2018
ANNUAL REPORT
TPG Telecom Limited
and its controlled entities
ABN 46 093 058 069
Annual Report
Year ended 31 July 2018
TPG Telecom Limited and its controlled entities
Annual report
For the year ended 31 July 2018
Contents
Chairman’s letter
Directors’ report
Lead auditor’s independence declaration
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
ASX additional information
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94
TPG Telecom Limited and its controlled entities
3
Chairman’s letter
For the year ended 31 July 2018
Dear Shareholders
On behalf of the Board of Directors, I am pleased to present to you the TPG Telecom Limited Annual Report for
the financial year ended 31 July 2018 (“FY18”).
The Australian telecommunications industry continues to experience an exceptionally challenging period as
the rollout of the NBN affects industry structure and profitability. Throughout this turbulent period, it is
important that TPG remain focussed on implementing its long-term strategies in order to build a platform for
long-term growth while simultaneously continuing to compete hard in the market place and optimise costs to
ensure that shareholder returns are also maximised in the short-term.
We believe that we have been successful in meeting these challenges in FY18:
- We made exciting progress with the implementation of our major long-term strategic initiatives
through our mobile network builds in Singapore and in Australia. Our outdoor coverage in Singapore
is on track to be completed before the end of 2018, and our innovative small cell network rollout is
underway across a number of major cities throughout Australia;
- We negotiated a tremendous deal for shareholders to, subject to regulatory approvals, merge our
business with that of Vodafone Hutchison Australia (VHA); and
- We delivered a tenth consecutive year of underlying revenue, EBITDA and NPAT growth.
Although this year’s earnings growth was more modest than in prior years, it remains a strong achievement
given the current challenges in the market place and the substantial focus we have placed on our longer-term
mobile projects during the year and is a credit to the many hardworking staff in the TPG team.
4
TPG Telecom Limited and its controlled entities
Chairman’s letter
For the year ended 31 July 2018
Further highlights of our achievements in FY18 include the following:
- We competed hard but rationally for customers in the Australian fixed broadband market as the
industry continues its transition to the NBN, maintaining an NBN market share of over 20% and
increasing the number of customers using our on-net fibre-to-the building services to fifty thousand.
- We continued to achieve strong cost optimisation gains to offset partially the gross margin declines
brought about by the NBN, to maximise returns for shareholders and to make the Company as fit as
possible to continue to compete strongly in the future.
- We achieved these cost savings without adversely affecting our strong customer service
performance, with Net Promoter Score (NPS) results across all brands continuing to improve and the
NPS result for our premium iiNet brand returning an exceptional result of greater than positive 50 for
the year.
- We substantially completed our fibre network expansion for the delivery of the VHA fibre contract.
This and other enterprise, government and wholesale sales helped drive continued strong growth in
data and internet revenues and profits in our Corporate Division.
- We entered into an exciting agreement with Adelaide City to connect our fibre network to over a
thousand buildings in Adelaide capable of delivering 10 Gbps services and vastly increased the
coverage area of our market leading Fibre1000 product leveraging our expanded fibre network to
help continue the growth of our Corporate Division over the coming years.
Your Board is immensely proud of what our Group has achieved over the past decade as we have firmly
established TPG as a leading challenger telecommunications company with the second largest fixed broadband
customer base in Australia, a thriving enterprise, government and wholesale business, extensive valuable
network infrastructure, innovative products, strong brands, a highly enviable cost structure and a dedicated
and talented workforce.
The merger with VHA, if approved, will create a step change in the evolution of our Group which will benefit
shareholders and customers alike. Together we will become a more formidable competitor to Telstra and
Optus, our complementary fixed and mobile infrastructure enabling us to deliver more competitive value
propositions to Australian consumers coupled with the high levels of customer service that differentiates us in
the marketplace.
We are extremely excited about the prospects of the Merged Group going forward and we have been
delighted with the enthusiasm with which the proposed merger has been embraced by our fantastic group of
employees whom I would like to thank again for another year of dedication and hard work.
On behalf of the Board I would also like to thank all our shareholders for their continued support of the
Company.
Yours faithfully
David Teoh
Chairman
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5
The directors present their report together with the financial report of the Group, being TPG Telecom Limited (‘the
Company’) and its controlled entities, for the financial year ended 31 July 2018, and the auditor’s report thereon.
Page
Contents of directors’ report
1.
2.
Board of Directors
Company secretary
3. Directors’ meetings
4. Operating and financial review
5.
6.
Remuneration report
Principal activities
7. Dividends
8.
9.
Events subsequent to reporting date
Likely developments
10. Directors’ interests
11.
Indemnification and insurance of officers and auditors
12. Non-audit services
13. Rounding off
6
6
7
7
19
31
31
31
32
32
32
33
33
TPG Telecom Limited and its controlled entities
6
Directors’ report
For the year ended 31 July 2018
1. Board of Directors
Details of directors of the Company who held office at any time during or since the end of the previous year
are set out below:
CURRENT
David Teoh
Executive Chairman
Chief Executive Officer
Denis Ledbury
Non-Executive Director
B.Bus
Independent
•
Robert Millner
Non-Executive Director
F.A.I.C.D.
Joseph Pang
Non-Executive Director
FCA
Independent
Shane Teoh
Non-Executive Director
B.Com, LLB
David is the founder and Chief Executive Officer of the TPG group of companies. He has served as
Executive Chairman of the Company since 2008.
Special Responsibilities: Chairman of the Board
Denis has served as a Director of the Company since 2000 and was the Managing Director of the
Company between 2000 and 2005. Denis was also associated with the NBN television group of
companies for over 24 years, the last 14 of which as Chief Executive Officer.
Special Responsibilities: Chairman of the Remuneration and Audit & Risk Committee
Robert has served as a Non-Executive Director of the Company since 2000 and was the Chairman until
2008.
Robert has over 30 years’ experience as a Company Director and is currently a Director of the
following listed companies: Apex Healthcare Berhad, Australian Pharmaceutical Industries Limited,
Brickworks Limited, BKI Investment Company Limited, Milton Corporation Limited, New Hope
Corporation Limited and Washington H. Soul Pattinson and Company Limited.
Robert was also an interim Director at Hunter Hall Global Value Limited from April 2017 to June 2017.
Special Responsibilities: Member of the Remuneration and Audit & Risk Committee
Joseph has served as a Non-Executive Director of the Company since 2008. Joseph worked in financial
roles in the UK, Canada and Hong Kong prior to starting his own management and financial consulting
service in Australia.
Special Responsibilities: Member of the Remuneration and Audit & Risk Committee
Shane has served as a Non-Executive Director of the Company since 2012.
Shane holds a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales.
He is managing director of Total Forms Pty Ltd, a leading developer of accounting and taxation
software in Australia.
2. Company secretary
Mr Stephen Banfield was appointed Company Secretary on 24 October 2007. Stephen holds a BA (Hons)
degree and is a member of the Institute of Chartered Accountants in England and Wales.
TPG Telecom Limited and its controlled entities
7
Directors’ report
For the year ended 31 July 2018
3. Directors’ meetings
The number of Board and committee meetings held during the financial year and the number of meetings
attended by each of the directors as a member of the Board or relevant committee were as follows:
Director
Board Meetings
D Teoh
D Ledbury
R Millner
J Pang
S Teoh
A
13
13
13
12
13
B
13
13
13
13
13
Audit & Risk Committee
(ARC) Meetings
B
A
-
-
2
2
2
2
2
2
-
-
Remuneration Committee
Meetings
A
-
1
1
1
-
B
-
1
1
1
-
A: Number of meetings attended. B: Number of meetings held while a member
The ARC meetings, disclosed above, do not include separate meetings that the ARC Chairman also had with the
audit partner during the year.
4. Operating and financial review
4.1 Operating result overview
Reported Results
Earnings before interest, tax, depreciation and amortisation (“EBITDA”) for the period of $841.1m;
The Group’s reported results for its year ended 31 July 2018 (“FY18”) included:
-
- Net Profit After Tax (“NPAT”) attributable to shareholders for the period of $396.9m; and
-
Earnings per share (“EPS”) of 42.8 cents per share.
Underlying Results
The FY18 EBITDA result includes no material irregular items and is therefore representative of underlying
EBITDA for the period. By contrast, as reported last year, the FY17 EBITDA result benefitted from $55.8m of
favourable non-recurring items (predominantly a profit realised on sale of an investment). Therefore,
although there is a $49.7m decrease in reported EBITDA between FY17 and FY18, underlying EBITDA in fact
increased by $6.1m in FY18 from $835.0m to $841.1m, making FY18 the 10th consecutive year of underlying
EBITDA growth for the Group.
Reconciliation of Reported to Underlying Profits
$m
Reported
Less: Profit on sale of equity investments
Less: One-off revenue
Add: Acquired customer base intangible amortisation
Underlying
FY18
FY17
EBIDA
841.1
-
-
-
841.1
NPAT
396.9
-
-
35.7
432.6
EBITDA
890.8
(48.8)
(7.0)
-
835.0
NPAT
413.8
(35.3)
(4.9)
43.7
417.3
8
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.1 Operating result overview (continued)
As shown in the chart below, this modest underlying EBITDA increase in FY18 has been achieved despite the
significant headwinds that were experienced during the year from the migration of DSL customers to lower
margin NBN services, loss of gross profit from home phone services as customers migrate to NBN bundled
services and electricity price increases.
Bridge between underlying FY17 and FY18 EBITDA
The adverse profit impacts of the headwinds shown in the chart above were all in line with, or slightly less
than, expectations, whilst the strong $72m of other EBITDA growth achieved relative to FY17 was pleasing.
The main contributors to this growth came from the Corporate Segment, TPG FTTB (‘fibre to the building’)
services, and cost savings from the ongoing integration of iiNet.
Segment Results
The Consumer Segment’s EBITDA for FY18 was $513.1m compared to $530.4m for FY17. As reported last year,
the FY17 result included $7.0m one-off revenue, excluding which the underlying movement is a $10.3m
decrease from FY17 to FY18. This movement comprises a $32.3m decrease in gross profit partially offset by a
$22.0m decrease in employment and overhead costs. The gross profit decline is driven by broadband gross
margin erosion and loss of home phone voice revenue, both due to the NBN rollout. The significant decrease
in employment and overhead costs reflects the results of further integration of iiNet operations within the
broader group.
The Corporate Segment achieved EBITDA of $330.1m for FY18 compared to $312.8m for FY17, a $17.3m year-
on year growth. It should be noted that $3.5m of EBITDA related to FTTB that was included in the Corporate
Segment’s FY17 EBITDA is recognised with the Consumer Segment in FY18 meaning that the comparable
EBITDA growth for the segment was in fact $20.8m. This EBITDA growth has been driven by continued strong
data and internet sales, and increased revenue from the VHA fibre contract offsetting ongoing declines in voice
revenues.
$835m($43m)($18m)($5m)$72m$841mFY17DSL-->NBNiiNetIncreasedOtherFY18UnderlyingGP marginfixed voiceelectricitygrowthUnderlyingEBITDAreductionGP decreasepricesEBITDA
9
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.1 Operating result overview (continued)
Cashflow, Capital Expenditure and Gearing
The Group delivered another strong cashflow result in FY18 with $868.3m cash generated from operations
(pre-tax).
Total capital expenditure for the year of $956.3m included $597.3m of spectrum payments (includes a
$594.8m instalment for the 2x10MHz of 700MHz spectrum acquired at auction last year) and $101.0m
invested in the mobile network builds in Singapore and Australia. The remaining ‘business as usual’ capital
expenditure of $258.0m was $104.5m lower than FY17 as the fibre expansion for the Vodafone fibre contract
was substantially completed during the year.
At the end of FY18 the Group had net debt of $1,266.4m, which represents a leverage ratio of ~1.5x EBITDA,
and had undrawn headroom of over $1 billion in its debt facilities to fund its remaining planned mobile
network investments in Australia and Singapore.
Mobile Network Rollout Update
In Australia, the Group’s small cell network rollout is continuing in major capital cities and densely populated
metropolitan areas. If the merger with Vodafone Hutchison Australia (VHA) proceeds, TPG’s small cell network
would be complementary to VHA’s mobile network bringing greater strength to the combined group through
increased coverage and capacity in densely populated areas.
In Singapore, the Group remains on track to achieve its milestone of outdoor service coverage by the end of
2018 with the majority of sites now live on the production network.
Dividend
The Board of Directors has declared a final FY18 dividend in line with the interim FY18 dividend of 2.0 cents per
share (fully franked), payable on 20 November 2018 to shareholders on the register on 16 October 2018.
10
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.2 Customer growth
Group Broadband Subscribers
The Group ended FY18 with 1.93m broadband subscribers, a 5k (0.3%) decline in the year. Included within this
movement was a significant change in the composition of the broadband customer base with NBN subscribers
increasing by 300k to 861k, representing 45% of the total broadband customer base as at the year-end.
Offsetting that, ADSL subscribers declined by 319k to 940k, representing 49% of the total customer base as at
the year-end. The number of customers using the Group’s on-net FTTB services grew by 13k to 50k as at the
year-end.
NBN
FTTB
On-net ADSL
Off-net ADSL
Other
)
s
0
0
0
(
s
r
e
b
i
r
c
s
b
u
S
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,868
75
255
1,911
78
223
1,262
1,198
0
276
24
388
1,936
79
176
1,083
37
561
1,928
80
138
945
45
720
1,931
80
100
840
50
861
July-16
Jan-17
July-17
Jan-18
July-18
11
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.2 Customer growth (continued)
Group MVNO Subscribers
The Group had 422k mobile subscribers as at 31 July 2018 under its mobile virtual network operator (MVNO)
arrangements with Vodafone and Optus.
Group MVNO subscribers
)
s
0
0
0
(
s
r
e
b
i
r
c
s
b
u
S
500
400
300
200
100
0
475
453
445
421
422
July-16
Jan-17
July-17
Jan-18
July-18
Corporate Revenues
The Group’s Corporate Segment revenues increased to $753.8m in FY18, up by $10.8m from the prior year.
The composition of the growth is shown in the table below.
Data and internet revenues grew by $36.6m (7%) reflecting the strength of the Corporate Segment’s data and
internet product suite leveraging the Group’s extensive fibre network.
The decline in voice revenues reflects a continuing industry trend of decline in fixed voice usage.
The decrease in legacy iiNet revenues reflects the fact that new corporate sales are predominantly made
under the TPG and AAPT brands rather than under iiNet.
12
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.3 Financial results review
There follows below a review of the key elements of the FY18 results:
Revenue
Consumer
Corporate
Total revenue
Telco costs
Consumer
Corporate
Total telco costs
Employment costs
Consumer
Corporate
Unallocated
Total employment costs
Other expenses
Consumer
Corporate
Unallocated
Total other expenses
Other income
EBITDA
Depreciation
Amortisation
Operating profit
Net financing costs
Profit before tax
Income tax
Profit after tax
Attributable to:
Owners of the Company
Non-controlling interest
Earnings per share (cents)
FY18
$m
% of
revenue
FY17
$m
% of
revenue
70%
30%
55%
37%
8%
14%
-
8%
5%
-
-
34%
6%
4%
24%
1%
23%
-
16%
1,741.4
753.8
2,495.2
(949.4)
(280.0)
(1,229.4)
(133.9)
(108.2)
(0.3)
(242.4)
(145.0)
(35.5)
(1.8)
(182.3)
841.1
(138.8)
(104.1)
598.2
(34.4)
563.8
(165.8)
398.0
396.9
1.1
42.8
70%
30%
52%
39%
8%
15%
-
9%
5%
-
-
36%
6%
4%
26%
2%
24%
-
17%
1,747.7
743.0
2,490.7
(916.4)
(287.4)
(1,203.8)
(147.8)
(108.8)
(0.1)
(256.7)
(153.1)
(34.0)
(1.1)
(188.2)
48.8
890.8
(141.1)
(103.3)
646.4
(50.9)
595.5
(179.8)
415.7
413.8
1.9
47.9
13
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.3 Financial results review (continued)
Revenue
a) Consumer
Consumer Segment revenue decreased by $6.3m
to $1,741.4m in FY18.
This movement was predominantly the result of a
$51.2m increase in broadband revenues, a $50.5m
decrease in fixed voice revenue, and a $7.0m one-
off revenue item disclosed last year that
benefitted the FY17 result.
Subscribers on the Group’s broadband plans
declined very slightly over the year by 5k (0.3%) to
1,931k. Included within this movement was a
significant change in the composition of the
broadband customer base with NBN subscribers
increasing by 300k to represent 45% of the total
broadband customer base as at the year-end.
Offsetting that, ADSL subscribers declined by 319k
to represent 49% of the total customer base as at
the year-end. The number of customers using the
Group’s on-net FTTB services grew by 13k to 50k
as at the year-end.
Monthly ARPU for broadband customers
continued to increase in the year due to the fact
that NBN services have a higher price point than
the DSL services they are replacing.
The $50.5m decline in revenue from fixed voice
services reflects both the fact that across the
industry usage of home phones is declining and
the fact that standalone home phone services are
being replaced by NBN services which bundle data
and voice.
b) Corporate
Corporate revenue increased by $10.8m to
$753.8m in FY18. This growth in revenue was
driven by a $36.6m (7%) increase in data and
internet revenues, partially offset by a $16.7m
decrease in voice revenues and $9.1m decrease in
legacy iiNet corporate customer revenues.
The increase in data and internet revenues reflects
the strength of the Corporate Segment’s data and
internet product suite leveraging the Group’s
extensive fibre network.
The decline in voice revenues reflects a continuing
industry trend of decline in fixed voice usage. The
decrease in legacy iiNet revenues reflects the fact
that new corporate sales are predominantly made
under the TPG and AAPT brands rather than under
iiNet.
Network, carrier and hardware costs (Telco
costs)
Telco costs comprise all of the direct operating
costs incurred to deliver the Group’s
telecommunications services to customers,
including amounts paid to other carriers, and the
non-staff costs of operating and maintaining the
Group’s own network.
a) Consumer
Consumer Segment telco costs increased by
$33.0m compared to the previous year and
increased as a proportion of revenue from 52% to
55%.
The increase in this cost % reflects the fact that
NBN services with a high wholesale cost and low
margin have grown from 29% to 45% of the
Group’s broadband customer base during the year.
b) Corporate
Corporate Segment telco costs decreased from
39% to 37% of revenue reflecting the fact that
revenue growth was driven by on-net data and
internet revenues delivered using the Group’s
extensive fibre network.
14
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.3 Financial results review (continued)
useful life, while expenditure on hardware assets
such as DSLAMs, which have much shorter useful
lives, has declined substantially; and (ii) capital
expenditure on the mobile network rollouts will
not start to be depreciated until the networks are
ready to deliver commercial services.
Amortisation
The Group’s FY18 intangible amortisation expense
of $104.1m was almost exactly in line with prior
year despite the significant investment in
spectrum licence assets during the year. The
spectrum licences will not start to be amortised
until the associated network assets are ready for
their intended use.
Net financing costs
Net financing costs decreased by $16.5m in FY18.
The average debt balance over the year was
roughly in line with the prior year so the principal
drivers of the movement in interest expense were
(i) $16.6m of interest expense accrued relating to
the deferred spectrum instalments, offset by
(ii) the capitalisation in FY18 of ~$39m of interest
directly attributable to the construction of capital
assets ($33m greater than in FY17).
Income tax
The Group’s effective income tax rate was 29.4%
in FY18, broadly in line with the Australian
corporate tax rate of 30%.
Employment costs
Consumer Segment employment costs decreased
by $13.9m in FY18 and from 8.5% to 7.7% of
revenue. This reduction in employment costs
principally reflects ongoing efficiencies that have
been achieved through the continued integration
of iiNet operations.
Corporate Segment employment costs decreased
by $0.6m, and from 14.6% to 14.4% of Corporate
Segment revenues.
The Group’s total number of employees as at 31
July 2018 was 5,056.
Other expenses
Other expenses include all of the overheads
incurred by the Group in running the business, as
well as marketing costs.
The Consumer Segment’s other expenses
decreased by $8.1m in FY18 declining from 8.8% to
8.3% as a proportion of Consumer Segment
revenue.
The Corporate Segment’s other expenses
remained constant as a proportion of revenue at
5% in FY18 and increased by just $1.5m.
Other income
Other income in FY17 of $48.8m represented a
one-off profit on disposal of shares held as an
investment by the Group.
Depreciation
The Group’s depreciation expense decreased by
$2.3m in FY18 despite the fact that capital
expenditure in the year exceeded depreciation
expense. This is explained by the fact that (i) a
large proportion of new capital expenditure has
been spent on fibre infrastructure which has a long
15
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.3 Financial results review (continued)
Free cashflow
Non-operating cashflows
Operating cashflow
Tax
IRU payments
Capex - BAU
Capex - mobile spectrum (Aus)
Capex - mobile spectrum (Sg)
Capex - mobile networks (Aus)
Capex - mobile networks (Sg)
Free cashflow
FY18
$m
868.3
(194.5)
(34.1)
(258.0)
(597.3)
-
(38.7)
(62.3)
(316.6)
FY17
$m
869.7
(147.0)
(27.0)
(362.5)
(83.1)
(124.4)
(1.9)
(4.4)
119.4
The Group achieved another year of strong
cashflow performance with operating cashflow for
FY18 of $868.3m again exceeding EBITDA. Tax
payments in FY18 were abnormally high because
they included tax paid on the capital gain realised
on the sale of investments in FY17.
IRU payments
IRU payments of $34.1m represent principally
payment of finance lease liabilities for
international capacity acquired by iiNet prior to its
acquisition by the Group. These monthly
payments ended in July 2018 as the liabilities have
now been repaid in full.
Free cashflow
Debt drawdown/(repayment)
Debt facility fees
Interest payments
Dividend payments
Investment sale proceeds
Net capital raise proceeds
Other
Increase in cash
FY18
$m
(316.6)
430.8
(10.8)
(44.6)
(23.0)
-
-
0.1
35.9
FY17
$m
119.4
(450.0)
(3.4)
(40.7)
(131.5)
124.5
396.3
(7.5)
7.1
Debt drawdown, facility fees and interest
The 700MHz spectrum payment made in the year
gave rise to overall negative free cashflow for the
Group in FY18 which was funded through a
drawdown on the Group’s debt facilities by an
amount of $430.8m.
The Group’s debt facilities were amended,
extended and increased at the start of the financial
year in order to finance the Group’s spectrum
commitments and mobile network investment
plans, at a cost of $10.8m. Interest payments
made under the facilities totalled $44.6m in the
year (net of $1.2m of interest received).
Capital expenditure
Dividends paid
Business as usual (‘BAU’) capital expenditure of
$258.0m is over $100m lower than last year
principally because the past few years have
included substantial expenditure for the Vodafone
fibre contract which was substantially completed
during FY18.
Mobile spectrum capex of $597.3m in FY18
reflects the payment during the year of the first
instalment for the 700MHz spectrum acquired at
auction in April 2017. In FY18 $38.7m of capex
was incurred in relation to the small cell mobile
network rollout in Australia and $62.3m in relation
to the Singapore mobile network rollout.
Dividends paid in the year comprise the final FY17
dividend and the interim FY18 dividend of 2.0
cents per share (“cps”) each. The reduction in
dividends paid reflect the Board’s fiscally prudent
decision to retain a greater proportion of profits in
the Company for deployment in the mobile
network rollouts.
Investment sale proceeds
In the prior year the Group generated proceeds of
$124.5m from the sale of an investment (which
gave rise to the profit on sale of $48.8m referred
to in ‘other income’ above).
16
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.3 Financial results review (continued)
Balance sheet
Balance sheet notes
Below is a condensed version of the Group’s
balance sheet as at the end of FY18, summarised
in a manner to highlight a few key points. Please
refer to the full financial statements contained in
this annual report for a comprehensive balance
sheet.
Cash (1)
Trade and other receivables
Other current assets
Total current assets
Property, plant & equipment (2)
Spectrum assets (3)
Intangible assets
Other non-current assets
Total non-current assets
Deferred income
Loans and borrowings (1)
Spectrum liability (3)
Other current liabilities
Total current liabilities
FY18
$m
82.2
129.1
20.5
231.8
1,249.0
1,479.7
2,420.7
9.1
5,158.5
148.3
5.5
344.3
387.2
885.3
FY17
$m
46.3
131.6
33.3
211.2
1,055.5
216.6
2,416.2
12.8
3,699.8
150.0
-
-
417.6
567.6
Loans and borrowings (1)
1,313.5
872.4
Spectrum liability (3)
Other non-current liabilities
Total non-current liabilities
327.8
79.5
1,720.8
-
71.7
944.1
Net assets
2,784.2
2,399.3
1. Net debt
Current and non-current loans and borrowings
totalling $1,319.0m are shown in the balance
sheet net of prepaid borrowing costs of $29.6m.
Gross borrowings at 31 July 2018 were $1,348.6m
comprising bank debt of $1,330.7m and finance
lease liabilities of $17.9m. Taking also into
account the $82.2m cash balance the Group had
net debt at the end of FY18 of $1,266.4m.
2. Property, plant & equipment (“PPE”)
The Group’s PPE balance is $193.5m higher at 31
July 18 than at 31 July 17. This increase comprises
$332.2m of capital expenditure (mainly network
infrastructure investment) during the year less
$138.8m of depreciation expense.
3. Spectrum assets and liabilities
The $1,267.9m increase in spectrum assets in the
year is driven by the Group’s purchase of its
700MHz spectrum licence at auction in FY17, for
which the Group took ownership of the licence
from 1 April 2018.
The first instalment for the licence of $595m was
paid during the year and the outstanding
instalments of $352m each, payable in January
2019 and January 2020, are disclosed as spectrum
liabilities on the balance sheet at their discounted
present values of $344.3m and $327.8m
respectively.
17
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.4 Business outlook
Prospects for FY19
EBITDA Guidance
The Group is anticipating another year of EBITDA growth from its ‘business as usual’ (BAU) operations in FY19
but, as reflected in the chart below which shows a bridge between actual FY18 EBITDA and forecast FY19
EBITDA from BAU operations, expects this to be offset by further gross profit margin headwinds as DSL and
home phone services continue to migrate to the NBN, and by a one-time step reduction in EBITDA caused by
adoption of the new AASB 15 revenue accounting standard under which certain subscriber acquisition costs
previously expensed within intangible amortisation will in future be recognised above the EBITDA line.
‘BAU’ EBITDA takes no account of start-up mobile operations in Australia and Singapore.
Merger of Equals with Vodafone Hutchison Australia
On 30 August 2018 the Company announced a planned merger of equals with Vodafone Hutchison Australia
(VHA) which, subject to satisfaction of certain conditions precedent, including the approval of the Australian
Competition and Consumer Commission, is expected to complete in 2019.
The FY19 guidance provided above takes no account of the potential completion of the merger during the
year, nor the associated transaction costs.
$841m(~$50m)(~$15m)(~$10m)$34-54m$800-820mFY18ADSL-->NBNiiNetAASB15OtherFY19FBAUGP marginfixed voiceaccountinggrowthBAUEBITDAreductionGP decreaseimpactEBITDA
18
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
4. Operating and financial review (continued)
4.4 Business outlook (continued)
Principal business risks
Like other businesses, the Group is exposed to a number of risks which may affect future financial
performance. The material business risks identified by the Group and how they are addressed are set out
below.
1. Competitive environment
Increased competition, for example as a result of the NBN rollout, could impact the Group’s financial
performance by affecting its ability to grow its customer base and/or its ability to make money from its service
offerings.
The Group attempts to mitigate this risk by continually reviewing its customer offerings, their pricing relative
to the market and customer needs. This is combined with constant reviews of the Group’s cost structures with
the objective of optimising costs to ensure the Group is best placed to continue providing value leading
services.
2. Business interruption
A significant disruption of the Group’s business through network or systems failure could cause financial loss
for the Group and increased customer churn. The Group maintains business interruption insurance and
continually invests in its network and systems to improve their resilience and performance.
3. Regulatory environment
Changes in regulation can significantly impact the Group’s business. In addition, failure to comply with
regulatory requirements could create financial loss for the Group. The Group attempts to mitigate this risk
through close monitoring of regulatory developments, engaging where necessary with the relevant regulatory
bodies, and monitoring its own compliance with existing regulations.
4. Data security
Failures or breaches of data protection and systems security can cause reputational damage, regulatory
impositions and financial loss. Australian Privacy Principles (APPs) now govern privacy and data protection
throughout Australia and significantly enhance privacy and data protection regulation.
The Group has policies regarding information security and risk protection measures in place to ensure
adherence to APPs and to provide safeguards to company and customer information. These measures include
restricted access to company premises and areas housing equipment, restricted access to systems and
network devices, strict change control measures, anti-virus software and firewall protection at various network
points.
Environmental and other sustainability risks
Environmental and other sustainability risks are addressed in the Group’s Sustainability Report which can be
found on the Company’s website at www.tpg.com.au/about/investorrelations.
TPG Telecom Limited and its controlled entities
19
Directors’ report
For the year ended 31 July 2018
5. Remuneration report
Foreword from Mr Denis Ledbury, Chairman of the Remuneration Committee
On behalf of the Board I am pleased to present the Remuneration Report for FY18.
The objectives of our remuneration structures are to attract, motivate and retain high calibre executive
employees necessary to lead the organisation and deliver on long-term shareholder returns.
The Board strongly believes that the remuneration structures it has employed consistently over many years
have been successful in helping achieve our objectives and delivering excellent value to shareholders. We
were therefore disappointed to receive votes against the remuneration report at the 2017 AGM totalling
29.8% of votes cast.
We have sought to take this shareholder feedback into account, particularly in relation to the disclosures
contained within this year’s report, by providing additional commentary around matters on which
shareholders indicated a desire for greater transparency.
The Group’s employees, led very capably by our Executive Chairman and CEO, David Teoh, and his senior
management team have had another extremely industrious year implementing our major long-term strategies
in the form of our mobile network builds in Australia and Singapore. At the same time the team has managed
to deliver a tenth consecutive year of record underlying EBITDA and NPAT.
This tenth year of underlying EBITDA and NPAT growth, though lower than in previous years, is a considerable
achievement given the challenges that are currently facing the industry from the margin erosion caused by the
government’s NBN rollout.
The mobile network builds in Australia and Singapore are large, complex, and ambitious projects which
demand an enormous amount of hard work and dedication from our teams, and I congratulate David, the
senior management team and all our employees for all that has been achieved in FY18.
Of course, alongside all the above, David and his team have also delivered a tremendous outcome for
shareholders through the negotiation of the planned merger of equals with VHA. I believe that the merger,
should it be approved, and the implementation of our mobile network projects will lead to a new exciting
chapter in the future of our Group which will generate excellent long-term value for the Company’s
shareholders.
One of the most important ingredients to the past and future success of the Group is the recruitment,
development, motivation and retention of high calibre employees. The Board firmly believes that the
remuneration structures that the Group has developed have not only helped achieve this but have also
delivered excellent value for shareholders. Evidence of this is reflected in:
a) The strong financial performance of the Group
•
In FY18 the Group delivered a tenth consecutive year of record underlying profits.
b) The exceptional stability of the Group’s key management personnel (‘KMP’)
• All our executive KMP have served the Group for over 10 years. This rare level of loyalty and
commitment creates a continuity that has enabled the Group to successfully implement organic and
inorganic growth strategies under a stable management team, which would certainly have been less
easily achieved without such continuity.
20
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5. Remuneration report (continued)
c)
The modest overall level of KMP remuneration relative to peers
•
Internally compiled analysis comparing the remuneration of our Group’s KMP to that disclosed by
industry and ASX peers (by market cap) shows our Group’s KMP remuneration to be not only modest
in overall dollar terms but also more heavily weighted towards performance related remuneration
than the comparator group.
• The performance related remuneration of our Group’s KMP in FY18 was on average 60% of total
remuneration compared to less than 50% for the comparator group.
In line with our Group’s overall approach to business, there is a deliberate emphasis on simplicity and
consistency in the remuneration policies we have developed whilst ensuring that they are effective in meeting
the objectives of retaining and motivating key employees. As a result of this, our incentive schemes described
in the sections below do reflect a lower level of complexity to those disclosed by some other ASX listed
companies, with our Group’s Remuneration Committee retaining a greater level of discretion in determining
the setting and achievement of appropriate performance targets.
We believe that this approach reduces the risk of employees working to achieve prescribed “remuneration
targets” rather than overall objectives that are in the longer-term interests of shareholders, and it gives the
Remuneration Committee valuable flexibility in the fast-moving environment in which the Group operates.
When combined with the strict discipline that the Remuneration Committee has consistently displayed in
keeping overall remuneration at modest levels, the approach has delivered and, I believe, will continue to
deliver good outcomes in the retention of talent and delivery of value for shareholders.
I trust that you will find this Remuneration Report simple to understand and informative, supported by the
increased disclosures we have included this year. I hope that you will support the resolution to adopt the
Remuneration Report at the 2018 AGM and I will be available at the AGM to answer any questions that you
may have regarding the work of the Remuneration Committee.
Denis Ledbury
Remuneration Committee Chairman
TPG Telecom Limited and its controlled entities
21
Directors’ report
For the year ended 31 July 2018
5. Remuneration report – audited
5.1
Introduction
This remuneration report sets out the remuneration structures of the directors of the Company and of other
key management personnel (‘KMP’) of the Group, and explains the principles underpinning those
remuneration structures.
For the purpose of this report, KMP are defined as those individuals who have authority and responsibility for
planning, directing and controlling the activities of the Group. KMP include the directors of the Company and
key Group executives including the five most highly remunerated.
5.2 Remuneration principles
Remuneration levels for KMP of the Group are designed to attract and retain appropriately qualified and
experienced directors and executives. The Remuneration Committee considers the suitability of remuneration
packages relative to trends in comparable companies and to the objectives of the Group’s remuneration
strategy.
The remuneration structures explained below are designed to attract suitably qualified candidates, to reward
the achievement of strategic objectives and to achieve the broader outcome of creation of value for
shareholders by:
a) providing competitive remuneration packages to attract and retain high calibre executives;
b) ensuring that a significant proportion of executives’ remuneration is performance-linked; and
setting performance hurdles for the achievement of performance-linked incentives at a sufficiently
demanding level as to ensure value creation for shareholders.
5.3 Remuneration structure
Remuneration packages include a mix of fixed and performance-linked remuneration.
(i)
Fixed remuneration
Fixed remuneration consists of base salary, employer contributions to superannuation funds, and non-
monetary benefits which typically only comprise annual leave entitlements but may also include such benefits
as the provision of a motor vehicle. The Group pays fringe-benefits tax on such non-monetary benefits where
applicable.
Fixed remuneration levels are reviewed annually through a process that considers individual performance,
overall performance of the Group, and remuneration levels for similar roles in comparable companies. The
fixed remuneration of executive directors is determined by the Remuneration Committee. The fixed
remuneration of other KMP is determined by the Executive Chairman in conjunction with the Remuneration
Committee. Fixed remuneration reviews for other staff are determined by the Executive Chairman.
(ii) Performance-linked remuneration
Performance-linked remuneration provided by the Group currently includes a performance rights plan and
cash bonuses.
22
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5. Remuneration report – audited (continued)
5.3 Remuneration structure (continued)
a) Performance Rights Plan
Under the rules of the performance rights plan, participants may be granted rights to fully paid ordinary shares
in the Company for no consideration, subject to certain performance conditions. The plan was introduced in
FY12 and performance rights have been granted under the plan rules in each financial year since, including in
FY18. All rights granted from FY16 onwards have the same key terms which are as follows:
• One quarter of the performance rights granted will vest following the release of the Group’s audited
financial statements for each of the four financial years ending after the date of grant, subject to the
satisfaction of performance conditions.
• At each vesting date:
o
o
30% of the performance rights that are due to vest on that date will vest if the rights holder has been
continuously employed by the Group up until and including the relevant vesting date (refer note 1
below); and
70% of the performance rights that are due to vest on that date will vest if the rights holder has been
continuously employed by the Group up until and including the relevant vesting date and the Group
has met its financial objectives for the financial year immediately preceding the relevant vesting date
(refer note 2 below).
• Any performance rights which do not vest, automatically lapse.
For the rights granted prior to FY16, the rules were consistent with the above except for the vesting period
was only three years.
Note 1
This feature of our performance rights plan is designed to promote the retention of our most valuable
employees, which is critical in the competitive industry in which the Group operates. If the value of this
component of the plan were removed and instead replaced with a commensurate increase to the fixed salaries
of our KMP, the KMP fixed salaries would continue to be modest relative to the market. The Remuneration
Committee is therefore satisfied that it is in shareholders’ interests to retain this feature of the performance
rights plan.
Note 2
The financial objectives that form part of the vesting conditions described above are determined annually by
the Remuneration Committee. For FY18, the financial objective set by the Remuneration Committee was
achievement of the Group’s Board approved FY18 financial budget. The Group’s actual performance for FY18
exceeded its financial budget. This is reflected in the fact that the Group upgraded its profit guidance mid-way
through the year with its full year result ultimately exceeding the top end of the upgraded guidance range. As
a result, the Remuneration Committee has determined that 100% of performance rights that have a vesting
date immediately following the release of the FY18 audited financial statements will be permitted to vest.
b) Cash bonuses
Cash bonuses may be paid by the Group, including to KMP, depending on the Group’s performance and to
reward individual performance. Bonuses awarded to executive directors are determined by the Remuneration
Committee. Bonuses awarded to other KMP are determined by the Executive Chairman in conjunction with
the Remuneration Committee. Bonuses awarded to other staff are made at the discretion of the Executive
Chairman.
23
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5. Remuneration report – audited (continued)
5.4 KMP remuneration detail
The KMP of the Company and of the Group during the year were as follows:
Mr D Teoh
Mr D Ledbury
Mr R Millner
Mr J Pang
Mr S Teoh
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
Executive Chairman & Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Financial Officer & Company Secretary
Chief Operating Officer
Chief Information Officer
General Counsel
Group Executive, Corporate, Government & Wholesale
(i)
FY18 Remuneration awarded to David Teoh, Executive Chairman & Chief Executive Officer
In FY18, David Teoh’s remuneration comprised:
• Fixed salary of $1,635,000 including super; and
• An annual bonus of up to 100% of his base salary.
David’s fixed salary was unchanged from the prior year and has not been increased since 2014.
The objectives set by the Remuneration Committee for determining David’s eligibility to receive his annual
bonus are a mix of financial and strategic objectives. In FY18 the objectives were:
• Delivery of FY18 financial results for the Group that were in line with or ahead of the Group’s FY18 budget;
and
• Delivery on mobile strategy in Singapore and Australia.
It was determined that David had achieved both objectives fully in FY18 and he was accordingly rewarded
100% of the maximum bonus for which he was eligible.
David is a businessman of rare and exceptional acumen and skills who is widely regarded as one of the leading
strategists in the telecommunications industry. It is difficult to place a value on David’s contribution to the
Group but, in contrast with the exceptional contribution he makes, the level of his remuneration can by no
means be considered exceptional. From the Remuneration Committee’s own analysis David’s base salary and
overall remuneration place him around the 50th percentile for CEO remuneration of ASX listed companies with
a similar market capitalisation. The Remuneration Committee believes that this represents excellent value for
shareholders relative to David’s contribution to the Group.
There is no long-term incentive component to David‘s remuneration nor any deferral or clawback provisions
attached to his annual bonus. These features that are common to many CEO remuneration structures are not
considered necessary by the Remuneration Committee given David’s position as the Company’s largest
shareholder with a very material interest in the Company. There can be no doubt that David’s interests are
already very well aligned with those of the Company’s shareholders generally and with such a significant
existing equity interest in the Company it is not considered necessary by the Board to incentivise David with
any additional equity component to his remuneration.
24
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5. Remuneration report – audited (continued)
5.4 KMP remuneration detail (continued)
(ii) FY18 Remuneration awarded to non-executive directors
Non-executive director remuneration in FY18 remained unchanged for the fourth consecutive year, at $400k in
aggregate. This relatively modest Board remuneration is another aspect of the Group’s remuneration
structures that represents excellent value for shareholders. The aggregate remuneration of non-executive
directors was last voted upon by shareholders at the 2004 AGM, when an aggregate limit of $500k per annum
was approved. Non-executive directors do not receive performance-linked remuneration nor are they entitled
to any retirement benefit other than statutory superannuation payments. Directors’ fees cover all main board
activities and membership of committees.
(iii) FY18 Remuneration awarded to other KMP
The remuneration of each of the other KMP comprises:
• Fixed salary
• Annual cash bonus
• Participation in the Performance Rights Plan.
None of the KMPs’ fixed salaries were increased during the FY18 year. The fixed salary of each of these
executives, as reflected in the remuneration table in section 5.5 below, is set at a level which, according to
internally performed benchmarking, is modest relative to comparatives from other ASX listed companies of a
similar market capitalisation.
The Remuneration Committee has sought to optimise outcomes for shareholders by keeping fixed salaries at
modest levels and compensating the executives with a relatively generous potential annual bonus.
Shareholders can take comfort that executive bonuses will not spike to unreasonable levels by the fact that the
Board has in force a set limit across the Group of annual bonus and performance rights expense as a % of
EBITDA, currently set at 1.5%. That is to say that, the aggregate annual expense of all bonuses and
performance rights across the Group including amounts awarded to the CEO and to other KMP cannot exceed
1.5% of the Group’s annual EBITDA. Total bonus and performance rights expense has been below this 1.5% of
EBITDA annual cap every year for the past 5 years.
The annual cash bonus awarded to each of the KMP in FY18 was 104% of their salary on average. The criteria
for assessing their individual performances included:
• Contribution to financial performance in the current financial year.
• Contribution to important strategic projects which may not have an immediate financial impact (for
example the mobile projects in Australia and Singapore).
• Other individual goals unique to the role each of the executives plays in the Group’s operations.
For the reasons described in section 5.3(ii)(a) above, the Remuneration Committee has determined that 100%
of the performance rights held by these executives that have a vesting date immediately following the release
of the FY18 audited financial statements will be permitted to vest.
25
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5. Remuneration report – audited (continued)
5.4 KMP remuneration detail (continued)
(iv) Link to Group financial performance
In determining the short-term incentive component of KMP remuneration, consideration is given to the
Group’s performance, including against its financial targets.
In FY18, notwithstanding the adverse margin pressure created for the industry by the rollout of the NBN, the
Group managed to achieve a tenth consecutive year of underlying growth in revenue, EBITDA and NPAT. In
line with expectations, underlying EPS fell slightly in FY18 reflecting that fact that the capital raise undertaken
in FY17 raised funds for the construction of the Group’s mobile network builds, which, whilst progressing well,
have not yet been completed and have therefore not yet started contributing to the Group’s earnings.
The Group’s ten-year financial record is set out in the table below.
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Revenue ($m)
Underlying1 EBITDA ($m)
Underlying1 NPAT ($m)
Underlying1 EPS (cents)
Closing share price ($)
Dividends (cps)
481
99
40
5.7
0.52
2.0
508
171
78
10.7
1.79
4.0
575
234
105
13.6
1.43
4.5
663
262
110
14.0
1.93
5.5
725
293
162
20.4
3.64
7.5
971
364
191
24.0
5.33
9.25
1,271
2,388
2,491
2,495
485
247
31.1
9.34
11.5
775
361
43.1
12.37
14.5
835
417
48.3
5.46
10.0
841
433
46.7
5.762
4.0
The Remuneration Committee believes that the Group’s exceptional track-record of earnings growth over the
past ten years reflects very well on the success of the remuneration structures described in this report,
especially given the consistency of the KMP over that timeframe.
(v) Service Contracts
No KMP employment contract in place during FY18 has a fixed term, nor do any contain any provision for
termination benefits other than as required by law.
No KMP employment contract in place during FY18 had a notice period of greater than five weeks, except for
the Group’s employment contracts with Mr D Teoh and Mr M Rafferty, both of which provide that the contract
may be terminated by either party giving three months’ notice.
_______________________________________________________________________________________
1 Underlying EBITDA, NPAT and EPS is as set out in the annual reports from FY15 onwards. For the years before FY15, underlying EBITDA is
the same as reported EBITDA and the only difference between underlying and reported NPAT and EPS is an adjustment each year to
exclude the post-tax effect of acquired customer base intangible amortisation.
2 Share price post year-end increased to $7.78 as at 18 October 2018.
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5.
Remuneration report – audited (continued)
5.5
Directors’ and executive officers’ remuneration
26
The tables below set out the statutory remuneration disclosures for each director of the Company and for other KMP of the Group. The amounts shown reflect the expense recognised
in the Group’s financial statements.
Directors
Executive Director
Mr D Teoh, Chairman
Non-Executive Directors
Mr D Ledbury
Mr R Millner
Mr J Pang
Mr S Teoh
Short-term
Post-employment
Salary &
fees
$‘000
(note A)
STI cash
bonus
$‘000
(note B)
Non-
monetary
benefits
$‘000
Total
$‘000
Superannuation
benefits
$‘000
(note C)
Other long term
$‘000
Share-based
payments
$‘000
Proportion of
remuneration
performance
related
%
Share-based
payments as
proportion of
remuneration
%
Total
$‘000
FY18
FY17
1,610
1,601
1,600
1,600
145
117
3,355
3,318
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
100
100
90
90
90
90
85
85
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
90
90
90
90
85
85
25
35
10
10
9
9
9
9
8
8
27
10
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,407
3,363
47%
48%
110
110
99
99
99
99
93
93
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5.
Remuneration report – audited (continued)
5.5
Directors’ and executive officers’ remuneration (continued)
Short-term
Post-employment
Share-based
payments
(note A)
STI cash
bonus
$’000
(note B)
Non-
monetary
benefits
$‘000
Salary & fees
$’000
Total
$‘000
Superannuation
benefits
$‘000
(note C)
Other long
term
$‘000
(note D)
Performance
rights
$‘000
Total
$‘000
Proportion of
remuneration
performance
related
%
Share-based
payments as
proportion of
remuneration
%
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
300
297
350
345
260
258
300
290
352
347
-
268
412
363
412
412
168
168
313
313
325
325
-
195
(3)
7
-
14
(5)
19
9
(8)
(3)
(6)
-
(13)
709
667
762
771
423
445
622
595
674
666
-
450
20
20
20
20
20
20
20
20
23
20
-
19
5
10
4
12
4
8
5
14
(11)
(1)
-
8
313
230
368
340
207
177
250
217
338
297
-
181
1,047
927
1,154
1,143
654
650
897
846
1,024
982
-
658
69%
64%
68%
66%
57%
53%
63%
63%
65%
63%
-
57%
30%
25%
32%
30%
32%
27%
28%
26%
33%
30%
-
28%
Executives
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
Mr W Springer(1)
(1) Mr W Springer was de-recognised as a KMP in FY18 as a consequence of his re-deployment to an operational role outside of the definition of a KMP
28
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5.
Remuneration report – audited (continued)
5.5
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 during the years ended 31 July 2018 and 31 July 2017 were for
performance during those years.
B. The amounts disclosed under ‘Non-monetary benefits’ reflect exclusively the movement in the annual leave
balance of each individual in the period, with the exception of Mr D Teoh whose amount also includes the
provision of other fringe benefits (principally a motor vehicle).
C. The amounts disclosed under ‘Other long-term’ reflect the movement in the long-service leave balance of each
individual in the period.
D. The share-based payments disclosed under ‘Performance Rights’ reflect the fair value of each right
multiplied by the number of rights granted to each individual, amortised pro-rata over the vesting period
of each right. The fair value of each right is calculated at date of grant by subtracting the expected
dividend payments per share during the vesting period from the share price at date of grant. The number
of rights granted to each KMP is disclosed in 5.6 below. The rules of the performance rights plan are
explained in 5.3(ii)(a) above.
Alternative ‘non-statutory’ remuneration calculations
The Remuneration tables on the pages above disclose the value of each KMP’s remuneration as calculated in
accordance with accounting standards. As explained in note D to the tables above, the value of share-based
payments reflects the proportion of the value of the performance rights, as valued at the date they were
granted, that was amortised through the Group’s Income Statement in the relevant financial year. This amount
can differ significantly from the actual value of the share-based payments that the KMP actually received in the
financial year. Therefore, as requested by certain shareholder groups, we have provided below a table showing
an alternative calculation of each KMP’s ‘take home pay’. The table shows the difference in the values under
both methodologies and the impact of this difference on each KMP’s total disclosed remuneration. For the
purpose of the table below, the actual value of the share-based payments that the KMP actually received in the
financial year is calculated by multiplying the number of performance rights that vested during the financial
year by the share price on the vesting date.
Share based
payments per
statutory
remuneration
table
$’000
313
230
368
340
207
177
250
217
338
297
Value of
performance
rights that
vested during
the year
$’000
185
227
238
319
129
125
166
217
209
172
Total
remuneration
per statutory
remuneration
table
$’000
1,047
927
1,154
1,143
654
650
897
846
1,024
982
Total
remuneration per
alternative
calculation
(Take home pay)
$’000
919
924
1,024
1,122
576
598
813
846
895
857
Difference
$’000
(128)
(3)
(130)
(21)
(78)
(52)
(84)
-
(129)
(125)
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
The table above demonstrates that in FY18 the ‘take home pay’ of each KMP was less than the value of their
remuneration set out in the statutory remuneration tables.
29
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5.
Remuneration report – audited (continued)
5.6
Share-based payments
Details of performance rights that were granted to KMP during the financial year ended 31 July 2018 are set out
below. All rights were provided at no cost to the recipients and have an exercise price of $nil.
FY18 Performance
rights grant
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
Number of rights
granted during
FY18
Number of rights
forfeited during
FY18
Number of rights
vested during
FY18
Number of rights
held as at 31 July
2018
Fair value per
right at grant
date ($)
50,000
62,000
32,000
39,000
62,000
-
-
-
-
-
-
-
-
-
-
50,000
62,000
32,000
39,000
62,000
5.6000
5.6000
5.6000
5.6000
5.6000
There has been no vesting or granting of any rights since the year-end.
Details of performance rights that were granted to KMP during previous financial years and that remained
outstanding at the start of FY18 are set out below. All rights in the tables below were provided at no cost to the
recipients and have an exercise price of $nil.
FY17 Performance
rights grant
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
FY16 Performance
rights grant
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
FY15 Performance
rights grant
Mr S Banfield
Mr C Levy
Ms M De Ville
Mr T Moffatt
Mr M Rafferty
Number of rights
held as at 31 July
2017
Number of rights
forfeited during
FY18
Number of rights
vested during
FY18
Number of rights
held as at 31 July
2018
Fair value per
right at grant
date ($)
64,400
74,100
42,000
51,800
65,000
-
-
-
-
-
16,100
18,525
10,500
12,950
16,250
48,300
55,575
31,500
38,850
48,750
6.0058
6.1655
6.0939
6.0906
6.1412
Number of rights
held as at 31 July
2017
Number of rights
forfeited during
FY18
Number of rights
vested during
FY18
Number of rights
held as at 31 July
2018
Fair value per
right at grant
date ($)
22,500
33,750
18,750
21,000
30,600
-
-
-
-
-
7,500
11,250
6,250
7,000
11,800
15,000
22,500
12,500
14,000
18,800
9.5160
9.5160
9.5160
9.5160
9.5471
Number of rights
held as at 31 July
2017
Number of rights
forfeited during
FY18
Number of rights
vested during
FY18
Number of rights
held as at 31 July
2018
Fair value per
right at grant
date ($)
12,000
16,000
8,000
12,000
12,000
-
-
-
-
-
12,000
16,000
8,000
12,000
12,000
-
-
-
-
-
5.9433
5.9433
5.9433
5.9433
5.9433
30
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
5.
Remuneration report – audited (continued)
5.7
KMP shareholdings
The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly
or beneficially by each KMP, including by their related parties, is as follows:
Directors
D Teoh
D Ledbury
R Millner
J Pang
S Teoh
Executives
S Banfield
C Levy
M De Ville
T Moffatt
M Rafferty
Held at
1 August
2017
317,933,350
85,109
8,235,739
102,429
132,456
Vested as
remuneration
Other
changes
Held at
31 July
2018
318,315,607
85,109
8,300,009
103,231
133,258
245,000
367,525
229,751
719,521
4,750
-
-
-
-
-
382,257
-
64,270
802
802
(5,600)
(20,000)
-
(7,000)
(58,600)
215,000
341,750
205,001
694,571
23,300
35,600
45,775
24,750
31,950
40,050
5.8
Transactions with KMP
During the year the Group rented office premises from companies related to a director of the Company, Mr D Teoh.
The total rent charged for FY18 was $1.4m (FY17: $1.3m).
Apart from the above, no director has entered into a material contract with the Company or the Group since the end
of the previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Loans to KMP and their related parties
There were no loans in existence between the Group and any KMP or their related parties at any time during or since
the financial year.
Other KMP transactions with the Company or its controlled entities
From time to time, KMP of the Company or its controlled entities, or their related entities, may purchase goods or
services from the Group. These purchases are on the same terms and conditions as those entered into by other
Group employees or customers and are trivial or domestic in nature.
31
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
6. Principal activities
During the financial year the principal activities of the Group continued to be the provision of consumer, wholesale
and corporate telecommunications services.
7. Dividends
Dividends paid or declared by the Company since the end of the previous financial year were as follows:
Cents per share
$m
Date of payment
Final 2017 ordinary
Interim 2018 ordinary
Total amount
2.0
2.0
18.5
18.5
37.0
21 Nov 2017
22 May 2018
Dividends declared and paid during the year were fully franked at the rate of 30 per cent.
After the balance sheet date the directors have declared a fully franked final FY18 dividend of 2.0 cents per ordinary
share, payable on 20 November 2018 to shareholders on the register at 16 October 2018. The Dividend
Reinvestment Plan (DRP) is currently suspended until further notice.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended
31 July 2018 and will be recognised in subsequent financial reports.
8. Events subsequent to reporting date
Proposed merger with Vodafone Hutchison Australia
On 30 August 2018, the Company and Vodafone Hutchison Australia (“VHA”) entered into a Scheme Implementation
Deed under which the companies have agreed a proposed merger of equals to establish a fully integrated
telecommunications operator in Australia.
The merger will be implemented via a TPG Scheme of Arrangement, with the new merged group listed on the
Australian Securities Exchange (“ASX”) and renamed “TPG Telecom Limited” in conjunction with implementation of
the scheme.
Following completion of the merger, TPG shareholders will own 49.9% of the equity of the Merged Group, with
VHA shareholders owning the remaining 50.1%.
The merger is subject to a number of conditions such as the approval of the Australian Competition and Consumer
Commission and it is anticipated that the merger will complete during 2019.
Further details about the planned merger are set out in market announcements made to the ASX on 30 August 2018.
Joint Venture and 5G Spectrum Auction
In parallel to the merger agreement, the Company and VHA have signed a separate 50:50 Joint Venture Agreement.
The scope of the joint venture is to acquire, hold and licence 3.6 GHz spectrum. The joint venture has registered as a
participant in the 3.6GHz spectrum auction expected to commence in late November 2018. The Joint Venture
Agreement is ongoing and will not terminate if the merger fails to proceed.
32
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
8. Events subsequent to reporting date (continued)
Separation of Singapore mobile operations
Separately, on or prior to the implementation of the merger, the Company intends to undertake a separation of its
Singapore mobile operations by way of an in-specie distribution of shares in the Singapore operation to TPG
shareholders.
Other than the above, 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 Group, the results of those operations, or the state of affairs of
the Group in future financial years.
9. Likely developments
Other than the possible completion of the planned merger of equals with VHA, there are no material likely
developments for the Group to disclose outside of normal business operations at the date of this report.
10. Directors’ interests
The relevant interest of each director in the shares and options over such instruments issued by the companies
within the Group 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 are as disclosed in section 5.7
above.
11.
Indemnification and insurance of officers and directors
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 a director or as an
officer 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.
Insurance policies
The Group maintains policies in respect of directors’ and officers’ liability insurance for current and former directors
and officers, including senior executives of the Company and directors, senior executives and secretaries of its
controlled entities. The terms of the insurance contract prohibit disclosure of the premiums payable and other terms
of the policies.
33
TPG Telecom Limited and its controlled entities
Directors’ report
For the year ended 31 July 2018
12. 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 KPMG and its related practices for audit and non-audit services provided during the
year are set out in note 27 to the financial statements.
13. Rounding off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Director’s Reports) instrument
2016/191 dated 24 March 2016 and, in accordance with that instrument, all financial information presented in
Australian dollars has been rounded to the nearest hundred thousand dollars, unless otherwise stated.
This report is made with a resolution of the directors.
David Teoh
Chairman
Dated at Sydney this 19th day of October, 2018
34
Lead Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
To the Directors of TPG Telecom Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of TPG Telecom Limited for the
financial year ended 31 July 2018 there have been:
i.
ii.
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.
KPMG
Chris Hollis
Partner
Sydney
19 October 2018
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
TPG Telecom Limited and its controlled entities
Consolidated income statement
For the year ended 31 July 2018
35
Revenue
Other income
Network, carrier and hardware costs
Employee benefits expense
Other expenses
Earnings before interest, tax, depreciation and amortisation
(EBITDA)
Depreciation of plant and equipment
Amortisation of intangibles
Results from operating activities
Finance income
Finance expenses
Net financing costs
Profit before income tax
Income tax expense
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interest
Note
FY18
$m
FY17
$m
4
9
2,495.2
-
2,490.7
48.8
(1,229.4)
(242.4)
(182.3)
(1,203.8)
(256.7)
(188.2)
841.1
890.8
10
11
(138.8)
(104.1)
(141.1)
(103.3)
5
6
598.2
646.4
1.7
(36.1)
(34.4)
1.4
(52.3)
(50.9)
563.8
595.5
(165.8)
(179.8)
398.0
415.7
396.9
1.1
398.0
413.8
1.9
415.7
Earnings per share:
Basic and diluted earnings per share (cents)
7
42.8
47.9
The notes on pages 40 to 87 are an integral part of these consolidated financial statements.
TPG Telecom Limited and its controlled entities
Consolidated statement of comprehensive income
For the year ended 31 July 2018
Profit for the year
Items that may be reclassified subsequently to profit or loss, net of tax:
Foreign exchange translation differences
Net gain/(loss) on cash flow hedges taken to equity
Net change in fair value of available-for-sale financial assets
Available-for-sale financial assets reclassified to profit or loss
Other comprehensive income, net of tax
Total comprehensive income for the year
Attributable to:
Owners of the Company
Non-controlling interest
36
FY18
$m
FY17
$m
398.0
415.7
7.0
1.0
(0.7)
-
(4.0)
(1.9)
(19.6)
(34.3)
7.3
(59.8)
405.3
355.9
404.2
1.1
405.3
354.0
1.9
355.9
The notes on pages 40 to 87 are an integral part of these consolidated financial statements.
TPG Telecom Limited and its controlled entities
Consolidated statement of financial position
As at 31 July 2018
Note
31 July 2018
$m
31 July 2017
$m
37
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Prepayments and other assets
Total Current Assets
Investments
Property, plant and equipment
Spectrum assets
Goodwill and other intangible assets
Prepayments and other assets
Total Non-Current Assets
Total Assets
Liabilities
Trade and other payables
Loans and borrowings
Spectrum liability
Current tax liabilities
Employee benefits
Provisions
Accrued interest
Deferred income and other liabilities
Total Current Liabilities
Loans and borrowings
Spectrum liability
Deferred tax liabilities
Employee benefits
Provisions
Derivative financial instruments
Deferred income and other liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Reserves
Retained earnings
Equity attributable to owners of the Company
Non-controlling interest
Total Equity
8
9
10
11
11
12
13
14
15
16
13
14
6
15
16
17
82.2
129.1
4.9
0.7
14.9
231.8
1.9
1,249.0
1,479.7
2,420.7
7.2
5,158.5
5,390.3
320.3
5.5
344.0
23.2
29.7
9.2
5.1
148.3
885.3
1,313.5
327.8
12.1
2.2
34.0
4.9
26.3
1,720.8
2,606.1
46.3
131.6
6.4
1.3
25.6
211.2
2.9
1,055.5
216.3
2,416.2
8.9
3,699.8
3,911.0
289.4
32.5
-
54.4
28.2
11.7
1.4
150.0
567.6
872.4
-
10.1
2.4
33.6
1.2
24.4
944.1
1,511.7
2,784.2
2,399.3
1,465.2
(8.2)
1,323.2
2,780.2
4.0
2,784.2
1,449.4
(18.1)
963.3
2,394.6
4.7
2,399.3
The notes on pages 40 to 87 are an integral part of these consolidated financial statements.
38
TPG Telecom Limited and its controlled entities
Consolidated statement of changes in equity
For the year ended 31 July 2018
Note
Share
capital
Foreign
currency
translation
reserve
Attributable to owners of the Company
Share based
payments
reserve
Fair value
reserve
Cash flow
hedge
reserve
Total
reserves
Retained
earnings
Total
Non-
controlling
interest
Total
equity
$m
1,051.9
-
-
-
400.3
(2.8)
-
-
1,449.4
1,449.4
-
-
-
15.8
-
-
1,465.2
17
17
18
17
18
$m
0.3
-
(4.0)
(4.0)
-
-
-
-
(3.7)
(3.7)
-
7.0
7.0
-
-
-
3.3
$m
(4.0)
-
-
-
-
-
0.5
-
(3.5)
(3.5)
-
-
-
-
2.6
-
(0.9)
$m
46.9
-
(53.9)
(53.9)
-
-
-
-
(7.0)
(7.0)
-
(0.7)
(0.7)
-
-
-
(7.7)
$m
(2.0)
-
(1.9)
(1.9)
-
-
-
-
(3.9)
(3.9)
-
1.0
1.0
-
-
-
$m
41.2
-
(59.8)
(59.8)
-
-
0.5
-
(18.1)
(18.1)
-
7.3
7.3
-
2.6
-
$m
681.0
413.8
-
413.8
-
-
-
(131.5)
$m
1,774.1
413.8
(59.8)
354.0
400.3
(2.8)
0.5
(131.5)
$m
5.1
1.9
-
1.9
-
-
-
(2.3)
$m
1,779.2
415.7
(59.8)
355.9
400.3
(2.8)
0.5
(133.8)
963.3
2,394.6
4.7
2,399.3
963.3
396.9
-
396.9
-
-
(37.0)
2,394.6
396.9
7.3
404.2
15.8
2.6
(37.0)
4.7
1.1
-
1.1
-
-
(1.8)
2,399.3
398.0
7.3
405.3
15.8
2.6
(38.8)
(2.9)
(8.2)
1,323.2
2,780.2
4.0
2,784.2
Balance as at 1 August 2016
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares
Share issue costs
Share-based payment transactions
Dividends paid to shareholders
Balance as at 31 Jul 2017
Balance as at 1 August 2017
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Issue of shares
Share-based payment transactions
Dividends paid to shareholders
Balance as at 31 Jul 2018
The notes on pages 40 to 87 are an integral part of these consolidated financial statements.
TPG Telecom Limited and its controlled entities
Consolidated statement of cash flows
For the year ended 31 July 2018
39
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of spectrum assets
Acquisition of other intangible assets
Proceeds from disposal of investments
Costs incurred on acquisition of subsidiaries
Payment of contingent consideration
Net cash used in investing activities
Cash flows from financing activities
Payment of finance lease liabilities
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to borrowings
Issue of shares
Share issue costs
Interest received
Interest paid
Dividends paid
Dividends paid to non-controlling interest
Net cash from/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations
Note
FY18
$m
FY17
$m
25
9
18
2,743.2
(1,874.9)
868.3
(194.5)
673.8
2,745.5
(1,875.8)
869.7
(147.0)
722.7
(292.5)
(597.3)
(66.5)
-
-
-
(956.3)
(34.1)
969.4
(538.6)
(10.8)
-
-
1.2
(45.8)
(21.2)
(1.8)
318.3
35.8
46.3
0.1
(299.9)
(199.8)
(76.6)
124.5
(1.5)
(3.8)
(457.1)
(27.0)
108.0
(558.0)
(3.4)
400.3
(4.0)
1.3
(42.0)
(131.5)
(2.3)
(258.6)
7.0
39.2
0.1
Cash and cash equivalents at end of the year
82.2
46.3
The notes on pages 40 to 87 are an integral part of these consolidated financial statements.
40
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
Index to notes to the consolidated financial statements
Page
Page
Note 1
Reporting entity
41
Note 16
Provisions
Note 2
Basis of preparation
41
Note 17
Capital and reserves
Note 3
Segment reporting
42
Note 18
Dividends
Note 4
Revenue
44
Note 19
Financial instruments and
risk management
Note 5
Finance income and expenses
Note 6
Taxes
Note 7
Earnings per share
Note 8
Trade and other receivables
Note 9
Investments
Note 10
Property, plant and equipment
Note 11
Intangible assets
45
45
47
48
48
49
51
Note 20
Operating leases
Note 21
Capital and other commitments
Note 22
Consolidated entities
Note 23
Deed of cross guarantee
Note 24
Parent entity disclosures
Note 25
Reconciliation of cash flows from
operating activities
Note 12
Trade and other payables
54
Note 26
Related parties
Note 13
Loans and borrowings
55
Note 27
Auditors’ remuneration
Note 14
Spectrum liability
57
Note 28
Subsequent events
Note 15
Employee benefits
57
Note 29
Significant accounting policies
59
60
61
62
71
71
72
74
77
78
79
79
79
80
41
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
1.
Reporting entity
TPG Telecom Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s
registered office is 65 Waterloo Road, Macquarie Park, NSW 2113. The consolidated financial statements as
at, and for the year ended 31 July 2018 (referred to throughout this report as “FY18”), comprise the
accounts of the Company and its subsidiaries (together referred to as the ‘Group’). The Group is a for-profit
entity and is primarily involved in the provision of consumer, wholesale, government and corporate
telecommunications services.
2.
a.
Basis of preparation
Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared
in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001.The consolidated financial statements comply with
International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards
Board (IASB).
The consolidated financial statements were approved by the Board of Directors on 19 October 2018.
b.
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis with the exception of
investments, derivatives and financial instruments which are measured at fair value. The methods used to
measure fair values are discussed further at note 29(k).
c.
Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the functional currency
of the majority of the subsidiaries of the Group.
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016 and, in accordance with that instrument, all financial information presented
in Australian dollars has been rounded to the nearest hundred thousand dollars unless otherwise stated.
d.
Use of estimates and judgements
Preparation of the consolidated financial statements in conformity with IFRSs 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 prospectively.
42
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
2.
Basis of preparation (continued)
In particular, information about significant areas of estimation uncertainties and critical judgements in
applying accounting policies that have the most significant effect on the amounts recognised in the financial
statements is provided in the following notes:
• Note 11(iii) – amortisation of intangible assets with finite useful lives;
• Note 11(iv) – impairment testing for cash-generating units containing goodwill;
3.
Segment reporting
The Group determines and presents operating segments based on the information that is internally provided
to the Executive Chairman, who is the Group’s chief operating decision maker.
An operating segment is a component of the Group that engages in business activities from which it may
earn revenues and incur expenses. All operating segments’ operating results are regularly reviewed by the
Group’s Executive Chairman to make decisions about resources to be allocated to each segment and assess
its performance, and for which discrete financial information is available.
As at the end of FY18, the Group recognises the following segments:
Consumer Segment
The Consumer Segment provides telecommunications and technology services to residential and small
business customers.
Corporate Segment
The Corporate Segment provides telecommunications services to corporate, government, and wholesale
customers.
Results for the year for each operating segment are set out in the table on the next page. In the table,
expenses in the ‘Unallocated’ column in the current year comprise start-up expenses in relation to the
Group’s Singapore operations and other corporate costs.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
43
Note
Consumer
Corporate
Unallocated
Total results
For the year ended 31 July 2018
3.
Segment reporting (continued)
FY18
Revenue
Other income
Network, carrier and hardware costs
Employee benefits expense
Other expenses
Results from segment activities
$m
1,741.4
-
(949.4)
(133.9)
(145.0)
513.1
$m
753.8
-
(280.0)
(108.2)
(35.5)
330.1
FY17
$m
$m
Revenue
Other income
Network, carrier and hardware costs
Employee benefits expense
Other expenses
Results from segment activities
1,747.7
-
(916.4)
(147.8)
(153.1)
530.4
743.0
-
(287.4)
(108.8)
(34.0)
312.8
Reconciliation of segment results to the Group’s profit before income tax is as follows:
Total segment results
Depreciation of plant and equipment
Amortisation of intangibles
Results from operating activities
Net financing costs
Profit before income tax
Geographic Information
FY18
$m
841.1
(138.8)
(104.1)
598.2
(34.4)
563.8
FY17
$m
890.8
(141.1)
(103.3)
646.4
(50.9)
595.5
$m
-
-
-
(0.3)
(1.8)
(2.1)
$m
-
48.8
-
(0.1)
(1.1)
47.6
$m
2,495.2
-
(1,229.4)
(242.4)
(182.3)
841.1
$m
2,490.7
48.8
(1,203.8)
(256.7)
(188.2)
890.8
All of the Group’s revenues are derived from Australian based entities, except for $32.8m (FY17: $27.5m)
derived from overseas customers.
An analysis of the Group’s non-current assets based on geographic location is set out below:
Country
Australia
Singapore
Other
Total
FY18
$m
4,717.7
203.0
237.8
5,158.5
FY17
$m
3,356.6
122.1
221.1
3,699.8
‘Other’ predominantly relates to submarine cables located in international waters.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
4.
Revenue
Rendering of services
Sale of goods
(i)
Rendering of services
44
FY18
$m
2,453.4
41.8
2,495.2
FY17
$m
2,455.7
35.0
2,490.7
Revenue from the rendering of telecommunications services includes the provision of data, internet, voice,
telehousing, network capacity and other services to consumers and corporate customers. It is recognised on a
straight-line basis over the period the service is provided. Usage revenue for voice services is recognised at
completion of the call.
Where revenue for services is invoiced to customers in advance, the amount that is unearned at a reporting
date is recognised in the statement of financial position as deferred income, and its recognition in the income
statement is deferred until the period to which the invoiced amount relates.
Installation and set-up fee revenue is recognised on a straight-line basis over the period of the contract to which
it relates.
(ii)
Sale of goods
Revenue from the sale of goods represents sales of customer equipment to consumer and corporate customers.
It is recognised (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 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)
Revenue arrangements with multiple deliverables
Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each
deliverable is accounted for separately.
The consideration from the revenue arrangement is allocated to its separate deliverables based on the relative
selling prices. If no third party evidence exists for the selling price, then the item is measured based on the best
estimate of the selling price. The revenue allocated to each deliverable is then recognised in accordance with the
revenue recognition policies described above.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
5.
Finance income and expenses
Interest income
Interest expense
Unwinding of discounts on provisions
Borrowing costs
Net financing costs
45
FY18
$m
1.7
(18.3)
(0.3)
(17.5)
(34.4)
FY17
$m
1.4
(37.8)
(0.3)
(14.2)
(50.9)
Interest expense in the current year excludes $39.5m of interest incurred in the year that is directly
attributable to the construction of the Group’s fibre and mobile networks and acquisition of mobile
spectrum which, in accordance with the Group’s accounting policies, has been capitalised as part of the cost
of the network.
6.
Taxes
Income tax expense
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Adjustments in respect of prior years
Income tax expense
Numerical reconciliation between tax expense and pre-tax accounting profit
Profit before tax
Income tax using Australian tax rate of 30%
Different tax rates in other jurisdictions
Non-deductible and non-assessable items
Adjustments in respect of prior years
Income tax expense
FY18
$m
165.4
(0.9)
1.3
0.4
165.8
563.8
169.1
0.2
(3.5)
-
165.8
FY17
$m
206.0
(24.3)
(1.9)
(26.2)
179.8
595.5
178.7
-
0.6
0.5
179.8
46
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
6. Taxes (continued)
Deferred tax assets and liabilities
Movement in temporary differences during the year
Balance
31 July 2016
$m
Recognised in
profit or loss
$m
Recognised in
equity
$m
Balance
31 July 2017
$m
Recognised in
profit or loss
$m
Recognised in
equity
$m
Balance
31 July 2018
$m
Deferred tax liabilities
Property, plant and equipment
Intangible assets
Deferred tax assets
Receivables
Inventories
Derivative financial assets
Investments
Provisions
Trade and other payables
Employee benefits
Unearned revenue
Equity raising costs
Tax losses carried forward
Other items
13.4
87.4
100.8
(7.9)
(0.9)
(0.9)
22.0
(15.8)
(5.8)
(8.7)
(10.3)
(1.3)
(1.7)
(6.8)
(38.1)
(4.5)
(19.4)
(23.9)
(1.9)
-
1.4
(2.0)
2.2
(3.4)
(0.3)
(0.6)
0.5
0.7
1.1
(2.3)
Net deferred tax liabilities
62.7
(26.2)
-
-
-
-
-
(0.6)
(23.0)
-
-
-
-
(1.2)
-
(1.6)
(26.4)
(26.4)
8.9
68.0
76.9
(9.8)
(0.9)
(0.1)
(3.0)
(13.6)
(9.2)
(9.0)
(10.9)
(2.0)
(1.0)
(7.3)
(66.8)
10.1
(1.0)
1.9
0.9
1.7
-
(0.4)
-
0.8
(6.1)
(0.3)
3.3
0.6
(4.0)
3.9
(0.5)
0.4
-
-
-
-
-
(0.7)
(0.3)
-
-
-
-
(0.1)
-
2.7
1.6
1.6
7.9
69.9
77.8
(8.1)
(0.9)
(1.2)
(3.3)
(12.8)
(15.3)
(9.3)
(7.6)
(1.5)
(5.0)
(0.7)
(65.7)
12.1
The Company has not recognised deferred tax assets on unutilised capital losses of $15.7m (FY17: $15.7m).
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
6. Taxes (continued)
47
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 a business combination, or items recognised
directly in equity, in which case it is recognised in equity or in other comprehensive income.
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 is not a business combination and that affects
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 levied by the same tax authority on the same taxable
entity.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
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 TPG Telecom Limited.
7.
Earnings per share
Basic and diluted earnings per share (cents)
FY18
42.8
FY17
47.9
Profit attributable to owners of the Company used in calculating basic and
diluted earnings per share ($m)
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings per share (No.)
396.9
413.8
926,209,453
864,306,858
The Group 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 owners of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, of which there were none at the end of the current or previous reporting period.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
8.
Trade and other receivables
Current
Trade receivables
Accrued income and other receivables
Less: Provision for impairment losses
48
FY18
$m
128.8
33.6
(33.3)
129.1
FY17
$m
142.9
29.9
(41.2)
131.6
The Group’s exposure to credit and currency risk and impairment losses related to trade and other
receivables is disclosed in note 19.
9.
Investments
Available-for-sale financial assets
Current
Carrying amount as at 1 August
Disposals
Change in fair value
Carrying amount as at 31 July
Non-Current
Carrying amount as at 1 August
Change in fair value
Carrying amount as at 31 July
FY18
$m
-
-
-
-
2.9
(1.0)
1.9
FY17
$m
139.1
(124.5)
(14.6)
-
16.3
(13.4)
2.9
The Group realised a profit of $48.8m on sale of investments in FY17.
The Group’s investments comprise available-for-sale financial assets, being ASX listed securities.
They are measured at fair value and are valued at quoted market prices. They are categorised as
Level 1 under the fair value hierarchy of AASB 13. Refer note 19(ii) for accounting policy on recognition and
measurement.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
10.
Property, plant and equipment
Cost
Balance at 1 August 2016
Additions
Disposals
Balance at 31 July 2017
Balance at 1 August 2017
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 July 2018
Depreciation and impairment losses
Balance at 1 August 2016
Depreciation charge for the year
Balance at 31 July 2017
Balance at 1 August 2017
Depreciation charge for the year
Disposals
Balance at 31 July 2018
Carrying amounts
At 31 July 2017
At 31 July 2018
Network
infrastructure
$m
Land &
Buildings
$m
Leasehold
improvements
$m
1,420.3
296.1
(0.1)
1,716.3
1,716.3
325.2
(0.1)
1.6
2,043.0
567.7
138.5
706.2
706.2
136.3
0.1
842.6
1,010.1
1,200.4
37.4
5.3
-
42.7
42.7
4.6
-
-
47.3
2.1
1.0
3.1
3.1
1.1
-
4.2
39.6
43.1
13.7
0.2
-
13.9
13.9
1.0
-
-
14.9
6.5
1.6
8.1
8.1
1.3
-
9.4
5.8
5.5
49
Total
$m
1,471.4
301.6
(0.1)
1,772.9
1,772.9
330.8
(0.1)
1.6
2,105.2
576.3
141.1
717.4
717.4
138.7
0.1
856.2
1,055.5
1,249.0
50
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
10. Property, plant and equipment (continued)
(i)
Recognition and measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses (see note 29(g)). Cost includes all expenditure that is directly attributable to bringing the
asset to the location and condition necessary for its intended use. The cost of self-constructed assets
includes the cost of materials, direct labour, and the initial estimate, where relevant, of the costs of
dismantling and removing the items and restoring the site on which they are located.
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying
assets form part of the cost of the asset.
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.
The gains and losses on disposal of an item of property, plant and equipment are determined by comparing
the proceeds from disposal with the carrying amount of the item being disposed and are recognised net
within other expenses in the income statement.
(ii)
Subsequent costs
Subsequent costs are added to existing assets if it is probable that future economic benefits will flow to the
Group.
(iii)
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 used in both the current and comparative periods are as follows:
•
•
•
Network infrastructure
Buildings
Leasehold improvements
3 - 25 years
40 years
8 years
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least
annually.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
11.
Intangible assets
Goodwill~
$m
Brands~
$m
Acquired
customer
bases
$m
Indefeasible
rights of use
of capacity
$m
Other
intangibles*
$m
Sub - total
$m
Spectrum
licences
$m
Cost
Balance 1 August 2016
Additions
Effect of movements in exchange rates
Balance 31 July 2017
Balance 1 August 2017
Additions
Effect of movements in exchange rates
Balance 31 July 2018
Amortisation and Impairment
Balance 1 August 2016
Amortisation for the year
Balance 31 July 2017
Balance 1 August 2017
Amortisation for the year
Balance 31 July 2018
Carrying amounts
At 31 July 2017
At 31 July 2018
1,911.0
-
-
1,911.0
1,911.0
-
-
1,911.0
-
-
-
-
-
-
90.6
-
-
90.6
90.6
-
-
90.6
-
-
-
-
-
-
1,911.0
1,911.0
90.6
90.6
480.5
-
-
480.5
480.5
-
-
480.5
209.4
62.4
271.8
271.8
51.0
322.8
208.7
157.7
178.9
36.9
-
215.8
215.8
35.4
-
251.2
44.5
11.6
56.1
56.1
15.0
71.1
159.7
180.1
84.2
20.4
-
104.6
104.6
64.7
-
169.3
32.8
25.6
58.4
58.4
29.6
88.0
46.2
81.3
2,745.2
57.3
-
2,802.5
2,802.5
100.1
-
2,902.6
286.7
99.6
386.3
386.3
95.6
481.9
28.9
197.9
(4.6)
222.2
222.2
1,262.8
9.1
1,494.1
2.2
3.7
5.9
5.9
8.5
14.4
~ Goodwill and Brands are non-amortising intangible assets as they have indefinite useful lives.
* Other intangible assets include software, subscriber acquisition costs, capitalised interest, development costs and other licences.
Amortising intangibles are removed from cost in the analysis in the year after they become fully amortised.
2,416.2
2,420.7
216.3
1,479.7
2,632.5
3,900.4
51
Total
$m
2,774.1
255.2
(4.6)
3,024.7
3,024.7
1,362.9
9.1
4,396.7
288.9
103.3
392.2
392.2
104.1
496.3
52
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
11. Intangible assets (continued)
(i)
Recognition and measurement
a.
Intangible assets with indefinite useful lives:
Goodwill
Goodwill arising on acquisition of subsidiaries is measured at cost less accumulated impairment losses. For
the measurement of goodwill at initial recognition, see note 29(a)(i).
Brands
On acquisition of a subsidiary, brands of the acquired subsidiary are valued and brought to account as
intangible assets. The value is calculated using the Relief from Royalty Method.
b.
Intangible assets with definite useful lives:
Acquired customer bases
On acquisition of a subsidiary, customer contracts and relationships of the acquired subsidiary are valued
based on their expected future economic benefits (using discounted cashflow projections) and brought to
account as intangible assets.
Indefeasible rights of use of capacity
Indefeasible rights of use (IRUs) of acquired network capacity are brought to account as intangible assets at
the present value of the future cashflows payable for the right. IRUs of acquired subsidiaries are accounted
for at their fair value as at the date of acquisition.
Spectrum licences
Spectrum licences are stated at cost less accumulated amortisation and any accumulated impairment losses.
Other intangible assets
Other intangible assets comprise software, subscriber acquisition costs, licences other than spectrum
licences, operating costs that are incurred in developing or acquiring income producing assets, and
capitalised interest related to the acquisition of intangible assets. Other intangible assets are stated at cost
less accumulated amortisation and any accumulated impairment losses.
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 amortised replacement cost.
(ii)
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.
53
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
11. Intangible assets (continued)
(iii)
Amortisation
Unless otherwise stated, amortisation is charged to the income statement on a straight-line basis, over the
estimated useful lives of intangible assets. Goodwill and intangible assets with an indefinite useful life are
systematically tested for impairment at each balance sheet date.
The estimated useful lives used in both the current and comparative periods are as follows:
• Acquired customer bases
•
•
Indefeasible rights of use (IRU) of capacity
Spectrum licences
• Other intangible assets with finite useful lives
-
-
-
-
Amortised on a reducing balance basis in line
with the expected economic benefits to be
derived.
Amortised over the life of the IRU.
Amortised over the licence term starting
from the date the related network is ready
for its intended use.
Amortised over the expected useful life.
(iv)
Impairment tests for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s cash generating units (CGUs).
CGUs are determined according to the lowest level of groups of assets that generate largely independent
cashflows.
As at 31 July 2017, the Group had three CGUs, being the Consumer, Corporate and Singapore CGUs. During
FY18, the Group has commenced building its own mobile network in Australia, in support of which it
acquired a 700MHz spectrum licence. The Australian mobile network is under construction and is not yet
generating revenue. The assets of this start-up division, including the spectrum licence, have therefore been
carved out as a separate CGU as at 31 July 2018.
Indefinite life intangible assets comprise goodwill and brands allocated to the CGUs as set out in the table
below. Goodwill is allocated to the CGU that is expected to benefit from the synergies of the acquisition.
Goodwill
$m
1,615.5
295.5
-
-
1,911.0
FY18
Brands
$m
83.6
7.0
-
-
90.6
Total
Goodwill
$m
1,699.1
302.5
-
-
2,001.6
$m
1,615.5
295.5
-
-
1,911.0
FY17
Brands
$m
83.6
7.0
-
-
90.6
Total
$m
1,699.1
302.5
-
-
2,001.6
Consumer
Corporate
Singapore
Australia Mobile
Total
Determining whether goodwill is impaired involves estimating the value-in-use of the CGUs to which the
goodwill has been allocated.
Value-in-use is determined by discounting the projected future cashflows generated from the continuing use
of the assets in the relevant CGU.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
11. Intangible assets (continued)
54
The cashflow projections utilised for this purpose comprise projections prepared by senior management for
a five year period plus a terminal value.
Key assumptions involved in the value-in-use calculations include:
• Gross profit: expected customer growth rates, average revenue per user, direct costs to deliver
customer services and product mix changes. These assumptions are determined based both on an
extrapolation of historical trends and on expected trends of future market developments.
• Overheads: forecast employee headcount and wage inflation, marketing costs and other overheads
required to support the growth assumed in the gross profit projections.
• Capital expenditure: forecast capital expenditure required to maintain and expand network
infrastructure to support the future growth assumed in the gross profit projections.
• Long-term growth rate: the terminal value calculation includes a long-term growth rate of 2.5% which is
reflective of the long-term industry outlook.
• Discount rate: A pre-tax discount rate of 12.0% has been used in discounting the projected cashflows of
each CGU, which is based on the Group’s weighted average cost of capital adjusted to reflect an estimate
of specific risks assumed in the cashflow projections.
Sensitivity analysis on all of the key assumptions employed in the value-in-use calculations has been
performed. From this it was concluded that no reasonable possible movement in any of the key
assumptions would give rise to any impairment in any of the CGUs.
12.
Trade and other payables
Trade creditors
Other creditors and accruals
FY18
$m
205.6
114.7
320.3
FY17
$m
185.5
103.9
289.4
Trade payables are non-interest bearing and are normally settled on 30-60 day terms.
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note
19.
55
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
13.
Loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and
borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see
note 19.
Current
Indefeasible right of use (IRU) lease liabilities
Other finance lease liabilities
Non-Current
Gross secured bank loans
Less: Unamortised borrowing costs
Other finance lease liabilities
FY18
$m
-
5.5
5.5
1,330.7
(29.6)
1,301.1
12.4
1,313.5
FY17
$m
32.5
-
32.5
900.0
(27.6)
872.4
-
872.4
In September 2017, in order to finance its planned mobile network builds, the Group entered into new
agreements to increase, amend and extend its debt facilities. The limit of the facilities was increased by
$750.0m to $2,385.0m (includes a Singapore dollar denominated facility of SGD100m which is translated to
AUD using the 31 July 2018 spot rate) and the tenor of the facilities was extended such that as at 31 July
2018, the maturity profile of the facilities is now between 2.2 and 6.2 years, with a weighted average of 3.6
years. As at 31 July 2018 $1,330.7m of the debt facilities were drawn down leaving $1,054.3m undrawn.
The Group incurred establishment fees of $10.8m for amending its debt facilities. The outstanding loan
balance as at the reporting date is shown in the statement of financial position net of unamortised
borrowing costs of $29.6m.
The interest rate payable under the debt facility is based on BBSY rates plus a margin determined quarterly
according to the Group’s gearing ratio.
As at 31 July 2018, the debt facilities were secured by a fixed and floating charge over all of the assets of the
Group, with the exception of the assets of the following subsidiaries:
Kooee Pty Ltd
Digiplus Contracts Pty Ltd
Blue Call Pty Ltd
Orchid Cybertech Services Incorporated
Orchid Human Resources Pty Ltd
TPG (NZ) Pty Ltd
IntraPower Pty Ltd
IP Service Xchange Pty Ltd
Trusted Cloud Pty Ltd
Trusted Cloud Solutions Pty Ltd
Alchemyit Pty Ltd
IP Group Pty Ltd
Mercury Connect Pty Ltd
VtalkVoip Pty Ltd
Intrapower Terrestrial Pty Ltd
Hosteddesktop.com Pty Ltd
Virtual Desktop Pty Ltd
Destra Communications Pty Ltd
iiNet (New Zealand) AKL Ltd
Neighbourhood Cable Unit Trust
The Tech2 Group Pty Ltd
Tech2 Business Solutions Pty Ltd
Tech2Home (Proprietary) Ltd
Tech2Home Pty Ltd
Tech2Home (Communications) Pty Ltd
Gizmo Corporation Pty Ltd
TPG Telecom Pte Ltd
56
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
13. Loans and borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Note
Bank Loans
& accrued
interest
$m
Finance
lease
liabilities
$m
Share
capital
Retained
earnings
$m
$m
873.8
32.5
1,449.4
963.3
17,18
-
969.4
(538.6)
(10.8)
1.2
(44.7)
-
-
376.5
55.9
-
1,306.2
(34.1)
-
-
-
-
(1.1)
-
-
(35.2)
20.6
-
17.9
-
-
-
-
-
-
15.8
-
15.8
-
-
-
-
-
-
(37.0)
-
(37.0)
-
-
-
396.9
1,465.2
1,323.2
Non-
controlling
interest
$m
4.7
-
-
-
-
-
-
-
(1.8)
(1.8)
-
1.1
4.0
Total
$m
3,323.7
(34.1)
969.4
(538.6)
(10.8)
1.2
(45.8)
(21.2)
(1.8)
318.3
76.5
398.0
4,116.5
Balance as at 1 August 2017
Changes from financing cash flows
Payment of finance lease liabilities
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to borrowings
Interest received
Interest paid
Dividends paid (including DRP)
Dividends paid to non-controlling interest
Total changes from financing cash flows
Other changes
Liability-related
Equity-related
Balance as at 31 July 2018
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
14.
Spectrum liability
Balance as at 1 August
Present value of spectrum acquired
Interest accrued during the year
Balance as at 31 July
Current
Non-current
57
FY18
$m
-
655.2
16.6
671.8
344.0
327.8
FY17
$m
-
-
-
-
-
-
The Group acquired a licence for two lots of 10MHz of 700MHz spectrum at an auction in April 2017 for a
purchase price of $1.260 billion, payable in three annual instalments starting from 31 January 2018. The
licence was available for use from 1 April 2018. $10.0m of the first instalment was prepaid in FY17 and the
balance of $594.8m was paid on 31 January 2018. The present value of the remaining two instalments of
$655.2m is disclosed in the table above.
The second and third instalments, payable on 31 January 2019 and 31 January 2020, amount to $352.4m
each. The total amount payable for the spectrum licence will amount to $1,309.6m and implies an interest
for deferred payment of $49.6m. This interest expense is being accrued over the remaining two instalments
on a straight-line basis.
15.
Employee benefits
Current
Liability for annual leave
Liability for long service leave
Non-Current
Liability for long service leave
(i)
Current employee benefits
FY18
$m
15.1
14.6
29.7
FY17
$m
15.1
13.1
28.2
2.2
2.4
Liabilities for employee benefits that are due within 12 months of the reporting date represent present
obligations resulting from employees’ services provided up to the reporting date, and are calculated at
undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at
reporting date including related on-costs such as workers’ compensation insurance and payroll tax.
(ii)
Non-Current employee benefits
The Group’s 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 corporate bonds at the balance sheet date which have maturity dates
approximating to the terms of the Group’s obligations.
58
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
15. Employee benefits (continued)
(iii)
Performance rights plan
The Group has in place a performance rights plan as detailed in Section 5.3 of the Remuneration Report.
The number of rights granted or outstanding during the year ended 31 July 2018 are set out below:
Balance as at 1 August 2017
Granted during the year
Forfeited during the year
Vested during the year
Balance as at 31 July 2018
Number of
Rights
1,503,300
872,600
(8,300)
(528,025)
1,839,575
The fair value of the rights at date of grant was calculated by subtracting the expected dividend payments
per share during the vesting period from the share price at date of grant. The weighted average fair value
and share price at date of grant of rights granted during the current and previous reporting periods are as
follows:
Date of grant
16 December 2016
31 July 2017
22 December 2017
23 March 2018
Weighted average
fair value
$6.3395
$5.4400
$6.3570
$5.6000
Share price
$6.76
$5.64
$6.46
$5.70
At the year-end an estimate of how many rights are likely to vest based on the continuous employment and
financial performance conditions has been updated. The fair value of the number of rights expected to vest
has been expensed in proportion to how far through the vesting period the rights are at that date. The
amount consequently expensed in the year was $4.7m (2017: $4.3m).
(iv)
Superannuation
The Group contributes to several defined contribution superannuation plans. Contributions are recognised
as an expense in the income statement on an accruals basis.
The Group contributed $14.7m to defined contribution superannuation plans during the current year (FY17:
$15.3m).
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
16.
Provisions
Balance as at 1 August 2017
Provisions made during the year
Provisions used during the year
Unwind of discount
Balance as at 31 July 2018
Current
Non-current
Make good
costs
$m
Lease
increment
$m
Onerous
leases
$m
38.1
0.4
(1.4)
0.3
37.4
5.0
32.4
0.8
-
(0.1)
-
0.7
0.1
0.6
3.6
-
(1.3)
-
2.3
1.3
1.0
Other
$m
2.8
-
-
-
2.8
2.8
-
59
Total
$m
45.3
0.4
(2.8)
0.3
43.2
9.2
34.0
A provision is recognised in the statement of financial position when the Group 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 cashflows
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. The unwinding of the discount is recognised as a finance
expense.
Make good costs
The make good costs provision relates to the Group’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.
Lease increment
Where the Group 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.
Onerous leases
Where the Group has contractual obligations with costs exceeding the expected economic benefits from the
arrangement, a provision is immediately recognised for the excess cost component.
60
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
17.
Capital and reserves
Share capital
Balance as at 1 August
Ordinary shares issued during the year:
- Institutional entitlement offer
- Retail entitlement offer
- Dividend reinvestment plan
Share issue costs (net of tax)
Balance as at 31 July
Ordinary shares
$m
FY18
FY17
FY18
FY17
924,719,448
848,473,118
1,449.4
1,051.9
-
-
3,092,045
-
927,811,493
15,242,739
61,003,591
-
-
924,719,448
-
-
15.8
1,465.2
80.0
320.3
-
(2.8)
1,449.4
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from equity, net of any tax effects. The Company
does not have authorised capital or par value in respect of its issued shares. 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.
Share-based payments reserve
The share-based payments reserve comprises the cost of performance rights granted to eligible employees
(refer note 15 (iii)) less any payments made to the employee share trust for the purpose of acquiring shares
to fulfil the Group’s obligations on vesting of the performance rights. At 31 July 2018 the number of
Company shares held in the employee share trust for the Group was nil. (FY17: 309,300).
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial
assets until the investments are derecognised or impaired.
Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of
hedging instruments used in cash flow hedges, pending subsequent recognition in the income statement as
the hedged cash flows or items affect profit or loss.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
18.
Dividends
Dividends recognised in the current year were as follows:
61
FY18
Interim FY18 ordinary
Final FY17 ordinary
Total amount
FY17
Interim FY17 ordinary
Final FY16 ordinary
Total amount
Cents
per share
Total
Amount
$m
Date of
payment
2.0
2.0
8.0
7.5
22 May 2018
21 Nov 2017
23 May 2017
22 Nov 2016
18.5
18.5
37.0
67.9
63.6
131.5
All dividends declared or paid during the year were fully franked at the tax rate of 30%.
The directors have declared a fully franked final FY18 dividend of 2.0 cents per share. As the final dividend
was not declared or resolved to be paid by the Board of directors as at 31 July 2018, the dividend has not
been provided for in the consolidated statement of financial position. The dividend has a record date of 16
October 2018 and will be paid on 20 November 2018. The Dividend Reinvestment Plan (DRP) is currently
suspended until further notice.
Dividend franking account
30 per cent franking credits available to shareholders of the
Company for subsequent financial years
FY18
$m
711.0
FY17
$m
563.7
The above available amounts are based on the balance of the dividend franking account at year-end
adjusted for:
(a) franking credits that will arise from the payment of the current tax liabilities; and
(b) franking credits transferred in on business combinations.
The ability to utilise the franking credits is dependent upon the ability of the Company to pay dividends. The
impact on the dividend franking account of dividends proposed after the balance sheet date but not yet
recognised as a liability is to reduce it by $8.0m (2017: $7.9m).
62
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19.
Financial instruments and risk management
Financial Instruments
Non-derivative financial instruments
The Group classifies non-derivative financial assets into the following categories: loans and receivables, and
available-for-sale financial assets.
(i)
Non-derivative financial assets and financial liabilities – recognition and derecognition
The Group initially recognises loans and receivables and debt securities issued on the date when they are
originated. All other financial assets and financial liabilities are initially recognised on the trade date.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are transferred and it does not retain control over the
transferred asset. The Group derecognises a financial liability when its contractual obligations are discharged
or cancelled, or expire.
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to settle
them on a net basis or to realise the asset and settle the liability simultaneously.
(ii)
Non-derivative financial assets - measurement
Loans and receivables
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at amortised cost using the effective interest method. The loans
and receivables category comprises trade and other receivables.
Available-for-sale financial assets
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are
recognised in other comprehensive income and accumulated in the fair value reserve. When these assets are
derecognised, the gain or loss in equity is transferred to profit or loss. The available-for-sale financial assets
category comprises equity securities.
(iii)
Non-derivative financial liabilities - measurement
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable
transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the
effective interest method. The non-derivative financial liabilities category comprises loans and borrowings,
spectrum liability and trade and other payables.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
Derivative financial instruments and hedging
63
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps to
manage the foreign currency and interest rate risks. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured to fair value. The fair value of forward currency contracts is calculated by reference to current
forward exchange rates. The interest rate swaps are valued at the present value of the estimated future cash
flows. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is
negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify
for hedge accounting, are taken to the consolidated income statement.
Derivative financial instruments that meet the criteria for hedge accounting are accounted for as follows:
Derivative financial instruments that hedge the Group’s exposure to variability in cash flows arising due to a
particular risk associated with a recognised asset or liability, a highly probable forecast transaction, or the
foreign currency risk in an unrecognised firm commitment, are called cash flow hedges.
The Group tests cash flow hedges for effectiveness at each reporting date both retrospectively and
prospectively.
The effective portion of the gain or loss on the hedging instrument is recognised directly in ‘other
comprehensive income’, while the ineffective portion is recognised in the consolidated income statement.
Amounts taken to ‘other comprehensive income’ are:
-
-
-
transferred to the consolidated income statement when the hedged transaction affects profit or loss,
such as, when the hedged financial income or financial expense is recognised, or when a forecast
transaction occurs,
transferred to the initial carrying amount of the non-financial asset or liability where the hedged item is
the cost of a non-financial asset or non-financial liability, or
transferred to the consolidated income statement immediately if the forecast transaction or firm
commitment is no longer expected to occur.
If the hedging instrument no longer meets the criteria for hedge accounting then hedge accounting is
discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is revoked (due to it being ineffective), amounts
previously recognised in ‘other comprehensive income’ remain in ‘other comprehensive income’ until the
forecast transaction occurs.
64
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
Risk management
The Group has exposure to the following risks from its use of financial instruments:
•
credit risk
•
liquidity risk
• market risk
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies
and processes for measuring and managing risk, and the management of capital. Further quantitative
disclosures are included throughout this financial report.
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 Group, 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 in the Group’s activities. The
Group aims to develop a disciplined and constructive control environment in which all employees
understand their roles and obligations.
The Group’s Audit & Risk Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation
to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
The Group’s exposure to credit risk is influenced by the individual characteristics of each customer, the
industry and the geographical region in which the customers operate.
The Group minimises concentration of credit risk by undertaking transactions with a large number of
customers. By industry, the Group is not subject to a concentration of credit risk as its customers operate in
a wide range of industries.
The Group has established a credit policy for its corporate customers under which each new customer is
analysed individually for creditworthiness before the Group’s standard payment and delivery terms and
conditions are offered. The review includes obtaining external ratings, when available, and in some cases
bank references.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
65
Credit limits may be established for each customer. These limits are reviewed regularly. Customers that fail
to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis
or on other specific terms considered by management to be satisfactory.
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 or retail customer, geographic
location, industry, ageing profile, and existence of previous financial difficulties.
The Group has established a provision for impairment that represents management’s estimate of incurred
losses in respect of trade and other receivables.
The carrying amount of the Group’s financial assets represents the maximum credit exposure from those
assets. The Group’s maximum exposure to credit risk at the reporting date was as follows:
Trade and other receivables
Cash and cash equivalents
Note
8
FY18
$m
128.8
82.2
211.0
FY17
$m
142.9
46.3
189.2
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by customer type
was as follows:
Type of customer
Wholesale
Corporate
Retail
Note
8
FY18
$m
30.9
45.3
52.6
128.8
FY17
$m
33.9
42.6
66.4
142.9
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographical
region was as follows:
Geographical region
Australia
Other
Note
8
FY18
$m
127.4
1.4
128.8
FY17
$m
141.3
1.6
142.9
Geographically, the Group is subject to a concentration of credit risk as predominantly all of its revenue is
generated in Australia.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
The ageing of the Group’s trade receivables at the reporting date was as follows:
66
Ageing of customer debt
Not past due
Past due 1-30 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
Net receivables
Note
8
8
FY18
$m
71.3
34.3
5.7
1.6
3.1
12.8
128.8
(33.3)
95.5
FY17
$m
83.3
35.2
6.6
3.9
2.4
11.5
142.9
(41.2)
101.7
The provision for impairment losses of the Group at 31 July 2018 of $33.3m (FY17: $41.2m) represents the
risk of non-collection of outstanding debts that are past due and believed to be at risk of non-collection. The
provision is used to record impairment losses unless the Group 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. The movement in the provision for impairment losses during the year ended 31 July
2018 is as follows:
Balance at 1 August
Impairment loss (written back)/recognised
Balance at 31 July
Liquidity risk
Note
8
FY18
$m
41.2
(7.9)
33.3
FY17
$m
33.3
7.9
41.2
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group’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 Group’s reputation.
The Group manages the cashflow requirements of subsidiaries to optimise its return on cash. The Group
ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing
of financial obligations.
In addition to its cash reserves, the Group had a debt facility of $2,385.0m available to it during the year, of
which $1,330.7m was utilised as at 31 July 2018 (refer note 13).
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
67
The following are the contractual maturities of financial liabilities, including estimated interest payments
and excluding the impact of netting agreements:
FY18
Non-derivative financial
liabilities
Secured bank loans
Finance lease liabilities
Spectrum liabilities
Trade and other payables
Derivative financial
liabilities
Interest rate swap
(settled net)
Foreign currency forward
contracts (settled gross)
- Outflow
-
Inflow
Total derivative financial
liabilities
Total
FY17
Non-derivative financial
liabilities
Secured bank loans
IRU and other finance
lease liabilities
Trade and other payables
Derivative financial
liabilities
Foreign currency forward
contracts (settled gross)
- Outflow
-
Inflow
Total derivative financial
liabilities
Total
Note
Carrying
amount
Contractual
cashflows
6 months
or less
$m
$m
$m
13
13
14
12
(1,330.7)
(17.9)
(671.8)
(320.3)
(2,340.7)
(1,581.1)
(18.0)
(704.8)
(320.3)
(2,624.2)
(25.8)
(2.5)
(352.4)
(320.3)
(701.0)
6-12
months
$m
(25.4)
(3.1)
-
-
(28.5)
1-2
years
$m
2-5
years
$m
More than
5 years
$m
(57.5)
(6.8)
(352.4)
-
(416.7)
(1,122.8)
(5.6)
-
-
(1,128.4)
(349.6)
-
-
-
(349.6)
Note
13
13
12
(4.8)
(4.8)
-
-
(2.1)
(5.1)
2.4
-
0.6
(49.2)
49.9
(33.4)
34.1
(5.0)
5.0
(6.3)
6.3
(4.5)
4.5
-
-
(4.2)
(2,344.9)
(4.1)
(2,628.3)
0.7
(700.3)
-
(28.5)
(2.1)
(418.8)
(5.1)
(1,133.5)
2.4
(347.2)
Carrying
amount
$m
Contractual
cashflows
$m
6 months
or less
$m
6-12
months
$m
1-2
years
$m
2-5
years
$m
More than
5 years
$m
(900.0)
(966.2)
(13.8)
(14.1)
(28.5)
(909.8)
(32.5)
(289.4)
(33.6)
(289.4)
(16.8)
(289.4)
(1,221.9)
(1,289.2)
(320.0)
(16.8)
-
(30.9)
-
-
-
-
(28.5)
(909.8)
-
0.1
0.1
(73.7)
75.7
(58.0)
58.2
(15.7)
17.5
2.0
0.2
1.8
-
-
-
-
-
-
(1,221.8)
(1,287.2)
(319.8)
(29.1)
(28.5)
(909.8)
-
-
-
-
-
-
-
-
It is not expected that the cashflows included in the maturity analysis above could occur significantly earlier,
or at significantly different amounts.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
Market risk
68
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will
affect the Group’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 return.
a) Currency risk
The Group is exposed to currency risk on revenues, expenses, receivables and payables that are
denominated in a currency other than its functional currency, the Australian dollar (AUD). These other
currencies include primarily the United States dollar (USD), the Singapore dollar (SGD), the New Zealand
dollar (NZD), Philippine peso (PHP), the Hong Kong dollar (HKD), and the South African Rand (ZAR). As at 31
July 2018, currency risks associated with the Group’s foreign currency denominated receivables and
payables are not considered to be significant.
The Group hedges its forecast foreign currency exposures on a rolling basis to manage the impact of short
term foreign exchange fluctuations on its earnings.
Currency risk in relation to SGD is partly managed by the existence of a SGD denominated debt facility within
the Group’s debt facilities.
b) Interest rate risk
At the reporting date the Group’s interest-bearing financial instruments were as follows:
Fixed rate instruments
Finance lease liabilities
Variable rate instruments
Cash and cash equivalents
Secured bank loans
Note
13
13
FY18
$m
FY17
$m
(17.9)
(32.5)
82.2
(1,330.7)
(1,248.5)
46.3
(900.0)
(853.7)
The Group is exposed to interest rate risk arising from the variable interest rate on its long term borrowings.
To manage this risk, the Group has entered into interest rate swap contracts to hedge the interest rate risk
on $800m of its debt facilities. These contracts will enable the Group to convert its borrowings from floating
rates to fixed rates for 5 years starting from December 2019.
Fair value sensitivity analysis for fixed rate instruments
As at 31 July 2018, the Group does not have 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.
69
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
Cashflow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates would cause a movement in the Group’s annualised interest
expense, based on the balance of its variable rate instruments as at 31 July 2018, of $12.5m (FY17: $8.5m)
(assumes that all other variables, in particular foreign currency rates, remain constant).
Fair values versus carrying amounts
As at 31 July 2018, the fair values of the Group’s financial assets and liabilities approximate their carrying
amounts shown in the statement of financial position.
Interest rates used for determining fair value
The interest rates used to discount estimated cashflows, where applicable, are based on the rates implicit in
the transaction. In the case of Loans and borrowings, interest rate is based on BBSY rates plus a margin
determined according to gearing ratio.
c) Equity price risk
The Group is exposed to equity price risk because of its investments in available-for-sale equity securities.
Material investments are managed on an individual basis with the goal of maximising returns.
Classification of financial instruments
Fair value hierarchy
There are three possible valuation methods (or ‘levels’) for financial instruments which are measured at fair
value. Those different levels are as follows:
-
-
-
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly; and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The Group’s financial instruments which are measured at fair value are categorised as follows:
Financial assets
Investments
Derivative financial assets
Interest rate swap contracts
Foreign currency forward contracts
Financial liabilities
Derivative financial liabilities
Interest rate swap contracts
Foreign currency forward contracts
Level 1
$m
1.9
-
-
-
-
FY18
Level 2
$m
-
0.7
-
(4.8)
(0.1)
Level 3
$m
Level 1
$m
FY17
Level 2
$m
Level 3
$m
-
-
-
-
-
2.9
-
-
-
-
-
-
1.3
-
(1.2)
-
-
-
-
-
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
19. Financial instruments and risk management (continued)
70
The Group’s investments, being ASX listed securities, are categorised as Level 1 as they are valued at quoted
market prices.
Interest rate swap contracts are categorised as Level 2 as they are valued at the present value of the
estimated future cash flows. Estimates of future floating rate cash flows are based on quoted swap rates,
futures prices and interbank borrowing rates. The fair value estimate is subject to a credit risk adjustment
that reflects the credit risk of the Group and of the counterparty.
Foreign currency forward contracts are categorised as Level 2 as they are measured based on observable
spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads
between the respective currencies.
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 monitors return on capital, which
the Group defines as profit from operating activities divided by total shareholders’ equity. The Board of
directors also determines the level of dividends to be paid to shareholders.
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 Group may purchase its own shares on market for the purpose of issuing shares under
employee share plans. The Group does not currently have a defined share buy-back plan.
There were no changes in the Group’s approach to capital management during the year.
The Group’s net debt to equity ratio at the reporting date was as follows:
Secured bank loans
Less: cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio at 31 July
FY18
$m
1,330.7
(82.2)
1,248.5
2,784.2
0.5
FY17
$m
900.0
(46.3)
853.7
2,399.3
0.4
71
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
20.
Operating lease commitments
The Group has entered into commercial leases on premises and office equipment under non-cancellable
operating leases.
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
FY18
$m
35.6
87.2
13.5
136.3
FY17
$m
42.2
81.2
11.6
135.0
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 as an integral part of the total lease expense,
over the term of the lease.
21.
Capital and other commitments
FY18
$m
FY17
$m
Capital expenditure commitments contracted but not provided for
in the financial statements
163.8
1,482.9
IRU agreements for international capacity (US$54.5m*);
Capital commitments at 31 July 2018 are comprised mainly of commitments in respect of:
•
• Domestic fibre construction projects;
• Mobile network builds.
Capital commitments at 31 July 2017 included $1.3 billion of spectrum licence payments that have either
been paid or shown as a liability in the consolidated statement of financial position as at 31 July 2018.
*translated into AUD at the prevailing spot rate at 31 July 2018 of 0.74.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
22.
Consolidated entities
The following is a list of all entities that formed part of the Group as at 31 July 2018:
Name of Entity
Parent entity
TPG Telecom Limited
Subsidiaries
TPG Holdings Pty Ltd
TPG Internet Pty Ltd
Value Added Network Pty Ltd
TPG Network Pty Ltd
TPG Energy Pty Ltd
FTTB Wholesale Pty Ltd
TPG (NZ) Pty Ltd
Orchid Cybertech Services Incorporated
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 Contracts Pty Ltd
Blue Call Pty Ltd
PIPE Networks Pty Ltd
PIPE Transmission Pty Ltd
PIPE International (Australia) Pty Ltd
PPC 1 Limited
PPC 1 (US) Incorporated
ACN 139 798 404 Pty Ltd
IntraPower Pty Ltd
IP Service Xchange Pty Ltd
Trusted Cloud Pty Ltd
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Philippines
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Bermuda
USA
Australia
Australia
Australia
Australia
72
Ownership interest
as at 31 July
2018
%
2017
%
100
100
100
100
100
100
100
99.99
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
99.99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
22. Consolidated entities (continued)
Name of Entity
Subsidiaries (continued)
Trusted Cloud Solutions Pty Ltd
Alchemyit Pty Ltd
IP Group Pty Ltd
Mercury Connect Pty Ltd
VtalkVoip Pty Ltd
Intrapower Terrestrial Pty Ltd
Hosteddesktop.com Pty Ltd
Virtual Desktop Pty Ltd
Destra Communications Pty Ltd
Numillar IPS Pty Ltd
Telecom New Zealand Australia Pty Ltd
AAPT Limited
Connect Internet Solutions Pty Limited
PowerTel Limited
Request Broadband Pty Ltd
Telecom Enterprises Australia Pty Limited
iiNet Limited
Chime Communications Pty Ltd
Internode Pty Ltd
Agile Pty Ltd
Westnet Pty Ltd
iiNet (New Zealand) AKL Ltd
Jiva Pty Ltd
Netspace Online Systems Pty Ltd
iiNet Labs Pty Ltd
TransACT Communications Pty Ltd
TransACT Broadcasting Pty Ltd
TransACT Capital Communications Pty Ltd
TransFlicks Pty Ltd
TransACT Victoria Holdings Pty Ltd
Cable Licence Holdings Pty Ltd
ACN 088 889 230 Pty Ltd
TransACT Victoria Communications Pty Ltd
Neighbourhood Cable Unit Trust
Connect West Pty Ltd
The Tech2 Group Pty Ltd
Tech2Home Proprietary Ltd
Tech2Home Pty Ltd
Gizmo Corporation Pty Ltd
Tech2Home(Communications) Pty Ltd
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
73
Ownership interest
as at 31 July
2018
%
100
100
100
100
100
100
100
100
100
88.57
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
60
60
60
60
60
2017
%
100
100
100
100
100
100
100
100
100
88.57
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
60
60
60
60
60
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
22. Consolidated entities (continued)
74
Name of Entity
Subsidiaries (continued)
Tech2 Business Solutions Pty Ltd
iHug Pty Ltd
Adam Internet Holdings Pty Ltd
Adam Internet Pty Ltd
iiNet (OzEmail) Pty Ltd
TPG Telecom Pte Ltd
23.
Deed of cross guarantee
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Singapore
Ownership interest
as at 31 July
2018
%
60
100
100
100
100
100
2017
%
60
100
100
100
100
100
Pursuant to the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated on 28 September
2016, the wholly-owned subsidiaries as mentioned below are relieved from the Corporations Act 2001
requirements for preparation, audit, and lodgement of financial reports and directors’ reports.
It is a condition of the instrument 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. All the subsidiaries listed in Note 22 above
are subject to the Deed except for the following:
Orchid Cybertech Services Incorporated
PPC 1 Limited
PPC 1 (US) Incorporated
Trusted Cloud Solutions Pty Ltd
Alchemyit Pty Ltd
IP Service Xchange Pty Ltd
Destra Communications Pty Ltd
Numillar IPS Pty Ltd
Neighbourhood Cable Unit Trust
Mercury Connect Pty Ltd
VtalkVoip Pty Ltd
Hosteddesktop.com Pty Ltd
The Tech2 Group Pty Ltd
Tech2Home Pty Ltd
Tech2Home (Communications) Pty Ltd
Tech2Home Proprietary Ltd
Gizmo Corporation Pty Ltd
Tech2 Business Solutions Pty Ltd
TPG Telecom Pte Ltd
There have been no changes to the parties to the Deed during the current reporting period.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
23. Deed of cross guarantee (continued)
75
A consolidated statement of comprehensive income and consolidated statement of financial position,
comprising the Company and the controlled entities which are a party to the Deed of Cross Guarantee, after
eliminating all transactions between parties to the Deed, at 31 July 2018 is set out as follows:
Statement of comprehensive income and retained profits
Revenue
Other income
Network, carrier and hardware costs
Employee benefits expense
Other expenses
FY18
$m
2,441.6
-
(1,197.5)
(234.2)
(168.7)
FY17
$m
2,444.0
48.8
(1,175.1)
(253.7)
(177.1)
Earnings before interest, tax, depreciation and amortisation (EBITDA)
841.2
886.9
Depreciation of plant and equipment
Amortisation of intangibles
Results from operating activities
Finance income
Finance expenses
Net financing costs
Profit before income tax
Income tax expense
(132.5)
(99.9)
(135.0)
(100.0)
608.8
651.9
1.6
(36.2)
(34.6)
1.4
(52.3)
(50.9)
574.2
601.0
(169.2)
(176.6)
Profit for the year attributable to owners of the company
405.0
424.4
Other comprehensive income, net of tax
Total comprehensive income for the year
Retained earnings at beginning of year
Profit for the year
Dividends recognised during the year
Retained earnings at end of year
6.8
411.8
1,002.9
405.0
(37.0)
1,370.9
(59.3)
365.1
710.0
424.4
(131.5)
1,002.9
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
23. Deed of cross guarantee (continued)
Statement of financial position
76
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Prepayments and other assets
Total Current Assets
Investments
Loans to subsidiaries
Property, plant and equipment
Spectrum assets
Goodwill and other intangible assets
Prepayments and other assets
Total Non-Current Assets
Total Assets
Liabilities
Trade and other payables
Loans and borrowings
Spectrum liability
Current tax liabilities
Employee benefits
Provisions
Accrued interest
Deferred income and other liabilities
Total Current Liabilities
Loans and borrowings
Spectrum liability
Deferred tax liabilities
Employee benefits
Provisions
Derivative financial instruments
Deferred income and other liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Share capital
Reserves
Retained earnings
Total Equity
31 July 2018
$m
31 July 2017
$m
62.8
113.4
4.4
0.7
12.9
194.2
1.9
386.3
1,101.0
1,350.6
2,376.8
5.6
5,222.2
5,416.4
303.9
5.5
344.0
20.2
28.4
7.0
5.1
146.8
860.9
1,313.5
327.8
19.6
1.9
33.9
4.9
26.3
1,727.9
2,588.8
35.9
117.6
6.1
1.3
23.8
184.7
2.9
290.5
973.6
96.3
2,374.4
7.9
3,745.6
3,930.3
279.2
32.5
-
50.9
27.4
9.3
1.4
148.7
549.4
872.4
-
12.7
2.1
33.6
1.2
24.4
946.4
1,495.8
2,827.6
2,434.5
1,465.2
(8.5)
1,370.9
2,827.6
1,449.4
(17.8)
1,002.9
2,434.5
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
24.
Parent entity disclosures
Result of the parent entity
Profit/(Loss) for the period
Comprising:
Dividend from subsidiaries
Finance expenses
Income tax benefit
Other
Total profit for the period
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity
Share capital
Reserves
Retained earnings
Total Equity
Parent entity guarantees
77
FY18
$m
FY17
$m
1,178.7
(35.6)
1,200.0
(39.0)
9.1
8.6
1,178.7
2.3
5,936.2
28.2
3,166.7
1,465.2
(12.0)
1,316.3
2,769.5
-
(51.0)
10.4
5.0
(35.6)
12.0
3,823.4
54.6
2,209.9
1,449.4
(10.5)
174.6
1,613.5
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees
debts in respect of certain subsidiaries.
Further details of the Deed of Cross Guarantee, and the subsidiaries subject to the deed, are disclosed in
note 23.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
25.
Reconciliation of cashflows from operating activities
78
Note
FY18
$m
FY17
$m
Cash flows from operating activities
Profit for the year after income tax
Adjustments for:
Depreciation of plant and equipment
Amortisation and impairment of intangibles
Bad and doubtful debts
Amortisation of borrowing costs
Performance rights plan expense
Unrealised foreign exchange loss
Interest income
Interest expense
Profit on sale of investments
Costs relating to mergers and acquisitions
Income tax expense
Operating profit before changes in working capital and provisions
10
11
5
15
5
5
6
Changes in:
-
Trade and other receivables
-
Inventories
- Other assets
-
- Other liabilities
-
-
Employee benefits
Provisions
Trade and other payables
Income taxes paid
398.0
415.7
138.8
104.1
4.9
17.5
4.7
(2.2)
(1.7)
18.6
-
-
165.8
848.5
2.5
1.5
2.3
14.1
0.3
1.2
(2.1)
868.3
(194.5)
141.1
103.3
9.0
14.2
4.3
1.1
(1.4)
38.1
(48.8)
1.5
179.8
857.9
(0.3)
5.6
3.8
7.1
(1.1)
0.2
(3.5)
869.7
(147.0)
Net cash from operating activities
673.8
722.7
79
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
26.
Related parties
The Group has no related party relationships other than with its key management personnel (KMP).
Information regarding transactions with KMP including their remuneration is provided in the Remuneration
Report section of the Directors’ report on pages 19 to 30.
27.
Auditors’ remuneration
Audit and review of financial statements
Audit and review services
Auditors of the Company – KPMG, Australia
-
- Other regulatory audit services
Network firms of KPMG
-
Audit of financial statements
Other services
KPMG, Australia
-
Taxation and other services
28.
Subsequent events
Proposed merger with Vodafone Hutchison Australia
FY18
$’000
FY17
$’000
954
8
15
977
940
8
16
964
106
1,083
120
1,084
On 30 August 2018, the Company and Vodafone Hutchison Australia (“VHA”) entered into a Scheme
Implementation Deed under which the companies have agreed a proposed merger of equals to establish a
fully integrated telecommunications operator in Australia.
The merger will be implemented via a TPG Scheme of Arrangement, with the new merged group listed on
the Australian Securities Exchange (“ASX”) and renamed “TPG Telecom Limited” in conjunction with
implementation of the scheme.
Following completion of the merger, TPG shareholders will own 49.9% of the equity of the Merged Group,
with VHA shareholders owning the remaining 50.1%.
The merger is subject to a number of conditions such as the approval of the Australian Competition and
Consumer Commission and it is anticipated that the merger will complete during 2019.
Further details about the planned merger are set out in market announcements made to the ASX on 30
August 2018.
Joint Venture and 5G Spectrum Auction
In parallel to the merger agreement, the Company and VHA have signed a separate 50:50 Joint Venture
Agreement. The scope of the joint venture is to acquire, hold and licence 3.6 GHz spectrum. The joint
venture has registered as a participant in the 3.6GHz spectrum auction expected to commence in late
November 2018. The Joint Venture Agreement is ongoing and will not terminate if the merger fails to
proceed.
80
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
28. Subsequent events (continued)
Separation of Singapore mobile operations
Separately, on or prior to the implementation of the merger, the Company intends to undertake a
separation of its Singapore mobile operations by way of an in-specie distribution of shares in the Singapore
operation to TPG shareholders.
Other than the above, 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 Group, the results of those operations,
or the state of affairs of the Group in future financial years.
29.
Significant accounting policies
The accounting policies as set out below have been applied consistently to all periods presented in these
consolidated financial statements and have been applied consistently across the Group. In the current
financial year, there are no new or revised Standards/ Interpretations issued by the Australian Accounting
Standards Board (AASB) that are effective for the current reporting period and that are relevant to the
Group.
a.
(i)
Basis of consolidation
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to
the Group (refer (ii) below). The consideration transferred in the acquisition is generally measured at fair
value, as are the identifiable net assets acquired. Valuation techniques adopted for measuring assets
acquired are explained at (k) below. Goodwill is measured as the excess of consideration transferred as
compared to the value of identifiable net assets acquired. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent
consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or
loss.
(ii)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date on which control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies
adopted by the Group. Such changes have been made with effect from the date of acquisition.
(iii)
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.
81
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
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.
c.
Foreign operations
The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the
reporting date. The income and expenses of foreign operations are translated to Australian dollars at
exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and presented in the foreign
currency translation reserve in equity.
d.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or
less and includes bank overdrafts that are repayable on demand and form an integral part of the Group’s cash
management.
e.
Leases
(i)
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A
specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified
asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to
control the use of the underlying asset.
(ii)
Leased assets
Leases in the terms of which the Group assumes substantially all the risks and rewards of ownership
are classified as finance leases. Other leases are operating leases and are not recognised in the Group’s
statement of financial position.
(iii)
Lease payments
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense 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.
At inception or upon reassessment of the arrangement, the Group separates payments and other
82
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
consideration required by such an arrangement into those for the lease and those for other elements on the
basis of their relative fair values.
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 estimated selling expenses.
g.
Impairment
Any financial asset that is not classified as an ‘at fair value through profit or loss’ 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 cashflows of that asset.
At each reporting date, the Group reviews the carrying amounts of its non-financial assets, other than
inventories and deferred tax assets, to determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have
indefinite useful lives or that are not yet available for use are tested annually for impairment.
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 and then to reduce the carrying amount of the other
assets in the units on a pro rata basis.
(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. 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 cashflows 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 cannot be reversed.
83
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
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.
h. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are
capitalised as part of the cost of the asset. Borrowing costs relating to loans and borrowings are capitalised and
amortised over the term of the loan. All other borrowing costs are expensed in the period they occur.
i.
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 statement of financial position.
Cashflows are included in the statement of cash flows on a gross basis. The GST components of cashflows arising
from investing and financing activities which are recoverable from, or payable to, the ATO are classified as
operating cashflows.
j.
New standards and interpretations not yet adopted
There are no new or revised Standards and Interpretations issued by the Australian Accounting Standards Board
(AASB) that are effective for the current reporting period and are relevant to the Group. Standards that have
been issued but are not effective yet, and have not been early adopted by the Group are set out below:
(i)
Financial instruments (Revised AASB 9)
The revised AASB 9 will be applicable to the Group from 1 August 2018. The Group’s assessment of the impact
of this revised standard on its consolidated financial statements is that it is not likely to be significant. However,
as we are yet to fully implement the new requirements across the Group there may be additional areas
identified that will be reflected in our FY19 reporting.
Impact on Financial assets
a. Classification and measurement
The revised standard contains a new classification and measurement approach for financial assets. AASB 9
contains three principal classification categories for financial assets: measured at amortised cost (MAAC), fair
value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). The standard
eliminates the existing categories of: held to maturity, loans and receivables, and available for sale.
84
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
Currently, the Group has the following categories of financial assets: (i) trade receivables and (ii) equity
investments.
Trade receivables are currently classified under loans and receivables and are measured at amortised cost using
the effective interest method. Under AASB 9, trade receivables will be classified as ‘Held-to-collect’ MAAC
assets and will continue to be measured at amortised cost.
At 31 July 2018, the Group had equity investments that are held for long-term strategic purposes valued at
$1.9m, classified as ‘available-for-sale’ and measured on a FVOCI basis. Upon initial application of AASB 9, the
Group has elected to classify these equity investments as FVOCI assets. Consequently, all fair value gains and
losses will continue to be reported in other comprehensive income, but no impairment losses will be recognised
in the income statement and no gains or losses will be reclassified to the income statement on disposal.
Impairment
b.
Under the revised standard, impairment of financial assets will be calculated using an ‘expected credit loss’
(ECL) model replacing the current ‘incurred loss’ model. The new impairment model will apply to financial
assets that are classified as MAAC or FVOCI, but excluding equity investments. Applying the ECL model to the
Group’s trade receivables is not expected to have a significant impact on initial application of the revised
standard.
Impact on Financial liabilities
AASB 9 largely retains the existing requirements for the classification of financial liabilities. The Group’s
assessment did not indicate any material impact regarding the classification of financial liabilities at 1 August
2018.
Hedge accounting
AASB 9 also provides simpler hedge accounting requirements and helps align accounting treatment more closely
to the Group’s risk management strategy. The Group will adopt the AASB 9 hedge accounting model on initial
application of the new standard. The types of hedge accounting relationships that the Group has currently
designated meet the requirements of AASB 9.
(ii) Revenue from contracts with customers (AASB 15)
The new AASB 15 will be applicable to the Group from 1 August 2018. The standard contains a single model
that applies to all contracts with customers. Under that model an entity must determine the various
performance obligations under a contract, allocate the total contract price amongst the performance
obligations, and recognise revenue when the performance obligations are satisfied. The standard also provides
guidance on treatment of contract costs, i.e. incremental costs of acquiring a contract and costs to fulfil the
contract.
The Group has undertaken a detailed review of its material contracts to assess the impact of changes introduced
by AASB 15.
The Group’s assessment of the impact of this standard on its consolidated financial statements is as follows:
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
85
-
-
-
Set-up revenue and connection costs in Consumer broadband contracts:
For certain products, set-up revenue charged to customers and connection costs incurred by the
Group are currently recognised on installation. As set-up revenue does not satisfy the definition of a
performance obligation under the new standard, from the date of initial application, it will be treated
as part of the total contract price and allocated over the identified performance obligations. Connection
costs, being costs of fulfilling orders, will be capitalised as contract costs and expensed to
network, carrier and hardware costs over the life of the contract.
Subscriber acquisition costs:
Certain customer acquisition costs such as sign-on incentives, free equipment and discounted installation
costs are currently classified as subscriber acquisition costs within intangible assets and amortised
through intangible amortisation.
From the date of initial application of the new standard, costs of this nature that arise on obtaining
customer contracts will either form part of the total contract price and hence reduce the revenue
recognised over the contract term, or (in the case of discounted installation costs) be classified as contract
costs and amortised through network, carrier and hardware costs over the contract term
The unamortised balance of these items as at 1 August 2018 of $9.7m will be reclassified from intangible
assets to other receivables ($5.3m) and contract costs ($4.4m).
Sales commission costs:
Incremental sales commission costs incurred in acquiring new contracts are currently expensed on
contract inception. Under the new AASB 15 these costs will be capitalised as contract costs and expensed
to employee benefits expense over the life of the contract.
The estimated impact of the above changes on the FY18 accounts are as follows:
-
Revenue would have been lower by $4.3m, network, carrier and hardware costs would have been higher
by $9.7m, employee benefits expense would have been higher by $0.3m and intangible amortisation
would have been lower by $13.6m resulting in EBITDA being lower by $14.3m and NPAT being lower by
$0.5m.
Transition:
The Group will adopt the retrospective method for transition to the new standard. Consequently, the prior
year comparatives will be restated in its FY19 financial statements. The Group has elected to use the following
practical expedients:
-
-
Contracts completed before 1 August 2018 will not be restated, and
For contracts entered before the date of initial application, the Group will not disclose the amount of the
transaction price allocated to remaining performance obligations, nor an explanation of when it expects
to recognise that amount as revenue.
The estimated impact detailed above would result in a net increase in retained earnings as at 1 August 2018 by
$5.1m (net of tax).
86
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
(iii) Leases (AASB 16)
AASB 16 will be applicable to the Group from 1 August 2019. AASB 16 introduces a single, on-balance sheet
lease accounting model for lessees.
From an initial assessment of the potential impact on its consolidated financial statements, the Group has noted
the following:
-
a number of lease contracts currently disclosed within note 20 (‘Operating lease commitments’), which
currently give rise to recurring expenses within operating expenses, will in future be recognised on the
balance sheet as ‘Right of use assets’;
a corresponding lease liability reflecting the Group’s commitment to make payments to third parties under
these contracts will also be recognised on the balance sheet;
the Group will depreciate the ‘Right of use assets’ with a charge to the income statement over the shorter
of the assets’ useful lives and the lease term;
the Group will recognise an interest expense on the liability as a finance cost in the income statement;
the profile of the overall expense in the income statement will change as the interest expense will be more
front-loaded compared to a straight-line operating lease rental expense.
-
-
-
-
The Group’s assessment of the impact of adopting AASB 16 on its consolidated financial statements is on-going
and the quantitative effect will depend on amongst other things, the Group’s future borrowing rate, the
composition of the Group’s lease portfolio, the Group’s latest assessment of whether it will exercise any lease
renewal options and the extent to which the Group chooses to use practical expedients and recognition
exemptions.
Transition:
The Group intends using the ‘Modified Retrospective method’ for transition to the new standard. Therefore,
the cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of
retained earnings at 1 August 2019, with no restatement of comparative information.
When applying the modified retrospective approach to leases previously classified as operating leases, the
lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The
Group is assessing the potential impact of using these practical expedients.
The Group is not required to make any adjustments for leases in which it is a lessor except where it is an
intermediate lessor in a sub-lease.
TPG Telecom Limited and its controlled entities
Notes to the consolidated financial statements
For the year ended 31 July 2018
29. Significant accounting policies (continued)
k. Determination of fair values
87
A number of the Group’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.
Material assets acquired through business combinations
Asset
acquired
Property,
plant and
equipment
Intangible
assets
Valuation technique
Fair values are based on quoted market prices for similar items when available, and
depreciated replacement cost when appropriate. Depreciated replacement cost reflects
adjustments for physical deterioration as well as functional and economic obsolescence.
The fair value of brands is based on the discounted estimated royalty payments that have
been avoided as a result of the trademark being owned. The fair value of other intangible
assets is based on the discounted cashflows expected to be derived from the use of the
assets.
Inventories
Fair value is determined based on estimated selling price in the ordinary course of business
less the estimated costs of sale.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cashflows, discounted at
the market rate of interest at the reporting date.
Equity and debt securities
The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the
reporting date, or if unquoted, by using valuation techniques including market multiples and discounted
cashflow analysis.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future
principal and interest cashflows, 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.
88
TPG Telecom Limited and its controlled entities
Directors’ declaration
For the year ended 31 July 2018
1.
In the opinion of the directors of TPG Telecom Limited (‘the Company’):
(a)
the consolidated financial statements and notes that are set out on pages 35 to 87 and the Remuneration
report in section 5 of the Directors’ report, set out on pages 19 to 30, are in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 31 July 2018 and of its 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)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2.
3.
4.
There are reasonable grounds to believe that the Company and the group entities identified in note 23 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 group entities pursuant to the ASIC Corporations (Wholly-
owned Companies) Instrument 2016/785.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
chief executive officer and chief financial officer for the financial year ended 31 July 2018.
The directors draw attention to note 2(a) to the consolidated financial statements, which includes a statement
of compliance with International Financial Reporting Standards.
Dated at Sydney this 19th day of October, 2018.
Signed in accordance with a resolution of the directors.
David Teoh
Chairman
89
Independent Auditor’s Report
To the shareholders of TPG Telecom Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
TPG Telecom Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the Group's
financial position as at 31 July 2018 and of
its financial performance for the year
ended on that date; and
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 31 July
2018
• Consolidated income statement, Consolidated statement of
comprehensive income, Consolidated statement of changes in
equity, and Consolidated statement of cash flows for the year
then ended
• Notes including a summary of significant accounting policies
• Directors' Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our
other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
90
Key Audit Matters
The Key Audit Matters we identified are:
• Revenue IT system processes and controls
Key Audit Matters are those matters that, in our professional
judgement, were of most significance in our audit of the
Financial Report of the current period.
• Carrying value of goodwill
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Revenue IT systems and controls ($2,495.2m)
Refer to Note 4 Revenue
The key audit matter
How the matter was addressed in our audit
Working with our IT specialists our procedures included:
• Testing the key manual and automated general IT
controls within the billing systems and multi-level sub-
systems. The controls tested included access to
programs and data, computer operations and change
control procedures for these systems;
• Testing the end-to-end reconciliation control which
reconciles the movement of transaction data from the
business support systems to the billing systems and
then to the general ledger. This included analysing
significant journals processed between the billing
system and the general ledger for accuracy and
consistency;
• Testing the system configuration for calculating
automated customer bill generations. This included
performing sample tests of accuracy by checking
customer agreed rate and charge plans in the systems
to sources such as published rate cards.
The majority of Group’s revenue relates to the
provision of telecommunication services for
consumer and corporate customers, which are
managed by the Group’s complex revenue IT
systems and associated controls. We focused
on these IT systems and controls as a Key Audit
Matter due to the significant audit effort
arising from the risks associated with the
complex IT systems.
The Group has various telecommunication
services plans operating on a number of
networks and uses a number of highly
automated billing systems and multi-level sub
systems to record revenue. The competitive
market the Group operates in also results in
frequent changes to the pricing of
telecommunication services plans. This
increases the inputs and therefore complexity
for revenue recognition due to multiple price
points, terms and conditions.
Testing the relevant controls in these systems
requires the involvement of our IT specialists
and increases the complexity of our audit
procedures.
91
Carrying value of goodwill ($1,911.0m)
Refer to Note 11 Intangible Assets
The key audit matter
How the matter was addressed in our audit
The carrying value of the Group’s goodwill is a
Key Audit Matter due to:
•
•
•
the size of the asset, $1,911.0 million,
being the Group’s largest asset;
the complexity of auditing forward looking
estimates underlying the valuation models
that are inherently subjective and require
a significant level of judgement by us to
assess; and
the industry the Group operates in is
being impacted by changes in technology,
such as the introduction of the National
Broadband Network, and a competitive
market with frequently changing price
points. These conditions create a risk that
the business forecasts used for the
assessment of recoverability will not be
achieved.
Our consideration of the Group’s recoverability
assessment of the carrying value of goodwill
involves evaluating the output of valuation
models for each cash generating unit (CGU).
We focused on the significant judgements the
Group applied in their recoverability
assessment including:
•
key assumptions relating to Average
Margin Per User (AMPUs) and service
costs including forecasts of the Group’s
broadband market share, pricing and
margins; and
• discount rates applied to forecast cash
flows, as well as the assumptions
underlying the forecast growth and
terminal growth rates.
In assessing this Key Audit Matter, we involved
senior audit team members and our valuation
specialists, who understand the Group’s
business, the telecommunications industry and
the economic environment in which it
operates.
Our procedures included:
• We assessed the Group’s key assumptions such as
forecast growth rates, terminal growth rates, AMPUs
and service costs including forecasts of the Group’s
broadband market share, pricing and margins by:
•
•
•
•
•
comparing key underlying data in valuation
models to Board approved forecasts;
comparing forecasts of market demand against
published analyst views and industry reports;
comparing forecasts for the Group’s broadband
market share, pricing and margins to historical
data and trends observed at year end;
performing sensitivity analysis, by varying key
assumptions, such as forecast growth rates,
terminal growth rates, margins and discount
rates, within a reasonably possible range. This
analysis identified those assumptions at higher
risk of bias or inconsistency in application and
enabled us to focus our further procedures;
assessing the Group’s historical forecasting
accuracy as an indication of risk in future
forecasts.
• working with our valuation specialists, we assessed the
valuation model calculation methodology, forecast
growth rates and terminal growth rates against
accounting standard requirements, published analysts’
growth rates and industry reports;
• working with our valuation specialists, we
independently developed discount rate ranges using
publicly available market data for comparable entities,
adjusted by risk factors specific to the Group and the
telecommunications sector;
• we assessed the quantitative and qualitative
disclosures in relation to this matter by comparing
these disclosures to the accounting standard
requirements and our understanding.
92
Other Information
Other Information is financial and non-financial information in TPG Telecom Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express
an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing
so, we consider whether the Other Information is materially inconsistent with the Financial Report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and
based on the work we have performed on the Other Information that we obtained prior to the date of this
Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our Auditor’s Report.
93
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of TPG Telecom Limited for the year
ended 31 July 2018, complies with
Section 300A of the Corporations Act
2001.
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 responsibilities
We have audited the Remuneration Report included in pages 21
to 30 of the Directors’ report for the year ended 31 July 2018.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Chris Hollis
Partner
Sydney
19 October 2018
94
TPG Telecom Limited and its controlled entities
ASX additional information
For the year ended 31 July 2018
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere
in this report is set out below. The shareholding information is current as at 30 September 2018.
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Name of shareholder
David Teoh and Vicky Teoh
Washington H Soul Pattinson and Company Limited
Distribution of equity security holders
Number of
ordinary shares
held
% of
capital held
318,315,607
234,396,121
34.31%
25.26%
An analysis of the number of shareholders by size of holding is set out below:
Number of shares held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of
holders
13,455
10,048
2,044
1,770
140
27,457
The number of shareholders holding less than a marketable parcel of ordinary shares is 745.
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.
Stock exchange
TPG Telecom Limited is listed on the Australian Stock Exchange. The home exchange is Sydney, and the ASX code is
TPM.
Other information
TPG Telecom Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
95
% of
capital held
25.26
9.23
8.41
8.32
5.74
5.14
5.10
4.03
3.53
3.53
1.31
1.10
0.99
0.97
0.75
0.70
0.67
0.52
0.41
0.41
86.11
Number of
ordinary
shares held
234,396,121
85,651,956
78,048,498
77,170,861
53,297,987
47,663,106
47,285,497
37,378,308
32,730,000
32,730,000
12,110,803
10,185,539
9,196,891
9,000,000
6,922,699
6,500,000
6,254,236
4,819,251
3,830,035
3,758,767
798,930,555
TPG Telecom Limited and its controlled entities
ASX additional information
For the year ended 31 July 2018
Twenty largest shareholders (as at 30 September 2018)
Name of shareholder
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
TSH HOLDINGS PTY LTD
VICTORIA HOLDINGS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
DAVID TEOH
VICKY TEOH
CITICORP NOMINEES PTY LIMITED
TSH HOLDINGS PTY LTD
VICTORIA HOLDINGS PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
WIN CORPORATION PTY LTD
J S MILLNER HOLDINGS PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
FARJOY PTY LTD
BKI INVESTMENT COMPANY LIMITED
BNP PARIBAS NOMS PTY LTD
MILONISS PTY LTD
Principal Registered Office
63-65 Waterloo Road
Macquarie Park NSW 2113
Telephone: 02 9850 0800
Share Registry
Computershare Investor Services Pty Ltd
Level 4, 60 Carrington Street
Sydney NSW 2000
Telephone:
(within Australia) 1300 850 505
(international) +61 3 9415 4000
www.investorcentre.com/au
TPG Telecom Limited ABN 46 093 058 069