2021 ANNUAL REPORT _____ SUPERLOOP LIMITED | ABN 96 169 263 094 2021 ANNUAL REPORT _____ Table of Contents Chair & CEO Report Directors’ Report Remuneration Report Auditor’s Independence Declaration Financial Report Notes to the Consolidated Financial Report Directors’ Declaration Independent Auditor’s Report ASX Additional Information 4 9 27 39 41 46 82 83 88 3 SUPERLOOP LIMITED AND CONTROLLED ENTITIESANNUAL REPORT FY21 Chair & CEO Report On behalf of the Board of Directors of Superloop Limited, it is our pleasure to present the Annual Report for the 12 months ended 30 June 2021 (FY21). For Superloop, FY21 has been a transformational year in which we have achieved the major milestone of free cash flow breakeven. It has been a year of simplification and building momentum in our three customer segments - Consumer, Business and Wholesale. A focus for the year just passed and year to come is increasing our asset utilisation through growing sales and now, further accelerated through the acquisition of Exetel. With a new management team in place and strong progress demonstrated in the first year of our multi-year accelerated growth plan, we have experienced strong financial performance on all metrics, meeting market guidance and near doubling of underlying EBITDA. Company Highlights FY21 EBITDA(1): $18.2m, achieving market guidance of $18.0m - $18.5m. 35% increase on a reported basis, 108% increase on underlying(2) basis. Connectivity Sales and Revenue Growth: Group revenue $111m, with 22% year-on-year growth in recurring fibre connectivity revenue(3) , 27% year-on-year growth in total new fibre connectivity annualised sales. 62% SUBS Consumer Home Broadband Growth: 62% growth in subscriptions and 69% growth in revenue year-on-year. Capital and Operating Expenditure: Operating expenditure reduced 17% year-on-year, capital expenditure stable at $14.6m (excluding leases and IRU’s). Strong Balance Sheet: The Group is well positioned with a Pro Forma Gearing Ratio(4) of 7.5% and a Pro Forma Leverage Ratio(5) of 1.4x. (1) EBITDA excluding acquisition costs incurred as part of the Exetel acquisition. (4) Pro Forma Gearing Ratio = net debt (excluding operating leases) / (net debt + equity) adjusted for Exetel settlement (July 2021). (2) EBITDA excluding acquisition costs and CMS gross margin. (5) Pro Forma Leverage Ratio = 12 month rolling Adjusted EBITDA (3) Excludes construction and subsea one-off revenue. (includes SLC, Exetel and Synergies) / Net Financial Indebtedness adjusted for Exetel settlement. Looking ahead into FY22, the Group will continue to focus on the accelerated growth phase of the multi-year Accelerated Growth Strategy. This will be delivered by targeting markets of scale where we can leverage our assets and competitive advantage, gaining market share by investing in the Group’s brands, products and customer experience, completing the integration of the Exetel acquisition and where appropriate, evaluating further inorganic growth opportunities. Whilst the COVID-19 pandemic has brought a period of business uncertainty, Superloop has responded with a focus on supporting our people and our customers, as they work from home, and to support families with children learning remotely. Network demand during periods of lockdown has been amplified and we continue to deliver uninterrupted services to our customers at our promised high standard. The pandemic period has brought some new and unique challenges, but we have rapidly responded to the ever-changing environment with the unequivocal support of our people. We would like to thank every Superloop employee who has remained committed, diligent and resilient despite an incredibly challenging environment. FY22 will also see the appointment of a new Non-Executive Chair with Peter O’Connell. We are delighted that Peter has agreed to join the Superloop Board and to take over as Chair. Peter brings invaluable experience and insights to Superloop’s ambitions around delivering digital-first services on the inf rastructure we have built and opened to Consumer, Business and Wholesale customers. Peter’s experience in the consumer telco space balances the board’s existing strong experience in the business and wholesale markets. As the outgoing Chair, having the opportunity to pick when and how you take a step back from a business you founded is always an important decision. As with previous listed companies, I don’t think I’ve been more sure than I am now. Since stepping in as Chair from the beginning of the pandemic in March last year, we have removed significant cost from the business, put in place a first class management team, recapitalised the business, delivered on guidance given two years in a row, and made a transformational acquisition with Exetel. As CEO, I would like to take this opportunity to acknowledge the enormous contribution that our outgoing Chair, Bevan has made to Superloop over the past six and a half years and thank him for the critical role he occupied as a Superlooper. We are pleased Bevan will remain a major shareholder of Superloop and wish him every success in the future. On behalf of the Board and Management, we would like to thank you for your continued support. Bevan Slattery Chair and Non-Executive Director Superloop Limited Paul Tyler Chief Executive Officer Superloop Limited CHAIR & CEO REPORT 5 SUPERLOOP LIMITED AND CONTROLLED ENTITIES "FY21 has been a transformational year in which we have achieved the major milestone of free cash flow breakeven. It has been a year of simplification and building momentum in our three customer segments - Consumers, Business and Wholesale - with a focus for the year just passed and year to come on increasing our asset utilisation through growing sales and now, further accelerated through the acquisition of Exetel. With a new management team in place, we look forward to continuing the strong progress demonstrated in FY21, to further drive our multi-year Accelerated Growth Strategy." Paul Tyler Chief Executive Officer 7 SUPERLOOP LIMITED AND CONTROLLED ENTITIESCHAIRMAN & CEO REPORT Directors’ Report _____________ Superloop has achieved significant progress as a leading telecommunications business, leveraging its superior network infrastructure to grow connectivity and related solutions in the Consumer, Business and Wholesale markets along with the successful execution of its multi-year Accelerated Growth Strategy. 9 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Directors’ Report The Directors present their report on the consolidated entity (referred to hereafter as ‘Superloop’ or ‘the Group’) consisting of Superloop Limited and the entities it controlled at the end of, or during, the year ended 30 June 2021. DIRECTORS The following persons were Directors of the Group during the year: > Bevan Slattery (Chair) > Richard (Tony) Clark > Vivian Stewart > Alexander (Drew) Kelton > Stephanie Lai > Paul Tyler (appointed 1 October 2020) > Greg Baynton (resigned 18 November 2020) PRINCIPAL ACTIVITIES The principal activities of the Group include: > The construction and operation of telecommunications infrastructure throughout the Asia Pacific region, providing complete high-performance network solutions for wholesale, enterprise and channel customers; > The operation of an advanced, large scale fixed wireless network in Australia providing alternative/redundant access methods from fixed line infrastructure; > The management and delivery of Guest WiFi broadband solutions for various environments including student accommodation, hotels and schools; > Residential and small business broadband services in Australia via fixed wireless or fixed line NBN™ services; and > Cyber safety and security services for schools and other organisations demanding safe internet. REVIEW OF OPERATIONS Superloop was founded to change the way that Asia Pacific connects, identifying in 2014 that legacy incumbent networks around the region were designed before the advent of the cloud, therefore creating an opportunity for a brand new purpose-built network and organisation to meet the growing demand for high capacity, low latency, connectivity across the region. Superloop is delivering on its core purpose by investing in advanced fibre networks connecting bandwidth- intensive properties across key markets in Asia Pacific, complemented by distributing connectivity within those campuses and properties smartly and securely, leveraging the Group’s investments and acquisitions in Fixed Wireless access, Guest WiFi, cybersecurity and Consumer Home Broadband assets, processes, systems and people. The Group’s three reporting segments reflect the nature of these service offerings, including Connectivity (fibre, fixed wireless and third party access networks), Broadband (Guest WiFi and Consumer Home Broadband) and Services (cybersecurity under the CyberHound product brand, and Cloud Managed Services). In order to deliver Connectivity, Broadband and Services to customers within Asia Pacific, the Group’s process value chain and organisational structure encompasses: > Developing strategy and capital requirements; > Building the core network ‘loop’ connecting bandwidth- intensive properties in Singapore, Australia and Hong Kong including a subsea cable network; > Marketing and selling to a range of wholesale, enterprise and residential customers under a single Superloop brand; > Delivering products and services to customers in an efficient, secure and effective manner; > Operating and maintaining the networks and services to high quality service levels; and > Enabling its core value chain by providing people and culture, legal and governance, finance, technology and security support. FY21 Operational Highlights include: > EBITDA (excluding acquisition costs) of $18.2 million, achieving market guidance of $18.0 million - $18.5 million; > Group revenue of $110.7 million, supported by strong growth in underlying recurring fibre connectivity revenue, 22% year-on-year growth. Continued strong fibre connectivity sales trajectory with 27% year-on-year growth in total new fibre connectivity annualised revenue; > Consumer Home Broadband subscriber growth of 62% year-on-year; > Exetel acquisition, a transformational deal for Superloop, funded by an equity raise of $100 million in June/July 2021. Completion of the transaction occurred 31 July 2021; > Debt refinance, increasing Group’s facility to $92.2 million and delivering more favourable covenant terms; > Ongoing focus on cost/income ratio reduction; and > Enhanced balance sheet strength. The Group fibre network assets have a carrying value of $252 million that are on average less than 4 years into a 20+ year useful life. Buildings and fibre total kilometres have now reached 464 and 1,047km respectively. Superloop’s metro fibre network covers the major data centres and enterprise locations in key markets. Platforms Leveraging our Asia Pacific Network Fibre Scale Economics AUSTRALIA $27.6 Million SINGAPORE $15.0 Million HONG KONG $3.8 Million 22%(1) YoY revenue growth 10% YoY revenue growth 18% YoY revenue growth $135m Asset Carrying Value(3) $52m Asset Carrying Value(3) $65m Asset Carrying Value(3) 31.5%(2) Utilisation 18.7% Utilisation 5.2% Utilisation 3.0yrs Avg. Asset Age 5.0yrs Avg. Asset Age 4.2yrs Avg. Asset Age 16.5yrs Avg. Asset Life 29.5yrs Avg. Asset Life 25.5yrs Avg. Asset Life 533 Fibre Kms 259 Fibre Kms 255 Fibre Kms 361 No. of Buildings 69 No. of Buildings 34 No. of Buildings (1) Includes recurring revenue only (2) Does not include INDIGO (3) Does not include Goodwill 11 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT SAN JOSE LOS ANGELES MARSEILLE Asia Pacific Fibre Network Fibre network INDIGO West INDIGO Central HONG KONG JAPAN GUAM SINGAPORE DARWIN PERTH BRISBANE ADELAIDE MELBOURNE HOBART SYDNEY CANBERRA AUCKLAND Hong Kong Fibre Network Singapore Fibre and Duct Network APAC Subsea Cable Network Australia Fibre Network SINGAPORE 10 Gbps 10 Gbps 10 Gbps 10 Gbps 10 Gbps 10 Gbps PERTH SYDNEY 10 Gbps 100 Gbps & 10 Gbps sites 10 Gbps 100 Gbps & 10 Gbps sites 10 Gbps 10 Gbps 10 Gbps 10 Gbps 100 Gbps & 10 Gbps sites 10 Gbps 100 Gbps & 10 Gbps sites 10 Gbps 10 Gbps 10 Gbps 10 Gbps 100 Gbps & 10 Gbps sites 13 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Directors’ Report FINANCIAL AND OPERATING PERFORMANCE The Group’s revenues were $110.7 million in FY21 versus $107.6 million in the previous financial year. The Group has seen core connectivity revenue growth of 22% year-on-year, and 62% year-on-year growth in Consumer Home Broadband subscribers. This strong revenue growth was offset by the temporary decline in Guest WiFi due to COVID-19 impact on student accommodation and hotel sectors and the planned retirement of non-core Cloud Managed Services products. Underlying year-on-year revenue growth was 14% (excluding non-core Cloud Managed Services products). The Group had a full year net loss after tax of $32.0 million in FY21 (compared to a loss of $41.1 million in FY20). Net loss before tax was $31.2 million (compared to a loss of $37.8 million in FY21). In June 2020, the Group met the eligibility requirements to receive the Government JobKeeper allowance for its Australian employees. For the period ended 30 June 2021, the total amount included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income was $2,532,000. The Group generated earnings before interest, tax, depreciation and amortisation (EBITDA) of $18.2 million excluding acquisition costs incurred as part of the Exetel acquisition. $'M FY20 FY21 Total Revenue $107.6 $110.7 Direct Costs Gross Margin $(53.1) $(58.5) $54.5 $52.2 Gross Margin % 51% 47% YoY 3% 10% -4% -8% Operational Costs $(41.0) $(34.0) -17% Statutory EBITDA (incl. acquisition costs) $13.5 $17.6 30% capacity in Australia, Singapore and Hong Kong as well as intangible assets arising from business combinations. Intangible assets include $135.1 million of goodwill. Balance Sheet ($'M) Cash and cash equivalents Property, plant and equipment Network IRUs intangible assets Goodwill from acquisitions Other assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Equity FY20 17.1 231.6 59.9 135.1 76.0 FY21 89.7 219.4 53.8 135.1 64.0 519.7 562.0 30.5 94.4 124.9 394.8 29.4 100.8 130.2 431.8 Cash flow performance The Group generated operating cash flows of $15.1 million in the year, and invested $15.2 million predominantly in property, plant and equipment, funded by $72.8 million of net financing cash flows inclusive of a $78 million equity raise settlement in June 2021 which will be used towards the Exetel acquisition. $'M FY20 FY21 Change Operating cash flows 12.9 15.1 Investing cash flows (55.1) (15.2) Financing cash flows(2) Net cash flows 40.6 (1.6) 72.8 72.7 2.2 39.9 32.2 74.3 Acquisition Costs(1) - $(0.6) - Free Cash flow (1) Statutory EBITDA (excl. acquisition costs) Cloud Managed Services GM $13.5 $18.2 35% $(5.1) $(0.7) Underlying EBITDA $8.4 $17.5 108% Depreciation and Amortisation $(46.6) $(46.4) Net profit/ (loss) before tax $(37.8) $(31.2) (1) Acquisition costs incurred as part of the Exetel acquisition Financial position At 30 June 2021, the Group held property, plant and equipment (primarily the construction of its metro and subsea fibre networks) of $219.4 million, and intangible assets of $223.6 million including rights to access (via Indefeasible Rights to Use (IRU) agreements) network FY20 $(42.2)m FY21 $(0.0)m (1) free cash flow = operating cash flows less investing cash flows (does not include lease payments). (2) Financing cash flows includes $79m of placement and institutional entitlement offer which settled prior to 30 June 2021, the retail entitlement offer of $21 million settled on 5 July 2021. BUSINESS STRATEGIES AND PROSPECTS FOR FUTURE FINANCIAL YEARS Superloop’s networks are strategically positioned to capitalise on market dynamics, driven by strong data growth, growth in data centre demand and the need for connectivity services with a focus on the Asia Pacific region. Network coverage across the Asia Pacific region, combined with the INDIGO subsea cable system, along with a standardised and scalable suite of connectivity solutions including broadband and cybersecurity, provide trusted and reliable services to a broad range of customer segments. The Group is focused on monetising these assets and increasing utilisation to deliver a return on investment to shareholders. The Group will continue to invest in connectivity solutions in markets where the Board and Management believe the demand for services will deliver an attractive return for Shareholders. MATERIAL BUSINESS RISKS Increasing business complexity As Superloop currently conducts business in multiple jurisdictions, Superloop is exposed to a range of multi-jurisdictional risks including risks relating to labour practices, difficulty in enforcing contracts, changes to or uncertainty in the relevant legal, political and regulatory regime (including in relation to taxation and foreign investment and practices of government and regulatory authorities) and other issues in foreign jurisdictions in which Superloop operates. In particular, the regulatory environment continues to grow as do the direct and indirect costs of compliance and the consequences of non-compliance. Two areas that have seen particular regulatory attention and are pertinent to the growth that Superloop will see in its consumer customer base as a result of the acquisition of Exetel Pty Ltd (completed 31 July 2021) relate to privacy and information governance and consumer information and rights. In addition, Superloop operates in a number of different sub-market segments within the telecommunications industry, including fibre infrastructure and network solutions, fixed wireless, cloud and managed services, cyber safety, campus broadband and fixed line residential NBN™ services. The material business risks faced by the Group that are likely to have an effect on its financial prospects include: Competition, disruption Revenue growth underperformance Superloop is focused on accelerating growth and the monetisation of network assets, by targeting markets of scale, winning and retaining business, considering M&A and capital recycling opportunities and increasing sales and revenue (and thereby increasing utilisation). The speed with which Superloop can achieve revenue growth on its networks in Australia, Singapore and Hong Kong is, in the short to medium term, a key factor in the market’s valuation of Superloop. The occurrence of anything that adversely affects the sales and revenue growth in those markets, including lower than expected customer demand and aggressive competition, will adversely affect Superloop’s growth prospects and/or financial performance. Impact of COVID-19 The ongoing COVID-19 pandemic has had a significant impact on the Australian and global economy and the ability of businesses to operate. The pandemic continues to evolve, as do the measures and recommendations introduced by governments in the countries where Superloop operates and Superloop’s customers and suppliers are located. While Superloop has not experienced significant disruptions to its operations, the impact COVID-19 has had on the student accommodation and hotel sectors has in turn negatively impacted the financial performance of our Guest WiFi platform. Superloop continues to monitor operational and financial implications closely and expects Guest WiFi revenues to gradually recover once borders are reopened. It is not possible to predict the length of time our business will be impacted by COVID-19. Superloop operates in a competitive landscape alongside other owners and operators of telecommunications infrastructure with competing offerings and a geographically diverse presence. The competitive environment continues to evolve and failing to appropriately respond could result in a decline in our financial performance and asset valuations. In addition, demand for technology inf rastructure can change rapidly because of technological innovation, new product introductions, declining prices and evolving industry standards, among other factors. New solutions and new technology often render existing solutions and services obsolete, excessively costly or otherwise unmarketable. As a result, the success of Superloop depends on Superloop being able to keep up with the latest technological progress and to develop or acquire and integrate new technologies into its fibre optic telecommunications infrastructure. Advances in technology also require Superloop to commit resources to developing or acquiring and then deploying new technologies for use in operations. Superloop attempts to mitigate these risks through the following key activities: > Considering emerging technologies, societal trends and the competitive environment as part of its strategic planning and review processes; > Selecting and deploying technologies with future developments and growth in mind; > Periodically reviewing its customer offerings in the context of the market and customer needs; and > Considering M&A and capital recycling opportunities that can support and accelerate growth, leverage our competitive advantage and deliver enhanced returns on investment. 15 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Directors’ Report Business resilience People and safety A significant network, systems failure or interruption could cause both tangible and intangible losses of shareholder value for Superloop through its inability to honour customer contracts, resultant customer churn and reputational damage. Network failure or interruptions can be caused by a variety of events (many outside the control of Superloop), including accidental damage from civil works (cable cuts), intentional damage from vandalism or terrorism and natural disasters such as earthquakes. Superloop’s key risk mitigations regarding business resilience related risks include: > Designing and investing in the network to provide in-built resilience; > Implementing advanced security measures to prevent and monitor for cyber security threats; > Implementation of sophisticated monitoring tools to provide early warning of any developing issues; > Formalising our approach to business resilience which includes the ongoing development of a formal business continuity framework to complement existing disaster recovery plans; > Provision in customer contracts protecting Superloop from claims in relation to failure to provide contracted services due to specific events outside of Superloop’s control; and > Maintenance of business interruption insurance. Attracting and retaining talent with the right mix of skills continues to be critical to our ongoing success. A key pillar of our strategy is to attract and retain talent and support our people to reach their potential. A positive outcome of the COVID-19 pandemic has been that it has demonstrated that we are able to work and thrive in a remote working model. Many staff have communicated their preference for greater working flexibility and this has been embraced as a key pillar in attracting and retaining talent. The safety of our people will always be number one at Superloop and this is why we have adopted and continue to adopt a conservative approach to the management of COVID-19 related risk. We also continue to mature our workplace health and safety (WHS) management system to not only keep our people safe, but ensure we meet the expectations of our customers. Integration and operating model The Exetel acquisition offers Superloop with significant synergy and cross sell opportunities. While Superloop’s operating model is structured to successfully deliver against its strategic objectives, there is a risk the Company may not achieve anticipated synergy and cross sell opportunities. This risk is well recognised internally and projects to ensure the opportunity is realised have been developed and are being monitored and governed by a project management office that reports through to our executive team. To date significant progress, efficiencies and savings have been identified in both the integration of core platforms and networks. Management continues to focus on these opportunities for delivery of efficiencies into FY22 and beyond. Reputation risk Risks that threaten an organisation’s reputation can have significant impacts on its revenue and brand. The speed at which information can now be shared publicly via social media can intensify the impact of this risk. Superloop’s governance and risk management framework, the various controls described in the previous sections combined with our focus on customer experience, social media and crisis management processes are our key mechanisms for managing our reputation. Regulatory risk Superloop operates in an increasingly regulated environment with significant growth in the regulation of ‘non-traditional’ areas including governance of pricing, product, customer experience and increasingly data protection and associated rights of access to customers and regulators. We continue to actively monitor the evolving regulatory landscape and ensure Superloop’s and our customers’ interests through our memberships to key industry groups. Funding risk While the material capital expenditure associated with Superloop’s network build is complete, Superloop’s business requires ongoing capital expenditure for the maintenance of telecommunications and IT infrastructure. Superloop requires access to sufficient capital to fund this expenditure. There is no assurance that additional funds will be available in the future on reasonable terms. Superloop believes the risk is mitigated, to some extent, through the control of capital expenditure requirements, generation of operating cash flows, maintenance of lines of credit on reasonable terms, and access to other forms of capital. Failure to obtain capital on favourable terms may hinder Superloop’s business, potentially reducing competitiveness and having an adverse effect on the financial performance, position and growth prospects of Superloop. Cyber risk, data and information governance The quantum and sophistication of cyber related risks continues to evolve and increase, evidenced by a number of high profile breaches impacting other businesses in recent years. In addition, the regulatory environment for information security and privacy is also evolving constantly and becoming increasingly complex, including the implementation of a number of new mandatory data breach reporting and more recently, the cyber surveillance laws and consumer data rights legislation. Customer requirements and expectations are also becoming more stringent. The management of cyber risk and data represents a key legal, financial, operational and reputational risk for Superloop. Superloop considers the protection of customer, employee and third-party data as a critical business priority and has processes and strategies in place to manage these risks. Relationships with key intellectual property licensors and technology Superloop uses intellectual property and technology developed in the course of its business that is owned by Superloop. Superloop also relies on relationships with key intellectual property licensors and technology partners, f rom whom it licenses the right to use particular intellectual property and technology. Superloop’s ability to maintain and manage its fibre optic telecommunications infrastructure is dependent on its ability to use particular intellectual property and technology, and any change in the ability to use intellectual property Superloop relies on may have an effect on Superloop’s future financial performance and position. Socio-political risks Socio-political unrest in any jurisdiction in which Superloop operates, may be adverse to its business in that jurisdiction. In particular, the current tensions and unrest in Hong Kong may continue to impact the local economy and ultimately give rise to concerns about the security of Superloop’s assets. The broad powers given to Chinese mainland authorities under the recently enacted national security law in Hong Kong, have resulted in concerns expressed by a number of large foreign companies operating in Hong Kong, particularly in relation to the obligations to surrender user data or block access to certain websites. More direct government intervention in the region could further exacerbate the situation. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no other significant changes in the state of affairs of Superloop other than those listed in matters subsequent to the end of financial year below. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The continued growth in transmission and storage of data should underpin a likely demand for services provided by the Company across the Asia Pacific region. The Board continues to evaluate further investment in expansion opportunities in the region, based on underlying market dynamics and demand for connectivity and managed services. SUPERLOOP LIMITED AND CONTROLLED ENTITIES 17 DIRECTORS' REPORT Directors’ Report DIVIDENDS No dividend has been declared or paid in respect of the 2021 or 2020 financial years. ENVIRONMENTAL REGULATION The Group is not subject to any significant environmental laws. INDEMNIFICATION OF OFFICERS The Company’s Constitution provides that to the extent permitted by law, the Company indemnifies each current and former director or secretary of the Company and/or its related bodies corporate on a full indemnity basis against all losses, liabilities, costs, charges and expenses incurred by the officer as an officer of the Company or a related body corporate. The current and former directors and secretary of the Company, as well as a number of executives, are also party to a customary deed of insurance, access and indemnity. During FY21, the Company paid a premium in respect of a contract insuring the directors and officers of the Company against any liability that may arise from the carrying out of their duties and responsibilities to the extent permitted by the Corporations Act. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the deductible or premium. NON-AUDIT SERVICES The Group may decide to employ the auditor (Deloitte) on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. Details of the amounts paid during the year to the Group’s external auditor, Deloitte Australia, for non-audit services are set out in Note 24 to the financial statements. The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non- audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: > All non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the impartiality and objectivity of the auditor; > None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. ROUNDING OF AMOUNTS The Group is of a kind referred to in the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016 and issued pursuant to section 341(1) of the Corporations Act 2001. In accordance with that Instrument, amounts in the Directors’ Report and the financial report have been rounded to the nearest thousand dollar, where permissible in accordance with the Instrument. PROCEEDINGS ON BEHALF OF THE GROUP AUDITOR’S INDEPENDENCE DECLARATION No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001. A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 39. Information on Directors _____________ BEVAN SLATTERY RICHARD ANTHONY (TONY) CLARK VIVIAN STEWART Chair and Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Appointed: 28 April 2014 Appointed Chair: 11 March 2020 Chief Executive Officer: 23 February 2016 to 30 June 2018 Experience and expertise Bevan Slattery is the founder and a Non-Executive Director of Superloop. He served as Executive Chair until June 2017 and Chief Executive Officer until 30 June 2018. Bevan has a background in building successful Australian IT and telecommunications companies and an earlier career in administration in local and state government. Prior to establishing Superloop, Bevan founded Megaport in 2013 with the aim of becoming a global leader in the fast growing elastic interconnection services market. The Company successfully listed on the ASX in December 2015. In 2010, Bevan founded NEXTDC, with a vision to become Australia’s largest independent data centre provider. As the founding CEO of NEXTDC, Bevan oversaw its listing on the ASX, overall design of its initial facilities and their development. In 2002, Bevan co-founded PIPE Networks which grew to become Australia’s largest Internet Exchange and Australia’s third largest metropolitan fibre network provider with over 1,500km of fibre in 5 cities connecting 80 data centres, 250 Telstra exchanges and over 1000 buildings. In 2009, PIPE Networks completed construction of Pipe Pacific Cable 1 (PPC-1), a $200 million submarine cable system linking Sydney to Guam. PIPE Networks was sold to TPG for an enterprise value of $420 million in May 2010. Bevan holds a Bachelor of Business (Accountancy) and has been awarded an honorary Master of Business Administration from Central Queensland University. Other current Directorships of listed entities > Megaport Limited (ASX: MP1) - appointed 27 July 2015 > Pointerra Limited (ASX: 3DP) - appointed July 2020 > intelliHR Limited (ASX: IHR) - appointed August 2020 Former Directorships of listed entities in last 3 years Nil Special responsibilities Nil Interests in shares and options 64,332,074 fully paid ordinary shares Appointed: 23 December 2015 Appointed: 21 December 2016 Experience and expertise Tony Clark is an Emmy Award-winning Cinematographer as well as co-founder and Managing Director of Rising Sun Pictures (RSP) and Cospective, and co-founder of CINENET Systems Pty Ltd. Tony has a wealth of industry knowledge and experience in digital media. His credits as a VFX Supervisor for RSP include Alfonso Cuarón’s Gravity, Pirates of the Caribbean: On Stranger Tides, The Sorcerer’s Apprentice, The Last Mimzy, The Core, and Harry Potter and the Goblet of Fire. Tony is a 2010 recipient of an Academy Award for Scientific and Technical Achievement as creator of the remote collaboration tool cineSync. His deep understanding of digital film became the foundation for the technology spin-off Rising Sun Research (now Cospective). Tony has served as a board member on the South Australian Film Corporation, is currently on the board of Ausfilm and is an active member of both AMPAS, the Academy of Motion Picture Arts and Sciences, and the Visual Effects Society. He is a Graduate of the Australian Institute of Company Directors. Experience and expertise Vivian Stewart served on BigAir Group Limited’s Board from June 2008 and was its Chair at the time of BigAir’s acquisition by Superloop in December 2016. Vivian is the Chief Operating Officer of Bigtincan Holdings Ltd - an ASX listed enterprise software company focused on the Sales Enablement market. He has extensive background in the IT&T industry, venture capital and corporate advisory services. He co-founded ISP Magna Data, venture firm Tinshed, corporate advisory firm Callafin and angel investment group Sydney Angels and its two venture capital funds. He serves on the Investment committee of Sydney Angels Sidecar Fund I and II. Most recently, he has spent 10 years as an independent corporate advisor specialising in sale, merger and acquisition transactions and related capital strategy for public and private companies. Vivian has a Bachelor of Arts (Honours) from The University of Sydney and an eMBA f rom the Australian Graduate School of Management. He is a Fellow of the Australian Institute of Company Directors. Other current Directorships of listed entities Nil Other current Directorships of listed entities Nil Former Directorships of listed entities in last 3 years Nil Former Directorships of listed entities in last 3 years Nil Special responsibilities > Chair of the Remuneration and Nomination Committee - appointed 26 March 2020 Interests in shares and options 566,079 fully paid ordinary shares Special responsibilities > Chair of the Risk Management Committee > Member of the Audit Committee > Member of the Remuneration and Nomination Committee Interests in shares and options 599,243 fully paid ordinary shares 21 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Information on Directors STEPHANIE LAI ALEXANDER (DREW) KELTON PAUL TYLER GREG BAYNTON Independent Non-Executive Director Non- Executive Director Chief Executive Officer Independent Non-Executive Director Appointed: 11 March 2020 Appointed: 1 April 20210 Chief Executive Officer: 1 July 2018 to 1 September 2020 (Executive Director: 23 November 2018 to 31 March 2021) Appointed: 1 October 2020 Appointed: 28 April 2014 Appointed Executive Director: 1 September 2020 Resigned: 18 November 2020 Experience and expertise Experience and expertise Experience and expertise Experience and expertise Stephanie Lai has over 20 years of experience as a Chartered Accountant and is a former M&A partner of Deloitte (to 2019) and KPMG (to 2009). Stephanie has significant experience providing due diligence and advisory services, including forecast reviews to listed entities, sovereign wealth funds, wealth managers and private equity. Stephanie has advised on numerous transactions (acquisitions /divestments, debt/ equity raisings and IPOs), across a range of industries (infrastructure, property, banking, insurance, wealth management, retail and transport) and markets (Australia, UK, Europe, Asia and the US). Stephanie is a Non-Executive Director and Chair of the Audit, Risk and Compliance Committee of Future Generation Investment Company Limited (ASX:FGX), was a Non-Executive Director and Chair of the Audit, Risk and Compliance Committee of Shine For Kids (a not for profit) from 2013 to 2017 and also founded an online retail business, which she grew and successfully divested in 2016. Stephanie holds a Bachelor of Business (University of Technology Sydney) and is a Graduate of the Australian Institute of Company Directors and the Institute of Chartered Accountants (Australia and New Zealand). Other current Directorships of listed entities > Future Generation Investment Company Limited (ASX: FGX) - appointed 27 March 2019 Drew is a global business leader and professional board director. With over 30 years of experience in the ICT and telecommunications arena, he held senior operational roles in the UK, Europe, India, Australasia and most recently, the US. In addition to executive leadership roles in global organisations, he has also been responsible for startups, M&A transactions and the IPO of one of those businesses. Drew would describe himself as a “professional entrepreneur”. Drew holds a Bachelor of Science with commendation in Electrical and Electronic Engineering from the University of Western Scotland. He is a Chartered Engineer with the Institute of Electrical and Electronic Engineers. Other current Directorships of listed entities Nil Former Directorships of listed entities in last 3 years > Megaport Limited (ASX:MP1) - resigned 1 June 2019 > Firstwave Cloud Technology Limited (ASX: FCT) - resigned 6 November 2018 Special responsibilities > Member of the Audit Committee > Member of the Risk Management Committee > HMC Funds Management Limited, responsible entity of Home Co Daily Needs REIT Limited (ASX:HDN) Interests in shares and options 114,993 fully paid ordinary shares - appointed October 2020 Paul brings several decades of experience and a distinguished international reputation for transforming and leading businesses in the IT and Telecommunications sector. Born and raised in Australia, Paul was most recently the Chief Customer Officer of NBN co building their enterprise, business and government segments from near infancy. As well as holding senior roles in Telstra including Group Managing Director of both Telstra Business and Telstra International Paul had a long career with Nokia holding executive roles in various countries across Australia, Europe and Asia, most recently based in Singapore as the President of Nokia in the Asia Pacific region. An experienced public company director (ASX and NYSE), Paul graduated with an Executive MBA from UCD – National University of Ireland; a Bachelor of Electrical Engineering – University of New South Wales and is a Graduate of the Australian Institute of Company Directors. Other current directorships of listed entities Nil Former Directorship of listed entities in last 3 years Nil Special responsibilities Nil Interests in shares and options 110,241 fully paid ordinary shares Former Directorships of listed entities in last 3 years Nil Special responsibilities > Chair of the Audit Committee (appointed: 26 March 2020) > Member of the Risk Management Committee > Member of the Remuneration and Nomination Committee Interests in shares and options 109,243 fully paid ordinary shares Greg Baynton is the founder and Managing Director of Orbit Capital, an investment and advisory company and holder of an Australian Financial Services Licence. He has a background in investment banking, infrastructure investment, and new projects and has experience in IPOs and other capital raisings, mergers and acquisitions, investor relations and corporate governance. He has considerable experience as a Director of ASX-listed companies. Among those, Greg is a former Director of Asia Pacific Data Centre Limited, NEXTDC and of PIPE Networks. Greg is also a Director of State Gas Limited, intelliHR Limited and NOVONIX Limited. Greg holds a Master of Business Administration (QUT), a Master of Economic Studies (UQ), a Postgraduate Diploma in Applied Finance and Investment (SIA), and a Bachelor of Business (Accountancy). He has completed a Certificate course in Risk Management and Corporate Governance and has been a Fellow of the Governance Institute of Australia. Greg is a Fellow of the Geological Society of London. Other current Directorships of listed entities > NOVONIX Limited (ASX: NVX) - appointed 5 April 2012 > intelliHR Holdings Limited (ASX: IHR) - appointed 18 November 2016 > State Gas Limited (ASX:GAS) - appointed 3 August 2017 Former Directorships of listed entities in last 3 years Nil Special responsibilities > Chair of the Audit Committee - resigned 26 March 2020 > Member of the Audit Committee > Member of the Risk Management Committee > Member of the Remuneration and Nomination Committee Interests in shares and options 1,051,323 fully paid ordinary shares 23 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Information on Directors Meetings of Directors RONNIE LAKE LOUISE BOLGER General Counsel and Company Secretary General Counsel and Company Secretary Appointed: 28 May 2021 Appointed: 20 September 2018 Resigned: 28 May 2021 Experience and expertise Experience and expertise Ronnie Lake joined Superloop in July 2018 as Head of Risk. Ronnie has broad risk and governance experience having worked across several sectors including consulting. Ronnie holds a science related undergraduate and postgraduate degree, a Graduate Certificate of Executive Leadership from the University of Queensland and a Graduate Certificate in Applied Risk Management from the Governance Institute of Australia. Ronnie is also a member of Australian Institute of Company Directors and the Governance Institute of Australia. Louise is an experienced in-house telecommunications, media and technology lawyer and company secretary having held General Counsel and Company Secretary roles with various ASX listed companies. She holds a Bachelor of Laws (Hons) and a Bachelor of Arts (Modern Asian Studies) from Griffith University and is a member of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia. The number of meetings of the Group's Board of Directors and of each board committee held during the year, and the number of meetings attended by each Director are as follows: Meeting of Committee Meetings of Directors Audit Risk Management A 14 9 16 16 16 14 9 B 16 9 16 16 16 16 9 A N/A 1 N/A 6 6 1 B N/A 2 N/A 6 6 1 A N/A 2 N/A 4 4 1 B N/A 2 N/A 4 4 1 N/A N/A N/A N/A Remuneration and Nomination A N/A B N/A 1 2 1 2 1 2 1 2 N/A N/A N/A N/A Bevan Slattery Greg Baynton(1) Tony Clark Stephanie Lai Vivian Stewart Alexander (Drew) Kelton Paul Tyler(2) (1) Greg Baynton resigned as a Director on 18 November 2020 (2) Paul Tyler was appointed as a Director on 1 September 2020 A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year N/A = Not applicable. Not a member of the relevant committee 25 SUPERLOOP LIMITED AND CONTROLLED ENTITIESDIRECTORS' REPORT Remuneration Report _____________ Letter from the Chair of the Remuneration and Nomination Committee 28 Remuneration Report Audited 1. The Persons Covered by this Report 2. Overview of Remuneration Governance Framework 3. Director Remuneration 4. Executive Remuneration 5. Employment Terms for Key Management Personnel 6. Remuneration for FY21 7. Performance Outcomes for FY21 8. Summary of Shares Held by Key Management Personnel 9. Summary of Options Held by Key Management Personnel 10. Summary of Rights Held by Key Management Personnel 11. Shares Under Option or Performance Rights 12. Other Transactions with Key Management Personnel 29 29 30 30 31 33 34 36 36 37 37 37 38 27 SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report Letter f rom the Chair of the Remuneration and Nomination Committee Remuneration Report - Audited The Remuneration Report, which forms part of the Directors’ Report, sets out the remuneration arrangements for the Directors and other Key Management Personnel of Superloop for the year ended 30 June 2021 (FY21), and is prepared in accordance with section 300A of the Corporations Act 2001 (Corporations Act). The information in this report has been audited as required by section 308(3C) of the Corporations Act. Dear Shareholders, 1. THE PERSONS COVERED BY THIS REPORT On behalf of the board, we are pleased to present Superloop’s Remuneration Report for 2021. For Superloop, FY21 was a year where many highlights were realised whilst we continued to face the ongoing challenge presented by COVID-19. Our achievements can be attributed to the whole Superloop team and I would like to thank them for their contributions during FY21. Our FY21 Operational Highlights include: > EBITDA (excluding acquisition costs) $18.2 million, achieving market guidance of $18.0 million - $18.5 million; > Group revenue of $110.7 million, supported by strong growth in underlying recurring fibre connectivity revenue, 22% year-on-year growth. Continued strong fibre connectivity sales trajectory with 27% year-on-year growth in total new fibre connectivity annualised revenue; > The acquisition of Exetel, a transformational deal for Superloop, funded by an equity raise of $100 million in June/July 2021. Completion of the transaction occurring 31 July 2021; > Debt refinanced, increasing Group’s facility to $92.2 million and delivering more favourable covenant terms; > Enhanced balance sheet strength; and > Ongoing focus on cost/income ratio reduction. On 1 October 2020, Paul Tyler assumed the position of CEO and Managing Director of Superloop. Paul’s appointment has positioned Superloop to best leverage the opportunities that the National Broadband Network has offered enterprises and service providers. Under Paul’s leadership, solid progress has been made executing the Accelerated Growth Strategy and 100+ years of industry experience has been added to the executive team. I would like to thank Drew Kelton for his contribution to Superloop since 2018, his support of the CEO transition and subsequent service as a Non-Executive Director. During the year, options were granted to executives under the Executive Option Plan and in accordance with contractual entitlements. In addition to this, we were pleased to extend participation in equity-based remuneration to Non-Executive members of the Superloop team. Further on from the framework that was adopted in FY20, the Committee will continue to oversee the development of a remuneration policy and remuneration structure that ensures there is a direct link between remuneration and performance, both Company and individual, that is ultimately aligned to shareholder interest. Yours sincerely, Tony Clark Chair, Remuneration and Nomination Committee Superloop Limited Key Management Personnel (“KMP”) include the Directors of the Group and Senior Executives. The term “Senior Executives” refers to the Chief Executive Officer and those executives with responsibility for planning, directing and controlling the activities of the Group. DIRECTORS Name Bevan Slattery Tony Clark Position Chair and Non-Executive Director Independent Non-Executive Director Chair of the Remuneration and Nomination Committee Vivian Stewart Independent Non-Executive Director Chair of the Risk Management Committee Member of the Audit Committee Member of the Remuneration and Nomination Committee Stephanie Lai Independent Non-Executive Director Chair of the Audit Committee Member of the Risk Management Committee Member of the Remuneration and Nomination Committee Alexander (Drew) Kelton Chief Executive Officer (CEO) (ceased 1 October 2020) Non-Executive Director (commenced 1 April 2021) Executive Director (23 November 2018 to 31 March 2021) Member of the Audit Committee Member of the Risk Management Committee Position Chief Executive Officer (CEO) (appointed 1 October 2020) Executive Director (appointed 1 September 2020) SENIOR EXECUTIVES Name Paul Tyler Lidia Valenzuela Group Chief Financial Officer Paul Smith Adrian Martin Dean Tognella Mehul Dave Chief Operations Officer, Infrastructure Group Executive, Wholesale and International Sales Group Executive, Enterprise Sales (appointed 7 September 2020) Group Executive, Consumer Sales (appointed 1 February 2021) Except as noted above or elsewhere in this report, the named persons held their position for the whole financial year. 29 SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report 2. OVERVIEW OF REMUNERATION GOVERNANCE FRAMEWORK 4. EXECUTIVE REMUNERATION 2.1 Remuneration and Nomination Committee 4.1 Senior Executive Remuneration Policy The role of the Remuneration and Nomination Committee (“the Committee”) is to review and make recommendations to the Board on matters relating to: > Board and Senior Executive succession planning; > Non-Executive Director fees and the aggregate fee pool; > The Company’s remuneration policy and procedures and other relevant policies including recruitment, retention and termination policies; > Senior Executive remuneration arrangements, including the Company’s equity-based incentives; > The annual assessment of Board and Senior Executive performance; > The assessment of the Board’s skills, size and composition; > The Group’s reporting and disclosure practices in relation to the remuneration of Directors and Senior Executives; and > Market practices and trends on remuneration matters. Further information regarding the Committee’s role, responsibilities and membership can be found in the Committee’s Charter, which forms part of the Corporate Governance Charter, a copy of which is available on Superloop’s website at https://investors.superloop.com/investors. 2.2 Securities Trading Policy A Securities Trading Policy (“Trading Policy”) has been adopted by the Board to provide guidance to Directors, employees of Superloop, and other parties who may have access to price sensitive information and who may be contemplating dealing in Superloop’s securities or the securities of entities with whom Superloop may have dealings. The Trading Policy is designed to ensure that any trading in Superloop’s securities is in accordance with the law and accordingly, it prohibits all Directors and Senior Executives from engaging in hedging arrangements, dealing in derivatives, or entering into similar arrangements. Any non-compliance with the Trading Policy will be regarded as an act of serious misconduct. The Trading Policy is available on Superloop’s website at https://investors.superloop.com/investors. 3. DIRECTOR REMUNERATION 3.1 Director Remuneration Policy Superloop’s Director remuneration policy is to provide fair remuneration that is sufficient to attract and retain Non-Executive Directors with appropriate experience, knowledge, skills and judgment. The Directors determine the total amount paid to each Director as remuneration for their services. Under the Listing Rules, the total amount paid to all Non-Executive Directors must not exceed in any financial year, the amount fixed in a general meeting of Superloop. This amount is currently $750,000. Non-Executive Directors fees include base fees and fees for membership of board committees, and where relevant are inclusive of superannuation contributions. Non-Executive Directors may be paid such additional or special remuneration where a Director performs extra work or services which are not conducted in their capacity as a Director of Superloop. Fees paid to Non-Executive Directors in FY21 were $340,334 (FY20 $351,005). There are no retirement benefit schemes for Directors other than statutory superannuation contributions. 3.2 Non-Executive Director Fees The current base Director fees per annum, including statutory superannuation, are: > Chair $ 110,000 > Non-Executive Director $ 60,000 > Committee member $ 10,000 (per committee) To preserve independence, Non-Executive Directors do not receive incentive or performance based remuneration. Non-Executive Directors are entitled to be reimbursed for travel and other expenses incurred while carrying out their duties as a Director. Superloop’s Senior Executive remuneration policy is designed to be transparent, competitive and reasonable while strengthening the alignment between performance related remuneration and shareholder returns. Its goal is to ensure the Group can attract and retain key talent while being linked to the achievement of the Group’s strategic and business objectives. The policy includes at-risk short term and long term incentives with direct links between remuneration and performance (both Company and individual) that is ultimately aligned to shareholder interest. Senior Executive remuneration packages consist of three key components: > Fixed remuneration being base salary inclusive of superannuation, non-monetary benefits and any applicable fringe benefits tax; > Short term incentives (STI) that provide a reward for performance against annual performance targets; and > Long term incentives (LTI) that provide a securities-based reward for performance against indicators of long-term shareholder value creation, vesting over a three year period. The following considerations are taken into account when formulating Senior Executive remuneration packages: > Fixed remuneration is set with reference to the median of relevant market practice; > Financial targets on which incentives are based are suitably challenging and must meet a budget and business plan; and > Remuneration will be managed within a range so as to allow for the recognition of individual differences such as the calibre of the executive, and competency with which they fulfil a role. 4.2 Short Term Incentive (STI) Policy and Procedure The short term incentive policy provides incentives for Senior Executives to achieve the Group’s strategic objectives by delivering or exceeding annual performance targets. Measurement period and award The measurement period for achieving annual performance targets is the financial year to 30 June, with an assessment of performance to be conducted following the end of the measurement period upon finalisation of the full year audited results. Short term incentives will be paid in cash following a successful assessment. For FY21 the CEO could have earned up to $350,000 in short term incentives. Other Senior Executives have a target award of 20% of their annual fixed remuneration. Performance metrics and weightings Assessment of performance for the CEO is against financial metrics including: > Net cashflow (40%); > EBITDA (40%); and > Net cash from strategic deals (20%). The performance metrics for other Senior Executives include: > Financial performance: Group EBITDA (50%); > Operational performance (50%). The short term incentive structure is considered appropriate during the Company’s current phase of growth. Senior Executives are motivated to generate operating profits and cash flow while meeting required outcomes in service delivery and operating efficiency and delivering on strategic projects which will generate long term shareholder value. The policy also allows for incentives to be paid for achieving specific strategic objectives or for specific outstanding performance. Cessation of employment If a Senior Executive’s employment terminates prior to the end of the measurement period, all incentives will be forfeited unless otherwise determined by the Board. 31 SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report Short term incentive outcomes for FY21 During the year there were no short term incentives awarded. Name Paul Tyler Lidia Valenzuela Paul Smith Adrian Martin Dean Tognella Mehul Dave Fixed Remuneration Target Incentive Awarded Incentive $750,000 $350,000 $300,000 $273,000 $358,000 $320,000 $350,000 $70,000 $60,000 $0 $71,600 $64,000 $ - $ - $ - $ - $ - $ - 4.3 Long Term Incentive (LTI) Policy and Procedure The purpose of the long term incentive policy is to align Senior Executive rewards with sustainable growth in shareholder value over time. It also acts as a retention mechanism for key executives. Further, the policy acts to establish a method by which eligible employees can participate in the future growth and profitability of the Company. Shareholders have approved the Company’s two LTI plans being the Employee Rights Plan and the Executive Option Plan. The Company’s Securities Trading Policy prohibits executives from entering into transactions which limit the economic risk related to equity-based remuneration schemes without written clearance. Measurement period and award The measurement period for long-term incentives is three financial years, unless the Board determines otherwise. The policy intends for grants to be issued annually with overlapping cycles. Incentives will be issued in the form of options or performance rights, subject to shareholder approval for Executive Directors. Where shareholder approval is not received for the issue of options to Executive Directors, incentives may be awarded in cash. Other Senior Executives can be awarded LTIs of up to 40% of their annual fixed remuneration. Performance metrics and weightings Vesting of long term incentives for participating Senior Executives is based on share price growth at the relevant vesting date. In order for subsequent tranches to be issued, goals in relation to total shareholder return must be achieved. The long term incentive structure is considered appropriate as it aligns Senior Executives with generating long term shareholder value and acts as an inducement to retain Senior Executives. Cessation of employment If a Senior Executive’s employment terminates prior to the end of the measurement period, all unvested entitlements will be forfeited unless otherwise determined by the Board. Employee Rights Plan At the 2015 Annual General Meeting held on 24 November 2015, shareholders approved an Employee Rights Plan. The Directors are empowered to operate the Employee Rights Plan (Plan) and grant Performance Rights to Eligible Participants in accordance with the Listing Rules and on the terms and conditions summarised in the Plan. The Board may offer any number of Performance Rights to an Eligible Participant on the terms the Board decides, subject to the Plan rules and any applicable law or the Listing Rules. An offer is required to set out details such as the total number of Performance Rights being offered, the vesting date and vesting conditions, any disposal restrictions, and other terms attached to the Performance Rights. A Participant is not required to pay for the grant of any Performance Rights or the issue of Superloop Shares on vesting. Once the Performance Rights vest, the Participant will be issued Superloop Shares, unless the Company decides to provide a cash payment in lieu of Superloop Shares. A Participant does not have the right to participate in dividends on Superloop Shares until Superloop Shares are issued after vesting of the Performance Rights. A Participant does not have the right to vote in respect of a Performance Right. The Company shall not grant Performance Rights if the number of shares to be issued on exercise of the Rights exceeds 5% of the issued shares at the time the offer is made. At 30 June 2021, 115,000 Performance Rights were on issue. Executive Option Plan At a General Meeting of shareholders held on 21 June 2016, shareholders approved an Executive Option Plan. The Board may designate a Director, Employee or Consultant as an Eligible Participant for the purposes of the Executive Option Plan. The Directors of Superloop believe an Executive Option Plan is an important part of a comprehensive remuneration strategy. The grant of options to participants under the Executive Option Plan further aligns the interests of the Company’s Senior Executives and Management and shareholders and helps preserve the Company’s cash funds. The Directors are empowered to operate the Executive Option Plan and grant options to Eligible Participants in accordance with the Listing Rules and on the terms and conditions set out in the Executive Option Plan. The Board has an absolute discretion to determine appropriate procedures for the administration of the Executive Option Plan and resolve questions of fact or interpretation and formulate special terms and conditions in addition to those set out in the plan. All options are to be offered to Participants for no consideration. The offer must be in writing and specify, amongst other things, the number of options for which the Participants may accept, any conditions to be satisfied before exercise, the option expiry date (as determined by the Board) and the exercise year for the options. Where employment or consultancy ends on or before an Exercise Date, the options will lapse. In the case where the employment ends as a result of death or disability, the Options will lapse 90 days after the date of death or disability. Except in the event of death or disability, when employment ends during an Exercise Period the Expiry Date will be adjusted by up to 60 days. The Company shall not grant options if the number of shares to be issued on exercise of the options exceeds 5% of the issued shares at the time the offer is made. During the year to 30 June 2021, 7,636,450 options were issued under the Executive Option Plan and at the date of this report there were a total of 8,892,042 options on issue. 5. EMPLOYMENT TERMS FOR KEY MANAGEMENT PERSONNEL 5.1 Directors On appointment to the Board, all Non-Executive Directors enter into agreements with the Company in the form of a letter of appointment. The agreements summarise the key terms of engagement including compensation relevant to the office of director. Each appointment has no initial term, has no notice period and is not subject to any termination benefits. Subject to ASX Listing Rules, Directors must retire from office at the conclusion of the third annual general meeting after the Director was last elected and will be eligible for re-election at that annual general meeting. Upon cessation of a Director’s appointment, the Director will be paid his or her Director’s fees on a pro-rata basis, to the extent that they are unpaid, up to the date of cessation. 5.2 Executive Directors CHIEF EXECUTIVE OFFICER Mr Tyler entered into an Employment Agreement with Superloop which commenced on 1 August 2020. The term is ongoing until terminated by Superloop or the employee. During the first twelve months of employment, either party could terminate the agreement by providing three months written notice. Following this, the notice period is increased to six months. Employment may be terminated immediately for serious misconduct. Mr Tyler can be restrained f rom working for a competing business for a period of six months following termination of employment. An amount equal to one months’ salary including superannuation must be paid for each month during the restraint period. 5.3 Senior Executives Remuneration and other terms of employment for Senior Executives are formalised in employment agreements. Key terms of those employment agreements are as follows: Duration of Contract Notice Period Termination Payments(1) Name Lidia Valenzuela Paul Smith Adrian Martin Dean Tognella Mehul Dave No fixed term No fixed term No fixed term No fixed term No fixed term 3 months 3 months 3 months 3 months 3 months (1) Base salary payable if the Company terminates the Executive without notice or without cause. 3 months 3 months 3 months 3 months 3 months 33 SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report 6. REMUNERATION FOR FY21 The tables below outline the remuneration received by KMP during the year. This information is disclosed in accordance with the Corporations Act 2001 and the Australian Accounting Standards. DIRECTORS Fees and remuneration received by the Directors: SENIOR EXECUTIVES Short-term employee benefits Post employment benefits Long-term employee benefits Salary / Fees $ Other benefits $ STI $ Total $ Super- annuation $ Long Service Leave $ Total Remuneration Package (TRP) $ % of TRP linked to performance % LTI $ Short-term employee benefits Post employment benefits Long-term employee benefits Salary $ STI $ Other* $ Total $ Super- annuation $ Long Service Leave $ Total Remuneration Package (TRP) $ % of TRP linked to performance % LTI $ 606,921 18,078 137,063 762,062 17.99% Lidia Valenzuela(1) 2021 321,221 Senior Executives Executive Directors Paul Tyler(1) 2021 606,921 2020 - Drew Kelton(2) 2021 376,233 2020 463,110 Non-Executive Directors Bevan Slattery(3) 2021 54,795 2020 41,097 Tony Clark 2021 63,927 2020 49,087 Vivian Stewart 2021 82,192 2020 75,342 Stephanie Lai(4) 2021 78,387 2020 13,347 Former Non-Executive Directors Greg Baynton(5) 2021 34,500 2020 78,750 Michael Malone(6) 2021 2020 76,389 TOTAL - 2021 2021 1,296,955 TOTAL - 2020 2020 797,122 - - - - - - - - - - - - - - - - - - - - - 35,308 411,542 - - - - - - - - - - - - - 463,110 54,795 41,097 63,927 49,087 82,192 75,342 78,387 13,347 34,500 78,750 - 76,389 - 16,271 21,003 5,205 3,904 6,073 4,663 7,808 7,157 7,447 1,268 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 427,812 484,113 60,000 45,001 70,000 53,750 90,000 82,499 85,834 14,615 34,500 78,750 - 76,389 - - - - - - - - - - - - - - - 835,117 - 35,308 1,332,264 60,882 137,063 - 797,122 37,995 - (1) Paul Tyler commenced with Superloop on 1 August 2020. He commenced as Executive Director on 1 September 2020 and as CEO on 1 October 2020. (2) Drew Kelton ceased as CEO on 1 October 2020. On 1 April 2021 Drew became a Non-Executive Director. He is a Member of the Audit Committee and the Risk Management Committee. His "Other" earnings include unused annual leave paid out on termination. (3) Bevan is entitled to be remunerated as chair, however has elected to be remunerated as a Non-Executive director. (4) Stephanie Lai commenced as Independent Non-Executive Director on 11 March 2020, Chair of the Audit Committee and Member of the Risk Management Committee on 26 March 2020. Stephanie commenced as Member of the Remuneration and Nomination Committee on 18 November 2020. (5) Greg Baynton ceased as Non-Executive Director on 18 November 2020. (6) Michael Malone ceased as Independent Non-Executive Chair on 11 March 2020. 2020 130,200 Paul Smith(2) 2021 277,302 2020 130,200 - - - - 7,089 328,310 21,694 13,726 3,597 133,797 10,501 6,735 999 278,301 21,694 12,530 7,148 137,348 10,501 6,735 Adrian Martin(3) 2021 119,377 - 216,450 335,827 2,177 4,250 2020 - Dean Tognella(4) 2021 275,512 2020 - Mehul Dave(5) 2021 124,294 2020 Former Senior Executives Jon Tidd 2021 - - 2020 314,778 David Thorn 2021 - 2021 164,903 Alex West 2021 - 2020 192,416 - - - - - - - - - - - - - - - - - - - - 275,512 18,079 34,471 - - - 124,294 9,039 8,273 - - - - - - 2,957 317,735 21,003 7,857 - - - 109,363 274,266 18,314 - - - 3,341 195,757 12,251 - - - - - - - - - - - - - - - - - - - - 363,730 151,033 312,525 154,584 342,254 - 3.77% 4.46% 4.01% 4.36% 1.24% - 328,062 10.51% - - 141,606 5.84% - - - - 346,595 2.27% - 292,580 - 208,008 - - - - (1) Lidia Valenzuela commenced as Group Chief Financial Officer on 1 January 2020. (2) Paul Smith commenced as Chief Operations Officer, Infrastructure on 1 January 2020. (3) Adrian Martin commenced as Group Executive, Wholesale on 7 September 2020. (4) Dean Tongella commenced as Group Executive, Enterprise Sales on 7 September 2020. (5) Mehul Dave commenced as Group Executive, Consumer Sales on 1 February 2021. * Includes the net movement of annual leave entitlement balance, commission, or termination payments if applicable. 35 1,530,208 8.96% TOTAL - 2020 2020 932,497 126,406 1,058,903 72,570 21,327 1,152,800 1.85% TOTAL - 2021 2021 1,117,706 224,538 1,342,244 72,683 73,250 1,488,177 4.92% SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report 7. PERFORMANCE OUTCOMES FOR FY21 9. SUMMARY OF OPTIONS HELD BY KEY MANAGEMENT PERSONNEL The following table outlines the performance of the Company over the 2021 financial year and the previous periods. Since listing on the Australian Securities Exchange with an initial share price of $1.00 in June 2015, Superloop Limited’s share price was $0.93 at 30 June 2021. Year ended 30 June 2021 $ 2020 $ 2019 $ 2018 $ 2017 $ 2016 $ Net profit / (loss) $(31,963,930) $(41,087,857) $(72,057,460) $1,315,981 $(1,239,792) $(7,164,110) Dividends declared* Share price at start of year Share price at end of year - $0.99 $0.93 - $1.54 $0.99 - $2.52 $1.54 - $2.56 $2.52 $0.01 $2.35 $2.56 - $1.94 $2.35 * Dividend was declared in FY17 but paid in FY18. The 2021 financial year saw Superloop make significant progress as a leading telecommunications business, leveraging its superior network infrastructure to grow connectivity and related solutions in the consumer, business and wholesale markets. Successful execution of year 1 of a multi-year Accelerated Growth Strategy. Short term incentives were not awarded for the current financial year. During the year, there were no Performance Rights issued to Senior Executives in accordance with the Employee Rights Plan. 8. SUMMARY OF SHARES HELD BY KEY MANAGEMENT PERSONNEL The table below outlines the movement in shareholdings by Key Management Personnel from 1 July 2020 to the date of this report: Year ended 30 June Opening balance 1 July 2020 Received as part of remuneration Additions Disposals Other movements(1) Closing balance 30 June 2021 Directors Bevan Slattery Drew Kelton Greg Baynton Tony Clark Vivian Stewart Stephanie Lai Paul Tyler TOTAL 64,023,689 100,000 971,323 492,274 577,738 95,000 - 66,260,024 - - - - - - - - 308,385 14,993 - 73,805 21,505 14,243 110,241 543,172 - - - - - - - - - - (971,323) - - - - 64,332,074 114,993 - 566,079 599,243 109,243 110,241 (971,323) 65,831,873 (1) Individual was not a KMP as at 30 June 2021 The Company’s Securities Trading Policy is designed to ensure that any trading in Superloop’s securities is in accordance with the law and it prohibits all Directors and Senior Executives from engaging in hedging arrangements, dealing in derivatives or entering into similar arrangements. The table below outlines the movement in options held by Key Management Personnel during the year: Opening balance 1 July 2020 Received as part of remuneration Exercised Other movements Closing balance 30 June 2021 Vested and exercisable Vested during the year Senior Executives Lidia Valenzuela Paul Smith Adrian Martin Dean Tognella Mehul Dave 118,811 118,811 0 0 0 121,460 104,110 61,650 500,000 120,000 0 0 0 0 0 0 0 0 0 0 240,271 222,921 61,650 500,000 120,000 - - - - - - - - - - 10. SUMMARY OF RIGHTS HELD BY KEY MANAGEMENT PERSONNEL No Performance Rights were held by Key Management Personnel during the year. 11. SHARES UNDER OPTION OR PERFORMANCE RIGHTS Details of unissued shares or interest under Option at the date of this report are: Date of Issue Number of shares under Option Class of shares Exercise price of option Vesting date Expiry date of options 18 November 2020 1,500,000 Ordinary 18 November 2020 1,000,000 Ordinary 18 November 2020 1,000,000 Ordinary 18 November 2020 1,000,000 Ordinary $1.11 $1.22 $1.34 $1.47 1 October 2021 1 April 2023 1 October 2022 1 October 2023 1 October 2023 1 October 2024 1 October 2024 1 October 2025 18 November 2020 1,000,000 Ordinary $2.00 31 December 2020 21 December 2023 9 November 2020 820,000 Ordinary 9 November 2020 9 November 2020 9 November 2020 9 November 2020 12 February 2020 12 February 2020 12 February 2020 12 February 2020 24 August 2018 24 August 2018 24 August 2018 329,114 329,114 329,111 329,111 235,144 235,146 235,151 235,151 105,000 105,000 105,000 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary $1.25 $1.26 1 September 2021 1 September 2022 1 September 2021 1 September 2025 $1.39 1 September 2022 1 September 2025 $1.53 1 September 2023 1 September 2025 $1.68 1 September 2024 1 September 2025 $1.11 1 September 2020 1 September 2025 $1.22 1 September 2021 1 September 2025 $1.34 1 September 2022 1 September 2025 $1.47 1 September 2023 1 September 2025 $2.00 15 September 2018 15 September 2022 $2.00 15 September 2019 15 September 2022 $2.00 15 September 2020 15 September 2022 37 SUPERLOOP LIMITED AND CONTROLLED ENTITIESREMUNERATION REPORT Remuneration Report Auditor’s Independence Declaration Details of unissued shares or interest under Performance Rights at the date of this report are: Date of issue 9 November 2020 Number of shares under Performance Rights Class of shares Vesting date Expiry date 115,000 Ordinary 1 September 2021 1 September 2022 No options expired during the year. At the date of this report there were 8,892,042 Options on issue. At the date of this report there are 115,000 Performance Rights on issue. The Options are subject to the terms and conditions as set out in the Executive Option Plan. The holders of these Options do not have the right, by virtue of the Option, to participate in any share issue or interest issue of the Company. Performance Rights are subject to the terms and conditions as set out in the Employee Rights Plan. The holders of the Performance Rights are not entitled, by virtue of the Performance Right, to participate in any share issue or interest issue of the Company. Each Performance Right entitles the holder, upon vesting, to be issued one Ordinary share. The participant must be an eligible employee on the vesting date for the rights to vest. 12. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL There were no other transactions with Key Management Personnel not otherwise disclosed in the report. This report is made in accordance with a resolution of the Board of Directors, in accordance with section 298(2) of the Corporations Act 2001. On behalf of the Directors Paul Tyler Chief Executive Officer and Director 24 August 2021 Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au The Board of Directors Superloop Limited Level 1, 545 Queen Street Brisbane QLD 4000 24 August 2021 Dear Directors, Auditor’s Independence Declaration to Superloop Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Superloop Limited. As lead audit partner for the audit of the financial report of Superloop Limited for the year ended 30 June 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: > The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and > Any applicable code of professional conduct in relation to the audit. Yours faithfully, DELOITTE TOUCHE TOHMATSU Tendai Mkwananzi Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation. 39 SUPERLOOP LIMITED AND CONTROLLED ENTITIESAUDITOR'S INDEPENDENCE DECLARATION Financial Report 30 June 2021 _____ These financial statements are the consolidated financial statements of the consolidated entity consisting of Superloop Limited (ABN 96 169 263 094) and its controlled entities. Superloop Limited is a company limited by shares, incorporated and domiciled in Australia. The financial statements are presented in the Australian currency. Superloop’s registered office and principal place of business is Level 1, 545 Queen Street, Brisbane QLD 4000. A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report on page 10, which is not part of these financial statements. The financial statements were authorised for issue by the Directors on 24 August 2021. The Directors have the power to amend and reissue the financial statements. Consolidated Statement of Profit or Loss and Other Comprehensive Income 42 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Report 43 44 45 46 41 SUPERLOOP LIMITED AND CONTROLLED ENTITIESFINANCIAL REPORT Financial Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position For the year ended 30 June 2021 As at 30 June 2021 30 June 2021 $’000 30 June 2020 $’000 Note 30 June 2021 $’000 30 June 2020 $’000 Note 5 5 6 7 8 Revenue Other income Total revenue and other income Direct costs Employee benefits expense Share based payments expense Professional fees Marketing costs Administrative and other expenses Acquisition costs Total expenses Earnings before interest, tax, depreciation, amortisation and foreign exchange gains / losses (EBITDA) Depreciation and amortisation expense Interest expense Foreign exchange gains / (losses) Loss before income tax Income tax expense Loss for the year after tax for the year attributable to the owners of Superloop Limited Other Comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss: Exchange differences arising from translation of foreign operations Net fair value gain on hedging transactions entered into the cash flow hedge reserve Total Other Comprehensive (loss)/income, net of income tax Total Comprehensive (loss) / profit for the year attributable to the owners of Superloop Limited 110,513 211 110,724 (58,486) (23,535) (447) (2,567) (1,265) (6,258) (551) (93,109) 17,615 (46,373) (3,173) 705 (31,226) (738) (31,964) (7,363) (532) (7,895) 106,644 947 107,591 (53,122) (26,968) (8) (2,903) (2,408) (8,712) - (94,121) 13,470 (46,631) (4,407) (217) (37,785) (3,303) (41,088) 1,499 - 1,499 (39,859) (39,589) Profit / (Loss) per share for profit / (loss) attributable to the ordinary equity holders of the Group: Basic (loss) / earnings per share Diluted (loss) / earnings per share The notes following the financial statements form part of the financial report. Note 30 30 Cents (8.66) (8.66) Cents (12.33) (12.33) ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets NON-CURRENT ASSETS Property, plant and equipment Intangible assets Other non-current assets Deferred tax assets Total Non-Current Assets Total Assets LIABILITIES CURRENT LIABILITIES Trade and other payables Employee benefits Deferred revenue Interest-bearing loans and borrowings Total Current Liabilities NON-CURRENT LIABILITIES Employee benefits Deferred revenue Interest-bearing loans and borrowings Deferred tax liabilities Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Contributed equity Reserves Other equity Accumulated losses Total Equity The notes following the financial statements form part of the financial report. 9 10 11 12 13 11 14 15 17 18 16 17 18 16 14 19 20 21 89,724 14,823 6,363 110,910 219,397 223,584 1,020 7,102 451,103 562,013 18,165 2,345 4,437 4,449 29,396 773 34,886 62,556 2,593 100,808 130,204 431,809 590,927 325 (3,327) (156,116) 431,809 17,090 14,691 7,610 39,391 231,644 240,013 1,751 6,889 480,297 519,688 17,581 2,188 4,813 5,889 30,471 1,614 38,389 52,479 1,936 94,418 124,889 394,799 514,505 7,773 (3,327) (124,152) 394,799 43 SUPERLOOP LIMITED AND CONTROLLED ENTITIESFINANCIAL REPORT Financial Report Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows For the year ended 30 June 2021 For the year ended 30 June 2021 Contributed equity $’000 Reserves $’000 Other Equity $’000 Accumulated losses $’000 Total Equity $’000 Balance at 1 July 2020 514,505 7,773 (3,327) (124,152) 394,799 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Dividends paid Share based payments Issue of ordinary share capital Share issue costs - - - - - 78,816 (2,394) - (7,895) (7,895) - 447 - - - - - - - - - (31,964) (31,964) - (7,895) (31,964) (39,859) - - - - - 447 78,816 (2,394) Balance at 30 June 2021 590,927 325 (3,327) (156,116) 431,809 For the year ended 30 June 2020 Contributed equity $’000 Reserves $’000 Other Equity $’000 Accumulated losses $’000 Total Equity $’000 Balance at 1 July 2019 426,283 6,266 (3,327) (83,064) 346,158 Loss for the year Other comprehensive income for the year Total comprehensive income for the year Dividends paid Share based payments Issue of ordinary share capital Share issue costs - - - - - 92,304 (4,082) - 1,499 1,499 - 8 - - - - - - - - - (41,088) (41,088) - 1,499 (41,088) (39,589) - - - - - 8 92,304 (4,082) Balance at 30 June 2020 514,505 7,773 (3,327) (124,152) 394,799 The notes following the financial statements form part of the financial report. Note 30 June 2021 $’000 30 June 2020 $’000 OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Income taxes (paid) / received Net cash inflow / (outflow) from operating activities 27 INVESTING ACTIVITIES Interest received Payments for property, plant and equipment Payments for intangible assets Proceeds received for sale of intangible assets Deferred consideration payments Net cash inflow / (outflow) from investing activities FINANCING ACTIVITIES Proceeds f rom issues of shares Transaction costs paid in relation to issue of shares Dividends paid Lease payments Proceeds from borrowings (net of fees) Repayment of borrowings Interest paid Net cash inflow / (outflow) from financing activities Net increase / (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the year Foreign exchange movement in cash Cash and cash equivalents at the end of the year The notes following the financial statements form part of the financial report. 9 9 117,507 (102,387) - 15,120 10 (9,636) (5,135) 100 (500) (15,161) 78,816 (2,394) - (5,636) 62,023 (57,469) (2,581) 72,759 72,719 17,090 (85) 89,724 116,206 (104,316) 1,000 12,890 40 (37,133) (16,050) - (2,000) (55,143) 92,304 (4,081) - (5,961) 72,051 (109,625) (4,026) 40,662 (1,591) 18,898 (217) 17,090 45 SUPERLOOP LIMITED AND CONTROLLED ENTITIESFINANCIAL REPORT Notes to the Consolidated Financial Report 1. Summary of significant accounting policies 2. Application of new and revised accounting standards 3. Critical accounting estimates and judgement 4. Segment information 5. Revenue 6. Interest expense 7. Foreign exchange gains / (losses) 8. Income tax expense 9. Cash and cash equivalents 10. Trade and other receivables 11. Other assets 12. Property, plant and equipment 13. Intangible assets 14. Deferred taxes 15. Trade and other payables 16. Interest-bearing loans and borrowings 17. Employee benefits 18. Deferred revenue 19. Contributed equity 20. Reserves 21. Accumulated losses 22. Dividends 23. Key management personnel disclosures 24. Remuneration of auditors 25. Commitments and contingencies 26. Related party transactions 27. Reconciliation of loss after income tax to net cash flow from operating activities 28. Non-cash transactions 29. Financial risk management 30. Earnings per share 31. Subsidiaries 32. Events occurring after the reporting period 33. Parent entity financial information 47 54 55 56 59 59 59 60 61 61 62 63 65 67 67 68 69 69 70 71 71 72 72 73 74 74 75 75 76 79 80 81 81 1. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Superloop Limited and its subsidiaries. Superloop Limited is a public company limited by shares, incorporated and domiciled in Australia. (vi) Going concern The financial statements have been prepared on the basis that the Group is a going concern, able to realise assets in the ordinary course of business and settle liabilities as and when they fall due. Based on forecast profitability, positive operating cash flows and available funding capacity under the Group’s debt facilities, the directors are of the opinion that no material uncertainties exist in relation to events or conditions which cast doubt on the Group’s ability to continue as a going concern. A. REPORTING YEAR AND COMPARATIVE C. PRINCIPLE OF CONSOLIDATION INFORMATION (i) Subsidiaries These financial statements cover the period 1 July 2020 to 30 June 2021. The prior year covers the period 1 July 2019 to 30 June 2020. Comparative information has, where necessary and immaterial, been reclassified to be consistent with current year disclosures. B. 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 and the Corporations Act 2001. Superloop Limited is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of the Superloop Group also comply with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’). (ii) New and amended standards adopted by the Group The Superloop Group has adopted all of the new, revised or amending Accounting Standards and interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. (iii) Early adoption of standards issued, but not effective The Group has not elected to apply any pronouncements before their operative date in the financial year beginning 1 July 2020. (iv) Historical cost convention These financial statements have been prepared under the historical cost convention. (v) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires Management to exercise its judgement in the process of applying the Group’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. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group 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 Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (ii) Business combinations under common control A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that the control is not transitory. Where an entity within the Group acquires an entity under common control, the acquirer consolidates the carrying values of the acquired entity’s assets and liabilities from the date of acquisition. No fair value adjustments are made to the acquired entity’s assets and liabilities at the date of acquisition. The consolidated financial statements of the Superloop Group include the acquired entity’s income and expenses from the date of acquisition onwards. Any difference between the fair value of the consideration paid / transferred by the acquirer and the net assets / (liabilities) of the acquired entity are taken to the common control reserve within other equity. This other equity relates to transactions during the period ended 30 June 2015 to form the Group. 47 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report D. SEGMENT REPORTING Operating segments are reported in a manner consistent with the operations of the Group and the internal reporting provided to the chief operating decision maker. The Group’s operating segments have remained consistent in FY21 on the prior year. E. REVENUE RECOGNITION Superloop earns revenue from contracts with customers primarily through the provision of telecommunications and other related offerings. Superloop records revenue from contracts with customers over time or at a point in time on the delivery of the promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognised for the major business activities as follows: (i) Long term capacity revenue Long term capacity arrangements (including rights-of-use (‘IRU’) agreements) provide customers exclusive access to fibre core capacity over an agreed contract term. These arrangements include the initial provisioning of the fibres, ongoing availability of capacity and maintenance of the infrastructure over the contract term which form part of an integrated service to the customer and is considered to be a single performance obligation. The transaction price is generally fixed, net of any upfront discounts given. The customer receives and consumes the benefit of the service simultaneously and revenue is recognised over time, as the service is performed. IRU agreements generally require the customer to make payment upon the execution of the agreement. In these cases, the Group receives most or all of the transaction price at the inception of the contract, resulting in a contract liability being recognised upfront and amortised over the contract term. Contract liabilities are presented in the Group’s consolidated statement of financial position as deferred revenue. At the inception of each IRU contract, in determining the transaction price, Superloop gives consideration to whether the timing of payments agreed to by the parties to the contract provides the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer. Factors considered take into account the difference, if any, between the amount of promised consideration and the cash selling price of the promised goods or services, and the combined effect of the expected length of time between when Superloop transfers the promised goods or services to the customer and when the customer pays for those goods or services and the prevailing interest rates in the relevant market. If a significant financing component is deemed to exist, the transaction price is adjusted for the effects of the time value of money, and for revenue to be recognised at an amount that reflects the price that a customer would have paid if the customer had paid cash for the goods or services when (or as) they transfer to the customer (i.e. the cash selling price). When the period between transferring a good or service and the customer paying for it will be one year or less, Superloop will adopt the practical expedient available in AASB 15 not to adjust the consideration for the effects of a significant financing component and applies this policy consistently to contracts with similar characteristics and in similar circumstances. The revenue in relation to long term capacity arrangements and IRU’s are all recognised within the Superloop Connectivity segment. Services Superloop provides a range of tailored services to customers. Revenue associated with these arrangements is recognised over time as the services are performed. Hardware and software sales Superloop sells certain hardware and software products to customers, including installation services as an integrated offering with the respective hardware or software products. Revenue in relation to hardware is recognised on delivery at the point in time when the customer obtains control of the goods. Software products are provided to the customer on-premises with a right-to-use the software as it exists when made available to the customer, generally with no further service obligation once the product has been installed. Revenue from distinct on-premises licenses with no further service obligation is recognised upfront at the point in time when the software is made available to the customer. There are some software products which require minor ongoing maintenance and software upgrades that do not significantly modify the form or function of the software and are therefore accounted for as a performance obligation distinct from the installed software. The stand- alone selling price of the ongoing maintenance and software updates has been determined using a residual approach, by reference to the total transaction price less the sum of the observable stand-alone selling price of the installed software (using an expected cost plus margin approach). Revenue associated with the ongoing service obligation is recognised over the term of the contract. Contract costs For certain long-term capacity agreements and managed services contracts, upfront set-up type activities are required to be performed for hardware to be installed to activate these arrangements. For costs incurred in fulfilling the contract with the customer that are within the scope of another standard, the group accounts for those costs in accordance with those standards (e.g. AASB 116 Property, Plant and Equipment). Where the costs do not fall within the scope of another standard, the guidance in AASB 15 is applied and Superloop defers costs incurred to fulfil contracts that relate directly to the contract, are expected to generate resources that will be used to satisfy Superloop’s performance obligation under the contract and are expected to be recovered through revenue generated under the contract. Contract fulfilment costs capitalised under AASB 15 are expensed to cost of service as Superloop satisfies its performance obligations under each arrangement. Deferred costs are presented in the Group’s consolidated statement of financial position as other current and other non-current assets. (ii) Other revenue Interest income Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. Research & Development tax offset The Group applies AASB 120 Accounting for Government Grants and Disclosure of Government Assistance in accounting for the Research & Development (R&D) Tax Offset, whereby a credit is recognised in profit before tax over the periods necessary to match the benefit of the credit with the costs for which it is intended to compensate. Such periods will depend on whether the R&D costs are capitalised or expensed as incurred. Where R&D costs are capitalised, the government grant income is deferred and recognised over the same period that such costs are amortised. F. CASH AND CASH EQUIVALENTS For the purpose of presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and term deposits 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. Bank overdrafts, if applicable, are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position. G. TRADE RECEIVABLES Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less any loss allowances. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the allowance for expected credit loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income within administrative expenses. When a trade receivable for which an allowance had been recognised becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other administrative expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. H. CONSUMPTION TAXES Revenues, expenses and assets are recognised net of the amount of associated consumption tax per jurisdiction, unless the consumption based tax incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of consumption based tax receivable or payable. The net amount of the consumption based tax recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated Statement of Financial Position. Cash flows are presented on a gross basis. The consumption based tax components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. I. INCOME TAX The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate in each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting year in each jurisdiction. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises f rom initial recognition of an asset or liability in a transaction other than a business combination that at 49 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting year and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the Group has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in the Consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. J. INVESTMENTS AND OTHER FINANCIAL ASSETS Loans and receivables Classification Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting year which are classified as non-current assets. Loans and receivables are included in trade and other receivables (Note 10) in the Consolidated Statement of Financial Position. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through the Consolidated Statement of Comprehensive Income, transaction costs that are directly attributable to the acquisition of the financial asset. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Impairment The Group assesses at the end of each reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The Group records lifetime expected losses on all eligible financial assets including trade receivables, contract assets and lease receivables. Assets carried at amortised cost For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the Consolidated Statement of Comprehensive Income. Impairment testing of trade receivables is described in Note 1(G). K. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Consolidated Statement of Profit or Loss and Other Comprehensive Income during the reporting year in which they are incurred. Depreciation on other assets is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the lease term (if shorter) as follows: Category Network assets Communication assets Other assets Leasehold Improvements Useful Life 15-25 years 3-5 years 3-10 years 3-10 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. L. ASSETS IN THE COURSE OF CONSTRUCTION Assets in the course of construction are shown at historical cost. Historical cost includes directly attributable expenditure on telecommunications infrastructure which at reporting date, has not yet been finalised and/or ready for use. Assets in the course of construction are not depreciated. Assets in the course of construction are transferred to property, plant and equipment upon successful testing and commissioning. M. INTANGIBLE ASSETS The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite useful lives are amortised over the useful lives: Category Rights and licenses Software Customer acquisition costs Useful Life 3-15 years 3-5 years 3-8 years Customer relationships, brands and trademarks 3-10 years Intangible assets with finite useful lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful life and the amortisation method for an intangible asset with a finite useful life are reviewed at least each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the useful life or method, as appropriate, which is a change in accounting estimate. Intangible assets with indefinite useful lives are tested for impairment annually, either individually or at the cash- generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed each reporting year to determine whether the indefinite useful life assessment continues to be supportable. If not, the change in useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. Indefeasible Rights to Use (‘IRUs’) IRUs of capacity are recognised as intangible assets and are amortised on a straight-line basis over the remaining life of the contracts. Goodwill Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration transferred over the fair value of the Group’s net identifiable assets acquired and liabilities assumed. Goodwill has an indefinite useful life and as such, is not amortised. The carrying value is assessed at each reporting date against the value of the cash-generating units to which it is assigned. Software On the acquisition of a company, internally developed software and systems are valued and brought to account as intangible assets and valued at its amortised replacement cost or discounted future earnings. Software is amortised on a straight-line basis over the period of its expected benefit. Spectrum licenses Spectrum licence assets acquired as part of a business combination are measured at their fair value at the date of acquisition. The amortisation of spectrum licence assets is calculated on a straight-line basis over the expected useful life of the asset based on the current renewal dates of each licence. Customer acquisition costs Direct customer acquisition costs in relation to customer contracts are recognised as an asset where it is probable that the future economic benefits arising as a result of the costs incurred will flow to the Group. Customer acquisition costs recognised as an asset are amortised from the inception of the contract over the lesser of the period of the contract and the period during which the future economic benefits are expected to be obtained, and reviewed for impairment at the end of the financial year. Customer acquisition costs not recognised as an asset are expensed as incurred. Other intangibles Other intangibles are amortised on a straight-line basis over the period of their expected benefit. N. LEASES When the Group leases an asset, a ‘right-of-use asset’ is recognised for the leased item and a lease liability is recognised for any lease payments due at the lease commencement date. The right-of-use asset is initially measured at cost, being the present value of the lease payments paid or payable, plus any initial direct costs incurred in entering the lease and less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis from the commencement date to the end of the lease term. The lease term is the non-cancellable period of the lease plus any periods for which the Group is ‘reasonably certain’ to exercise any extension options. Lease liabilities are initially measured at the value of the lease payments that are not paid at the commencement 51 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report date and are discounted using the incremental borrowing rates of the applicable Group entity (the rate implicit in the lease is used if it is readily determinable). Only fixed lease payments for the term of the lease are included in the lease liability. After initial recognition, the lease liability is recorded at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate (e.g. an inflation related increase) or if the Group’s assessment of the lease term changes; any change in the lease liability as a result of these changes also results in a corresponding change in the recorded right-of-use asset. O. IMPAIRMENT OF ASSETS Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss recognised for goodwill is not reversed in subsequent periods. P. TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the year of the facility to which it relates. R. EMPLOYEE BENEFITS (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of each reporting year in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting year and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. In June 2020 the Group met the eligibility requirements to receive the Government JobKeeper allowance, this allowance has been offset against employee benefits expense and for the period ended 30 June 2021 the total amount included in the Consolidated Statement of Profit or Loss and other Comprehensive Income was $2.5 million. (ii) Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the reporting year in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting year 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 end of the reporting year on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Retirement benefit obligations Except for the statutory superannuation guarantee charge, the Group does not have any other retirement benefit obligations. Q. BORROWINGS (iv) Share-based payments Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income over the year of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. This fair value is expensed on a straight-line basis over the vesting period with a corresponding increase in equity. S. BORROWING COSTS W. ROUNDING OF AMOUNTS Borrowing costs incurred for the construction of any qualifying asset are capitalised during the year of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. T. CONTRIBUTED EQUITY Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. U. FOREIGN EXCHANGE The financial statements are presented in Australian dollars, which is the Group’s presentation currency. Foreign currency transactions Foreign currency transactions are translated into the functional currency of the entity using the exchange rates prevailing at the date of the transactions. Foreign operations The assets and liabilities of foreign operations are translated into the presentation currency (Australian dollars) using the exchange rates as at the reporting date. The revenues and expenses of the foreign operations are translated into the presentation currency using the average exchange rates, which approximate the rate at the date of the transaction. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. V. EARNINGS PER SHARE (i) Basic earnings per share Basic earnings per share is calculated by dividing: > the profit / (loss) attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares; > by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the year (Note 30). (ii) 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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Company is of a kind referred to in the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016 and issued pursuant to section 341(1) of the Corporations Act 2001. In accordance with that Instrument, amounts in the financial statements have been rounded to the nearest thousand dollars, unless otherwise indicated. X. HEDGING Hedging of risk exposure can be carried out using derivatives or physical instruments. Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship Y. HEDGE ACCOUNTING Superloop designates certain hedging instruments as either fair value hedges or cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. (i) Cash flow hedge The effective portion of changes in the fair value of financial instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item. (ii) Fair value hedge Changes in the fair value of financial instruments that are designated and qualify as fair value hedges are recognised in profit or loss immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognised in profit or loss in the line item relating to the hedged item. Z. PARENT ENTITY FINANCIAL INFORMATION The financial information for the parent entity, Superloop Limited, disclosed in Note 33 has been prepared on the same basis as the consolidated financial statements. 53 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 2. Application of new and revised accounting standards At the date of the financial statements, the Group has not applied the following new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective: Standard/amendment Effective for annual reporting periods beginning on or after AASB 17 Insurance Contracts and AASB 2020-5 Amendments to Australian Accounting Standards – Insurance Contracts 1 January 2023 AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture, AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current and AASB 2020-6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – Deferral of Effective Date AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates AASB 2021-3 Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021 1 January 2022 (Editorial corrections in AASB 2017-5 applied from 1 January 2018) 1 January 2022 1 January 2022 1 June 2021 1 January 2023 1 April 2021 Management has evaluated the impact of the above Standards on the financial statements and have determined that there should be no impact of the initial application of the above Standards. 3. Critical accounting estimates and judgement The preparation of the Group’s consolidated financial statements requires Management to make estimates, judgements and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. These estimates and judgements are continually evaluated against historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. In the process of applying the Group’s accounting policies, Management has made the following estimates and judgements, which involved a higher degree of judgement or complexity, and which have the most significant effect on the amounts recognised in the consolidated financial statements. Goodwill and other indefinite life intangible assets In assessing impairment of goodwill and other indefinite life intangible assets, in accordance with accounting policy outlined in Note 1(O), Management estimates the recoverable amount of each asset, cash-generating or group of cash-generating assets based on the greater of “Value in use” or “Fair value less costs to sell”. Value in use is assessed through a discounted cash flow analysis which includes significant estimates and the use of assumptions, including growth rates, estimated future cash flows and estimated discount rates based on the current cost of capital, refer to Note 13. The identification of cash-generating units (“CGU”) is an area of significant judgement, given the interdependence of the services and offerings. Our Connectivity operating segment includes a number of different connectivity services. The connectivity assets are interconnected and the different connectivity services are offered in conjunction with each other to our enterprise customers. The various telecommunications equipment which forms our connectivity network is considered to be working together to generate our cash inflows. Deferred tax recoverability Deferred tax assets are recognised to the extent that their utilisation is probable. The utilisation of deferred tax assets will depend on whether it is possible to generate sufficient taxable income in the respective tax type and jurisdiction. Various factors are used to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plans, and tax planning strategies. Revenue recognition The Group’s construction and other complex contracts are recognised as and when performance obligations are met. Identifying performance obligations, allocating the transaction price to performance obligations, and determining the timing of revenue recognition of these contracts requires the application of judgement due to the complexity and nature of the customer arrangements. The assumptions made in the estimates are based on the information available to Management at the reporting date. A change in the estimated stage of completion could have an impact on the timing of the revenue recognition. Refer to Note 1(E) for further information on revenue recognition. Useful life of assets The economic life of property, plant and equipment, and intangible assets is a critical accounting estimate, with the ranges outlined in Note 1(K) and Note 1(M), respectively. The useful economic life is the Board’s and Management’s best estimate based on historical experiences and industry knowledge. The Group reviews the estimated useful lives at least at each reporting period. Should the actual lives of these component parts be significantly different this would impact the depreciation and amortisation charge recognised. Income taxes The Group is subject to income taxes in each jurisdiction that it operates. Estimation is required in determining the provision for income taxes as there are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of the tax law. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year. Business combinations Accounting for acquisitions is inherently complex, requiring a number of judgements and estimates to be made. In accounting for business combinations, the Group has made a number of judgements in relation to identification of fair values attributable to separately identifiable assets and liabilities acquired, including intangible assets such as customer relationships, software and brand name and trademarks identified. The determination of fair values requires the use of valuation techniques based on assumptions including revenue growth, cash flows, margins, customer attrition rates and weighted-average cost of capital. Additional judgement and estimates have been applied in estimating the useful lives of intangible assets and tangible assets acquired refer to Note 1(M) and 1(K). 55 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 4. Segment information A. DESCRIPTION OF SEGMENTS Superloop is a trusted enabler of connectivity and managed services in Asia Pacific. During the year, the principal activities of the Group included: (i) the development and operation of independent connectivity infrastructure and services throughout the Asia Pacific region for wholesale and enterprise customers including fibre optic cable, international submarine cables and fixed wireless networks (Connectivity); (ii) the provision of outsourced cloud and managed services, cyber security and cyber safety (Services); and (iii) the provision of broadband services for individual end users including residential NBN™, retail fixed wireless and fixed line internet services and connectivity services for hotels, student accommodation sites and schools (Broadband). The operations of the Group are reported in these segments to Superloop’s Board and Senior Management team (chief operating decision makers). Items not specifically related to an individual segment are classified as Group Shared Services, refer below for details of material items. The accounting policies of the segments are the same as the Group (refer to Note 1). Comparative information has been restated to align with the current operating segments. B. SEGMENT INFORMATION PROVIDED TO MANAGEMENT The segment information provided to Management for the reportable segments is as follows: Operating Segments for year ended 30 June 2021 Connectivity (1) $000 Services (2) $000 Broadband (3) $000 Group Shared Services (4) $000 Revenue and other income Direct costs Gross margin Operating expenses Acquisition costs 62,412 (30,203) 32,209 6,280 (2,214) 4,066 41,821 (26,069) 15,752 211 - 211 The below table provides further information regarding the group’s main Connectivity segment. Analysis of Connectivity Operating Segment for the year ended 30 June 2021 Australia (5) $000 Singapore $000 Hong Kong $000 Connectivity Sub Total $000 Revenue and other income Direct costs Gross margin 43,570 (22,867) 20,703 15,037 (3,226) 11,811 3,805 (4,110) (305) 62,412 (30,203) 32,209 Depreciation and amortisation (33,726) (4,845) (4,378) (42,949) Analysis of Connectivity Operating Segment for the year ended 30 June 2021 Australia (5) $000 Singapore $000 Hong Kong $000 Connectivity Sub Total $000 PP&E and intangible assets (excluding goodwill) Property, plant and equipment 105,800 44,435 52,685 202,920 Intangible assets excluding goodwill (includes indefeasible rights to use) 65,836 7,770 12,359 85,965 Total 171,636 52,205 65,044 288,885 Total $000 110,724 (58,486) 52,238 (34,072) (551) Operating Segments for year ended 30 June 2020 Connectivity (1) $000 Services (2) $000 Broadband (3) $000 Revenue and other income 56,989 18,126 31,857 Direct costs Gross margin Operating expenses (27,240) (8,407) (17,475) 29,749 9,719 14,382 Group Shared Services (4) $000 619 - 619 Total $000 107,591 (53,122) 54,469 (40,999) Depreciation and amortisation (42,949) (155) (3,269) - (46,373) Depreciation and amortisation (37,545) (2,812) (6,274) - (46,631) Interest, FX and other Loss before income tax Operating Segments for year ended 30 June 2021 Connectivity (1) $000 Services (2) $000 Broadband (3) $000 Group Shared Services (4) $000 Non-current assets Property, plant and equipment 202,920 - 16,477 Intangible assets excluding goodwill (includes indefeasible rights to use) Goodwill Total 85,965 2,554 - 104,855 393,740 - 30,210 2,554 46,687 (1) Connectivity includes earnings associated with the development of the INDIGO subsea cable system. (2) Services includes earnings associated with the Cloud Managed Services and cybersecurity. (3) Broadband includes earnings and assets from BigAir Community Broadband, NuSkope and GX2 Technology. (4) Group Shared Services includes inter-segment eliminations and unallocated earnings. - - - - (2,468) (31,226) Total $000 219,397 88,519 135,065 442,981 Interest, FX and other Loss before income tax (1) Connectivity includes earnings associated with the development of the INDIGO subsea cable system. (2) Services includes earnings associated with the Cloud Managed Services and cybersecurity. (3) Broadband includes earnings and assets from BigAir Community Broadband, NuSkope and GX2 Technology. (4) Group Shared Services includes inter-segment eliminations and unallocated earnings. (5) Australia includes INDIGO subsea cable assets, Australia Fibre and Australia Fixed Wireless. Operating Segments for year ended 30 June 2020 Connectivity (1) $000 Services (2) $000 Broadband (3) $000 Group Shared Services (4) $000 Non-current assets Property, plant and equipment 219,790 - 11,854 Intangible assets excluding goodwill (includes indefeasible rights to use) Goodwill Total 91,274 5,058 8,617 104,854 415,918 - 5,058 30,210 50,681 - - - - (4,624) (37,785) Total $000 231,644 104,949 135,064 471,657 57 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report The below table provides further information regarding the group’s main Connectivity segment. 5. Revenue Analysis of Connectivity Operating Segment for the year ended 30 June 2020 Australia (5) $000 Singapore $000 Hong Kong $000 Connectivity Sub Total $000 Revenue and other income Direct costs Gross margin Depreciation and amortisation 38,493 (20,035) 18,458 (27,734) 14,897 (2,703) 12,194 (4,789) 3,599 56,989 (4,502) (27,240) (903) 29,749 (5,022) (37,545) Analysis of Connectivity Operating Segment for the year ended 30 June 2020 Australia (5) $000 Singapore $000 Hong Kong $000 Connectivity Sub Total $000 PP&E and intangible assets (excluding goodwill) Property, plant and equipment 111,429 48,217 60,144 219,790 Intangible assets excluding goodwill (includes indefeasible rights to use) 68,669 8,852 13,753 91,274 Total 180,098 57,069 73,897 311,064 Revenue from ordinary activities Customer revenue Other income Interest income Gain on sale of assets Other income Total revenue and other income 30 June 2021 $’000 30 June 2020 $’000 110,513 106,644 10 100 101 40 16 891 110,724 107,591 The total future revenue from the Group’s contracts with customers with performance obligations not satisfied at 30 June 2021 is $39.3 million of which $4.4 million is expected to be recognised within the next year and the remaining amount will be recognised beyond 12 months over the life of the contracts on a straight-line basis. The future revenue primarily relates to the Group’s long-term capacity arrangements or IRUs, refer to revenue recognition accounting policy for further information. These contracts have contract terms of between 7 and 20 years, with a weighted average remaining term of 11 years. 6. Interest expense Interest on borrowings Total interest expense 30 June 2021 $’000 30 June 2020 $’000 (3,173) (3,173) (4,407) (4,407) The Group incurs interest on the drawn amount of its debt facility (refer to Note 16). 7. Foreign exchange gains / (losses) Foreign exchange (losses) for the year arose as a result of unfavourable exchange rate movements in the ordinary course of business. Net foreign exchange gain / (losses) for the year Total net foreign exchange gain / (losses) 30 June 2021 $’000 30 June 2020 $’000 705 705 (217) (217) 59 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 8. Income tax expense Foreign exchange (losses) for the year arose as a result of unfavourable exchange rate movements in the ordinary course of business. (a) Income tax recognised in profit or loss In respect of the current year In respect of prior years Total current tax Deferred tax In respect of the current year In respect of prior years Total deferred tax 30 June 2021 $’000 30 June 2020 $’000 - - - (738) - (738) - 2,758 2,758 (3,303) (2,758) (6,061) Total income tax expense (738) (3,303) (b) The income tax expense for the year can be reconciled to the accounting loss as follows: Loss from continuing operations before income tax expense (31,226) (37,785) Tax (expense) / credit at the Australian tax rate of 30% Non-deductible acquisition costs Non-deductible entertainment expenses Non-deductible share based payments Effect of different tax rates of subsidiaries operating in other jurisdictions 9,368 (153) (20) (134) (947) 11,336 - - (3) (159) Adjustments to opening deferred tax balances - (2,758) 9. Cash and cash equivalents Cash at bank and on hand Short term deposits Total cash and cash equivalents 10. Trade and other receivables Trade receivables Allowance for expected credit losses Net trade receivables Consumption tax receivable Other receivables Total Trade receivables Allowance for expected credit losses Net trade receivables Deferred tax credits in respect of temporary differences and unused tax losses not recognised in current year (8,852) (11,719) Consumption tax receivable Total income tax expense (738) (3,303) Other receivables Total 30 June 2021 $’000 30 June 2020 $’000 7,185 82,539 89,724 7,660 9,430 17,090 Current $’000 Non-Current $’000 30 June 2021 Total $’000 14,730 (301) 14,429 - 394 14,823 - - - - - - 14,730 (301) 14,429 - 394 14,823 Current $’000 Non-Current $’000 30 June 2020 Total $’000 14,203 (424) 13,779 207 705 14,691 - - - - - - 14,203 (424) 13,779 207 705 14,691 Note (A) (B) (C) Note (A) (B) (C) (A) PAST DUE BUT NOT IMPAIRED Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period for which the Group has not recognised an allowance for credit loss because there has not been a significant change in credit quality and the amounts are still considered recoverable. Age of trade receivables that are not impaired Not past due 60 – 90 days 90 days plus Total 30 June 2021 $’000 30 June 2020 $’000 11,842 181 2,406 14,429 11,217 605 1,957 13,779 (B) AGING OF ALLOWANCE FOR EXPECTED CREDIT LOSS (“LOSS ALLOWANCE”) As at 30 June 2021, the Group had a loss allowance of $0.3 million (2020: $0.4 million). Superloop applies the AASB 9 simplified approach to measure expected credit loss (“ECL”) which uses a lifetime expected loss allowance for all trade receivables. 61 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report Aging of credit loss allowance 0 – 60 days 60 – 90 days 90 days plus Total past due and impaired Movement in credit loss allowance Balance at beginning of the year Impairment losses recognised on receivables Allowance for expected credit losses Balance at end of the year 30 June 2021 $’000 30 June 2020 $’000 15 3 283 301 77 121 226 424 30 June 2021 $’000 30 June 2020 $’000 424 (297) 174 301 296 (19) 147 424 (C) CONSUMPTION TAX RECEIVABLE These amounts generally arise from consumption tax paid by the Group in the respective tax jurisdictions in which the Group operates and where a consumption tax exists. Ordinarily these amounts are offset against the consumption tax collected by the Group as part of its sales and the net amount remitted to the local tax authorities, however where the amount of consumption tax paid by the Group per jurisdiction is greater than the amount collected from sales to customers in that jurisdiction, a receivable is raised. 11. Other Assets CURRENT Prepayments Contract assets Other current financial assets Total other assets – current NON-CURRENT Other non-current assets Installation costs Total other assets – non-current 30 June 2021 $’000 30 June 2020 $’000 4,723 1,640 - 6,363 370 650 1,020 4,167 3,443 - 7,610 289 1,462 1,751 12. Property, plant and equipment Carrying amounts of: Assets in the course of construction Network assets Communication assets Other assets Total 30 June 2021 $’000 30 June 2020 $’000 1,871 171,086 40,833 5,607 1,866 179,341 50,091 346 219,397 231,644 Assets in the course of construction $’000 Network assets $’000 Communication assets $’000 Other assets $’000 Cost or valuation: Balance at 30 June 2019 6,805 192,669 66,636 Adoption of AASB16 Lease accounting standard Additions Movement in foreign exchange Disposals Transfers Balance at 30 June 2020 Additions Movement in foreign exchange Disposals Transfers Balance at 30 June 2021 - 2,315 (2) - (7,252) 1,866 5,087 (31) - (5,051) 1,871 - 5,895 877 - 6,025 205,466 1,498 (8,010) (786) 2,166 200,334 Total $’000 270,233 11,210 17,125 922 (593) - 298,897 18,624 (8,454) 7,637 8,641 38 - 1,227 84,179 5,831 (332) 4,123 3,573 274 9 (593) - 7,386 6,208 (81) (23,278) (8,002) (32,066) 2,687 69,087 198 5,709 - 277,001 63 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report (26,125) (34,088) (7,040) (67,253) Assets in the course of construction $’000 Network assets $’000 Communication assets $’000 Accumulated depreciation and Impairment: Balance at 30 June 2019 Depreciation charge Disposals Movement in foreign exchange Balance at 30 June 2020 Reclassifications Depreciation charge Disposals Movement in foreign exchange Balance at 30 June 2021 - - - - - - - - - (17,744) (8,464) - 82 (20,008) (14,088) - 8 3,256 (8,415) 787 1,249 (5,021) (12,451) 23,277 29 (29,248) (28,254) Other assets $’000 (3,806) (3,844) 593 17 Total $’000 (41,558) (26,395) 593 107 1,765 - (2,890) (23,756) 8,002 62 (102) 5,607 346 32,066 1,340 (57,603) 219,397 231,644 Carrying value – 2021 Carrying value – 2020 1,871 1,866 171,086 179,341 40,833 50,091 A property, plant and equipment impairment of $7.4m was raised at 30 June 2019 for the carrying value of assets relating to the CMS Services segment. These assets were disposed of during the year ended 30 June 2021. A “right-of-use” asset is recognised for leased items, with a lease liability recognised for lease payments due. “Right-of-use” asset additions during FY21 totalled $9.2 million. Right of Use Asset Adoption of AASB16 Lease accounting standard Additions Depreciation charge Carrying value – 2020 Additions Depreciation charge Movements in foreign exchange Carrying value – 2021 Communication assets $’000 7,637 1,138 (3,489) 5,286 3,112 (3,166) 5,232 Other assets $’000 3,573 - (2,193) 1,380 6,083 (2,150) (12) 5,301 Total $’000 11,210 1,138 (5,682) 6,666 9,195 (5,316) (12) 10,533 13. Intangible assets Carrying amounts of: Assets being developed Rights and licences Software Customer acquisition costs and other intangible assets Customer relationships, brands and trademarks Goodwill Total intangible assets 30 June 2021 $’000 30 June 2020 $’000 3,181 1,785 53,835 59,884 2,654 4,759 5,367 4,506 24,091 33,407 135,064 135,064 223,584 240,013 Customer acquisition Assets costs and other Customer, being Rights and intangible brand and developed licences Software assets trademarks Goodwill $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 Movements Cost or valuation: 7,256 1,292 (9) - 62,531 178,319 312,632 - - - - - - 24,128 23 - Balance as at 30 June 2019 1,074 52,685 10,767 Additions 711 19,498 2,627 Movement in foreign exchange Transfers Balance as at 30 June 2020 Additions - - 1,785 3,009 32 - - - 72,215 13,394 8,539 62,531 178,319 336,783 Movement in foreign exchange - (1,947) Transfers Disposals (1,613) - - - 2,571 375 - 909 831 (19) 704 - - - - - - 6,786 (1,966) - (4,742) (808) (4,085) (43,255) (52,890) Balance as at 30 June 2021 3,181 72,839 9,936 9,247 58,446 135,064 288,713 Accumulated amortisation and impairment: Balance as at 30 June 2019 Amortisation charge Movement in foreign exchange Balance as at 30 June 2020 Amortisation charge Movement in foreign exchange Disposals Balance as at 30 June 2021 - - - - - - - - (5,391) (4,769) (2,829) (22,219) (43,255) (78,463) (7,035) (3,258) (1,210) (6,905) 95 - 6 - - - (18,408) 101 (12,331) (8,027) (4,033) (29,124) (43,255) (96,770) (6,882) (3,997) (1,267) (9,316) 209 - - 4,742 4 808 - - (21,462) 213 - 4,085 43,255 52,890 (19,004) (7,282) (4,488) (34,355) - (65,129) Carrying value – 2021 Carrying value – 2020 3,181 1,785 53,835 59,884 2,654 5,367 4,759 24,091 135,064 223,584 4,506 33,407 135,064 240,013 65 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report A goodwill impairment of $43.3m was raised at 30 June 2019 relating to the CMS Services segment, the asset was disposed of during the year ended 30 June 2021, which is aligned to cessation of the services. 14. Deferred tax Goodwill has been allocated for impairment testing purposes to the following operating segments, which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. The operating segments are comprised of cash-generating units or groups of cash-generating units. Note 30 June 2021 $’000 30 June 2020 $’000 Connectivity Services Broadband Total goodwill 30 June 2021 $’000 30 June 2020 $’000 104,854 104,854 - - 30,210 30,210 135,064 135,064 Goodwill and intangible assets with an indefinite useful life are not subject to amortisation and are assessed for impairment at least annually, or whenever an indication of impairment arises. An impairment loss relating to goodwill is recognised for the amount by which the carrying amount of a group of cash-generating units exceeds their recoverable amount. The recoverable amount for each group of cash-generating units is determined based on the higher of fair value in use less costs of disposal or value in use. An impairment loss recognised for goodwill is not reversed in subsequent periods. The COVID-19 outbreak has developed, with measures taken to contain the virus having an adverse effect on economic activity and causing disruption to many businesses. As the outbreak continues to progress and evolve, it is extremely challenging to predict the full extent and duration of its impact on Superloop, in particular the Student accommodation revenue stream (part of the Guest WiFi business within the Broadband group of cash-generating units). Based on information available as at 30 June 2021, Management has made additional adjustments to the five-year business plan used in the Group’s impairment testing in order to reflect the estimated impact. As at 30 June 2021, Management has assumed Guest WiFi revenues will continue to be impacted by COVID-19 in FY22, returning to pre COVID-19 levels in FY23. Management apply judgement to identify cash-generating units and groups of cash-generating units. Recoverable amounts and impairment assessment is determined using a value in use calculation. Value in use calculations require judgements to be made in relation to cash flow forecasts and projections, terminal value growth rates and discount rates. The forecast cash flows are based on the financial year ending 30 June 2022 budget approved by the Board with the cash flows beyond the budget period projected over 5 years using annual growth rates for each cash-generating unit based on historical earnings growth, current and forecast trading conditions and business plans. A terminal value growth rate is applied beyond the financial projection period and a post-tax discount rate has been assumed, representing the long- term average and includes a risk-premium given the stage in the business cycle of the Group’s business. Management have used the following key assumptions in determining the recoverable amount of each group of cash-generating units to which goodwill has been allocated: Terminal value growth rate Discount rate 30 June 2021 30 June 2020 30 June 2021 30 June 2020 Connectivity Broadband Services 2.9% 2.5% 3.0% 2.9% 2.5% 3.0% 11.3% 11.3% 11.3% 10.7% 10.7% 10.7% Management has reviewed sensitivities on the key assumptions on which the recoverable amounts are based and believe that any reasonable change would not cause the cash-generating units’ carrying amounts to exceed their recoverable amounts. The sensitivity tests applied were to reduce the terminal value growth rate by 1.0%, or increase the post-tax discount rate from 11.3% to 12.0% for each cash-generating unit and groups of cash-generating units, which did not result in any cash-generating units’ carrying amounts exceeding their recoverable amounts. Recognised deferred tax assets / (liabilities) attributed to: Employee benefits Expenses deductible in future periods Tax credits from tax losses Deferred revenue Future deduction of share issue costs Customer acquisition and equipment installations costs Property, plant and equipment and intangible assets Total deferred taxes Compromising of: Deferred tax assets Deferred tax (liabilities) Total deferred taxes 924 4,081 13,549 2,908 915 (1,567) (16,301) 4,509 7,102 (2,593) 4,509 1,434 3,697 13,745 2,370 1,732 (1,234) (16,791) 4,953 6,889 (1,936) 4,953 At the reporting date, the Group has unused tax losses of $154.5 million available for offset against future profits. A deferred tax asset of $13.5 million has been recognised in respect of $56.6 million of such losses. No deferred tax asset has been recognised in respect of the remaining $97.9 million. Deferred tax assets are recognised where it is considered probable that they will be recovered against taxable profits in the future. 15. Trade and other payables Trade payables Other payables Accrued expenses Other current financial payables Current tax liabilities Deferred consideration Total trade and other payables 30 June 2021 $’000 30 June 2020 $’000 14,953 13,299 1,016 2,021 - 175 - 1,116 2,413 34 219 500 18,165 17,581 67 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 16. Interest-bearing loans and borrowings The Group had interest bearing loans and borrowings as at 30 June 2021 of $67.0 million (30 June 2020: $58.4 million). The Group re-financed its debt facility during the year. The facility is now a $92.2 million three year revolving facility with Westpac, HSBC and ANZ maturing on 29 June 2024. The facility can be used for working capital, capital expenditures and permitted acquisitions. The Group is required to adhere to financial covenants, including leverage ratio, debt capitalisation ratio and interest cover ratio. Bank guarantees to the value of $1.1 million have been issued under the facility. The Group utilises an equipment vendor to provide funding for network equipment, entering into three year fixed rate instalment payment agreements. At 30 June 2021, a total of $1.4 million had been funded under this arrangement (30 June 2020: $3.9 million). In terms of the Consolidated Statement of Cash Flows, the impact of the equipment financing has been shown on a gross basis, with the amount of property, plant and equipment funded by the equipment financing included in the payments for property, plant and equipment and shown as a cash inflow in proceeds from borrowings. Note 30 June 2021 $’000 30 June 2020 $’000 Current Equipment financing Lease liability Total current interest-bearing loans and borrowings Non-current Equipment financing Lease liability Revolving debt facility drawn (net of transaction costs) (A) Total non-current interest-bearing loans and borrowings 1,386 3,063 4,449 - 7,808 54,748 62,556 2,499 3,390 5,889 1,386 3,398 47,695 52,479 Total interest-bearing loans and borrowings 67,005 58,368 Total revolving debt facility limit Less bank guarantees issued under the facility Less amounts drawn (before transaction costs) Revolving debt facility available 92,200 (1,095) 61,700 (1,095) (56,269) (49,462) 34,836 11,143 (A) The drawn debt amount is recognised net of transaction costs which are amortised over the term of the facility using the effective interest rate method. Total interest-bearing loans and borrowings (excluding lease liability) 30 June 2020 $’000 Net Financing cash flows Net transaction costs 30 June 2021 $’000 51,580 4,308 246 56,134 17. Employee benefits Current Non-current Total employee benefits The employee benefits represents accrued annual leave and long service leave entitlements. 18. Deferred revenue Deferred revenue Deferred installation fees Total deferred revenue Current Non-current Total deferred revenue 30 June 2021 $’000 30 June 2020 $’000 2,345 773 3,118 2,188 1,614 3,802 30 June 2021 $’000 30 June 2020 $’000 36,810 2,513 39,323 4,437 34,886 39,323 41,765 1,437 43,202 4,813 38,389 43,202 Deferred revenue includes long-term capacity arrangements (rights-of-use (‘IRU’) agreements) which provide customers exclusive access to fibre core capacity over an agreed contract term in addition to other customer contracts where payment has been received but services not yet provided. The IRU arrangements include the initial provisioning of the fibres, ongoing availability of capacity and maintenance of the inf rastructure over the contract term which form part of an integrated service to the customer and is considered to be a single performance obligation. The transaction price is generally fixed, net of any upfront discounts given. The customer receives and consumes the benefit of the service simultaneously and revenue is recognised over time, as the service is performed. For other customer contracts, revenue is recognised once performance obligation is met. The table below shows the movement of deferred revenue for the year. Deferred revenue movement Opening balance Additions Revenue recognised Closing balance 30 June 2021 $’000 30 June 2020 $’000 43,202 5,263 (9,142) 39,323 38,487 11,408 (6,693) 43,202 69 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 19. Contributed equity (A) SHARE CAPITAL 30 June 2021 Number of Shares 30 June 2020 Number of Shares 30 June 2021 $’000 30 June 2020 $’000 Fully paid ordinary shares 450,614,343 365,866,416 603,931 Total share capital Less: Issue costs Contributed equity (B) MOVEMENTS IN ORDINARY SHARE CAPITAL Date Details 30-Jun-19 Balance 30-Sep-19 Accelerated Entitlement Offer 30-Sep-19 Share placement 18-Oct-19 Retail Entitlement Offer 18-Oct-19 Retail Entitlement Offer 1-Nov-19 Share placement 30-Jun-20 Balance 17-Jun-21 Accelerated Entitlement Offer 17-Jun-21 Share placement 30-Jun-21 Balance 525,115 525,115 450,614,343 365,866,416 603,931 450,614,343 365,866,416 590,927 514,505 (13,004) (10,610) Number of Shares 253,301,037 17,703,183 30,527,680 3,778,921 20,739,140 39,816,455 365,866,416 32,059,755 52,688,172 450,614,343 Issue Price $ Value $ 0.82 0.82 0.82 0.82 0.82 0.93 0.93 432,811,444 14,516,610 25,032,698 3,098,715 17,006,095 32,649,493 525,115,055 29,815,572 49,000,000 603,930,627 (C) ORDINARY SHARES Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of, and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share, is entitled to one vote. Ordinary shares have no par value and the Group does not have a limited amount of authorised capital. (D) DIVIDEND REINVESTMENT PLAN The Group does not have a dividend reinvestment plan in place. Total borrowings (as per Note 16) Less: cash and cash equivalents Net debt / (surplus cash) Total equity Gearing ratio 30 June 2021 $’000 30 June 2020 $’000 67,005 58,368 (89,724) (17,090) (22,719) 41,278 431,809 394,799 -5.3% 10.5% The Group manages its capital structure by reviewing its gearing ratio to ensure it maintains an appropriate level of gearing. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total interest bearing financial liabilities and derivative financial instruments, less cash and cash equivalents. Total capital is calculated as equity, as shown in the Consolidated Statement of Financial Position. Excluding lease liabilities and net borrowing transaction costs, the gearing ratio was -5.3% as at 30 June 2021 (FY20: 10.5%). 20. Reserves Cash flow hedge reserve(1) Share based payments Foreign currency translation reserve(2) Total reserves 30 June 2021 $’000 30 June 2020 $’000 - 1,320 (995) 325 532 873 6,368 7,773 (1) The cash flow hedge reserve represents the cumulative effective portion of gains or losses arising from changes in fair value of hedging instruments entered into as cash flow hedges. The cumulative gain or loss arising from changes in fair value of the hedging instruments that are recognised and accumulated in the cash flow hedge reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or is included in the carrying value of a fixed asset where the purpose of the hedge was to minimise the exposure on a contractual commitment to acquire or construct a fixed asset. (2) The assets and liabilities of foreign operations are translated into the presentation currency (Australian dollars) using the exchange rates as at the reporting date. The revenues and expenses of the foreign operations are translated into the presentation currency using average exchange rates, which approximate the rate at the date of the transaction. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency translation reserve. 21. Accumulated losses (E) CAPITAL MANAGEMENT The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In future, the Directors may pursue other funding options such as other debt, sale and leaseback of assets, additional equity and various other funding mechanisms as appropriate in order to undertake its projects and deliver optimum shareholders’ return. The Group intends to maintain a gearing ratio appropriate for a company of its size and stage of development. Opening balance Loss for the year Dividends paid Total accumulated losses 30 June 2021 $’000 30 June 2020 $’000 (124,152) (83,064) (31,964) (41,088) - - (156,116) (124,152) 71 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 22. Dividends No dividends were paid or declared in FY21 (FY20: Nil). 23. Key management personnel disclosures (A) KEY MANAGEMENT PERSONNEL COMPENSATION Short term employee benefits Post employment benefits Other Long-term employee benefits Share based payments Total key management personnel compensation Detailed remuneration disclosures are provided in the Remuneration Report. 30 June 2021 $ 30 June 2020 $ 2,674,508 1,729,619 133,565 236,971 - - 210,313 21,327 3,018,386 1,987,917 (B) SHARE BASED PAYMENTS During the year, Key Management Personnel and other employees of the Group participated in long-term incentive schemes. Total expense arising from share based payment transactions in the year to 30 June 2021 was $447,146 (FY20: $8,407). There were no cancellations or modifications to the awards during the year. (C) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL There were no other transactions with Key Management Personnel during the year not otherwise disclosed in the report in Note 26. 24.Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (A) DELOITTE TOUCHE TOHMATSU Deloitte and related network firms Audit or review of financial reports: - Group - Subsidiaries Other assurance and agreed-upon procedures under other legislation or contractual arrangements Other services: - Due Diligence Services Total remuneration of Deloitte Touche Tohmatsu 30 June 2021 $ 30 June 2020 $ 371,050 424,969 37,410 49,234 17,356 17,779 399,780 - 825,596 491,982 The Group may decide to employ the auditor (Deloitte) on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out above. The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out above, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: > all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor; > none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. (B) NON-DELOITTE AUDIT FIRMS Superloop Limited did not engage with any other non-Deloitte audit firms. 73 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 25. Commitments and contingencies (A) CAPITAL COMMITMENTS Capital expenditure contracted for at the end of each reporting year but not recognised as liabilities is as follows: Supplier agreement with Subco Superloop has entered into a supplier agreement for the provision of connectivity services with Subco. The Chair of Superloop is also the founder/Director of Subco. During FY21, payments made to Subco totalled to $825,000 (2020: $ nil). PROVISION OF SERVICES TO / FROM RELATED PARTIES Property, plant and equipment Total capital commitments 30 June 2021 $’000 30 June 2020 $’000 2,102 2,102 729 729 Capital commitments relate to contractual commitments associated with network expansion. (B) CONTINGENT ASSETS The Group did not have any contingent assets during the year or as at the date of this report. (C) CONTINGENT LIABILITIES The Group did not have any material contingent liabilities during the year or as at the date of this report. 26. Related party transactions The following is a summary of the transactions with related parties. Shared services agreement with Capital B The Group has entered into a shared services agreement with Capital B Pty Ltd (Capital B), a company controlled by the Chair of Superloop. Under the agreement, Capital B and Superloop provide certain services to/from the Group (e.g. administrative and information technology services) on an as needed basis and provided on arm’s length terms. Either party may terminate the agreement for convenience on 60 days’ written notice. For FY21, the total amount net payable in relation to the shared services agreement was $nil (2020: $4,500). Customer agreement with Megaport Superloop has entered into customer agreements for the provision of connectivity services with Megaport Limited and its operating subsidiaries (Megaport). The Chair of Superloop is also the Chair and significant shareholder of Megaport. The agreements are on the same terms as other agreements between Superloop and unrelated customers and the fees are at competitive market rates. During FY21, net fees earned from Megaport totalled $830,672 (2020: $516,200). Customer agreement with Rising Sun Pictures Superloop has entered into a customer agreement for the provision of connectivity services to Rising Sun Pictures. Non-Executive Director, Mr Tony Clark, is Managing Director of Rising Sun Pictures and has significant influence over the business. The agreement is on an arm’s length basis. During FY21, fees earned from Rising Sun Pictures totalled $77,880 (2020: $66,800). Consulting services provided to APX Partners Pty Ltd The Chair of the Superloop is also the founder and a shareholder of APX Partners Pty Ltd. APX Partners Pty Ltd is a party to the Joint Build Agreement with SubPartners Pty Ltd and other counterparties for the construction of the INDIGO West and INDIGO Central submarine cable systems (completed in May 2019). In addition to the above, the Group provides adhoc consulting services to APX Partners Pty Ltd. During FY21, fees earned from APX Partners Pty Ltd totalled $592,261 (2020: $1.0 million). Customer agreement with Fiber Sense Pty Ltd Superloop entered into a customer agreement in June 2018 with a former associate entity for the provision of long-term capacity. The agreement is on the same terms as other agreements between Superloop and unrelated customers and the fees in each service order form are at competitive market rates. During FY21, net amount payable to Fiber Sense totalled $5,949 (FY20: net receivables $413,600). Supplier agreement with Cloudscene Superloop has entered into a supplier agreement for the provision of marketing data services from Cloudscene. The Chair of Superloop is the founder of Cloudscene and has significant influence over the business. The agreement is on an arm’s length basis. During FY21, payments made to Cloudscene totalled $ nil (2020: $7,300). SALES OF GOODS / SERVICES Revenue earned from related parties Proceeds from sale of investment in associate AMOUNTS PAID TO RELATED PARTIES Provision of services to Superloop BALANCE OUTSTANDING AT THE END OF THE YEAR Receivables Trade and other payables 30 June 2021 $ 30 June 2020 $ 1,591,495 2,176,071 - - 921,631 191,187 112,000 1,102,346 17,975 - 27. Reconciliation of loss after income tax to net cash flow from operating activities Profit / (loss) for the year after income tax Adjustments for: Depreciation and amortisation Other adjustments Interest expense Gain on sale of assets Change in operating assets and liabilities (Increase) / decrease in trade debtors (Increase) / decrease in prepayments and other receivables (Decrease) / increase in trade creditors and other payables (Decrease) / increase in deferred revenue (Decrease) / increase in provisions (Decrease) / increase in tax related balances Net cash from operating activities 30 June 2021 $’000 30 June 2020 $’000 (31,964) (41,088) 46,373 1,241 3,173 (100) (132) 1,941 (1,294) (3,879) (684) 445 15,120 46,631 (9) 4,407 (16) 12,110 799 (9,545) (3,362) (987) 3,950 12,890 28. Non-cash transactions During the year, the Group entered into a number of intangible IRU non-cash investing activities which are not reflected in the consolidated statement of cash flows. FY21: $1.6 million (FY20: $8.0 million). 75 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 29. Financial Risk Management The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. In terms of fair value measurement, the carrying value of the Group’s financial assets are set out in Note 9 “Cash and cash equivalents” and Note 10 “Trade and other receivables”. For all financial assets held at amortised cost the carrying values approximate fair value. The carrying value of the Group’s financial liabilities are set out in Notes 15 “Trade and other payables” and Note 16 “Interest-bearing loans and borrowings”. For the Trade and other payables the carrying values approximate fair value. The Group holds the following financial instruments measured at fair value: Level 1 - Quoted prices in active markets $’000 Level 2 - Significant observable inputs $’000 Level 3 - Significant unobservable inputs $’000 Total $’000 30 June 2021 Financial assets measured at fair value Derivative financial assets Total financial assets Financial liabilities measured at fair value Deferred consideration Derivative financial liabilities Total financial liabilities 30 June 2020 Financial assets measured at fair value Derivative financial assets Total financial assets Financial liabilities measured at fair value Deferred consideration Derivative financial liabilities Total financial liabilities - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 500 - 500 500 - 500 (A) MARKET RISK Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange risk, price risk and interest rate risk. (i) Foreign exchange risk Superloop is exposed to exchange rate movements, in particular movements in the A$/US$ rate, A$/SG$, A$/HK$ and SG$/US$. Because a proportion of Superloop’s payments for inventory and construction work are made or are expected to be made in foreign currency, primarily US dollars, movements in exchange rates impact on the amount paid for assets, inventory and construction work. Also, because a proportion of Superloop’s revenues and profits are earned in Singapore and Hong Kong, movements in exchange rates impact on the translation of account balances in Superloop’s Singapore and Hong Kong operations. Therefore, movements in exchange rates, particularly the A$/US$ rate, the A$/SG$, A$/HK$ and the SG$/US$ rate, may have an impact on Superloop’s financial position and performance. The Group has reduced the potential impact of exchange rate movements in contracted foreign currency obligations through the use of derivative foreign exchange contracts, none of which were open as at 30 June 2021. (ii) Price risk The Group is not exposed to any equity securities price risk or commodity price risk. (iii) Cash flow and fair value interest rate risk Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. The Group’s main interest rate risk arises from its cash at bank, term deposits (refer to Note 9), and the Group’s interest-bearing liabilities. The Group mitigates potential exposure to a movement in interest rates via the use of a derivative interest rate swap when required. (iv) Sensitivity At 30 June 2021, if interest rates had increased by 100 basis points or decreased by 100 basis points from the year end rates, and the cash balances remain constant for the year along with all other variables, profit before tax for the year would be impacted $529k higher / lower. (B) CREDIT RISK Credit risk arises from cash and cash equivalents, trade receivables, other receivables and loans receivable. (i) Cash and cash equivalents Deposits are placed with Australian banks. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash at bank and short term deposits AA rated A+ rated BBB+ rated TOTAL 30 June 2021 $’000 30 June 2020 $’000 89,724 17,090 - - - - 89,724 17,090 In determining the credit quality of the financial assets, Superloop has used the long term rating from Standard & Poor’s. (i) Trade receivables Customer credit risk is managed by performing a credit assessment of customers. The Group’s standard payment terms are 30 days, but the Group may agree to longer payment terms. The Group does not require collateral in respect of financial assets. Outstanding customer receivables are monitored regularly. The Group aims to minimise concentration of credit risk by undertaking transactions with a large number of customers. In addition, receivable balances are monitored on an ongoing basis with the intention that the Group’s exposure to bad debts is minimised. As at 30 June 2021, the Group had $14.8 million customer trade receivables (refer to Note 10). 77 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report (C) LIQUIDITY RISK Superloop’s business is capital intensive in nature, and the continued growth of the Company relies on the acquisition and development of new telecommunications infrastructure and ongoing maintenance of existing telecommunications infrastructure. Superloop requires sufficient access to debt and equity capital to fund this expenditure. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Failure to obtain capital on favourable terms may hinder Superloop’s ability to expand and pursue growth opportunities, which may reduce competitiveness and have an adverse effect on the financial performance, position and growth prospects of the Company. The Group believes the re-financed senior debt facility and equity raise completed June 2021, together with cash flows from operations, provides sufficient capital to fund its expected working capital requirements for at least the next 12 months. Contractual maturities of financial liabilities 30 June 2021 Trade payables Interest-bearing borrowings Total non-derivatives 30 June 2020 Trade payables Interest-bearing borrowings Total non-derivatives Within 12 months $’000 Between 1 and 5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying Amount $’000 18,165 4,449 22,614 17,581 5,889 23,470 - 68,357 68,357 - 52,479 52,479 - - - - - - 18,165 72,806 90,970 17,581 58,368 75,949 18,165 67,005 85,170 17,581 58,368 75,949 30. Earnings per share (A) EARNINGS PER SHARE 30 June 2021 Cents 30 June 2020 Cents Total basic earnings per share attributable to the ordinary equity holders of the Group (8.66) (12.33) (B) DILUTED EARNINGS PER SHARE Total diluted earnings per share attributable to the ordinary equity holders of the Group (8.66) (12.33) 30 June 2021 Cents 30 June 2020 Cents (C) RECONCILIATIONS OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE Basic Earnings Per Share Profit attributable to the ordinary equity holders of the Group used in calculating basic losses per share (31,964) (41,088) Diluted Earnings Per Share Profit from continuing operations attributable to the ordinary equity holders of the Group (31,964) (41,088) 30 June 2021 $’000 30 June 2020 $’000 (D) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Effects of dilution from: Performance rights Share options 30 June 2021 $’000 30 June 2020 $’000 369,117,021 333,191,823 - - - - Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 369,117,021 333,191,823 Performance rights and Share Options granted to employees under the Performance Rights and Options Plan are considered to be potential ordinary shares. These have not been included in the calculation of diluted earnings per share because potential ordinary shares that would reduce a loss per share are not considered to be dilutive. 79 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Notes to the Consolidated Financial Report 31. Subsidiaries Superloop (Australia) Pty Ltd(1) Superloop (Singapore) Pte Ltd Superloop (Hong Kong) Limited Superloop (Japan) K.K. APEXN Pty Ltd(1) CINENET Systems Pty Ltd(1) BigAir Group Pty Ltd(1) Clever Communications Pty Ltd(1) Clever Communications Operations Pty Ltd(1) Saise Pty Ltd(1) Access Providers Group Pty Ltd(1) Activ Australia Pty Ltd(1) BigAir Universe Broadband Pty Ltd(1) BigAir Community Broadband Pty Ltd(1) Allegro Networks Pty Ltd(1) Radiocorp Pty Ltd(1) Link Innovations Pty Ltd(1) Intelligent IP Communications Pty Ltd(1) BigAir Cloud Managed Services Pty Ltd(1) Unistar Enterprises Pty Ltd(1) Oriel Technologies Pty Ltd(1) Integrated Data Labs Pty Ltd(1) Applaud IT Pty Ltd(1) CyberHound Pty Ltd(1) SubPartners Pty Ltd(1) SubPartners Pte Ltd APX West Limited SuperBB Pty Ltd(1) RA WiFi Pty Ltd(1) Nuskope(1) GX2 Holdings Pty Ltd(1) GX2 Technology Pty Ltd(1) My Gossip Pty Ltd(1) GX2 Communications Pty Ltd(1) GX2 Technology Ltd Global Gossip LLC GX2 Technology Pte Ltd GX2 Technology Limited Superloop (Operations) Pty Ltd(1) Superloop (Services) Pty Ltd(1) Superloop (Software) Pty Ltd(1) Country of Incorporation Class of Shares 30 June 2021 % 30 June 2020 % Australia Ordinary Singapore Ordinary Hong Kong Ordinary Japan Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Singapore Ordinary Bermuda Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary United Kingdom Ordinary USA Fiji Ordinary Ordinary New Zealand Ordinary Australia Ordinary Australia Ordinary Australia Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 32. Events occurring after the reporting period On 31 July 2021 Superloop Limited acquired 100% of Exetel Pty Ltd for total consideration of $110 million, paid as $100 million in cash and $10 million in Superloop Limited shares. The acquisition accelerates the monetisation of Superloop’s infrastructure assets and is expected to deliver cost synergies. The acquisition was funded by a placement and institutional entitlement offer of $79 million which settled prior to 30 June 2021, the retail entitlement offer of $21 million settled on 5 July 2021. 33. Parent entity financial information The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements, except as set out below. Refer to Note 1 for a summary of the significant accounting policies relating to the Group. ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES EQUITY Contributed equity Dividends paid Reserves Accumulated losses TOTAL EQUITY Profit / (loss) for the year Total comprehensive profit / (loss) for the period 30 June 2021 $’000 30 June 2020 $’000 83,080 537,452 11,475 537,127 620,532 548,602 1,386 63,669 65,055 998 58,432 59,430 590,927 514,505 (1,050) 1,320 (1,050) 1,402 (35,720) (25,685) 555,477 489,172 (10,035) (9,954) (8,672) (8,663) (A) GUARANTEES ENTERED INTO BY THE PARENT ENTITY IN RELATION TO THE DEBTS OF ITS SUBSIDIARIES As at 30 June 2021, Superloop Limited did not have any parent entity guarantees. (B) CONTINGENT LIABILITIES OF SUPERLOOP LIMITED (PARENT ENTITY) As at 30 June 2021, Superloop Limited did not have any contingent liabilities. (1) These wholly-owned subsidiaries are members of the Australian tax-consolidated group. 81 SUPERLOOP LIMITED AND CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL REPORT Independent Auditor’s Report _____________ Directors’ Declaration In the directors’ opinion: a. the financial statements and notes set out on pages 42 to 81 are in accordance with the Corporations Act 2001, including: i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii. giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that date. At the date of this declaration, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors as per section 295(5) of the Corporations Act 2001. Paul Tyler Chief Executive Officer and Director 24 August 2021 SUPERLOOP LIMITED AND CONTROLLED ENTITIES INDEPENDENT AUDITOR'S REPORT 83 SUPERLOOP LIMITED AND CONTROLLED ENTITIES Independent Auditor’s Report Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au Independent Auditor’s Report to the Members of Superloop Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Superloop Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: > Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and > Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation Key Audit Matter How the scope of our audit responded to the Key Audit Matter Carrying value of goodwill assets As at the 30 June 2021 the Group’s goodwill balance totals $135.1 million as disclosed in Note 13. The assessment of the recoverable amount of the goodwill and other intangible assets allocated to the cash-generating units (“CGUs”) or groups of CGUs requires management to exercise significant judgement including: > the determination of and the allocation of goodwill to the CGUs or groups of CGUs; and > the determination of the following key assumptions used in the calculation of the recoverable amount of each of the CGUs or groups of CGUs: - the cash flow forecasts; - terminal growth rates; and - discount rates. Recoverability of deferred tax assets As at 30 June 2021 the Group’s deferred tax assets total $22.4 million as disclosed in Note 14. The deferred tax assets include timing differences and previously recorded tax losses. The recoverability of deferred tax assets is dependent on the generation of sufficient future taxable profit to utilise the assets. Taxable profits must be generated in the same jurisdiction in which the losses or timing differences were generated. Significant judgement is required in forecasting future taxable profit. In conjunction with our valuation specialists our procedures included, but were not limited to: > obtaining an understanding of the process that management undertook to determine the CGUs or groups of CGUs and prepare the valuation models; > evaluating the Group’s identified CGUs and groups of CGUs and the allocation of goodwill to the carrying value of the CGUs and groups of CGUs based on our understanding of the Group’s business. This evaluation included performing an analysis of the Group’s internal reporting; > assessing and challenging: - the cash flow forecasts by agreeing inputs in the cash flow models to relevant data including approved budgets and assessing forecasting accuracy by comparing historic forecasts to actual outcomes; - the market and terminal growth rates against relevant historical and industry data; and - the discount rates applied, by comparing the rates used to the discount rates calculated by our valuation specialists. > performing sensitivity analysis on key assumptions; > testing the mathematical accuracy of the valuation models; and > assessing the appropriateness of the disclosures in Notes 3 and 13 to the financial statements. In conjunction with our tax specialists, our audit procedures included, but were not limited to: > challenging the appropriateness of management’s estimation of future taxable profit and assessing whether these estimates were consistent with the forecasts used as part of the impairment testing of goodwill and intangible assets; > assessing the appropriateness of the deferred tax calculation prepared by management in terms of relevant accounting standards and applicable tax regulation; and > recalculating the accuracy of the deferred tax calculation. We also assessed the appropriateness of the disclosures in Note 14 to the consolidated financial statements. 85 SUPERLOOP LIMITED AND CONTROLLED ENTITIESINDEPENDENT AUDITOR'S REPORT Independent Auditor’s Report Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report, which we obtained prior to the date of this auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): Chair Report, CEO Report, Business Overview and ASX Additional Information, which is expected to be made available to us after that date. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Chair Report, CEO Report, Business Overview and ASX Additional Information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or 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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: > Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. > Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. > Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. > Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. > Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. > Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s 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 on the Remuneration Report We have audited the Remuneration Report included in pages 28 to 38 of the Directors’ Report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Superloop Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Tendai Mkwananzi Partner Chartered Accountants Brisbane, 24 August 2021 87 SUPERLOOP LIMITED AND CONTROLLED ENTITIESINDEPENDENT AUDITOR'S REPORT ASX Additional Information The following shareholder information was applicable as at 08 September 2021. The Company has one class of shares on issue, fully paid ordinary shares. (A) DISTRIBUTION OF EQUITY SECURITIES Holding 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable Parcels Number of investors % Number of securities 225 2,854 1,601 3,166 2,215 10,061 892 79.66 15.78 2.51 1.79 0.25 100.00 0.04 385,001,071 76,287,095 12,151,721 8,675,208 1,197,529 483,312,624 191,874 (C) SUBSTANTIAL HOLDERS Name 1 2 3 BEVAN ANDREW SLATTERY PERENNIAL VALUE MANAGEMENT LIMITED BLACKROCK INVESTMENT MANAGEMENT (D) UNQUOTED EQUITY SECURITIES Issued shares Percentage of issued shares 64,332,074 43,654,681 27,026,696 13.31 9.03 5.59 Options and Performance Rights A total of 8,892,042 unlisted options and 115,000 performance rights are on issue. All unlisted options are held by current employees under the Company’s Executive Option Plan. (E) VOTING RIGHTS The voting rights attaching to each class of equity securities are set out below: (B) EQUITY SECURITY HOLDERS The names of the twenty largest holders of quoted equity securities are listed below: Name 1 2 3 4 5 6 7 8 9 10 11 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BEVAN ANDREW SLATTERY NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD ARGO INVESTMENTS LIMITED ANNETTE ELIZABETH LINTON BNP PARIBAS NOMS PTY LTD UBS NOMINEES PTY LTD MIRRABOOKA INVESTMENTS LIMITED 12 MRS JODIE ANN SLATTERY 13 14 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD 15 WIDE HORIZONS PTY LTD 16 MIRRABOOKA INVESTMENTS LIMITED 17 SCM CAPITAL PTY LTD 18 WASHINGTON H SOUL PATTINSON & AND COMPANY LIMITED 19 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD 20 CS FOURTH NOMINEES PTY LIMITED Total Balance of register Grand total Issued shares Percentage of issued shares Ordinary Shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options Holders of options do not have voting rights. Performance Rights Holders of performance rights do not have voting rights. (F) ON-MARKET BUY-BACK There is no current on-market buy back of equity securities. 85,497,271 60,625,389 59,445,757 35,649,924 20,567,197 16,527,974 11,411,654 7,920,792 7,566,487 7,451,319 5,415,130 3,398,300 2,362,846 2,136,836 1,980,198 1,811,474 1,770,372 1,627,424 1,343,601 1,214,292 17.69 12.54 12.30 7.38 4.26 3.42 2.36 1.64 1.57 1.54 1.12 0.70 0.49 0.44 0.41 0.37 0.37 0.34 0.28 0.25 335,724,237 147,588,387 69.46 30.54 483,312,624 100.00 89 SUPERLOOP LIMITED AND CONTROLLED ENTITIESASX ADDITIONAL INFORMATION Corporate Directory DIRECTORS AUDITOR Bevan Slattery Chair and Non-Executive Director Greg Baynton Non-Executive Director Richard Anthony (Tony) Clark Non-Executive Director Vivian Stewart Non-Executive Director Stephanie Lai Non-Executive Director Alexander (Drew) Kelton Non-Executive Director CHIEF EXECUTIVE OFFICER Paul Tyler COMPANY SECRETARY Ronnie Lake REGISTERED OFFICE Superloop Limited Level 1, 545 Queen Street Brisbane QLD 4000 Tel: +61 (7) 3905 2400 Deloitte Touche Tohmatsu Level 23, Riverside Centre 123 Eagle Street Brisbane QLD 4000 www.deloitte.com/au SOLICITORS Baker & McKenzie Level 8, 175 Eagle Street Brisbane QLD 4000 www.bakermckenzie.com/australia SHARE REGISTER Link Market Services Limited Level 21, 10 Eagle Street Brisbane QLD 4000 www.linkmarketservices.com.au Telephone: (within Australia): 1300 554 474 Facsimile: (02) 9287 0303 SECURITIES EXCHANGE LISTING Superloop Limited shares are listed on the Australian Securities Exchange (ASX: SLC) COMPANY WEBSITES https://superloop.com https://investors.superloop.com 91 SUPERLOOP LIMITED AND CONTROLLED ENTITIESANNUAL REPORT FY21 I I T R O P E R L A C N A N F D E T A D I L O S N O C 1 2 0 2 D E T I M I L P O O L R E P U S Superloop Limited Annual Report FY21 SUPERLOOP.COM 4 9 0 3 6 2 9 6 1 6 9 N B A