecom Limited is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its financial
performance for the year ended on that date; and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the consolidated entity 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.
Basis for Opinion
Independence
Key Audit Matters
A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that context.
Key audit matter – Business combinations
How our audit addressed this matter
As described in note 33, the Company entered into
Our procedures included, but were not limited to, the
agreements to acquire 100% of the equity in Bigscreens
following:
Sound Pty Ltd, trading as Arinda IT (‘Arinda’), Phoenix
Austec Group Pty Ltd (‘Phoenix’), Trident Computer
Services Pty Ltd (‘Trident’) and its subsidiary Neptune
Managed Services Pty Ltd (‘Neptune’). The consolidated
entity also acquired the business assets and liabilities of
Cloud Business Technology (‘CloudBT’).
The acquisitions were accounted in accordance with AASB
3 Business Combinations.
The acquisition-date fair value of the total consideration
transferred in respect of each acquisition amounted to:
settlement contracts;
•
•
•
•
Arinda IT: $2,825,650
Phoenix: $1,546,047
Trident and Neptune: $6,474,134
CloudBT: $663,487
evaluating
the consolidated entity’s accounting
treatment against the requirements of AASB 3, key
transaction agreements, our understanding of each
business acquired and its industry;
assessing the methodology applied to recognise the
fair value of identifiable assets and liabilities;
validating inputs of the components of the business
combinations
to underlying
support
including
assessing Management’s determination of the point at
which control was gained of each acquiree;
assessing
the
calculation of
the
contingent
consideration and its accuracy in accordance with the
contractual arrangements and relevant accounting
standards;
reviewing the accounting entries associated with the
business combinations; and
•
•
•
•
•
•
67
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
SPIRIT 2020 ANNUAL REPORT
I N D E P E N D E N T A u D I T o R ' S R E P o R T 97
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SPIRIT TELECOM LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Spirit Telecom Limited (the Company), 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, notes comprising a summary of significant accounting policies and other explanatory
information, and the Directors’ Declaration of the Company and the consolidated entity comprising the Company and
the entities it controlled at the year’s end or from time to time during the financial year.
In our opinion, the financial report of Spirit Telecom Limited is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its financial
performance for the year ended on that date; and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the consolidated entity 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.
Key Audit Matters
A key audit matter is a matter that, in our professional judgement, was of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that context.
Key audit matter – Business combinations
How our audit addressed this matter
As described in note 33, the Company entered into
agreements to acquire 100% of the equity in Bigscreens
Sound Pty Ltd, trading as Arinda IT (‘Arinda’), Phoenix
Austec Group Pty Ltd (‘Phoenix’), Trident Computer
Services Pty Ltd (‘Trident’) and its subsidiary Neptune
Managed Services Pty Ltd (‘Neptune’). The consolidated
entity also acquired the business assets and liabilities of
Cloud Business Technology (‘CloudBT’).
The acquisitions were accounted in accordance with AASB
3 Business Combinations.
The acquisition-date fair value of the total consideration
transferred in respect of each acquisition amounted to:
•
•
•
•
Arinda IT: $2,825,650
Phoenix: $1,546,047
Trident and Neptune: $6,474,134
CloudBT: $663,487
Our procedures included, but were not limited to, the
following:
•
evaluating
the consolidated entity’s accounting
treatment against the requirements of AASB 3, key
transaction agreements, our understanding of each
business acquired and its industry;
assessing the methodology applied to recognise the
fair value of identifiable assets and liabilities;
validating inputs of the components of the business
combinations
including
settlement contracts;
assessing Management’s determination of the point at
which control was gained of each acquiree;
contingent
calculation of
assessing
consideration and its accuracy in accordance with the
contractual arrangements and relevant accounting
standards;
to underlying
support
the
the
reviewing the accounting entries associated with the
business combinations; and
•
•
•
•
•
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
67
SPIRIT 2020 ANNUAL REPORT
98 I N D E P E N D E N T A u D I T o R ' S R E P o R T
Key audit matter – Business combinations (continued)
Significant judgements were formed by Management in
valuing the acquired identifiable assets and allocation to
goodwill. Based on this we have considered these
business combinations to be a Key Audit Matter.
Key audit matter – Impairment of goodwill and indefinite
life intangibles
How our audit addressed this matter (continued)
•
reviewing the related financial statement disclosures for
the acquisitions for consistency with the relevant financial
reporting standards.
How our audit addressed this matter
life
intangibles was $23,974,241
As at 30 June 2020, the carrying value of goodwill and
indefinite
(2019:
$12,561,797), as disclosed in note 15 of the financial
report. The accounting policy in respect of these assets is
outlined in note 2 Intangibles.
An annual impairment test for goodwill and other
indefinite life intangibles is required under AASB 136
Impairment of Assets. Management’s testing has been
performed using a discounted cash
flow model
(Impairment model) to estimate the value-in-use of the
Cash Generating Unit (CGU) to which the intangible assets
have been allocated.
The evaluation of the recoverable amount requires the
consolidated entity to exercise significant judgement in
determining key assumptions, which include:
•
•
•
5-year cash flow forecast;
growth rate and terminal growth factor; and
discount rate.
The outcome of the impairment assessment could vary if
different assumptions were applied. As a result, the
evaluation of the recoverable amount of intangibles is an
significant Management estimation and
area of
judgement, and a Key Audit Matter.
Our procedures included, but were not limited to, assessing
and challenging:
•
the appropriateness of Management’s determination of
the CGU to which goodwill and indefinite life intangibles
are allocated;
•
•
•
•
•
•
the application of an indefinite useful life to these
intangible assets;
the reasonableness of the financial year 2021 budget
approved by the Directors, comparing to current actual
results, and considering trends, strategies and outlooks;
the testing of inputs used in the impairment model,
including the approved budget;
the determination of the discount rate applied in the
impairment model, comparing to available industry data;
the short to medium term growth rates applied in the
forecast cash flow, considering historical results and
available industry data;
the arithmetic accuracy of the impairment model;
• Management’s sensitivity analysis around the key drivers
of the cash flow projections, to consider the likelihood of
such movements occurring sufficient to give rise to an
impairment; and
•
the appropriateness of the disclosures including those
relating to sensitivities in assumptions used in note 15.
Key audit matter – Revenue recognition
The consolidated entity’s sales revenue amounted to
$34,457,306 during the year (2019: $17,414,861). Note 2
Revenue Recognition describes the following accounting
in
policies applicable to distinct revenue streams
accordance with AASB 15 Revenue from Contracts with
Customers:
•
Recurring
internet access,
equipment rentals and line rentals, in addition to
installation
into underlying
contracts, are recognised over the period during
which the contracted service provision occurs.
• Non-recurring revenue such as call charges and
hardware sales are recognised at the point in time
the service is delivered.
revenue bundled
such as
revenue
In addition, the consolidated entity receives grant
revenue which is deferred and recognised as services are
performed or conditions fulfilled in accordance with AASB
120 Accounting for Government Grants and Disclosure of
Government Assistance. Unearned revenue is disclosed in
notes 17 and 23.
How our audit addressed this matter
Our procedures included, but were not limited to, the
following:
•
for a sample of contracts across each revenue stream,
evaluating the contracts and agreeing revenue amounts to
the records accumulated as
inputs to the financial
statements, including supporting billing systems and bank
records; these procedures enabled our assessing the
values recorded and the timing of revenue recognition as
appropriate to the completion of performance obligations
and the timeframe of product delivery or period of service
provision;
revenue cut off and
assessing
completeness of revenue deferred in accordance with the
principles of AASB 15 as of the year-end;
assessing through analytical review the reasonableness of
revenue streams by data analytics and comparison to prior
year and budgeted results; and
the accuracy of
•
•
SPIRIT 2020 ANNUAL REPORT
I N D E P E N D E N T A u D I T o R ' S R E P o R T 99
Key audit matter – Revenue recognition (continued)
How our audit addressed this matter (continued)
The recognition of revenue and associated unearned
revenue is considered a Key Audit Matter due to the
varied timing of revenue recognition relative to the
different revenue streams, consideration of business
combinations, and the relative complexity of processes
supporting the accounting for each.
Other Information
•
assessing the consistency of the consolidated
entity’s accounting policies in respect of revenue
recognition with the criteria prescribed by AASB 15
and AASB 120.
Those charged with governance are responsible for the other information. The other information comprises the
information included in the consolidated entity’s annual report for the year ended 30 June 2020 but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and, accordingly, we do not express an audit
opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report.
In connection with our audit of the financial report, our responsibility is to read the other information and in doing so,
we consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If based on the work we have performed, we conclude that there is a material misstatement of this information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors’ for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the consolidated entity or cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue the 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 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 aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with 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
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion, forgery,
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
consolidated entity’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and other
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 consolidated entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
SPIRIT 2020 ANNUAL REPORT
Key audit matter – Revenue recognition (continued)
How our audit addressed this matter (continued)
The recognition of revenue and associated unearned
revenue is considered a Key Audit Matter due to the
varied timing of revenue recognition relative to the
different revenue streams, consideration of business
combinations, and the relative complexity of processes
supporting the accounting for each.
Other Information
•
assessing the consistency of the consolidated
entity’s accounting policies in respect of revenue
recognition with the criteria prescribed by AASB 15
and AASB 120.
Those charged with governance are responsible for the other information. The other information comprises the
information included in the consolidated entity’s annual report for the year ended 30 June 2020 but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and, accordingly, we do not express an audit
opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report.
In connection with our audit of the financial report, our responsibility is to read the other information and in doing so,
we consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If based on the work we have performed, we conclude that there is a material misstatement of this information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors’ for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the consolidated entity or cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue the 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 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 aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with 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
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion, forgery,
100 I N D E P E N D E N T A u D I T o R ' S R E P o R T
•
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
consolidated entity’s internal control.
•
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and other
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 consolidated entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
consolidated entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the consolidated entity to express an opinion on the group financial report. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Directors, we determine those matters that were of most significance in the
audit of the financial report of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Spirit Telecom Limited for the year then ended complies with Section 300A
of the Corporations Act 2001.
PKF
Melbourne, 17 August 2020
Steven Bradby
Partner
SPIRIT 2020 ANNUAL REPORT
I N D E P E N D E N T A u D I T o R ' S R E P o R T 101
SPIRIT 2020 ANNUAL REPORT 102
SHAREHOLDER
INFORMATION
SPIRIT 2020 ANNUAL REPORT Spirit Telecom Limited
Shareholder information
30 June 2020
S H A R E H oL D E R I N F oR M A T I oN 103
The shareholder information set out below was applicable as at 17 August 2020.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number Number
of holders
of
%
of
Number
Number
of holders
of
%
of
Number
Number
of holders
of
%
of
of
ordinary
shares
ordinary
shares
ordinary
shares
of
unquoted
options
unquoted
options
unquoted
options
of
performance
rights
performance
rights
Performance
rights
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
21,291
148
1,596,090
493
355
2,934,089
795 29,419,403
227 425,938,447
2,018 459,909,320
-
0.35%
0.64%
6.40%
92.61%
100.00%
-
-
-
-
-
-
-
-
2 18,000,000 100.00%
2 18,000,000 100.00%
-
-
-
-
Holding less than a
marketable parcel
158
33,596
0.01%
-
-
-
-
-
-
-
5
5
-
-
-
-
-
1,933,822
1,933,822
-
100.00%
100.00%
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
% of total
shares
Number
held
issued
1. CRAZY DIAMOND PTY LTD
2. MR PETER DIAMOND & MRS DIANA DIAMOND (P & D DIAMOND SUPER
FUND A/C)
3. UBS NOMINEES PTY LTD
4. CS THIRD NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 13 A/C)
5. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
6. NATIONAL NOMINEES LIMITED
7. BRIGGS GROUP CONSULTING PTY LTD (L & C BRIGGS FAMILY A/C)
7. WADE TECHNOLOGIES PTY LTD (THE WADE FAMILY A/C)
8. CITICORP NOMINEES PTY LIMITED
9. MR TODD MAUNDER
10. THE BENTLEY GROUP (AUST) PTY LTD (MOONRIVER HOLDINGS A/C)
11. MRS LEORA SHAMGAR
12. MDJD PTY LTD (MARK DIAMOND SUPER FUND A/C)
13. CS FOURTH NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 11 A/C)
14. SEABIRD INVESTMENTS (WA) PTY LTD (THE JA SUPERANNUATION A/C)
15. BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
16. PENBURY GRANGE PTY LTD (JOUGHIN FAMILY S/F A/C)
17. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
18. THREE ZEBRAS PTY LTD (JUDD FAMILY A/C)
19. BRISPOT NOMINEES PTY LTD (HOUSE HEAD NOMINEE A/C)
20. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
51,000,000
11.09
48,000,000
44,452,433
26,689,683
23,785,939
20,736,328
12,578,750
12,578,750
12,520,087
6,584,346
5,818,750
5,500,000
5,200,000
5,084,005
5,000,000
4,197,022
4,045,455
4,008,018
4,000,000
3,509,506
3,363,786
10.44
9.67
5.80
5.17
4.51
2.74
2.74
2.72
1.43
1.27
1.20
1.13
1.11
1.09
0.91
0.88
0.87
0.87
0.76
0.73
Unquoted options over ordinary shares on issue
Performance rights over ordinary shares on issue
308,652,858
67.11
Number
on issue
Number
of holders
18,000,000
1,933,822
2
5
SPIRIT 2020 ANNUAL REPORT
Spirit Telecom Limited
Shareholder information
104 S H A R E H oL D E R I N F oR M A T I oN
30 June 2020
The following persons hold 20% or more of unquoted equity securities:
Name
Class
Solomon Lukatsky
Mark Dioguardi
Geoffrey Neate
Dioguardi Family Trust
Unquoted options
Unquoted options
Unquoted performance rights
Unquoted performance rights
Number
held
9,000,000
9,000,000
512,820
520,000
Substantial holders in the Company, as disclosed in substantial holding notices given to the Company, are set
out below:
Ordinary shares
% of total
shares
Number
held
issued
CRAZY DIAMOND PTY LTD / MR PETER DIAMOND & MRS DIANA DIAMOND
REGAL FUNDS MANAGEMENT PTY LTD (RFM)
99,000,000
81,508,469
21.53
17.72
Voting rights
The voting rights attached to each class of equity security are set out below:
Ordinary shares
All issued shares carrying voting rights on a one-for-one basis.
Unquoted options
There are no voting rights attached to unquoted options.
Performance rights
There are no voting rights attached to performance rights.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Ordinary fully paid shares
Ordinary fully paid shares
Ordinary fully paid shares
Expiry date
3 February 2021
18 February 2021
1 July 2021
Number
of shares
700,000
5,818,750
29,000,000
35,518,750
Corporate Governance Statement
Refer to the Company's Corporate Governance statement at: https://spirit.com.au/investor-centre/
SPIRIT 2020 ANNUAL REPORT
S H A R E H oL D E R I N F oR M A T I oN 105
Spirit Telecom Limited
Shareholder information
30 June 2020
Solomon Lukatsky
Mark Dioguardi
Geoffrey Neate
Dioguardi Family Trust
out below:
The following persons hold 20% or more of unquoted equity securities:
Name
Class
Unquoted options
Unquoted options
Unquoted performance rights
Unquoted performance rights
Substantial holders in the Company, as disclosed in substantial holding notices given to the Company, are set
Number
held
9,000,000
9,000,000
512,820
520,000
Ordinary shares
% of total
shares
Number
held
issued
99,000,000
81,508,469
21.53
17.72
CRAZY DIAMOND PTY LTD / MR PETER DIAMOND & MRS DIANA DIAMOND
REGAL FUNDS MANAGEMENT PTY LTD (RFM)
The voting rights attached to each class of equity security are set out below:
Voting rights
Ordinary shares
All issued shares carrying voting rights on a one-for-one basis.
Unquoted options
There are no voting rights attached to unquoted options.
Performance rights
There are no voting rights attached to performance rights.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Ordinary fully paid shares
Ordinary fully paid shares
Ordinary fully paid shares
Expiry date
3 February 2021
18 February 2021
1 July 2021
Number
of shares
700,000
5,818,750
29,000,000
35,518,750
Corporate Governance Statement
Refer to the Company's Corporate Governance statement at: https://spirit.com.au/investor-centre/
SPIRIT 2020 ANNUAL REPORT
106
C O R P O R A T E
D I R E C T O R Y
Directors
Auditor
James Joughin (Non-Executive Chairman)
James Joughin (Non-Executive Chairman)
PKF Melbourne Audit & Assurance Pty Ltd
Sol Lukatsky (Managing Director)
Sol Lukatsky (Managing Director)
Level 12, 440 Collins Street
Mark Dioguardi (Executive Director)
Mark Dioguardi (Executive Director)
Melbourne, Victoria 3000
Gregory Ridder (Non-Executive Director)
Gregory Ridder (Non-Executive Director)
Inese Kingsmill (Non-Executive Director)
Inese Kingsmill (Non-Executive Director)
Stock exchange listing
Spirit Telecom Limited securities are listed
on the Australian Securities Exchange
(ASX code: ST1)
ACN 089 224 402
Website
spirit.com.au
Company secretary
Melanie Leydin
Registered office
Level 4, 100 Albert Road
South Melbourne, Victoria 3205
Phone: 03 9692 7222
Principal place of business
Level 2, 19-25 Raglan Street
South Melbourne, Victoria 3205
Phone: 1300 007 001
Share register
Automic Group
Level 5, 126 Phillip Street
Sydney, New South Wales 2000
Phone: 1300 288 664 (within Australia)
+61 (0) 2 9698 5414 (International)
SPIRIT 2020 ANNUAL REPORT
107
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