2009
ANNUAL
REPORT
SP Telemedia Limited ABN 46 093 058 069
SP Telemedia Limited
and its controlled entities
ABN 46 093 058 069
Annual Report
31 July 2009
SP Telemedia Limited and its controlled entities
Contents
For the year ended 31 July 2009
• Directors’ report
(including corporate governance statement and remuneration report)
Index to notes to the consolidated financial statements
Income statements
•
• Statements of recognised income and expense
• Balance sheets
• Statements of cash flows
•
• Notes to the consolidated financial statements
• Directors’ declaration
• Audit report
• Lead auditor’s independence declaration
• ASX additional information
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91
3
SP Telemedia Limited and its controlled entities
Directors’ report
For the year ended 31 July 2009
The directors present their report together with the financial report of SP Telemedia Limited (‘the Company’)
and of the Consolidated Entity, being the Company and its controlled entities, for the financial year ended
31 July 2009 and the auditor’s report thereon.
Contents of directors’ report
Page
1.
2.
3.
4.
5.
Directors
Company Secretary
Directors’ meetings
Subsidiary name change
Corporate governance statement
Principle 1 - Lay solid foundations and oversight
Principle 2 - Structure the Board to add value
Principle 3 - Promote ethical and responsible decision-making
Principle 4 - Safeguarding integrity in financial reporting
Principle 5 - Make timely and balanced disclosure
Principle 6 - Respect the rights of shareholders
Principle 7 - Recognise and manage risk
Principle 8 - Remunerate fairly and responsibly
Remuneration report - audited
Principles of compensation
Directors’ and executive officers’ remuneration
Equity instruments
Shares, options and rights over equity instruments granted as compensation
Modification of terms of equity-settled share-based payment transactions
Exercise of options granted as compensation
Analysis of options and rights over equity instruments granted as compensation
Principal activities
Operating and financial review
Dividends
Events subsequent to reporting date
Likely developments
Directors’ interests
Share options
Indemnification and insurance of officers and auditors
Non-audit services
Lead auditor’s independence declaration
Rounding off
5.1
5.1.1
5.1.2
5.1.3
5.1.3.1
5.1.3.2
5.1.3.3
5.1.3.4
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
4
5
5
5
6
6
6
8
9
10
10
11
11
12
13
14
16
16
17
17
17
17
18
19
19
19
19
20
20
21
22
22
4
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
1. Directors
Details of the directors of the Company who held office at any time during or since the end of the financial
year are as follows:
Name, qualifications
and independence
status
Current Directors
David Teoh
Chairman
Executive Director
Chief Executive Officer
Robert D Millner
Non-Executive Director
F.A.I.C.D.
Denis Ledbury
Independent
Non-Executive Director
B.Bus.
A.I.C.D.
Alan J Latimer
Executive Director
B.Com
CA
G.A.I.C.D
Joseph Pang
Independent
Non-Executive Director
FCA
Age
Experience, special responsibilities and other directorships
54
58
59
55
56
David was the founder and Managing Director of the TPG group of
companies, one of the largest privately owned internet businesses in
Australia.
SP Telemedia Ltd (2008-current).
SP Telemedia Ltd (2000-current), Washington H Soul Pattinson and
Company Ltd (1984-current), New Hope Corporation Ltd (1995-current),
Souls Private Equity Ltd (2004-current), Brickworks Ltd (1997-current),
Brickworks Investment Company Ltd (2003-current), Australian
Pharmaceutical Industries Ltd (2000-current), Milton Corporation Ltd (1998-
current), Choiseul Investments Ltd (1995-current).
Former Chairman, resigned position in 2008. Member of Audit & Risk
Committee.
Denis was the Managing Director of SP Telemedia between 2000 and 2005,
and was associated with the NBN group of companies for over 24 years (the
last 14 as Chief Executive Officer).
SP Telemedia Ltd (2000-current), Soul Communications Pty Ltd (2005-
2008).
Chairman of Audit & Risk, and Remuneration Committees.
Prior to becoming an Executive Director of SP Telemedia Alan was the
Chief Financial Officer of the TPG group of companies. He has also
previously worked with a number of large international IT and financial
companies.
SP Telemedia Ltd (2008-current), Chariot Ltd (2007-2008).
Member of Remuneration Committee.
Joseph has worked in financial roles in the UK, Canada and Hong Kong
prior to starting his own Management and Financial Consulting Service in
Australia.
SP Telemedia Ltd (2008-current).
Member of Audit & Risk, and Remuneration Committees.
5
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
2.
Company secretary
Mr Stephen Banfield was appointed Company Secretary on 24 October 2007. Mr Banfield holds a
BA(Hons) degree and is a member of the Institute of Chartered Accountants in England and Wales.
3.
Directors’ meetings
The number of directors’ meetings held during the financial year (including meetings of committees of
directors) and the number of meetings attended by each of the directors of the Company were as follows:
Director
Board Meetings
Audit & Risk Committee
Meetings
Remuneration Committee
Meetings
D Teoh
RD Millner
D Ledbury
AJ Latimer
J Pang
A
12
10
11
12
11
B
12
12
12
12
12
A
-
3
3
-
3
B
-
3
3
-
3
A
-
-
2
2
2
B
-
-
2
2
2
A – Number of meetings attended.
B – Number of meetings held during the time the director held office during the year.
4.
Subsidiary name change
During the financial year the subsidiary company formerly known as Chariot Limited changed its name to
Chariot Pty Ltd.
6
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement
The Board of SP Telemedia Limited (‘the Company’) determines the most appropriate corporate
governance arrangements having regard to the best interests of the Company, its shareholders and
consistent with its responsibilities to other stakeholders.
This statement outlines the Company’s main corporate governance practices, which comply with the
Australian Securities Exchange (“ASX”) Corporate Governance Principles and Recommendations (“ASX
Recommendations”), unless otherwise stated.
Principle 1
Lay solid foundations for management and oversight
The Board’s primary role is the protection and enhancement of long-term shareholder value.
To fulfill this role the Board is responsible for the overall corporate governance of the Consolidated Entity
including formulating its strategic direction, setting remuneration, appointing, removing and creating
succession policies for directors and senior executives, establishing and monitoring the achievement of
management’s goals, ensuring the integrity of risk management, internal control, legal compliance and
management information systems, and approving and monitoring capital expenditure.
The Board delegates to senior management responsibility for the implementation of the strategic direction
of the Company.
During the year the Board adopted a Board Charter which defines the functions reserved for the Board as is
required by ASX Recommendation 1.1. This Board Charter can be found on the Company’s website at
www.soulaustralia.com.au/aboutus.
The performance of the executive directors is reviewed by the non-executive directors on the Board. The
performance of other senior executives is reviewed by the Chief Executive Officer (ASX Recommendations
1.2 and 1.3).
Principle 2
Structure the Board to add value
The Board considers that the number of directors and the composition of the Board are important for the
success of the Company.
The Board considers that the appropriate number of directors in the current circumstances is five, with three
being non-executive directors including two independent.
Details of the experience and background of all directors are also set out in full on page 4 of this Annual
Report.
7
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement (continued)
Principle 2
Structure the Board to add value (continued)
Independence of directors
The Board believes that maximum value for shareholders is best served with the current Board
composition. The Board currently comprises five directors, two of whom are independent.
The executive directors are David Teoh and Alan Latimer. The Board is of the view that the benefit of the
depth of experience and understanding that both directors have of the industry in which the Company
operates, outweighs the requirement for independent non-executive directors.
Robert Millner, a non-executive director, is not independent as he is a director of a major shareholder,
Washington H Soul Pattinson and Company Limited. Robert has specific historical, financial and business
knowledge of the Company, the benefit of which in the opinion of the Board, outweighs the requirement for
independence at this time.
The Board is of the view that another non-executive director, Denis Ledbury, is independent, even though
he was Managing Director of the Company until his retirement on 1 August 2005, due to the changes in the
operations and senior management of the Company that have occurred since his retirement. These
changes mean that Denis is free from interests and influences that could present a potential conflict of
interest.
The Board believes that each director brings an independent mind and judgement to bear on all Board
decisions, notwithstanding that the Chairman and a majority of the Board are not independent (which is not
in line with ASX Recommendation 2.1). All directors are able to and do review and challenge the
assumptions and performance of management to ensure decisions taken are in the best interest of the
Company.
Chairman of the Board
The Chairman is an executive director and is acting as the Chief Executive Officer of the Company.
Nevertheless, the Board believes that David Teoh, in this dual role, does bring the quality and independent
judgement to all relevant issues that are required of the Chairman and, as Chief Executive Officer, he
consults the Board on matters that are sensitive, extraordinary or of a strategic nature.
Nominations Committee
The Board acts as a Nominations Committee and as such has responsibility for the selection and
appointment of directors, undertaking evaluation of the Board’s performance and developing and
implementing a plan for identifying, assessing and enhancing directors’ competencies (ASX
Recommendation 2.4).
The process for evaluating the performance of the Board, its committees and individual directors involves
the Chairman conducting individual interviews with each of the directors at which time they are able to
make any comment or raise issues they have in relation to the Board’s operations (ASX Recommendation
2.5).
Access to Company information and independent professional advice
Directors may request additional information as and when they consider it appropriate or necessary to
discharge their obligation as a director of the Company. This includes access to internal senior executives
or external advisors as and when appropriate. A director must consult the Chairman first before accessing
external independent advice and provide a copy of the advice received to other members of the Board
(ASX Recommendation 2.6).
8
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement (continued)
Principle 3
Promote ethical and responsible decision-making
The Company is committed to maintaining the highest standards in dealing with all of its stakeholders, both
internally and externally. The Company has adopted a written Code of Conduct to assist directors and staff
in understanding their responsibilities to ensure the Company conducts its business in accordance with all
applicable laws and regulations and in a way that enhances the Company’s reputation (ASX
Recommendation 3.1 and 3.3). The Code of Conduct is also reflected in internal policies and procedures
which reinforce the Company’s commitment to complying with all applicable laws and regulations.
A copy of the Code of Conduct can be found on the Company’s website at
www.soulaustralia.com.au/aboutus (ASX Recommendation 3.3).
Policy regarding trading in securities
The Company has established a written Securities Trading Policy which identifies the principles by which
the Company balances the investment interests of directors, senior executives and employees with the
requirements for ensuring such trades only take place when all information relevant to making such
investment decisions is fully disclosed to the market (ASX Recommendation 3.2).
Directors and senior executives are only permitted to deal in Company shares during a six week period
following the release of the Company’s half-year and annual results to the ASX, the annual general meeting
or any major announcement. Notwithstanding this, the Board may in certain circumstances permit dealings
during other periods.
The acquisition of shares or options acquired pursuant to an employee share or option plan and the
acquisition of securities through exercising rights to securities or through conversion of convertible
securities is specifically excluded from this policy. This exclusion applies only to the acquisition, exercise or
conversion of securities. Subsequent dealing in the underlying securities is restricted as outlined in the
policy.
Directors must notify the Company Secretary in writing of all transactions in accordance with the
requirements of Sections 205F and 205G of the Corporations Act 2002. The Company will notify the ASX
of the details of any transaction, on behalf of the directors.
A copy of the Securities Trading Policy can be found on the Company’s website at
www.soulaustralia.com.au/aboutus (ASX Recommendation 3.3).
9
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement (continued)
Principle 4
Safeguarding integrity in financial reporting
The Board has responsibility for ensuring the integrity of the financial statements and related notes and that
the financial statements provide a true and fair view of the Company’s financial position. To assist the
Board in fulfilling this responsibility, the Board has established an Audit & Risk Committee which has the
responsibility for providing assurance that the financial statements and related notes are complete, are in
accordance with the applicable accounting standards, and provide a true and fair view.
Audit & Risk Committee
The Audit & Risk Committee is comprised of three non-executive directors, two of whom are independent,
and is chaired by Mr Denis Ledbury. Details of all members of the Audit & Risk Committee during the year
and their qualifications are set out on page 4 of this Annual Report (ASX Recommendation 4.1, 4.2 & 4.4).
The Board has adopted a formal charter which details the function and responsibility of the Audit & Risk
Committee to ensure the integrity of the financial statements and independence of the external auditor
(ASX Recommendation 4.3). A copy of the charter can be found on the Company’s website at
www.soulaustralia.com.au/aboutus.
The Audit & Risk Committee’s responsibilities include ensuring the integrity of the financial reporting
process, the risk management system, internal reporting and controls, management of strategic and major
financial and operational risks and the external audit process, based on sound principles of accountability,
transparency and responsibility.
The external auditors, other directors, the Chief Executive Officer and the Chief Financial Officer are invited
to Audit & Risk Committee meetings at the discretion of the Committee. The Committee meets at least
twice a year. It met three times during the year and Committee members’ attendance record is disclosed in
the table of directors’ meetings on page 5 of this Annual Report (ASX Recommendation 4.4).
Auditor selection and appointment
The Audit & Risk Committee will annually review the audit process including assessment of auditor
independence. Any non-audit work requires the prior approval of the Committee, which approval will only
be given where it can be established that it will not compromise the independence of the audit.
10
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement (continued)
Principle 5
Make timely and balanced disclosure
Continuous disclosure
The Company believes that shareholders and the wider business community should be informed of all
material information concerning the Company in a timely and accurate manner.
Accordingly, the Company has established a Continuous Disclosure Policy to ensure that the share market
is properly informed of matters that may have a material impact on the price at which the Company’s
securities are traded. This policy is designed to ensure compliance with the ASX Listing Rules Chapter 3
(ASX Recommendation 5.1 and 5.2).
A copy of the Continuous Disclosure Policy can be found on the Company’s website at
www.soulaustralia.com.au/aboutus.
Principle 6
Respect the rights of shareholders
The Board aims to ensure that shareholders are informed of all major developments affecting the
Company.
The Company posts its annual report and major announcements on its website under the investor section
(www.soulaustralia.com.au/investors) and provides a link via the website to the ASX website so that all
ASX releases can be accessed (ASX Recommendation 6.1.).
Historical information is also available to shareholders on the Company’s website including prior years’
Annual Reports.
Shareholders are encouraged to participate at general meetings, either in person or by proxy, and are
specifically offered the opportunity of receiving communications via email (ASX Recommendation 6.1 and
6.2).
11
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5. Corporate governance statement (continued)
Principle 7
Recognise and manage risk
The Company has in place strategies and controls in relation to management of financial risk which include
identifying and measuring financial risk, developing strategies to minimise the identified risks and
monitoring implementation.
The Chief Executive Officer and the Chief Financial Officer are required to provide assurance to the Board
as to the contents of the annual financial statements including compliance with accounting standards, that
they are founded on a sound system of financial risk management, and that the accounts represent a true
and fair view of the Company’s financial position (ASX Recommendation 7.3).
The Company has established a business risk framework based on AS/NZS 4360:2004 to ensure
management, control and oversight of the major business risks of the Company. The framework takes into
account various risks including operational, financial, compliance, technical, and strategic risks and
provides a means of evaluation and reporting on the management of risk. As part of this process a risk
management committee has been established to ensure oversight of the Company’s business risk and to
report to the Audit & Risk Committee on the effectiveness of the risk management controls (ASX
Recommendation 7.1, 7.2 & 7.4).
Principle 8
Remunerate fairly and responsibly
The Remuneration Committee reviews and makes recommendations to the Board on remuneration
packages and policies applicable to executives and directors.
The Remuneration Committee comprises three directors, two of whom are independent non-executive
directors. The Committee meets at least twice a year and as required. It met twice during the year and
Committee members’ attendance record is disclosed in the table of directors’ meetings on page 5 of this
Annual Report.
Non-executive directors’ fees may not exceed $500,000 per annum, as voted upon by shareholders at the
2004 AGM. In addition, non-executive directors will not be entitled to a retirement benefit, nor are any
directors entitled to participate in share or option plans except with the approval of shareholders.
For further information, refer to the Remuneration Report included at page 12 in the Directors’ Report (ASX
Recommendation 8.2 & 8.3).
12
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5.1
Remuneration report – audited
5.1.1 Principles of compensation
Remuneration is referred to as compensation throughout this report.
Key management personnel have authority and responsibility for planning, directing and controlling the
activities of the Company and the Consolidated Entity, including those of directors of the Company and
other executives. Key management personnel comprise the directors of the Company and executives for
the Company and the Consolidated Entity including the five most highly remunerated Company and
Consolidated Entity executives.
Compensation levels for key management personnel of the Consolidated Entity are designed to attract and
retain appropriately qualified and experienced directors and executives. The Remuneration Committee
considers the appropriateness of compensation packages given trends in comparative companies and the
objectives of the Consolidated Entity’s compensation strategy.
The compensation structures explained below are designed to attract suitably qualified candidates, reward
the achievement of strategic objectives, and achieve the broader outcome of creation of value for
shareholders. The compensation structures take into account:
•
•
•
•
the capability and experience of the key management personnel
the key management personnel’s ability to affect the Consolidated Entity’s performance
the Consolidated Entity’s performance
the amount of incentives within each key management person's compensation.
Compensation packages include a mix of fixed and variable compensation and short-term and long-term
performance-based incentives.
In addition to their salaries, the Consolidated Entity may also provide non-cash benefits to its key
management personnel.
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes
any FBT charges related to employee benefits including motor vehicles), as well as employer contributions
to superannuation funds.
Compensation levels are reviewed annually by the Remuneration Committee through a process that
considers individual performance and overall performance of the Consolidated Entity.
Performance-linked compensation
a) Former incentive plans
The Company suspended the operation of former performance-linked compensation plans following the
acquisition of TPG. These former performance-linked compensation plans included both short-term and
long-term incentives and were designed to reward the key management personnel for meeting or exceeding
the financial and personal objectives set by the Company. The long-term component of these incentives
comprised shares that were allocated to the employee and vested at 20% per annum at the end of each of
the five years following allocation, provided they continued to be employed by the Consolidated Entity. As
such, at 31 July 2009 certain key management personnel still had unvested shares under the former plans,
as set out below in 5.1.3.1. This aside, the performance-related compensation plans that pre-dated the
TPG acquisition in April 2008 have completely ceased to operate.
13
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5.1
Remuneration report – audited (continued)
5.1.1
Principles of compensation (continued)
Performance-linked compensation (continued)
b) New incentive plans
(i)
Long-term
On 27 February 2009, the Company announced a pool of 13.5 million share options with an exercise price
of $0.18 per share, based on the 60 day Volume Weighted Average Share Price (“VWAP”) at that date of
$0.16 per share.
On 7 July 2009, the Board approved the terms of a new Employee Share Option Plan under which these
options would be granted to employees.
On 8 July 2009, 10.875 million of these share options were granted to employees (including certain key
management personnel). The allocation of the options was approved by the Remuneration Committee.
All options granted on that date were immediately exercisable with a latest exercise date of 30 June 2010.
(ii) Short-term
Certain short-term cash bonuses were also paid during the year, including to certain key management
personnel, to award individual performance. These awards were made at the discretion of the Executive
Chairman.
Other benefits
Key management personnel can also receive non-cash benefits as part of the terms and conditions of their
appointment. Non-cash benefits typically include motor vehicles, and the Company pays fringe benefits tax
on these benefits.
Service contracts
On 28 May 2008, the Consolidated Entity entered into a service contract with Mr D Teoh. The contract was
for an initial term which expired on 31 July 2009, after which the contract may be terminated by either party
giving 3 months notice.
Other than as noted above:
•
no key management personnel employment contract has a fixed term; and
•
no key management personnel employment contract has a notice period of greater than 1 month.
No key management personnel employment contract contains any provision for termination benefits other
than as required by law.
Non-executive directors
Total compensation for all non-executive directors, last voted upon by shareholders at the 2004 AGM, is not
to exceed $500,000 per annum. Non-executive directors do not receive performance related compensation.
Directors’ fees cover all main board activities and membership of committees.
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
Remuneration report – audited (continued)
5.1
5.1.2 Directors’ and executive officers’ remuneration (Company and Consolidated)
14
Details of the nature and amount of each major element of remuneration of each director of the Company, each of the five named Company executives and relevant Consolidated Entity
executives who receive the highest remuneration and other key management personnel are set out in the table below:
Directors
Executive Directors
Mr D Teoh, Chairman
(appointed 7 April 2008)
Mr AJ Latimer
(appointed 7 April 2008)
Non-executive Directors
Mr D Ledbury
Mr RD Millner (1)
Mr J Pang
(appointed 7 April 2008)
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
Short-term
Post-
employment
Share-based payments
Salary &
fees
$
STI
cash
bonus
$(A)
Non-
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term
$
Termination
benefits
$
Options
$(B)
Shares
$(B)
Total
$
S300A (1)(e)(i)
Proportion of
remuneration
performance
related %
S300A
(1)(e)(vi)
Value of
options as
proportion of
remuneration
%
250,000
76,923
191,891
64,614
-
-
50,000
-
26,157
-
6,262
-
276,157
76,923
248,153
64,614
100,311
29,525
21,770
5,816
4,900
-
7,592
-
52,500
46,250
50,000
65,000
50,000
13,125
-
-
-
-
-
-
-
3,765
-
-
-
-
52,500
50,015
50,000
65,000
50,000
13,125
4,725
4,050
4,500
5,850
4,500
1,181
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
381,368
106,448
277,515
70,430
57,225
54,065
54,500
70,850
54,500
14,306
-
-
18%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) RD Millner was formerly Chairman and retired from this position effective 7 April 2008.
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5.1
5.1.2
Remuneration report – audited (continued)
Directors’ and executive officers’ remuneration (Company and Consolidated) (continued)
15
Executives
Salary &
fees
$
STI cash
bonus
$(A)
Non-
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term
$
Termination
benefits
$
Options
$(B)
Shares
$(C)
Total
$
Short-term
Post-
employment
Share-based payments
S300A
(1)(e)(i)
Proportion of
remuneration
performance
related %
S300A
(1)(e)(vi)
Value of
options as
proportion of
remuneration
%
Mr W Piestrzynski (appointed 7
April 2008)
Ms M De Ville
Mr S Banfield
Mr C Levy (recognised in key
mgmt personnel from 1 August 2008)
Mr J Paine (recognised in key
mgmt personnel from 1 August 2008)
Mr S McCullough (appointed 26
August 2008)
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
241,081
77,858
211,009
211,009
165,000
165,000
165,000
-
154,577
-
140,770
-
20,000
-
-
7,500
-
32,500
30,000
-
30,000
-
77,932
-
6,614
-
2,434
-
3,791
-
4,125
-
1,225
-
10,748
-
267,695
77,858
213,443
218,509
168,791
197,500
199,125
-
185,802
-
229,450
-
23,498
7,007
18,991
19,666
14,850
17,775
17,550
-
16,603
-
19,682
-
4,298
-
3,515
-
2,748
-
2,748
-
2,645
-
2,328
-
-
-
-
-
-
-
-
-
-
-
-
-
204,840
-
20,484
-
102,420
-
102,420
-
143,388
-
30,726
-
-
-
2,707
1,124
8,472
1,837
7,666
-
-
-
-
-
500,331
84,865
259,140
239,299
297,281
217,112
329,509
-
348,438
-
282,186
-
45%
-
9%
4%
37%
16%
43%
-
50%
-
39%
-
41%
-
8%
-
34%
-
31%
-
41%
-
11%
-
16
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5.1
5.1.2
Remuneration report – audited (continued)
Directors’ and executive officers’ remuneration (continued)
Notes in relation to the table of directors’ and executive officers remuneration
A. The short-term incentive bonuses paid in the 2009 financial year were for performance during the 31 July 2009
financial year and were awarded at the discretion of the Executive Chairman, other than for Mr S McCullough
whose short-term incentive bonus represents sales commission.
The short-term incentive bonuses paid in the 2008 financial year were for performance during the 31 July 2007
financial year, and were awarded under the former incentive plans that ceased to operate following the acquisition
of TPG in April 2008.
B. Certain executives received share options as part of their remuneration under the Employee Share Option Plan
approved by the Board on 7 July 2009. The fair value of the options was calculated using a Black Scholes model.
The resulting expense has all been recognised in the financial results for the year ended 31 July 2009.
C. Certain executives received shares as part of their remuneration under the former incentive plans that ceased to
operate following the acquisition of TPG in April 2008. The fair value of the shares was the market value of the
shares purchased under the scheme for the executive. The fair value is allocated to each reporting period evenly
over the period from grant date to vesting date subject to certain events which trigger vesting.
5.1.3
Equity instruments
5.1.3.1
Shares, options and rights over equity instruments granted as compensation
Details on options over ordinary shares in the Company that were granted as compensation to each key management
person during the reporting period and details on options that vested during the reporting period are as follows:
Number of
options
granted
during 2009
1,000,000
700,000
500,000
500,000
150,000
100,000
Fair value
per option
at grant
date ($)
Exercise
price per
option ($)
$0.20484
$0.20484
$0.20484
$0.20484
$0.20484
$0.20484
$0.18
$0.18
$0.18
$0.18
$0.18
$0.18
Number of
options
vested
during 2009
1,000,000
700,000
500,000
500,000
150,000
100,000
Expiry date
30 June 2010
30 June 2010
30 June 2010
30 June 2010
30 June 2010
30 June 2010
Grant date
8 July 2009
8 July 2009
8 July 2009
8 July 2009
8 July 2009
8 July 2009
Mr V Piestrzynski
Mr J Paine
Mr C Levy
Mr S Banfield
Mr S McCullough
Ms M De Ville
The above options were provided at no cost to the recipients. No options were granted during the year ended 31 July
2008, nor have any been granted since 31 July 2009.
17
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
5.1
Remuneration report – audited (continued)
5.1.3
5.1.3.1
Equity instruments (continued)
Shares, options and rights over equity instruments granted as compensation (continued)
Details on ordinary shares in the Company that were granted as compensation to each key management person during
the reporting period and details on the shares that vested during the reporting period are as follows:
Number of
shares
granted
during 2008 Grant date
Fair value
per share at
grant date
($)
Number of
shares
vested
during 2009
Number of
unvested
shares as at
31 July 2009
Mr S Banfield
Mr C Levy
Ms M De Ville
99,971
90,565
31,401
13 Dec 2007
13 Dec 2007
13 Dec 2007
$0.42373
$0.42322
$0.43096
19,994
18,113
6,280
75,603
68,758
22,445
The shares in the table above were granted under the incentive plans that ceased to operate following the acquisition of
TPG in April 2008. The unvested shares will vest in accordance with the rules described in 5.1.1. No shares have
been granted to key management personnel since 13 December 2007.
5.1.3.2 Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including options and rights granted as compensation to
a key management person) have been altered or modified by the issuing entity during the reporting period or the prior
period.
5.1.3.3
Exercise of options granted as compensation
On 15 July 2009, Mr V Piestrzynski exercised 1,000,000 of his options by paying to the Company $0.18 per option.
1,000,000 ordinary shares were accordingly issued to him on 6 August 2009. No other options were exercised by key
management personnel during the reporting period.
5.1.3.4
Analysis of options and rights over equity instruments granted as compensation
All options granted on 8 July 2009 vested fully on that date and are not subject to forfeiture. Other than those exercised
by Mr V Piestrzynski detailed in 5.1.4.3 above, all options granted to key management personnel on that date remain
outstanding at 31 July 2009, but must be exercised by 30 June 2010 at the latest.
6.
Principal activities
During the financial year the principal continuing activities of the Consolidated Entity consisted of :
Licensed telecommunications carrier in accordance with the Telecommunications Act 1997.
•
• Sale of retail and wholesale telecommunication products and services.
18
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
7.
Operating and financial review
Consolidated Entity earnings before interest, tax, depreciation and amortisation (EBITDA) for the year were
$98.5 million whilst net profit after tax (NPAT) was $17.7 million (compared to guidance of $93 million and $16
million respectively).
These results represent a 296% increase on the EBITDA of $24.9 million achieved last year and a 194%
increase on last year’s $18.9 million net loss after tax.
Earnings per share for the year of 2.6 cents represent a 168% increase on the 3.8 cents loss per share last
year.
The continued growth of the business has been underpinned by broadband subscribers, with net additions for
the year ended 31 July 2009 of 88,000 including 56,000 added in the second-half of the financial year. Total
broadband subscribers have reached 400,000 in September 2009.
The TPG consumer mobile offering, since its inception in late 2008 has already been taken up by more than
90,000 subscribers, comprising new customers and customers transferring from the Soul post paid plans.
The corporate and government business has continued to focus on improving systems and processes resulting
in improved customer service levels, with increasing on-net services providing improved margins.
Cash Flow
The Consolidated Entity generated a net cash inflow from operations before interest, tax, capex and debt
repayments during the year of $153 million. This excellent cash generation included a significant improvement
of $29 million in working capital and has enabled the Consolidated Entity to make repayments in the year of $81
million against its bank debt facilities, including $60 million in the second-half of the financial year.
In the 15 months since the April 2008 merger with TPG, the Consolidated Entity has repaid $95 million of bank
debt, putting it $72 million ahead of its debt repayment schedule. It now has $58 million of bank debt remaining
and its next compulsory debt repayment does not arise until February 2011.
Final Dividend
On 22 September 2009 the directors also declared a fully franked final dividend of 1 cent per share, payable on
18 November 2009 to shareholders on the register at 21 October 2009. For this dividend, the DRP (Dividend
Reinvestment Plan) discount will be 2.5%.
Guidance for FY10
The Consolidated Entity’s strong profit growth is forecast to continue and the directors have provided the
following guidance for the FY10 result:
(cid:1) Revenue
(cid:1) EBITDA
(cid:1) EBIT
$460 million
$130 million (excludes amortisation of deferred subscriber acquisition costs)
$71 million.
19
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
8. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
Cents per
share
Total amount
$’000
Franked/
unfranked
Date of payment
Declared and paid during the year 2009
Interim 2009 ordinary
1.0
6,842
Franked
27 May 2009
Total amount
6,842
Franked dividends declared as paid during the year were fully franked at the rate of 30 per cent.
Declared after end of year
After the balance sheet date the directors have declared a fully franked dividend of 1.0 cents per ordinary share
payable on 18 November 2009 to shareholders on the register at 21 October 2009.
The financial effect of this dividend has not been brought to account in the financial statements for the year
ended 31 July 2009 and will be recognised in subsequent financial reports.
9.
Events subsequent to reporting date
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to
affect significantly the operations of the Consolidated Entity, the results of those operations, or the state of
affairs of the Consolidated Entity, in future financial years.
10.
Likely developments
Other than the matters discussed, there are no material likely developments for the Consolidated Entity at the
date of this report.
11.
Directors’ interests
The relevant interest of each director in the shares and options over such instruments issued by the companies
within the Consolidated Entity and other related bodies corporate, as notified by the directors to the Australian
Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as
follows:
Mr D Teoh
Mr RD Millner
Mr D Ledbury
Mr AJ Latimer
Mr J Pang
Shares in
SP Telemedia Limited
273,383,415
5,837,468
311,709
1,322,844
-
20
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
12. Share options
Options granted to directors and executives of the Consolidated Entity
During or since the financial year, the Company granted options over unissued ordinary shares in the Company
to the following of the five most highly remunerated officers of the Consolidated Entity as part of their
remuneration:
Executives
Mr V Piestrzynski
Mr J Paine
Mr C Levy
Mr S Banfield
Mr S McCullough
Number of options
granted
1,000,000
700,000
500,000
500,000
150,000
All of the above options were granted during the financial year. None have been granted since the end of the
financial year. No options have been granted to any director during or since the financial year.
Unissued shares under options
At the date of this report there are 6,205,000 unissued ordinary shares of the Company under option, all with an
exercise price of $0.18 and with an expiry date of 30 June 2010. None of these outstanding options are subject
to forfeiture.
Shares issued on exercise of options
During or since the end of the financial year, the Company issued 4,670,000 ordinary shares as a result of the
exercise of options. The amount paid for each of these shares was $0.18. There are no amounts unpaid on the
shares issued.
13.
Indemnification and insurance of officers and auditors
Indemnification
The Company has agreed to indemnify all directors and officers of the Company against all liabilities to another
person (other than the Company or a related body corporate) that may arise from their position as directors of
the company and its controlled entities, except where the liability arises out of conduct involving a lack of good
faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including
costs and expenses.
The Company has also agreed to indemnify all directors and officers of its controlled entities for all liabilities to
another person (other than the company or a related body corporate) that may arise from their position, except
where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the
Company will meet the full amount of any such liabilities, including costs and expenses.
Insurance premiums
Since 31 July 2008 the Company has paid insurance premiums of $34,391 in respect of directors’ and officers’
liability insurance contracts, for current and former directors and officers, including senior executives of the
Company and directors, senior executives and secretaries of its controlled entities. The insurance premiums
relate to:
• costs and expenses that may be incurred by the relevant officers in defending proceedings, whether civil or
criminal and whatever their outcome; and
• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of
duty or improper use of information or position to gain a personal advantage.
21
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
14. Non-audit services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their
statutory duties.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that
the provision of those non-audit services during the year by the auditor is compatible with, and did not
compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services were subject to the corporate governance procedures adopted by the Company and
•
have been reviewed by the Audit & Risk Committee to ensure they do not impact the integrity and
objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or
auditing the auditor’s own work, acting in a management or decision making capacity for the Company,
acting as an advocate for the Company or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-
audit services provided during the year are set out below. In addition, amounts paid to other auditors have been
disclosed:
Audit services:
Auditors of the Company:
Audit and review of financial reports (KPMG Australia)
Other Auditors:
Audit and review of financial reports (Hayes Knight)
Audit and review of financial reports (PKF)
Services other than statutory audit:
Other regulatory audit services:
Telecommunications USO return (KPMG Australia)
Bank covenant compliance certificate (KPMG Australia)
Other services:
Taxation compliance services (Hayes Knight)
Taxation compliance services (PKF)
Other assurance services (Hayes Knight)
Consolidated
2009
$
2008
$
405,000
423,000
-
-
405,000
59,600
40,000
522,600
5,000
7,500
5,000
7,500
-
-
-
12,500
69,600
16,000
14,500
112,000
22
SP Telemedia Limited and its controlled entities
Directors’ report (continued)
For the year ended 31 July 2009
15.
Lead auditor’s independence declaration
The Lead auditor’s independence declaration is set out on page 90 and forms part of the directors’ report for
financial year ended 31 July 2009.
16.
Rounding off
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with
that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
This report is made with a resolution of the directors:
David Teoh
Chairman
Dated at Sydney this 15th day of October, 2009.
23
SP Telemedia Limited and its controlled entities
Income statements
For the year ended 31 July 2009
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Administrative expenses
Results from operating activities
Finance income
Finance expenses
Net finance expense
9
8
9
9
11
11
481,169
(291,406)
189,763
446,449
(303,345)
143,104
-
-
-
-
-
-
-
(42,737)
(111,761)
7,658
(50,435)
(120,604)
13,661
-
(5,036)
-
-
(2,546)
35,265
(20,277)
8,625
(2,546)
1,342
(10,284)
(8,942)
4,565
(7,952)
(3,387)
12
(8,499)
(8,487)
2,389
(7,000)
(4,611)
Profit/(loss) before income tax
26,323
(23,664)
138
(7,157)
Income tax (expense)/benefit
12
(8,662)
4,731
(612)
92
Profit/(loss) for the year
17,661
(18,933)
(474)
(7,065)
Attributable to:
Equity holders of the Company
Minority interest
Profit/(loss) for the year
Earnings/(loss) per share:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
17,661
-
17,661
(18,783)
(150)
(18,933)
(474)
-
(474)
(7,065)
-
(7,065)
13
13
2.6
2.5
(3.9)
(3.9)
The notes on pages 27 to 86 are an integral part of these consolidated financial statements.
24
SP Telemedia Limited and its controlled entities
Statements of recognised income and expense
For the year ended 31 July 2009
In thousands of AUD
Consolidated
Company
2009
2008
2009
2008
Foreign currency translation differences on
retranslation of foreign operations
Income and expense recognised directly in
equity
207
207
(156)
(156)
-
-
-
-
Profit/(loss) for the year
17,661
(18,933)
(474)
(7,065)
Total recognised income and expense for
the year
Attributable to:
Equity holders of the Company
Minority interest
Total recognised income and expense for
the year
17,868
(19,089)
(474)
(7,065)
17,868
-
(18,939)
(150)
(474)
-
(7,065)
-
17,868
(19,089)
(474)
(7,065)
The notes on pages 27 to 86 are an integral part of these consolidated financial statements.
SP Telemedia Limited and its controlled entities
Balance sheets
As at 31 July 2009
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
25
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Intangible assets
Current tax assets
Prepayments and other assets
Total current assets
Receivables
Investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Prepayments and other assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Current tax liabilities
Employee benefits
Provisions
Deferred income and other liabilities
Total current liabilities
Loans and borrowings
Deferred tax liabilities
Employee benefits
Provisions
Deferred income and other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
(Accumulated losses)/retained
earnings
14
15
16
22
19
17
15
18
20
21
22
17
23
24
19
25
26
27
24
20
25
26
27
28
28
28
17,179
30,282
705
7,315
55
6,983
62,519
-
-
-
135,408
324,904
993
461,305
523,824
75,997
8,535
8,023
3,066
936
25,371
121,928
58,429
8,070
537
2,193
7,869
77,098
199,026
14,053
64,483
1,133
24,720
-
9,814
114,203
2,804
-
-
137,594
361,089
2,705
504,192
618,395
80,917
22,294
8,353
3,100
827
32,459
147,950
137,629
17,050
746
156
8,214
163,795
311,745
109
22
-
-
-
1,868
1,999
80,995
461,928
4,180
-
-
269
547,372
549,371
693
73,392
8,023
-
-
325
82,433
58,000
-
-
-
-
58,000
140,433
107
98
-
-
-
2,025
2,230
103,460
462,061
5,507
-
-
1,833
572,861
575,091
1,405
33,665
512
-
-
355
35,937
130,000
-
-
-
-
130,000
165,937
324,798
306,650
408,938
409,154
389,747
(54,079)
384,693
(55,878)
389,747
1,842
384,693
(204)
(10,870)
(22,165)
17,349
24,665
Total equity
324,798
306,650
408,938
409,154
The notes on pages 27 to 86 are an integral part of these consolidated financial statements.
26
SP Telemedia Limited and its controlled entities
Statements of cash flows
For the year ended 31 July 2009
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Income taxes paid
549,549
(396,723)
152,826
773
(9,920)
(19,104)
456,155
(419,379)
36,776
3,438
(5,876)
(17,268)
-
(1,974)
(1,974)
11
(8,292)
(872)
-
(1,205)
(1,205)
2,394
(5,096)
(12,805)
Net cash from operating activities
34
124,575
17,070
(11,127)
(16,712)
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment
Acquisition of property, plant and
equipment
Acquisition of subsidiaries, net of cash
acquired
Acquisition of minority interest, net of
costs
Security deposits
Loans to related parties
Loans from subsidiaries
Net cash (used in)/from investing
activities
Cash flows from financing activities
Payment of transaction costs on issue of
share capital
Proceeds from exercise of share options
Proceeds from borrowings
Repayment of borrowings
Repayments to related parties
Payment of finance lease liabilities
Restricted cash released
Dividends paid
Net cash (used in)/from financing
activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at 1 August
Effect of exchange rate fluctuations on
cash held
34
(23,040)
91
(21,694)
7
-
-
(135,565)
(98)
-
-
-
-
(348)
-
-
-
(1,291)
-
(348)
-
90,957
-
-
(154,831)
(45)
-
-
19,138
(23,354)
(158,557)
90,609
(135,738)
(17)
229
-
(83,375)
-
(13,510)
80
(1,771)
(124)
-
150,000
(55,378)
-
(6,024)
1,083
(14,588)
(17)
229
-
(78,000)
-
-
79
(1,771)
(124)
-
150,000
(52,517)
-
-
-
(14,588)
(98,364)
74,969
(79,480)
82,771
2,857
14,053
(66,518)
80,644
269
(73)
2
107
-
109
(69,679)
69,786
-
107
Cash and cash equivalents at 31 July
14
17,179
14,053
The notes on pages 27 to 86 are an integral part of these consolidated financial statements.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
Index to notes to the consolidated financial statements
Page
1.
2.
3.
4.
5.
6.
7.
8.
9.
Reporting entity
Basis of preparation
Significant accounting policies
Determination of fair values
Financial risk management
Segment reporting
Acquisitions of subsidiaries and
minority interests
Other income
Expenses
10. Auditors’ remuneration
11.
12.
Finance income and expenses
Income tax expense
13. Earnings per share
14. Cash and cash equivalents
15.
Trade and other receivables
16.
Inventories
17. Prepayments and other assets
18.
Investments
19. Current tax assets and liabilities
28
28
29
43
44
47
48
50
50
51
51
52
53
54
54
54
54
55
55
20.
Deferred tax assets and liabilities
21.
Property, plant and equipment
22.
Intangible assets
23.
Trade and other payables
24.
Loans and borrowings
25.
Employee benefits
26.
Provisions
27.
Deferred income and other liabilities
28.
Capital and reserves
29.
Financial instruments
30. Operating leases
31.
Capital and other commitments
32.
Contingencies
33.
Consolidated entities
34.
Reconciliation of cash flows from
operating activities
35.
Related parties
36.
Subsequent events
37.
Deed of cross guarantee
27
Page
56
58
60
62
63
65
66
67
68
72
78
78
78
79
80
81
85
86
28
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
1.
Reporting entity
SP Telemedia Limited (the ‘Company’) is a company domiciled in Australia. The address of the
Company’s registered office is 65 Waterloo Road, North Ryde, NSW 2113. The consolidated financial
report of the Company as at, and for the year ended 31 July 2009 comprises the Company and its
subsidiaries (together referred to as the ‘Consolidated Entity’ and individually as ‘Consolidated entities’).
2.
Basis of preparation
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report complies with
International Financial Reporting Standards (IFRSs) and interpretations adopted by the International
Accounting Standards Board (IASB).
The financial statements were approved by the Board of Directors on 15 October 2009.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis with the exception
of assets and liabilities acquired through business combinations being measured at fair value. The
methods used to measure fair values are discussed further at note 4.
The accounts have been prepared on a going concern basis as there are reasonable grounds to believe
that the Company and Consolidated Entity will be able to pay their debts as and when they become due
and payable based on management’s budgeted cashflows which have been approved by the Board,
notwithstanding the fact that the classifications within the 31 July 2009 consolidated balance sheet show
a net current liability position.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency and the functional currency of the majority of the Consolidated Entity.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance
with that Class Order, all financial information presented in Australian dollars has been rounded to the
nearest thousand unless otherwise stated.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in
applying accounting policies that have the most significant effect on the amount recognised in the
financial statements are described in the following notes:
•
•
•
•
•
note 7 – business combinations
note 18 – measurement of the recoverable amounts of investments in subsidiaries
note 20 – utilisation of tax losses
note 22 – measurement of the recoverable amounts of cash-generating units containing goodwill
note 29 – valuation of financial instruments.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies
29
The accounting policies set out below have been applied consistently to all periods presented in
these consolidated financial statements and have been applied consistently by the Consolidated
Entities.
Certain comparative amounts have been reclassified to conform with the current year presentation.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Consolidated Entity. Control exists when the
Consolidated Entity has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting
rights that presently are exercisable or convertible are taken into account. The financial statements
of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the
policies adopted by the Consolidated Entity.
Investments in subsidiaries are carried at the lower of their cost of acquisition or fair value in the
Company’s financial statements.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from
intra-group transactions are eliminated in preparing the consolidated financial statements.
(iii) Acquisition of minority interests
On acquisition of minority interests the Consolidated Entity recognises the difference between the
cost of the acquisition and the carrying value of the minority interests as an equity reserve.
(b) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance
sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement. Non-
monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated to Australian
dollars at foreign exchange rates ruling at the dates the fair value was determined.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
30
(c) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated
depreciation and impairment losses (see accounting policy (h)). The cost of self-constructed
assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the
costs of dismantling and removing the items and restoring the site on which they are located, and
an appropriate proportion of production overheads.
Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
(ii) Leased assets
Leases in terms of which the Consolidated Entity assumes substantially all the risks and rewards
of ownership are classified as finance leases.
(iii) Subsequent costs
The Consolidated Entity recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when that cost is incurred, if it is probable
that the future economic benefits embodied within the item will flow to the Consolidated Entity and
the cost of the item can be measured reliably. All other costs are recognised in the income
statement as an expense as incurred.
(iv) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful
lives of each part of an item of property, plant and equipment.
The estimated useful lives in the current and comparative periods are as follows:
• Plant and equipment
Leasehold improvements
Leased assets
•
•
• Buildings
2.5 - 20 years
8 years
5 - 10 years
40 years
The residual value, the useful life and the depreciation method applied to an asset are
reassessed at least annually.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
31
Intangible assets
(d)
(i) Goodwill
Business combinations
All business combinations are accounted for by applying the purchase method. Goodwill
represents the difference between the cost of the acquisition and the fair value of the net
identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-
generating units and tested annually for impairment (see accounting policy (h)).
(ii) Capitalised subscriber costs
Capitalised subscriber costs comprising dealer connection commissions, fulfilment costs and sim-
cards are recognised as an asset and amortised using the straight line method from the date of
initial recognition over the period during which the future economic benefits are expected to be
obtained, being the contract period.
(iii) Acquired customer base
On acquisition of a subsidiary, customers of the acquired subsidiary are valued and brought to
account as intangible assets. The value given to the customers is the expected future economic
benefit expected to be derived from these customers.
(iv) Development costs
Operating costs incurred in developing or acquiring income producing assets are recognised as
an asset and amortised using the straight line method from the date of initial recognition over the
period during which the future economic benefits are expected to be obtained, being the contract
period.
(v) Trademark
On acquisition of a subsidiary, trademarks of the acquired subsidiary are valued and brought to
account as intangible assets. The valuation of a trademark is calculated using the Relief from
Royalty Method.
(vi)
Internally-generated software
On acquisition of a subsidiary, internally developed software and systems are valued and brought
to account as intangible assets. The software is valued at its depreciated replacement cost.
(vii)
Indefeasible right of use of capacity
Indefeasible rights of use of capacity are brought to account as intangible assets at cost, being
the present value of the future cashflows payable for the right.
32
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(d)
Intangible assets (continued)
(viii) Other intangible assets
Other intangible assets that are acquired by the Consolidated Entity are stated at cost less
accumulated amortisation (see below) and impairment losses (see accounting policy (h)).
Expenditure on internally generated goodwill and brands is recognised in the income statement as
an expense as incurred.
(ix) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred.
(x) Amortisation
Amortisation is charged to the income statement on a straight-line basis, unless stated otherwise,
over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and
intangible assets with an indefinite useful life are systematically tested for impairment at each
balance sheet date. Other intangible assets are amortised from the date they are available for
use. The estimated useful lives in the current and comparative periods are as follows:
• Goodwill
• Trademark
•
• Acquired customer bases
Indefeasible right of use (IRU) of capacity
•
Internally-generated software
• Capitalised subscriber costs
• Development costs
indefinite life
indefinite life
over the life of the IRU
amortised on a reducing balance basis in
line with the expected economic benefits
to be derived from the acquired customer
base
5 years
2 years
2 - 20 years
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
33
(e) Trade and other receivables
Trade and other receivables are stated at their amortised cost less impairment losses (see
accounting policy (h)).
(f)
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, short term bills and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Consolidated Entity’s
cash management are included as a component of cash and cash equivalents for the purpose of
the statement of cash flows.
(h)
Impairment
A financial asset is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.
The carrying amounts of the Consolidated Entity’s non-financial assets, other than inventories and
deferred tax assets, are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-
generating unit exceeds its recoverable amount. Impairment losses are recognised in the
income statement, unless an asset has previously been revalued, in which case the impairment
loss is recognised as a reversal to the extent of that previous revaluation with any excess
recognised through profit or loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce
the carrying amount of any goodwill allocated to cash-generating units (group of units) and then
to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
34
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
Impairment (continued)
(h)
(i) Calculation of recoverable amount
Impairment of receivables is not recognised until objective evidence is available that a loss event
has occurred. Significant receivables are individually assessed for impairment. Impairment
testing of significant receivables that are not assessed as impaired individually is performed by
placing them into portfolios of significant receivables with similar risk profiles and undertaking a
collective assessment of impairment. Non-significant receivables are not individually assessed.
Instead, impairment testing is performed by placing non-significant receivables in portfolios of
similar risk profiles, based on objective evidence from historical experience adjusted for any
effects of conditions existing at each balance sheet date.
The recoverable amount of other assets is the greater of their fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to
which the asset belongs.
(ii) Reversals of impairment
Impairment losses, other than in respect of goodwill, are reversed when there is an indication that
the impairment loss may no longer exist and there has been a change in the estimate used to
determine the recoverable amount.
An impairment loss in respect of goodwill is not reversed.
An impairment loss in respect of a receivable carried at amortised cost is reversed if the
subsequent increase in recoverable amount can be related objectively to an event occurring after
the impairment loss was recognised.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
35
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
Impairment (continued)
(h)
(iii) Derecognition of financial assets and liabilities
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognised when:
(cid:1)
(cid:1)
the rights to receive cash flows from the asset have expired
the Consolidated Entity retains the right to receive cash flows from the asset, but has
assumed an obligation to pay them in full without material delay to a third party; or
the Consolidated Entity has transferred its rights to receive cash flows from the asset and
either (a) has transferred substantially all the risks and rewards of the asset, or (b) has
neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
(cid:1)
A financial liability is derecognised when the obligation under the liability is discharged, cancelled
or expired. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in profit and
loss.
(i) Share capital
Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of
any related income tax benefit.
(j)
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with
any difference between cost and redemption value being recognised in the income statement
over the period of the borrowings on an effective interest basis.
36
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(k) Employee benefits
(i) Long-term service benefits
The Consolidated Entity’s net obligation in respect of long-term service is the amount of future benefit that
employees have earned in return for their service in the current and prior periods. The obligation is
calculated using expected future increases in wage and salary rates including related on-costs and
expected settlement dates, and is discounted using the rates attached to the Commonwealth Government
bonds at the balance sheet date which have maturity dates approximating to the terms of the Consolidated
Entity’s obligations.
(ii) Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within
12 months of the reporting date represent present obligations resulting from employees’ services provided
to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary
rates that the Consolidated Entity expects to pay as at reporting date including related on-costs, such as
workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as
medical care, housing, cars and free or subsidised goods and services, are expensed based on the net
marginal cost to the Consolidated Entity as the benefits are taken by the employees.
(iii) Employee share option plan
During the financial year ended 31 July 2009, the Company offered options to employees of the
Consolidated Entity under an employee share option plan. The fair value of options granted was
recognised as an employee expense with a corresponding increase in equity. As all options were
immediately exercisable, the fair value of the options was measured using the share price at date of grant
(calculated as the 5 day VWAP for the preceding 5 days) less the exercise price, and the resulting expense
was recognised in full in the year ended 31 July 2009.
(iv) Employee share scheme
The Consolidated Entity has in place an Employee Share Scheme that provides for selected employees to
receive ordinary shares in the Company. Under this scheme funds are transferred to a trust which acts as
an agent and purchases shares for the benefit of the selected employees. A treasury share reserve is
recognised for the funds transferred to the scheme. An employee expense is recognised over the period
during which the employees become unconditionally entitled to the shares with a corresponding decrease in
the treasury share reserve.
(v) Superannuation
The Company and other controlled entities contribute to several defined contribution superannuation plans.
Contributions are recognised as an expense in the income statement on an accruals basis.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
37
(l) Provisions
A provision is recognised in the balance sheet when the Consolidated Entity has a present legal or
constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
(m) Trade and other payables
Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing
and are normally settled on 30-60 day terms.
(n) Revenue
(i) Goods sold and services rendered
Revenues are recognised at fair value of the consideration received net of the amount of goods and
services tax (GST).
(ii) Sale of goods
Revenue from the sale of goods is recognised (net of returns, discounts and allowances) when control of
the goods passes to the customer.
Revenue from the sale of equipment and handsets is recognised in the income statement (net of rebates,
returns, discounts and other allowances) when the significant risks and rewards of ownership have been
transferred to the customer, which is ordinarily when the equipment and handset is delivered to the
customer.
Where the sale is settled through instalments, interest revenue is recognised over the contract term,
using the effective interest method.
(iii) Rendering of services
Revenue from rendering services is recognised in proportion to the stage of completion of the contract
and is only brought to account when it is considered probable that the revenue will be received.
Revenue from the provision of telecommunication services includes access to the mobile network,
telephone calls, connection and retention commission and other services. Connection and retention
commissions are recognised on a straight-line basis over the specified contract period. These are
received at the time of connection or retention of a customer. These are deferred and amortised over the
contract term. Airtime and access fee revenues are recognised when the fee in respect of the services is
earned.
(iv) Unearned revenue
Unearned revenue represents customer access fees invoiced that are not earned at the reporting date.
Access fees are normally invoiced to customers one month in advance. This is taken to revenue in the
month to which the access fees relate.
38
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(o) Expenses
(i) Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line
basis over the term of the lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense and spread over the lease term.
(ii) Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the
outstanding liability. The finance charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability.
(iii) Finance income and expenses
Net financing costs comprise interest payable on borrowings calculated using the effective
interest method and interest receivable on funds invested. Borrowing costs are expensed as
incurred and included in net financing costs.
Interest income is recognised in the income statement as it accrues, using the effective interest
method. The interest expense component of finance lease payments is recognised in the income
statement using the effective interest method.
(p)
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Deferred tax is provided using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not
provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levies by the same tax authority on the
same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same
time as the liability to pay the related dividend.
39
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
(p)
Significant accounting policies (continued)
Income tax (continued)
Tax consolidation
The Company and its wholly-owned Australian resident entities formed a tax-consolidated group
with effect from 1 August 2006 and have therefore been taxed as a single entity from that date.
The head entity within the tax-consolidated group is SP Telemedia Limited.
TPG Holdings Pty Ltd and its wholly owned Australian resident entities joined the Company’s tax-
consolidated group from 7 April 2008 (the date of acquisition of TPG).
Chariot Pty Ltd joined the Company’s tax-consolidated group from 14 August 2008.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from
temporary differences of the members of the tax-consolidated group are recognised in the
separate financial statements of the members of the tax-consolidated group using the ‘separate
taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in
the separate financial statements of each entity and the tax values applying under tax
consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the
subsidiaries are assumed by the head entity in the tax-consolidated group and are recognised as
amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction
with any tax funding arrangement amounts (refer below). Any difference between these amounts
is recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-
consolidated group to the extent that it is probable that future taxable profits of the tax-
consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a
result of revised assessments of the probability of recoverability is recognised by the head entity
only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered
into a tax funding arrangement which sets out the funding obligations of members of the tax-
consolidated group in respect of tax amounts. The tax funding arrangements require payments
to/from the head entity equal to the current tax liability (asset) assumed by the head entity and
any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity
recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset)
assumed. The inter-entity receivables (payables) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement
and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the
relevant tax authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also
entered into a tax sharing agreement. The tax sharing agreement provides for the determination
of the allocation of income tax liabilities between the entities should the head entity default on its
tax payment obligations. No amounts have been recognised in the financial statements in
respect of this agreement as payment of any amounts under the tax sharing agreement is
considered remote.
40
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(q) Segment reporting
A segment is a distinguishable component of the Consolidated Entity that is engaged either in
providing related products or services (business segment), or in providing products or services
within a particular economic environment (geographical segment), which is subject to risks and
returns that are different from those of other segments.
(r) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax
(GST), except where the amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST
recoverable from, or payable to, the ATO is included as a current asset or liability in the balance
sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components
of cash flows arising from investing and financing activities which are recoverable from, or
payable to, the ATO are classified as operating cash flows.
(s) Earnings per share
The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary
shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares outstanding during the
period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders of the Company and the weighted average number of ordinary shares outstanding
for the effects of all dilutive potential ordinary shares, which comprise share options.
41
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(t) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as
those which may impact the entity in the period of initial application. They are available for early
adoption at 31 July 2009, but have not been applied in preparing this financial report:
• Revised AASB 3 Business Combinations (2008) incorporates the following changes that
are likely to be relevant to the Consolidated Entity’s operations: the broadening of the
definition of a business, which is likely to result in more acquisitions being treated as
business combinations; contingent consideration being measured at fair value with
subsequent changes therein recognised in profit or loss; transaction costs, other than share
and debt issue costs, being expensed as incurred; any pre-existing interest in the acquiree
being measured at fair value with the gain or loss recognised in profit or loss; any non-
controlling (minority) interest being measured at either fair value, or at its proportionate
interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-
transaction basis.
The revised standard, which becomes mandatory for the Consolidated Entity’s 31 July 2010
financial statements, will be applied prospectively and therefore there will be no impact on
prior periods in the Consolidated Entity’s 2010 consolidated financial report.
• AASB 8 Operating Segments introduces the “management approach” to segment reporting.
AASB 8, which becomes mandatory for the Consolidated Entity’s 31 July 2010 financial
statements, will require a change in the presentation on and disclosure of segment
information based on the internal reports regularly reviewed by the Consolidated Entity’s chief
operating decision maker in order to assess each segment’s performance and to allocate
resources to them. Currently the Consolidated Entity presents segment information in
respect of its business and geographical segments (see note 6). The standard is not
expected to have an impact on the financial results of the Company and the Consolidated
Entity as the standard is only concerned with disclosures.
• Revised AASB 101 Presentation of Financial Statements (2007) introduces the term total
comprehensive income, which represents changes in equity during a period other than those
changes resulting from transactions with owners in their capacity as owners. Total
comprehensive income may be presented in either a single statement of comprehensive
income (effectively combining both the income statement and all non-owner changes in
equity in a single statement) or, in an income statement and a separate statement of
comprehensive income.
The revised standard will become mandatory for the Consolidated Entity’s 31 July 2010
financial statements. The Consolidated Entity has not yet determined the potential effect of
the revised standard on the Consolidated Entity’s disclosures.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
3.
Significant accounting policies (continued)
(t) New standards and interpretations not yet adopted (continued)
42
• Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs
and requires that an entity capitalise borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset as part of the cost of that
asset.
The revised standard will become mandatory for the Consolidated Entity’s 31 July 2010
financial statements and will constitute a change in accounting policy for the
Consolidated Entity. In accordance with the transitional provisions the Consolidated
Entity will apply the revised AASB 123 to qualifying assets for which capitalisation of
borrowing costs commences on or after the effective date. Therefore there will be no
impact on prior periods in the Consolidated Entity’s 31 July 2010 financial statements.
• Revised AASB 127 Consolidated and Separate Financial Statements (2008)
requires accounting for changes in ownership interests by the Consolidated Entity in a
subsidiary, while maintaining control, to be recognised as an equity transaction. When
the Consolidated Entity loses control of a subsidiary, any interest retained in the former
subsidiary will be measured at fair value with the resulting gain or loss being recognised
in profit or loss.
The revised standard will become mandatory for the Consolidated Entity’s 31 July 2010
financial statements. The Consolidated Entity has not yet determined the potential effect
of the revised standard on the Consolidated Entity’s financial report.
• AASB 2008-1 Amendments to Australian Accounting Standard – Share-based
Payment: Vesting Conditions and Cancellations clarifies the definition of vesting
conditions, introduces the concept of non-vesting conditions, requires non-vesting
conditions to be reflected in grant-date fair value and provides the accounting treatment
for non-vesting conditions and cancellations.
AASB 2008-1 will be mandatory for the Consolidated Entity’s 31 July 2010 financial
statements, with retrospective application. The Consolidated Entity has not yet
determined the potential effect of the amending standard on the Consolidated Entity’s
financial report.
43
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
4.
Determination of fair values
A number of the Consolidated Entity’s accounting policies and disclosures require the
determination of fair value, for both financial and non-financial assets and liabilities. Fair values
have been determined for measurement and/or disclosure purposes based on the following
methods. When applicable, further information about the assumptions made in determining fair
values is disclosed in the notes specific to that asset or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination
is based on market values. The market value of property is the estimated amount for which a
property could be exchanged on the date of valuation between a willing buyer and a willing seller
in an arm’s length transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion. The market value of items of plant,
equipment, fixtures and fittings is based on the quoted market prices for similar items.
Intangible assets
The fair value of patents and trademarks acquired in a business combination is based on the
discounted estimated royalty payments that have been avoided as a result of the patent or
trademark being owned. The fair value of other intangible assets is based on the discounted
cash flows expected to be derived from the use and eventual sale of the assets.
Inventories
The fair value of inventories acquired in a business combination is determined based on its
estimated selling price in the ordinary course of business less the estimated costs of completion
and sale, and a reasonable profit margin based on the effort required to complete and sell the
inventories.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash
flows, discounted at the market rate of interest at the reporting date.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value
of future principal and interest cash flows, discounted at the market rate of interest at the
reporting date. For finance leases, the market rate of interest is determined by reference to
similar lease agreements.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
5.
Financial risk management
44
Overview
The Company and Consolidated Entity have exposure to the following risks from their use of
financial instruments:
•
credit risk
•
liquidity risk
• market risk.
This note presents information about the Company’s and Consolidated Entity’s exposure to each
of the above risks, their objectives, policies and processes for measuring and managing risk, and
the management of capital. Further quantitative disclosures are included throughout this financial
report (including note 29).
The Board of directors has overall responsibility for the establishment and oversight of the risk
management framework.
Risk management policies are established to identify and analyse the risks faced by the
Company and Consolidated Entity, to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed regularly to reflect
changes in market conditions and the Company’s and Consolidated Entity’s activities. The
Company and Consolidated Entity, through their training and management standards and
procedures, aim to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Consolidated Entity’s Audit & Risk Committee oversees how management monitors compliance
with the Company’s and Consolidated Entity’s risk management policies and procedures and reviews
the adequacy of the risk management framework in relation to the risks faced by the Company and
Consolidated Entity. The Consolidated Entity’s Audit & Risk Committee is assisted in its oversight
role by the Risk Management Committee. The Risk Management Committee undertakes both
regular and ad-hoc reviews of risk management controls and procedures, the results of which are
reported to the Consolidated Entity’s Audit & Risk Committee.
Credit risk
Credit risk is the risk of financial loss to the Consolidated Entity if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from the
Consolidated Entity’s receivables from customers. For the Company it arises from receivables
due from subsidiaries.
Trade and other receivables
The Company’s and Consolidated Entity’s exposure to credit risk is influenced mainly by the
individual characteristics of each customer, the industry in which the customers operate and the
geographical region in which the customers operate.
• Approximately 41% (2008: 68%) of the Consolidated Entity’s trade receivables are
attributable to retail customers. The Consolidated Entity minimises concentrations of credit
risk by undertaking transactions with a large number of customers.
• By industry, the Consolidated Entity is not subject to a concentration of credit risk as its
customers operate in a wide range of industries.
• Geographically, the Consolidated Entity’s credit risk is concentrated in Australia.
45
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
5.
Financial risk management (continued)
Credit risk (continued)
Trade and other receivables (continued)
The Company and Consolidated Entity have established a credit policy under which each new
customer is analysed individually for creditworthiness before the Consolidated Entity’s standard
payment and delivery terms and conditions are offered. The Consolidated Entity’s review
includes external ratings, when available, and in some cases bank references. Purchase limits
are established for each customer. These limits are reviewed regularly. Customers that fail to
meet the Consolidated Entity’s benchmark creditworthiness may transact with the Consolidated
Entity only on a prepayment basis.
In monitoring customer credit risk, customers are grouped according to their credit characteristics,
including whether they are an individual or legal entity, whether they are a wholesale, retail or
end-user customer, geographic location, industry, aging profile, maturity and existence of
previous financial difficulties.
The Company and Consolidated Entity have established an allowance for impairment that
represents their estimate of incurred losses in respect of trade and other receivables.
Liquidity risk
Liquidity risk is the risk that the Consolidated Entity will not be able to meet its financial
obligations as they fall due. The Consolidated Entity’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Consolidated Entity’s reputation.
The Consolidated Entity monitors cash flow requirements from its businesses to optimise its
return on cash. The Consolidated Entity ensures that it has sufficient cash on demand to meet
expected operational expenses including the servicing of financial obligations.
In addition, the Consolidated Entity maintains a bank overdraft facility of $7.9 million (2008: $6
million) which was fully unutilised at 31 July 2009 (2008: fully unutilised).
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
5.
Financial risk management (continued)
46
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest
rates, will affect the Consolidated Entity’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
Currency risk
The Consolidated Entity is exposed to currency risk on revenues, expenses, receivables and
borrowings that are denominated in a currency other than the functional currency of the
Company, the Australian dollar (AUD). These other currencies include the United States dollar
(USD), the New Zealand dollar (NZD) and Philippine peso (PP).
The Consolidated Entity does not hedge its exposure to these non-functional currencies as the
exposure is not considered to be a significant risk to the Consolidated Entity.
Interest rate risk
The Consolidated Entity has adopted a policy of hedging its exposure to changes in interest rates
on its core borrowings. An interest rate cap agreement was entered into on 22 April 2008 to
effectively hedge 50 percent of the maximum cash advance available ($150 million) under the
loan agreement entered into on the same date. The balance of this loan advance was $58 million
at 31 July 2009 (2008: $136 million).
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development of the business. The Board of directors
monitors the return on capital, which the Consolidated Entity defines as net operating income
divided by total shareholders’ equity, excluding minority interests. The Board of directors also
monitors the level of dividends to ordinary shareholders.
It is a policy of the Board to encourage employees of the Consolidated Entity to hold ordinary
shares in the Company.
The Board seeks to maintain a balance between the higher returns that might be possible with
higher levels of borrowings and the advantages and security afforded by a sound capital position.
From time to time the Consolidated Entity may purchase its own shares on the market; the timing
of these purchases depends on market prices. The Consolidated Entity does not currently have a
defined share buy-back plan.
There were no changes in the Consolidated Entity’s approach to capital management during the
year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital
requirements.
47
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
6.
Segment reporting
Segment information is presented in respect of the Consolidated Entity’s business segments
based on the Consolidated Entity’s management and internal reporting structure.
Inter-segment pricing is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment
assets that are expected to be used for more than one period.
Business segments
The Consolidated Entity operates predominantly in the Australian telecommunications industry.
Geographical segments
The Consolidated Entity operates predominantly within Australia.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
7.
Acquisitions of subsidiaries and minority interests
Acquisition of subsidiary TPG Holdings Limited
On 7 April 2008, the parent entity acquired 100% of TPG Holdings Limited.
48
The consideration for the acquisition was a cash payment of $150 million plus the issue of 270,000,003
ordinary shares in SP Telemedia Limited. The cash payment was financed through a bank loan.
The operating results of TPG Holdings Limited and its controlled entities have been included in the
consolidated income statement since the date of acquisition.
The acquisition had the following effect on the Consolidated Entity’s assets and liabilities on acquisition
date:
In thousands of AUD
Property, plant and equipment
Intangible assets (excluding goodwill)
Goodwill
Inventories
Deferred tax assets
Trade and other receivables
Cash and cash equivalents
Prepayments
Interest-bearing loans and borrowings
Current tax liabilities
Employee benefits
Provisions
Deferred tax liabilities
Deferred revenue
Trade and other payables
Net identifiable assets and liabilities
Outside equity interests
Goodwill on acquisition
Consideration paid (including transaction costs)
Less Consideration paid, satisfied by issue of shares
in parent entity
Less Net cash acquired
Net cash outflow
Pre-acquisition
carrying
amounts
24,960
47,280
5,931
489
4,910
3,342
19,274
1,412
(27,565)
(8,990)
(636)
(653)
(3,659)
(13,393)
(22,368)
30,334
Fair value
adjustments
-
90,818
(5,931)
-
-
-
-
-
477
-
-
-
(24,125)
-
(2,610)
58,629
Recognised
values on
acquisition
24,960
138,098
-
489
4,910
3,342
19,274
1,412
(27,088)
(8,990)
(636)
(653)
(27,784)
(13,393)
(24,978)
88,963
1,124
90,087
174,102
264,189
(109,350)
(19,274)
135,565
Pre-acquisition carrying amounts were determined based on applicable AASBs immediately before the
acquisition. The values of assets and liabilities recognised on acquisition are their estimated fair values
(see note 4 for methods used in determining fair values).
In the period from 7 April 2008 to 31 July 2008 the acquisition contributed $61.341 million to consolidated
revenue and $8.904 million to consolidated net profit after tax. If the acquisition had occurred on 1
August 2007, management estimates that the acquisition would have contributed $167.687 million to
consolidated revenue and $28.382 million to consolidated net profit after tax.
49
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
7.
Acquisitions of subsidiaries and minority interests (continued)
Adjustment to provisional acquisition accounting
It was noted at 31 July 2008 that the acquisition accounting shown above was provisional pending
potential adjustments that could be made to reflect new information obtained about facts and
circumstances that existed at the date of acquisition which would have affected measurement of amounts
recognised at that date.
During the year ended 31 July 2009, the income tax assessment for TPG Holdings Pty Ltd was finalised
for the period up until the date of its acquisition by the Company. The income tax payable was $348,000
higher than the amount provided for in its balance sheet at the date of acquisition, resulting in an
understatement of goodwill on acquisition of $348,000 at 31 July 2008.
In this year end report, the 31 July 2008 balance sheet comparatives have therefore been adjusted to
reflect this amendment, by increasing non-current intangibles by $348,000 and increasing current tax
liabilities by $348,000.
Acquisition of minority interest in Chariot Limited
On 7 April 2008, the parent entity acquired 70.25% of Chariot Limited and its controlled entities by way of
its 100% acquisition of TPG Holdings Limited.
On 22 April 2008, the parent entity announced an unconditional offer to acquire the shares in its
controlled entity, Chariot Limited, that it did not already own, at an offer price of 6.1 cents per share. On
27 May 2008, the parent entity’s relevant interest in Chariot Limited exceeded the threshold required to
trigger the compulsory acquisition provisions. The final shares were acquired under compulsory
acquisition on 14 August 2008.
Prior to announcing the offer, the parent entity held 70.25% of the shares in Chariot Limited. As a result
of the acquisition, the net profit after tax attributable to members for the 2008 financial year incorporates
70.25% of the Chariot Limited results for the period 7 April 2008 to 27 May 2008 and 100% of its results
for the period 28 May 2008 to 31 July 2008.
The total cost of the acquisition of the remaining shares was $2.7 million (including transaction costs),
with the surplus of the acquisition price over the minority interest acquired being recognised in equity in
accordance with the Consolidated Entity’s accounting policies (refer note 3). The effect of the surplus led
to a reduction in the net assets of the Consolidated Entity of $3.98 million.
The $2.7 million cost of acquisition was financed by the issue of 8,991,543 shares in SP Telemedia
Limited.
Take over of operation of retail stores
On 19 June 2008, following termination of a dealer agreement, the Consolidated Entity elected to take
over the management and operations of certain retail stores which were up until then being operated by
that dealer. This involved offering employment to employees whose employment had been terminated
by the dealer. The fair value of assets and liabilities acquired from the dealer was $nil and there was $nil
consideration paid.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
8.
Other Income
In thousands of AUD
Results from operations include the
following specific items within Other
income:
Lease surrender fee
Management fee
9.
Expenses
In thousands of AUD
Results from operating activities include
the following specific expenses within:
a) Cost of sales
Amortisation of capitalised deferred
subscriber acquisition costs
Impairment of capitalised deferred
subscriber acquisition costs
b) Selling and distribution expenses
Depreciation of plant and equipment
Impairment of plant and equipment
Employee benefits
c) Administrative expenses
Amortisation of non-current intangibles
Bad and doubtful debts expense
Employee benefits
Net foreign exchange losses/(gains)
Consolidated
Company
2009
2008
2009
2008
-
-
7,398
-
-
13,661
Consolidated
Company
2009
2008
2009
2008
20,071
32,676
2,196
7,453
27,193
-
5,274
19,670
7,756
7,089
-
-
-
-
36,075
3,438
37,712
5,171
18,356
23,420
41,403
(2,471)
-
-
2,228
-
50
-
-
-
-
-
-
-
-
-
-
51
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
10.
Auditors’ remuneration
Consolidated
Company
2009
2008
2009
2008
Audit services
Auditors of the Company – KPMG Australia
Audit and review of financial reports
Other regulatory audit services
405,000
12,500
417,500
423,000
12,500
435,500
Other Auditors – Hayes Knight
Audit and review of financial reports
-
59,600
Other Auditors – PKF
Audit and review of financial reports
Other services
Auditors of the Company – KPMG Australia
Other assurance services
Taxation
Other Auditors – Hayes Knight
Other assurance services
Taxation
Other Auditors – PKF
Taxation
-
417,500
40,000
535,100
-
-
-
-
-
-
-
-
14,500
69,000
16,000
99,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11.
Finance income and expense
Recognised in profit or loss
In thousands of AUD
Interest income
Interest expense
Borrowing costs
Net finance expense
Recognised in equity
In thousands of AUD
Foreign currency translation differences
on retranslation of foreign operations
Finance income(expense) recognised
directly in equity, net of tax
Attributable to:
Equity holders of the Company
Minority interest
Finance income(expense) recognised
directly in equity, net of tax
Consolidated
Company
2009
2008
2009
2008
1,342
(9,791)
(493)
(8,942)
4,565
(6,427)
(1,525)
(3,387)
12
(8,033)
(466)
(8,487)
2,389
(5,475)
(1,525)
(4,611)
Consolidated
Company
2009
2008
2009
2008
207
(156)
207
(156)
207
-
(156)
-
207
(156)
-
-
-
-
-
-
-
-
-
-
52
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
12.
Income tax expense
Recognised in the income statement
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Tax losses transferred on tax consolidation
17,538
(100)
17,438
(8,776)
-
(8,776)
3,073
(365)
2,708
(7,439)
-
(7,439)
(958)
-
(958)
1,327
243
1,570
(14,004)
(365)
(14,369)
3,308
10,969
14,277
Total income tax expense/(benefit)
8,662
(4,731)
612
(92)
Numerical reconciliation between tax expense and pre-tax accounting profit
Consolidated
Company
In thousands of AUD
2009
2008
2009
2008
Profit/(loss) before income tax
Income tax expense/(benefit) using the Company’s
domestic tax rate of 30% (2008: 30%)
Increase/(decrease) in income tax expense due to:
Non-deductible expenses/(other deductible items)
Effect of implementation of tax consolidation
Effect of tax losses cancelled on failure of
continuity of ownership tests
Over provided in prior years
Income tax expense/(benefit)
26,323
(23,664)
138
(7,157)
7,896
(7,098)
41
(2,147)
866
-
-
8,762
(100)
8,662
(163)
438
2,457
(4,366)
(365)
(4,731)
571
-
-
612
-
612
(37)
-
2,457
273
(365)
(92)
53
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
13.
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
2009
Cents
2008
Cents
2.6
2.5
(3.9)
(3.9)
2009
Number
2008
Number
Weighted average number of shares used in calculating
basic earnings per share
Ordinary shares issued at 1 August
Effect of ordinary shares issued under the Dividend Reinvestment Plan
Effect of ordinary shares issued as part consideration for purchase of
100% of TPG Holdings Limited
Effect of ordinary shares issued as consideration for purchase of
minority interest of Chariot Limited
684,200,230
405,208,684
3,454,927
-
-
-
84,836,067
1,596,754
Weighted average number of ordinary shares at 31 July
687,655,157
491,641,505
Weighted average number of shares used in calculating
diluted earnings per share
Ordinary shares issued at 1 August
684,200,230
405,208,684
Effect of ordinary shares issued under the Dividend Reinvestment Plan
3,454,927
-
Effect of ordinary shares issued as part consideration for purchase of
100% of TPG Holdings Limited
Effect of ordinary shares issued as consideration for purchase of
minority interest of Chariot Limited
Effect of share options on issue
-
-
6,559,630
84,836,067
1,596,754
-
Weighted average number of ordinary shares at 31 July
694,214,787
491,641,505
In thousands of AUD
2009
2008
Profit/(loss) attributable to ordinary shareholders
Profit/(loss) for the year
Loss attributable to outside equity interest
Profit/(loss) attributable to ordinary shareholders used in calculating
basic and diluted earnings per share
17,661
(18,933)
-
(150)
17,661
(18,783)
54
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
14.
Cash and cash equivalents
In thousands of AUD
Current
Bank balances
Cash
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents in the statements
of cash flows
Consolidated
Company
Note
2009
2008
2009
2008
17,172
7
17,179
-
14,046
7
14,053
-
17,179
14,053
109
-
109
-
109
107
-
107
-
107
The Consolidated Entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and
liabilities are disclosed in note 29.
15.
Trade and other receivables
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
Current
Trade receivables
Less: Provision for impairment losses
Accrued income
Other receivables
Non-current
Other receivables
Loans to controlled entities
20,489
(7,819)
13,608
4,004
30,282
73,863
(23,844)
7,650
6,814
64,483
-
-
-
22
22
-
-
-
98
98
-
-
-
2,804
-
2,804
-
80,995
80,995
-
103,460
103,460
The Consolidated Entity’s exposure to credit and currency risk and impairment losses related to trade and
other receivables are disclosed in note 29.
16.
Inventories
In thousands of AUD
Note
2009
2008
2009
2008
Consolidated
Company
Customer hardware
705
1,133
-
-
During the year ended 31 July 2009, the write-down of inventories to net realisable value amounted to
$785,206 (2008: $732,330).
17.
Prepayments and other assets
In thousands of AUD
Current
Prepayments
Other
Non-current
Security deposits
Prepayments
Other
Consolidated
Company
Note
2009
2008
2009
2008
6,983
-
6,983
993
-
-
993
8,748
1,066
9,814
749
1,833
123
2,705
1,868
-
1,868
269
-
-
269
2,025
-
2,025
-
1,833
-
1,833
55
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
18.
Investments
In thousands of AUD
Note
2009
2008
2009
2008
Non-current investments
Consolidated
Company
Investments in subsidiaries
-
-
461,928
462,061
The carrying value of each of the investments has been compared to its recoverable amount. The
recoverable amount is the higher of the fair value less cost to sell, and the value in use. Value in use
was determined by discounting the projected future cashflows of the respective subsidiaries. The
cashflow projections utilised were the Board approved budgeted cashflows for the year to 31 July 2010,
extrapolated based on revenue and margin growth assumptions to cover a 5 year period and
incorporating a terminal value. The net projected growth rate in cashflows is 2% per annum in years 2
to 5 based on the long-term industry growth rate. In the terminal phase beyond year 5 the growth rate
used was 0%. A pre-tax discount rate of 18% has been used in discounting the projected cashflows,
which is based on the Company’s WACC adjusted to reflect an estimate of specific risks assumed in the
cashflow projections.
In both financial year 2009 and the comparative year, the results from this exercise indicated no
impairment.
19.
Current tax assets and liabilities
The current tax asset for the Consolidated Entity of $55,000 (2008: $nil) represents the amount of
income taxes recoverable in respect of current and prior financial periods that arise from the payment of
tax in excess of the amounts due to the relevant tax authority. There was no current tax asset for the
Company (2008: $nil) at 31 July 2009.
The current tax liability for the Consolidated Entity of $8.023 million (2008: $8.005 million) represents the
amount of income taxes payable in respect of current and prior financial periods. The comparative
amount includes $7.841 million relating to the income tax payable by one of its subsidiaries, TPG
Holdings Pty Ltd, prior to entering the tax consolidated group on 7 April 2008.
The current tax liability at 31 July 2009 of the Company was $8.023 million (2008: $512,000) and this
represents the income tax payable by all members of the tax consolidated group.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
20.
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
56
Deferred tax assets and liabilities are attributable to the following:
Consolidated
In thousands of AUD
Assets
Liabilities
Net
2009
2008
2009
2008
2009
2008
Property, plant and equipment
Intangible assets
Receivables
Inventories
Interest-bearing loans and borrowings
Employee benefits
Payables
Provisions
Other items
Unearned revenue
Tax value of loss carry-forwards
recognised
Tax (assets)/liabilities
Set off of tax
Net tax liabilities
(1)
-
(2,266)
(236)
-
(1,047)
(1,625)
(2,094)
(423)
(1,009)
(457)
-
(6,891)
(306)
-
(1,175)
(824)
(601)
(966)
(3,898)
4,795
14,256
1,058
-
538
-
12
-
-
-
4,679
29,189
2,609
-
871
-
-
-
-
-
4,794
14,256
(1,208)
(236)
538
(1,047)
(1,613)
(2,094)
(423)
(1,009)
4,222
29,189
(4,282)
(306)
871
(1,175)
(824)
(601)
(966)
(3,898)
(3,888)
(5,180)
-
-
(3,888)
(5,180)
(12,589)
12,589
(20,298)
20,298
20,659
(12,589)
37,348
(20,298)
-
-
8,070
17,050
8,070
-
8,070
17,050
-
17,050
Company
In thousands of AUD
Assets
Liabilities
Net
2009
2008
2009
2008
2009
2008
Other items
Tax value of loss carry-forwards
recognised
Equity raising costs
Tax assets
Set off of tax
Net tax assets
(264)
(271)
(3,888)
(28)
(4,180)
-
(4,180)
(5,107)
(129)
(5,507)
-
(5,507)
-
-
-
-
-
-
-
-
-
-
-
-
(264)
(271)
(3,888) (5,107)
(129)
(28)
(4,180) (5,507)
-
-
(4,180) (5,507)
At 31 July 2009, a deferred tax liability of $14.853 million (2008: $14.853 million) relating to an investment in a
subsidiary has not been recognised because the Company controls whether the liability will be incurred and it is
satisfied that it will not be incurred in the foreseeable future.
57
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
20. Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
In thousands of AUD
Consolidated
Receivables
Property, plant and equipment
Intangible assets
Inventories
Interest-bearing loans and
borrowings
Payables
Investments
Unearned revenue
Provisions
Employee benefits
Other items
Tax loss carry-forwards
Company
Equity raising costs
Other items
Tax loss carry-forwards
Recognised
Acquired in
transferred on
Tax losses
Tax losses
transferred
Balance
in profit or
Recognised
business
tax
Balance
Recognised in
Recognised
on tax
Balance
1 August 2007
loss
in equity
combinations
consolidation
31 July 2008
profit or loss
in equity
consolidation
31 July 2009
2,819
5,413
10,141
-
-
-
-
(5,226)
(995)
(1,195)
(686)
(8,452)
1,819
(363)
-
(8,452)
(8,815)
(6,912)
(717)
(5,985)
(298)
258
(741)
-
1,328
895
558
473
3,702
-
-
(204)
-
-
-
-
-
-
-
-
-
(189)
(474)
25,237
(8)
613
(83)
-
-
(501)
(538)
(753)
(430)
(7,439)
(204)
22,874
-
-
-
-
-
-
-
-
-
-
-
-
-
234
(271)
14,314
14,277
-
-
-
-
-
-
-
-
-
-
(10,969)
(10,969)
(4,282)
4,222
29,189
(306)
871
(824)
-
(3,898)
(601)
(1,175)
(966)
(5,180)
17,050
(129)
(271)
(5,107)
(5,507)
3,074
572
(14,729)
70
(333)
(789)
-
2,889
(1,493)
128
543
1,292
(8,776)
101
7
1,462
1,570
-
-
(204)
-
-
-
-
-
-
-
-
-
(204)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(243)
(243)
(1,208)
4,794
14,256
(236)
538
(1,613)
-
(1,009)
(2,094)
(1,047)
(423)
(3,888)
8,070
(28)
(264)
(3,888)
(4,180)
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
21.
Property, plant and equipment
58
Consolidated
In thousands of AUD
Cost
Balance at 1 August 2007
Acquisitions through business combinations
Additions
Disposals
Write-downs and write-offs
Balance at 31 July 2008
Balance at 1 August 2008
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 July 2009
Note
Land
Plant and
equipment
Leasehold
improvements
Leased assets
Buildings
Total
60
-
-
-
-
60
60
-
-
-
60
150,664
23,926
17,945
(126)
(279)
192,130
192,130
25,078
(460)
(20)
216,728
1,216
44
6
-
(1,147)
119
119
-
-
-
119
1,650
-
1,095
-
(275)
2,470
2,470
114
-
-
2,584
-
990
-
-
-
990
990
-
-
45
1,035
153,590
24,960
19,046
(126)
(1,701)
195,769
195,769
25,192
(460)
25
220,526
59
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
21.
Property, plant and equipment (continued)
Consolidated
In thousands of AUD
Note
Land
Plant and
equipment
Leasehold improvements
Leased assets
Buildings
Total
Depreciation and impairment losses
Balance at 1 August 2007
Depreciation charge for the year
Impairment losses
Disposals
Write-downs and write-offs
Balance at 31 July 2008
Balance at 1 August 2008
Depreciation charge for the year
Disposals
Effect of movements in exchange rates
Balance at 31 July 2009
Carrying amounts
At 1 August 2007
At 31 July 2008
At 1 August 2008
At 31 July 2009
-
-
-
-
-
-
-
-
-
-
-
60
60
60
60
32,141
18,375
7,756
(8)
(847)
57,417
57,417
26,918
(184)
(58)
84,093
118,523
134,713
134,713
132,635
557
443
-
-
(927)
73
73
5
-
-
78
659
46
46
41
108
852
-
-
(275)
685
685
221
-
-
906
1,542
1,785
1,785
1,678
-
-
-
-
-
-
-
49
-
(8)
41
32,806
19,670
7,756
(8)
(2,049)
58,175
58,175
27,193
(184)
(66)
85,118
-
120,784
990
137,594
990
994
137,594
135,408
60
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
21.
Property, plant and equipment (continued)
Leased plant and equipment
The Consolidated Entity leases plant and equipment under a number of finance lease agreements. At the
end of each of the leases the Consolidated Entity has the option to purchase the plant and equipment at a
beneficial price. At 31 July 2009 the net carrying amount of leased plant and equipment was $1.678
million (2008: $1.785 million). The leased plant and equipment secures lease obligations (see note 24).
22.
Intangible assets
Consolidated
In thousands of AUD
Current
Net capitalised deferred subscriber acquisition costs
Balance 1 August
Additions
Written-off
Balance 31 July
Amortisation
Balance 1 August
Amortisation
Written-off
Balance 31 July
Carrying amounts
At 1 August
At 31 July
2009
2008
45,824
4,003
(26,567)
59,856
35,970
(50,002)
23,260
45,824
21,104
20,071
(25,230)
30,645
32,676
(42,217)
15,945
21,104
24,720
7,315
29,211
24,720
61
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
22.
Intangible assets (continued)
Consolidated
In thousands of AUD
Non-current
Cost
Balance at 1 August 2007
Acquisitions through business combinations
Balance 31 July 2008
Balance 1 August 2008
Acquisitions through business combinations
Balance 31 July 2009
Amortisation and Impairment
Balance at 1 August 2007
Amortisation for the year
Balance 31 July 2008
Balance 1 August 2008
Amortisation for the year
Balance 31 July 2009
Carrying amounts
At 1 August 2007
At 31 July 2008
At 1 August 2008
At 31 July 2009
Goodwill
61,497
174,450
235,947
235,947
(110)
235,837
-
-
-
-
-
-
61,497
235,947
235,947
235,837
Acquired
customer
bases
28,341
84,124
112,465
112,465
-
112,465
24,007
16,858
40,865
40,865
32,307
73,172
4,334
71,600
71,600
39,293
Trademark
Internally
generated
software
Indefeasible
right of use of
capacity
Development
costs
-
20,068
20,068
20,068
-
20,068
-
-
-
-
-
-
-
20,068
20,068
20,068
-
7,837
7,837
7,837
-
7,837
-
522
522
522
1,567
2,089
-
7,315
7,315
5,748
-
26,069
26,069
26,069
-
26,069
-
624
624
624
2,107
2,731
-
25,445
25,445
23,338
1,459
-
1,459
1,459
-
1,459
393
352
745
745
94
839
1,066
714
714
620
Total
91,297
312,548
403,845
403,845
(110)
403,735
24,400
18,356
42,756
42,756
36,075
78,831
66,897
361,089
361,089
324,904
62
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
22.
Intangible assets (continued)
Amortisation
The amortisation charge is recognised in the following line items in the income statement:
In thousands of AUD
Cost of sales
Administrative expenses
Consolidated
Company
2009
20,071
36,075
56,146
2008
32,676
18,356
51,032
2009
2008
-
-
-
-
-
-
Impairment tests for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Consolidated Entity’s cash generating units
(CGUs). CGUs are determined according to the lowest level of groups of assets that generate largely independent
cashflows. Following the acquisition of TPG Holdings Limited and its subsidiaries during the 2008 financial year
and the subsequent integration of the businesses and networks, it was determined that there was now one single
CGU with total goodwill in the CGU of $235,837,000 (2008: $235,947,000).
The recoverable amount of the goodwill in the CGU has been determined based on a value in use calculation.
Value in use was determined by discounting the projected future cashflows generated from the continuing use of
the assets in the CGU. The cashflow projections utilised were the Board approved budgeted cashflows for the year
to 31 July 2010, extrapolated based on revenue and margin growth assumptions to cover a 5 year period and
incorporating a terminal value. The net projected growth rate in cashflows is 2% per annum in years 2 to 5 based
on the long-term industry growth rate. In the terminal phase beyond year 5 the growth rate used was 0%. A pre-tax
discount rate of 18% has been used in discounting the projected cashflows, which is based on the Company’s
WACC adjusted to reflect an estimate of specific risks assumed in the cashflow projections. Sensitivity analysis on
these assumptions has been performed which indicated that a reasonably possible movement in the assumptions
would not create an impairment.
23.
Trade and other payables
In thousands of AUD
Trade creditors
Other creditors and accruals
Consolidated
Company
2009
36,334
39,663
75,997
2008
60,316
20,601
80,917
2009
208
485
693
2008
197
1,208
1,405
The Consolidated Entity’s exposure to currency and liquidity risk related to trade and other payables is disclosed in
note 29.
63
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
24.
Loans and borrowings
This note provides information about the contractual terms of the Consolidated Entity’s interest-bearing loans
and borrowings. For more information about the Consolidated Entity’s exposure to interest rate and foreign
currency risk, see note 29.
In thousands of AUD
Current liabilities
Secured bank loans
Secured note facility
Insurance premium funding
Finance lease liabilities
Liability under network capacity agreement
Loans from controlled entities
Non-current liabilities
Secured bank loans
Finance lease liabilities
Liability under network capacity agreement
Consolidated
Company
Note
2009
2008
2009
2008
(i)
(ii)
(iii)
35
(i)
(iii)
-
-
-
442
8,093
-
8,535
9,375
2,000
23
843
10,053
-
22,294
-
-
-
-
-
73,392
73,392
6,000
-
-
-
-
27,665
33,665
58,000
429
-
58,429
130,000
912
6,717
137,629
58,000
-
-
58,000
130,000
-
-
130,000
(i)
On 22 April 2008, the Consolidated Entity entered into a secured bank loan facility to help finance the
acquisition of TPG Holdings Limited. Under the facility it originally drew down $150 million, but repaid $14
million by 31 July 2008, such that the balance outstanding at that date was $136 million. The Consolidated
Entity then repaid a further $78 million during the year ended 31 July 2009 such that the balance outstanding
at that date was $58 million.
The bank loan facility is secured by a fixed and floating charge over all of the assets of the Consolidated Entity,
excluding Chariot Pty Ltd and its subsidiaries.
Bank loans totalling $3.375 million in Chariot Pty Ltd at 31 July 2008 were repaid in full during the year ended
31 July 2009.
(ii) The secured notes totalling $2 million in Chariot Pty Ltd at 31 July 2008 were repaid in full during the year
ended 31 July 2009.
(iii) Unsecured liability in respect of an agreement for the supply of network capacity (indefeasible right of use of
capacity).
64
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
24.
Loans and borrowings (continued)
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Consolidated
In thousands of AUD
Currency
interest rate
maturity
Nominal
Year of
2009
2008
Face
value
Carrying
amount
Face
value
Carrying
amount
Secured bank loan (3)
AUD
BBSY
Secured bank loan
Secured note facility
Finance lease liabilities
Liability under network
capacity agreement
AUD
AUD
AUD
USD
+ margin (1)
2011 (2)
58,000
58,000
136,000
136,000
(2008: 11.9%)
(2008: 31.2%)
-
-
-
-
-
-
6.9%
2010-2013
940
871
3,375
2,000
1,923
3,375
2,000
1,755
8.7%
2010
8,261
8,093
17,827
16,770
Insurance premium funding
AUD
(2008: 10.9%)
-
-
-
24
23
Company
In thousands of AUD
Currency
interest rate
maturity
Nominal
Year of
Secured bank loan (3)
AUD
BBSY +
67,201
66,964
161,149
159,923
2009
2008
Face
value
Carrying
amount
Face
value
Carrying
amount
margin (1)
2011 (2)
58,000
58,000
136,000
136,000
Loans from controlled entities
AUD
0%
-
73,392
73,392
27,665
27,665
131,392
131,392
163,665
163,665
(1) Margin is variable and is determined quarterly according to gearing ratio.
(2)
The next compulsory repayment is not until the facility expires in February 2011.
(3) During the year the Consolidated Entity breached one financial covenant for the period ended 31 October 2008 as a result of
losses incurred for the year ended 31 July 2008. The breach was remedied through the lender waiving its rights in relation
to this breach.
Finance lease liabilities
Finance lease liabilities of the Consolidated Entity are payable as follows:
Consolidated
In thousands of AUD
Less than one year
Between one and five years
Minimum
lease
payments
2009
485
455
940
Interest
2009
Principal
2009
(43)
(26)
(69)
442
429
871
Minimum
lease
payments
2008
958
965
1,923
Interest
2008
Principal
2008
(99)
(69)
(168)
859
896
1,755
65
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
25.
Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non Current
Liability for long service leave
Share based payments
(i) Employee Share Option Plan
Consolidated
Company
2009
2008
2009
2008
2,289
777
3,066
2,544
556
3,100
537
746
-
-
-
-
-
-
-
-
On 27 February 2009, the Company announced a pool of 13.5 million share options with an exercise price of
$0.18 per share, based on the 60 day Volume Weighted Average Share Price (“VWAP”) at that date of $0.16.
On 7 July 2009, the Board approved the terms of a new Employee Share Option Plan under which these options
would be granted to employees. On 8 July 2009, 10.875 million of these share options were granted to
employees. All options granted on that date were immediately exerciseable with a latest exercise date of 30 June
2010. All options are to be settled by physical delivery of shares.
The fair value of services received in return for share options granted is based on the fair value of share options
granted. The fair value of the options was measured using a Black Scholes model with the following inputs:
Share price at grant date
Exercise price
Expected volatility
Option life
Expected dividends
Risk-free interest rate
Fair value at grant date
(ii) Employee Share Scheme
$0.38
$0.18
66.3%
0.27 years
-
5.5%
$0.20484
The Consolidated Entity has in place an Employee Share Scheme that provides for selected employees to receive
ordinary shares in the Company. Under this scheme funds are transferred to a trust which acts as an agent and
purchases shares for the benefit of the selected employees. A treasury share reserve is recognised for the funds
transferred to the scheme. An employee expense is recognised over the period during which the employees
become unconditionally entitled to the shares with a corresponding decrease in the treasury share reserve.
Under the share scheme the employee receives the voting rights and dividend entitlement to shares purchased
under the scheme, however they are unable to access the shares until they satisfy the continuity of service
criteria. Shares purchased during 2009 vested immediately, whereas shares purchased under this scheme in
previous years vest to the employee at 20% per annum at the end of each of the five years following the
purchase, provided they continue to be employed in the Consolidated Entity. If the employee terminates their
employment, they forfeit their entitlement to the unvested shares, except in limited circumstances such as medical
reasons, bona fide retirement or termination other than for gross misconduct.
During the year $400,388 (2008: $458,126) was paid into the employee share scheme for the purchase of shares.
Shares were purchased for the benefit of 43 (2008: 20) employees using $212,160 of these funds and the balance
of unused funds was repaid to the Company after the year-end. During the year ended 31 July 2009, $219,507
(2008: $252,640) was recognised as an employee benefit expense.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
66
26.
Provisions
In thousands of AUD
Consolidated
Balance 1 August 2008
Provisions made during the year
Provisions used during the year
Balance 31 July 2009
Current
Non-current
Company
Make good
costs
Customer
loyalty
program
Lease
increment
Other
Total
595
2,414
100
-
-
(100)
3,009
936
2,073
3,009
-
-
-
-
156
-
(36)
120
-
120
120
132
-
(132)
-
-
-
-
983
2,414
(268)
3,129
936
2,193
3,129
There were no provisions in the Company at 31 July 2009 (2008: $nil).
Make good costs
The make good costs provision relates to the Consolidated Entity’s estimated costs to make good leased premises.
The provision is based on the estimated cost per leased site using historical costs for sites made good previously.
Customer loyalty program
The customer loyalty provision is for the expected settlement costs of loyalty program obligations.
Lease increment
Where the Consolidated Entity has contracted lease agreements that contain incremental lease payments over the
term of the lease a provision is recognised for the increased lease payments so that lease expenditure is recognised
on a straight line basis over the lease term.
67
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
27.
Deferred income and other liabilities
In thousands of AUD
Current liabilities
Unearned revenue
Accrued interest
Other
Non-current liabilities
Unearned revenue
Consolidated
Company
2009
2008
2009
2008
25,046
96
229
25,371
32,104
355
-
32,459
-
96
229
325
-
355
-
355
7,869
8,214
-
-
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
68
28. Capital and reserves
Consolidated
In thousands of AUD
Share
capital
Foreign
currency
reserve
Share
option
reserve
Treasury
share
reserve
Revaluation
reserve
Minority
interest
acquisition
reserve
Retained
earnings
Total
Minority
interest
Total
equity
Balance at 1 August 2007
Total recognised income and expense
Minority interest on acquisition of Chariot Limited
Transfer between reserves
Movement in treasury share reserve
Acquisition of minority interest
Issue of ordinary shares
Transaction costs
Dividends to equity holders
Balance at 31 July 2008
Balance at 1 August 2008
Total recognised income and expense
Transfers between reserves
Movement in share option reserve
Movement in treasury share reserve
Acquisition of minority interest
Transaction costs
Dividends to equity holders
Balance at 31 July 2009
272,837
-
-
-
-
-
111,980
(124)
-
384,693
384,693
-
-
-
-
-
(17)
5,071
389,747
26
(156)
-
-
-
-
-
-
-
(130)
(130)
207
-
-
-
-
-
-
77
440
-
-
(440)
-
-
-
-
-
-
-
-
-
2,227
-
-
-
-
2,227
-
-
-
-
(204)
-
-
-
-
(204)
(204)
-
-
-
(181)
-
-
-
(385)
1,389
-
-
(474)
-
-
-
-
-
915
915
-
(476)
-
-
-
-
-
439
(52,482)
-
-
-
-
(3,977)
-
-
-
(56,459)
(56,459)
-
-
-
-
22
-
-
(56,437)
10,292
(18,783)
-
914
-
-
-
-
(14,588)
(22,165)
(22,165)
17,661
476
-
-
-
-
(6,842)
(10,870)
232,502
(18,939)
-
-
(204)
(3,977)
111,980
(124)
(14,588)
306,650
306,650
17,868
-
2,227
(181)
22
(17)
(1,771)
324,798
-
(150)
(1,124)
-
-
1,274
-
-
-
-
-
-
-
-
-
-
-
-
-
232,502
(19,089)
(1,124)
-
(204)
(2,703)
111,980
(124)
(14,588)
306,650
306,650
17,868
-
2,227
(181)
22
(17)
(1,771)
324,798
69
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
28.
Capital and reserves (continued)
Reconciliation of movement in capital and reserves
Company
In thousands of AUD
Share
capital
Note
Share
option
reserve
Treasury
share
reserve
Retained
earnings
Total
equity
Balance at 1 August 2007
Total recognised income and expense
Movement in treasury share reserve
Issue of ordinary shares
Transaction costs
Dividends to equity holders
Balance at 31 July 2008
Balance at 1 August 2008
Total recognised income and expense
Movement in share option reserve
Movement in treasury share reserve
Transaction costs
Dividends to equity holders
272,837
-
-
111,980
(124)
-
384,693
384,693
-
-
-
(17)
5,071
-
-
-
-
-
-
-
-
-
2,227
-
-
-
-
-
(204)
-
-
-
(204)
(204)
-
-
(181)
-
-
46,318
(7,065)
-
-
-
(14,588)
319,155
(7,065)
(204)
111,980
(124)
(14,588)
24,665
409,154
24,665
(474)
-
-
-
(6,842)
409,154
(474)
2,227
(181)
(17)
(1,771)
Balance at 31 July 2009
389,747
2,227
(385)
17,349
408,938
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
28.
Capital and reserves (continued)
Share capital
On issue at 1 August
Ordinary shares issued under the Dividend Reinvestment Plan
Ordinary shares issued as part consideration for purchase of 100% of
TPG Holdings Limited
Ordinary shares issued as consideration for purchase of minority interest
of Chariot Limited
70
Company
Ordinary shares
2009
2008
684,200,230
405,208,684
19,400,744
-
-
270,000,003
-
8,991,543
On issue at 31 July
703,600,974
684,200,230
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the
Company’s residual assets.
Foreign currency translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations where their functional currency is different to the presentation
currency of the reporting entity.
Revaluation reserve
The revaluation reserve relates to the value of contracted customers that was recognised on the
consolidation of SPT Telecommunications Pty Ltd. This entity was previously equity accounted and the
amount recognised in the reserve reflects 50% of the increment in value of contracted customers.
Treasury share reserve
The treasury share reserve represents the value of shares held by an equity compensation plan that the
Consolidated Entity is required to include in the consolidated financial statements. This reserve will be
reversed against share capital when the underlying shares vest in the employee. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or cancellation of the Consolidated Entity’s own
equity instruments.
Share option reserve
The share option reserve is used to recognise the fair value of options issued but not exercised.
Minority interest acquisition reserve
The minority interest acquisition reserve represents the surplus of the acquisition price over the minority
interest acquired. Refer to note 7 for details regarding the acquisition of the minority interest in Chariot
Limited (2008 financial year).
71
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
28.
Capital and reserves (continued)
Dividends
Dividends recognised in the current year by the Company are:
In thousands of AUD
2009
Interim 2009 ordinary (special)
Total amount
2008
Interim 2008 ordinary (special)
Final 2007 ordinary
Total amount
Cents
per share
Total
amount
Franked /
unfranked
Date of
payment
1.0
6,842
Franked
27 May 2009
2.4
1.2
6,842
9,725
4,863
14,588
Franked
Franked
22 May 2008
15 November 2007
Franked dividends declared or paid during the year were fully franked at the tax rate of 30%.
The directors have declared a fully franked final FY09 dividend of 1 cent per share. The dividend has a
record date of 21 October 2009 and will be paid on 18 November 2009.
Dividend franking account
In thousands of AUD
30 per cent franking credits available to shareholders of SP Telemedia Limited
for subsequent financial years
34,774
12,060
Company
2009
2008
The above available amounts are based on the balance of the dividend franking account at year-end
adjusted for:
(a)
(b)
(c)
franking credits that will arise from the payment of the current tax liabilities;
franking debits that will arise from the payment of dividends recognised as a liability at the year-end;
franking credits that will arise from the receipt of dividends recognised as receivables by the tax
consolidated group at the year-end; and
franking credits that the entity may be prevented from distributing in subsequent years.
(d)
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare
dividends. The impact on the dividend franking account of dividends proposed after the balance sheet date
but not recognised as a liability is to reduce it by $3,015,433 (2008: $nil). In accordance with the tax
consolidation legislation, the Company as the head entity in the tax-consolidated group has also assumed
the benefit of $34.774 million (2008: $12.060 million) franking credits.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments
72
Exposure to credit, liquidity and market risks arise in the normal course of the Company’s and Consolidated
Entity’s activities. The Consolidated Entity’s risk management policies are addressed at note 5.
Credit risk
Exposure to credit risk
The carrying amount of the Consolidated Entity’s financial assets represents the maximum credit exposure.
The Consolidated Entity’s maximum exposure to credit risk at the reporting date was:
In thousands of AUD
Current assets
Trade and other receivables
Cash and cash equivalents
Non-current
Receivables *
Carrying amount
Consolidated
Company
Note
2009
2008
2009
2008
15
14
15
30,282
17,179
64,483
14,053
22
109
98
107
-
2,804
80,995
103,460
47,461
81,340
81,126
103,665
* The amount outstanding at 31 July 2009 and at 31 July 2008 for the Company fully relates to amounts owed
from subsidiaries.
The Consolidated Entity’s maximum exposure to credit risk for trade receivables at the reporting date by
customer was:
In thousands of AUD
Type of customer
Government
Corporate
Wholesale
Retail
Carrying amount
Consolidated
Company
Note
2009
2008
2009
2008
4,788
3,947
3,352
8,402
15
20,489
6,397
9,393
7,526
50,547
73,863
-
-
-
-
-
-
-
-
-
-
Approximately 41% of the Consolidated Entity’s trade receivables are attributable to retail customers (2008:
68%). The Consolidated Entity minimises concentrations of credit risk by undertaking transactions with a large
number of customers.
By industry, the Consolidated Entity is not subject to a concentration of credit risk as its customers operate in a
wide range of industries.
73
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments (continued)
Credit risk (continued)
Exposure to credit risk (continued)
The Consolidated Entity’s maximum exposure to credit risk for trade receivables at the reporting date by
geographical region was:
In thousands of AUD
Geographical region
Australia
New Zealand
United States
Other
Carrying amount
Consolidated
Company
Note
2009
2008
2009
2008
20,042
174
10
263
20,489
73,057
143
172
491
73,863
15
-
-
-
-
-
Geographically, the Consolidated Entity is subject to a concentration of credit risk as predominantly all of its
revenue is attributable to Australia.
Provision for Impairment losses
The aging of the Consolidated Entity’s trade receivables at the reporting date was:
Carrying amount
Consolidated
Company
Note
2009
2008
2009
2008
In thousands of AUD
Aging of customer
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due 121 days
Gross trade receivables
Less: Provision for impairment losses
15
15
Net trade receivables
8,861
3,428
1,420
1,630
430
4,720
20,489
(7,819)
12,670
27,715
17,181
10,290
5,512
4,218
8,947
73,863
(23,844)
50,019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The provision for impairment losses of the Consolidated Entity at 31 July 2009 of $7.819 million (2008: $23.844
million) represents the risk of non-collection of outstanding debts that are past due and believed to be at risk.
The allowance is used to record impairment losses unless the Consolidated Entity is satisfied that no recovery
of the amount owing is possible. At this point the amount is considered irrecoverable and is written off against
the financial asset directly.
Based on historic default rates, the Consolidated Entity believes that no impairment allowance is necessary in
respect of trade receivables not past due or past due by up to 30 days.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments (continued)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements:
Consolidated
31 July 2009
In thousands of AUD
Secured bank loans
Finance lease liabilities
Liability under network
capacity agreement
Trade and other payables
31 July 2008
In thousands of AUD
Secured bank loans
Secured notes
Finance lease liabilities
Liability under network
capacity agreement
Insurance premium funding
Trade and other payables
Company
31 July 2009
In thousands of AUD
Secured bank loans
Trade and other payables
31 July 2008
In thousands of AUD
Secured bank loans
Trade and other payables
Note
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5 years
58,000
(62,914)
(1,575)
(1,575)
(59,764)
-
871
(940)
(341)
(144)
(289)
(166)
8,093
75,997
(8,261)
(75,997)
(6,196)
(75,997)
(2,065)
-
-
-
-
-
142,961
(148,112)
(84,109)
(3,784)
(60,053)
(166)
Note
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
Months
1-2
years
2-5 years
139,375
(168,631)
(5,961)
(11,897)
(31,869) (118,904)
2,000
1,755
(2,312)
(1,923)
(2,312)
(480)
-
-
-
(478)
(827)
(138)
16,770
23
80,917
(17,827)
(24)
(5,348)
(24)
(5,348)
-
(7,131)
-
(80,917)
(80,917)
-
-
-
-
-
240,840
(271,634)
(95,042)
(17,723)
(39,827) (119,042)
Note
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5 years
58,000
(62,914)
(1,575)
(1,575)
(59,764)
693
(693)
(693)
-
-
58,693
(63,607)
(2,268)
(1,575)
(59,764)
-
-
-
Note
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
1-2
years
2-5 years
136,000
(164,084)
(5,760)
(11,696)
(31,467) (115,161)
1,405
(1,405)
(1,405)
-
-
-
137,405
(165,489)
(7,165)
(11,696)
(31,467) (115,161)
74
More
than 5
years
-
-
-
-
-
More
than 5
years
-
-
-
-
-
-
-
More
than 5
years
-
-
-
More
than 5
years
-
-
-
75
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments (continued)
Market risk
Currency risk
Exposure to currency risk
The Consolidated Entity is exposed to foreign currency risk on revenues, expenses and financial instruments that
are denominated in a currency other than AUD. The Consolidated Entity’s exposure to foreign currency risk at
balance date was as follows:
Consolidated
In thousand of AUD
Trade receivables
Other financial assets
Trade payables
Other financial liabilities
Gross balance sheet exposure
AUD
equivalent
455
13,292
(1,838)
(8,093)
3,816
NZD
USD
PP
AUD
equivalent
NZD
USD
PP
31 July 2009
31 July 2008
204
117
(77)
240
-
10,567 12,287
676
654
177
553
513
-
5
9,540
(1,457)
-
(6,636)
-
-
(3,710)
(55)
(3,366)
(5,324)
(16,770)
- (15,932)
-
244
2,714 12,287
(19,150)
675 (18,780)
4,216
In addition to the above, the Consolidated Entity has operating lease commitments denominated in USD (refer
note 30).
Company
The Company had no exposure to foreign currency risk at 31 July 2009 (2008: $nil).
The following significant exchange rates applied during the year:
In AUD
NZD
USD
PP
Average rate
Reporting date spot rate
2009
2008
2009
2008
1.23
0.73
35.05
1.19
0.91
39.84
1.26
0.82
39.38
1.30
0.95
42.59
Sensitivity analysis
A 10 percent strengthening of the Australian dollar against the following currencies at 31 July would have
increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2008.
In thousands of AUD
31 July 2009
NZD
USD
PP
31 July 2008
NZD
USD
PP
Consolidated
Company
Equity
Profit or loss
Equity
Profit or loss
(18)
(301)
(28)
(47)
1,797
(9)
-
(301)
-
-
1,797
-
-
-
-
-
-
-
-
-
-
-
-
-
A 10 percent weakening of the Australian dollar against the above currencies at 31 July would have had the equal
but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables
remain constant.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments (continued)
Market risk (continued)
76
Interest rate risk
Profile
At the reporting date the interest rate profile of the Company’s and the Consolidated Entity’s interest-bearing
financial instruments was:
In thousands of AUD
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Consolidated
Carrying amount
Company
Carrying amount
Note
2009
2008
2009
2008
-
(8,964)
(8,964)
-
(18,548)
(18,548)
-
-
-
-
-
-
17,179
(58,000)
(40,821)
14,053
(141,375)
(127,322)
109
(58,000)
(57,891)
107
(136,000)
(135,893)
Fair value sensitivity analysis for fixed rate instruments
The Consolidated Entity does not account for any fixed rate financial assets and liabilities at fair value through profit
or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) the
Consolidated Entity’s equity and profit or loss by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for
2008.
Consolidated Entity
Company
Profit or loss
Equity
Profit or loss
Equity
100bp
increase
100bp
decrease
100bp
increase
100bp
decrease
100bp
increase
100bp
decrease
100bp
increase
100bp
decrease
(409)
(409)
409
409
(409)
(409)
409
409
(579)
(579)
579
579
(579)
(579)
579
579
In thousands of AUD
31 July 2009
Variable rate instruments
Cash flow sensitivity
31 July 2008
Variable rate instruments
Cash flow sensitivity
(1,067)
1,067
(1,067)
1,067
(1,162)
1,162
(1,162)
(1,067)
1,067
(1,067)
1,067
(1,162)
1,162
(1,162)
1,162
1,162
77
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
29.
Financial instruments (continued)
Fair values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are
as follows:
Consolidated
In thousands of AUD
Trade debtors and other receivables
Cash and cash equivalents
Secured bank loans
Secured notes
Insurance premium funding
Finance lease liabilities
Trade and other payables
Company
In thousands of AUD
Loans and receivables
Cash and cash equivalents
Secured bank loans
Trade and other payables
31 July 2009
31 July 2008
Carrying
amount
30,282
17,179
Fair value
30,282
17,179
Carrying
amount
67,287
14,053
Fair value
67,287
14,053
(58,000)
(58,000)
(139,375)
(139,375)
-
-
(871)
(75,997)
(87,407)
-
-
(871)
(75,997)
(87,407)
(2,000)
(23)
(1,755)
(80,917)
(2,000)
(23)
(1,755)
(80,917)
(142,730)
(142,730)
31 July 2009
31 July 2008
Carrying
amount
80,995
109
Fair value
80,995
109
Carrying
amount
Fair value
103,558
103,558
107
107
(58,000)
(58,000)
(136,000)
(136,000)
(693)
(693)
(22,411)
(22,411)
(1,405)
(33,740)
(1,405)
(33,740)
The basis for determining the fair values of financial assets and liabilities is disclosed in note 4.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
30.
Operating leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
Consolidated
Company
2009
22,121
79,331
533
101,985
2008
18,423
41,655
912
60,990
2009
2008
-
-
-
-
These operating lease commitments include $94.784 million denominated in USD (2008: $47.648
million).
31.
Capital and other commitments
In thousands of AUD
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
One year or later and no later than five years
Consolidated
Company
2009
2008
2009
2008
3,648
-
3,648
6,983
44
7,027
-
-
-
32.
Contingencies
The directors are of the opinion that provisions are not required in respect of these matters, as it is not
probable that a future economic sacrifice of economic benefits will be required or the amount is not
capable of reliable measurement.
78
-
-
-
-
-
-
-
Guarantees
Under the terms of a Deed of Cross Guarantee (refer note 37) the Company guarantees to each creditor
payment in full of any debt in the event of winding up of any of the subsidiaries.
Litigation
The Company (or its subsidiaries) are parties to various legal cases which have arisen in the ordinary
course of the business of the company.
The directors have provided for costs and settlement of certain cases where such amounts can be
reliably estimated. In the opinion of directors, the likelihood of significant cash outflows relating to other
cases is considered remote.
In the opinion of directors, disclosure of further information about these legal cases would be prejudicial
to the interests of the company.
79
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
33.
Consolidated entities
The following is a list of all entities that form part of the Consolidated Entity at 31 July 2009:
Parent entity
SP Telemedia Limited
Subsidiaries
TPG Holdings Pty Ltd
TPG Internet Pty Ltd
Value Added Network Pty Ltd
TPG Network Pty Ltd
TPG Research Pty Ltd
TPG Broadband Pty Ltd
TPG (NZ) Pty Ltd
Country of
Incorporation
Ownership interest (%)
2009
2008
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Orchid Cybertech Services Incorporated
Philippines
99.99
99.99
Orchid Human Resources Pty Ltd
Chariot Pty Ltd
Soul Pattinson Telecommunications Pty Ltd
SPT Telecommunications Pty Ltd
SPTCom Pty Ltd
Kooee Communications Pty Ltd
Kooee Pty Ltd
Kooee Mobile Pty Ltd
Soul Communications Pty Ltd
Soul Contracts Pty Ltd
Digiplus Investments Pty Ltd
Digiplus Holdings Pty Ltd
Digiplus Pty Ltd
Digiplus Limited
Codex Limited
Digiplus Contracts Pty Ltd
Blue Call Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
34.
Reconciliation of cash flows from operating activities
In thousands of AUD
Cash flows from operating activities
Profit/(loss) for the year after income tax
Adjustments for:
Depreciation of plant and equipment
Impairment of plant and equipment
Amortisation of intangibles
Impairment of intangibles
Bad and doubtful debts
Prepaid advertising written-off
Borrowing costs written-off
Employee share plan expense
Employee share option plan expense
Unrealised foreign exchange loss/(gain)
Interest income
Interest expense
Net loss/(gain) on sale on non-current assets
Income tax expense/(benefit)
Operating profit before changes in working
capital and provisions
Changes in operating assets and liabilities adjusted for
effects from purchase of controlled entities during the
financial year:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
(Increase)/decrease in intangible assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in other liabilities
(Decrease)/increase in employee benefits
(Decrease)/Increase in provisions
Interest paid
Income taxes paid
Interest received
80
Consolidated
Company
2009
2008
2009
2008
17,661
(18,933)
(474)
(7,065)
27,193
-
56,146
2,196
3,438
2,000
493
219
2,228
929
(1,342)
9,791
219
8,662
19,670
7,756
51,032
7,453
23,420
2,000
534
254
-
(259)
(4,622)
6,484
(87)
(4,731)
-
-
-
-
-
2,000
466
219
2,228
-
(12)
8,033
-
612
-
-
-
-
-
2,000
534
254
-
-
(2,389)
5,475
-
(92)
129,833
89,971
13,072
(1,283)
34,597
428
5,308
(4,863)
(4,872)
(7,482)
(244)
121
152,826
(9,920)
(19,104)
773
(20,131)
2,082
(2,448)
(27,443)
(1,070)
(4,138)
(1,730)
1,683
36,776
(5,876)
(17,268)
3,438
76
-
(14,869)
-
(253)
-
-
-
(1,974)
(8,292)
(872)
11
(44)
-
9
-
113
-
-
-
(1,205)
(5,096)
(12,805)
2,394
Net cash from operating activities
124,575
17,070
(11,127)
(16,712)
81
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
35.
Related parties
The following were key management personnel of the Consolidated Entity at any time during the reporting
period and, unless otherwise indicated, were key management personnel for the entire period:
Executive directors
Mr David Teoh
Chairman
Mr Alan Latimer
Non-executive directors
Mr Robert Millner
former Chairman
Mr Denis Ledbury
Mr Joseph Pang
Executives
Mr Witold Piestrzynski
Chief Operating Officer
Mr Stephen Banfield
Chief Financial Officer and Company Secretary
Ms Mandie De Ville
Chief Information Officer
Mr Craig Levy
General Manager – Mobile Products & Consumer Sales
recognised in key management personnel
from 1 August 2008
Mr John Paine
National Technical and Strategy Manager
recognised in key management personnel
from 1 August 2008
Mr Stuart McCullough
National General Manager, Sales
appointed 26 August 2008
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
35.
Related parties (continued)
Key management personnel compensation
82
The key management personnel compensation included in employee benefits (see note 25) is as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Equity compensation benefits
Consolidated
Company
2009
2008
2009
2008
1,742,293
445,803
30,775
-
623,123
2,076,015
533,639
731,727
523,245
80,782
557,111
255,505
12,492
-
-
361,778
117,820
-
-
-
2,841,994
3,945,408
825,108
479,598
Individual directors’ and executives’ compensation disclosures
Information regarding individual directors’ and executives’ compensation is provided in the Remuneration
Report section of the Directors’ report on pages 12 to 17.
During the year the Consolidated Entity rented office premises from companies related to a director of the
Company, Mr D Teoh. The total rent charged for the financial year 2009 was $100,920 (2008: $28,600).
Apart from the details disclosed in this note, no director has entered into a material contract with the Company
or the Consolidated Entity since the end of the previous financial year and there were no material contracts
involving directors’ interests existing at year-end.
Loans to key management personnel and their related parties (consolidated)
There were no loans in existence between the Consolidated Entity and any key management personnel or their
related parties at any time during or since the financial year.
Other key management personnel transactions with the Company or its controlled
entities
From time to time, key management personnel of the Company or its controlled entities, or their related entities,
may purchase goods from the Consolidated Entity. These purchases are on the same terms and conditions as
those entered into by other Consolidated Entity employees or customers and are trivial or domestic in nature.
83
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
35.
Related parties (continued)
Options and rights over equity instruments
The movement during the 2009 financial year in the number of options over ordinary shares in SP Telemedia
Limited held directly, indirectly or beneficially, by each key management person, including their related parties, is
as as follows:
Held at
1 August
Granted as
Vested and
Held at
31 July
Vested
exercisable
during the
at 31 July
2008
compensation
Exercised
Expired
2009
year
2009
Executives
Mr V Piestrzynski
Mr J Paine
Mr C Levy
Mr S Banfield
Mr S McCullough
Ms M De Ville
-
-
-
-
-
-
1,000,000
1,000,000
700,000
500,000
500,000
150,000
100,000
-
-
-
-
-
-
-
-
-
-
-
- 1,000,000
-
700,000
700,000
700,000
500,000
500,000
150,000
100,000
500,000
500,000
150,000
100,000
500,000
500,000
150,000
100,000
There were no options outstanding, nor any new options granted during the comparative 2008 financial year.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
35. Related parties (continued)
Movements in shares
84
Shares in SP Telemedia Limited
Directors
Mr D Teoh
Mr R Millner
Mr D Ledbury
Mr A Latimer
Mr J Pang
Executives
Mr W Piestrzynski
Mr S Banfield
Ms M De Ville
Mr C Levy
Mr J Paine
Mr S McCullough
Held at
Granted as
1 August 2008
Purchases
remuneration
Received under
Dividend
Reinvestment
Plan
Held at
31 July 2009
261,172,492
3,195,784
178,223
1,174,102
-
2,219,626
2,300,000
122,000
100,000
-
-
-
-
-
-
9,991,297
208,332
11,486
48,742
-
273,383,415
5,704,116
311,709
1,322,844
-
2,303,352
4,374
2,676
10,593
2,600,000
-
-
-
-
88,000
400,000
90,000
-
19,994
6,280
18,113
-
-
-
-
-
-
114,767
3,060
2,303,352
24,368
8,956
116,706
3,114,767
93,060
Held at
1 August 2007
Purchases
Granted as
remuneration
Received as
consideration
for sale of
shares in TPG
Holdings Pty Ltd
Held at
31 July 2008
-
2,695,784
178,223
-
-
-
500,000
-
-
-
-
-
-
-
-
261,172,492
-
-
1,174,102
-
261,172,492
3,195,784
178,223
1,174,102
-
-
-
-
390,000
-
-
-
4,374
2,676
1,913,352
-
-
2,303,352
4,374
2,676
Shares in SP Telemedia Limited
Directors
Mr D Teoh
Mr R Millner
Mr D Ledbury
Mr A Latimer
Mr J Pang
Executives
Mr W Piestrzynski
Mr S Banfield
Ms M De Ville
85
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
35.
Related parties (continued)
Identity of related parties
The Consolidated Entity has a related party relationship with its subsidiaries (see note 33) and with its key
management personnel.
Other related party transactions
Subsidiaries
Loans are made by the Company to wholly owned subsidiaries and received from wholly owned subsidiaries.
During the 2009 financial year, the Company received $4,718,854 from one of its subsidiaries, Soul Pattinson
Telecommunications Pty Ltd, as part repayment of an existing loan. During the 2008 financial year, $7,567,949 was
received from Soul Pattinson Telecommunications Pty Ltd. Interest is not charged on the loan and there is no fixed
date for the loan to be repaid. At 31 July 2009, the amount owed to the Company was $80,595,862 (2008:
$85,314,716).
During the 2009 financial year, the Company received $8,245,880 from one of its subsidiaries, SPTCom Pty Ltd, as
repayment of an existing loan. During the 2008 financial year, $6,867,280 was loaned to SPTCom Pty Ltd. Interest
was not charged on the loan during the year and the loan was repaid in full during the 2009 financial year. At 31 July
2009, the amount owed to the Company was $nil (2008: $8,245,880).
During the 2009 financial year, the Company received $9,897,855 from one of its subsidiaries, SPT
Telecommunications Pty Ltd, as repayment of an existing loan. During the 2008 financial year, the Company
received $123,638 from SPT Telecommunications Pty Ltd. Interest was not charged on the loan during the year and
the loan was repaid in full during the 2009 financial year. At 31 July 2009, the amount owed to the Company was
$nil (2008: $9,897,855).
During the 2009 financial year, the Company was loaned $16,140,142 from one of its subsidiaries, Soul
Communications Pty Ltd, increasing the amount payable of an existing loan. During the 2008 financial year,
$3,759,929 was received from Soul Communications Pty Ltd. Interest is not charged on the loan and there is no
fixed date for the loan to be repaid. At 31 July 2009, the amount owed by the Company was $25,696,867 (2008:
$9,556,725).
During the 2009 financial year, the Company was loaned $27,368,384 from one of its subsidiaries, TPG Holdings Pty
Ltd, increasing the amount payable of an existing loan. During the 2008 financial year, the Company was loaned
$20,326,843 by TPG Holdings Pty Ltd. Interest is not charged on the loan and there is no fixed date for the loan to
be repaid. At 31 July 2009, the amount owed by the Company was $47,695,227 (2008: $20,326,843).
During the 2009 financial year, the Company loaned $397,525 to one of its subsidiaries, Chariot Pty Ltd (2008: $nil).
At the 31 July 2009, the amount owed to the Company was $397,525 (2008: $nil).
36.
Subsequent events
There has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in
future financial years.
SP Telemedia Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2009
37.
Deed of cross guarantee
86
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries
listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of
financial reports, and directors’ report.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross
Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any
debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act
2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event
that after six months any creditor has not been paid in full. The subsidiaries have also given similar
guarantees in the event that the Company is wound up.
The Deed of Cross Guarantee was entered into on 25 June 2008.
The subsidiaries subject to the Deed are:
Soul Communications Pty Ltd
Digiplus Investments Pty Ltd
Soul Contracts Pty Ltd
Kooee Communications Pty Ltd
SPTCom Pty Ltd
Kooee Pty Ltd
Digiplus Holdings Pty Ltd
Digiplus Pty Ltd
Digiplus Contracts Pty Ltd
Blue Call Pty Ltd
Soul Pattinson Telecommunications Pty Ltd
Kooee Mobile Pty Ltd
SPT Telecommunications Pty Ltd
TPG Holdings Pty Ltd
TPG Internet Pty Ltd
Value Added Network Pty Ltd
Orchid Human Resources Pty Ltd
TPG Broadband Pty Ltd
TPG Network Pty Ltd
TPG Research Pty Ltd
TPG (NZ) Pty Ltd
Digiplus Limited (NZ)
Codex Limited (NZ)
Chariot Pty Ltd
There is only one of the Company’s subsidiaries (Orchid Cybertech Services Incorporated) that is not party to
the Deed of Cross Guarantee. As a consequence, a separate consolidated income statement and balance
sheet comprising the Company and only those controlled entities which are a party to the Deed are not
provided because of the immaterial difference between what would be shown and the Consolidated income
statement and balance sheet shown on pages 23 & 25 respectively.
87
SP Telemedia Limited and its controlled entities
Directors’ declaration
For the year ended 31 July 2009
1.
In the opinion of the directors of SP Telemedia Limited (‘the Company’):
(a)
the financial statements and notes set out on pages 23 to 86 and the Remuneration report in
section 5.1 of the Directors’ report, set out on pages 3 to 22, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company and the Consolidated
Entity as at 31 July 2009 and of their performance for the financial year ended on that date;
and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed
in note 2(a); and
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
There are reasonable grounds to believe that the Company and the consolidated entities identified in
Note 37 will be able to meet any obligations or liabilities to which they are or may become subject to
by virtue of the Deed of Cross Guarantee between the Company and those consolidated entities
pursuant to ASIC Class Order 98/1418.
The directors have been given the declarations from the chief executive officer and chief financial
officer for the financial year ended 31 July 2009 required by Section 295A of the Corporations Act
2001.
2.
3.
Dated at Sydney this 15th day of October, 2009.
Signed in accordance with a resolution of the directors:
David Teoh
Chairman
88
Independent auditor’s report to the members of SP Telemedia Limited
Report on the financial report
We have audited the accompanying financial report of SP Telemedia Limited (the Company), which
comprises the balance sheets as at 31 July 2009, and the income statements, statements of recognised
income and expense and cash flow statements for the year ended on that date, a summary of significant
accounting policies and other explanatory notes 1 to 37 and the directors’ declaration set out on page 87
of the Consolidated Entity comprising the Company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal control relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In note 2(a), the
directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial report comprising the financial statements and notes, complies
with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report 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 entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the
Australian Accounting Interpretations), a view which is consistent with our understanding of the
Company’s and the Consolidated entity’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
89
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of SP Telemedia Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Company’s and the Consolidated Entity’s financial position
as at 31 July 2009 and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001.
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in
note 2(a).
Report on the remuneration report
We have audited the Remuneration Report included in pages 12 to 17 of the directors’ report for the year
ended 31 July 2009. 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of SP Telemedia Limited for the year ended 31 July 2009,
complies with Section 300A of the Corporations Act 2001.
KPMG
Kevin Leighton
Partner
Sydney
15 October 2009
90
Lead Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
To: the directors of SP Telemedia Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year
ended 31 July 2009 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
(i)
(ii)
KPMG
Kevin Leighton
Partner
Sydney
15 October 2009
91
SP Telemedia Limited and its controlled entities
ASX additional information
For the year ended 31 July 2009
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere
in this report is set out below.
Shareholdings (as at 7 October 2009)
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Shareholder
David Teoh and Vicky Teoh
Washington H Soul Pattinson and Company Limited
Number of
ordinary
shares held
% of
capital
held
273,383,415
199,988,286
38.60
28.24
Voting rights
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.
Distribution of equity security holders
Number of Equity Security Holders
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,000 - 100,000
100,000 and over
Ordinary
shares
752
1,301
779
1,429
190
4,451
The number of shareholders holding less than a marketable parcel of ordinary shares is 333.
Stock exchange
The Company is listed on the Australian Stock Exchange. The home exchange is Sydney and ASX code is SOT.
Other information
SP Telemedia Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
SP Telemedia Limited and its controlled entities
ASX additional information (continued)
For the year ended 31 July 2009
92
Twenty largest shareholders
Name of shareholder
Number
of
ordinary shares
held
Percentage
of
capital held
Washington H Soul Pattinson and Company Limited
Mr David Teoh
Mrs Vicky Teoh
National Nominees Limited
WIN Corporation Pty Ltd
J P Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Ltd
Farjoy Pty Ltd
HSBC Custody Nominees (Australia) Pty Ltd
JS Millner Holdings Pty Ltd
Mr John Eric Paine
Brickworks Investment Company Limited
ANZ Nominees Limited
Ms Seng Bee Teoh and Mr Sin Mong Wong
Mr Witold Maciej Piestrzynski
Cogent Nominees Pty Ltd
Citicorp Nominees Pty Ltd
Gwynvill Trading Pty Ltd
Mr Kok Yeong Moey
Total Peripherals Pty Ltd
199,988,286
135,627,043
135,536,746
24,175,533
21,530,923
14,189,834
13,736,153
9,900,000
6,513,182
5,353,424
3,814,767
3,789,436
3,758,535
3,498,166
3,303,352
3,155,717
3,133,359
2,500,000
2,350,787
2,219,626
28.24
19.15
19.14
3.41
3.04
2.00
1.94
1.40
0.92
0.76
0.54
0.54
0.53
0.49
0.47
0.45
0.44
0.35
0.33
0.31
598,074,869
84.45
Principal Registered Office
65 Waterloo Road
North Ryde NSW 2113
Telephone: 02 9850 0800
Location of Share Registry
Computershare Investor Services Pty Ltd
Level 3, 60 Carrington Street
Sydney NSW 2000
Telephone: 02 8234 5000
SP Telemedia Limited ABN 46 093 058 069