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ABN 73 158 957 889
ANNUAL REPORT
2019
Operational Highlights
Year in Review
Chairman's Letter
CEO 's Report
Strategic Portfolios
Corporate Governance Statement
Board of Directors
Directors’ Report
Auditor’s Independence Declaration
Financial Report
Corporate Directory
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IBC
AGM
The Uniti Group Limited Annual General Meeting will be held at
11am on Wednesday, 23 October 2019 at the offices of Lander
& Rogers, Level 12, 600 Bourke Street, Melbourne Vic 3000
UNITI GROUP LIMITED ANNUAL REPORT 2019Pro forma underlying EBITDA at
$2m
in line with prospectus
Cash increased to
Revenue increased 262% to
$19M
FROM $1M IN FY18
$14m
4
ACQUISITIONS
COMPLETED IN FY19
Operating cash flow positive at
$254k
1
UNITI GROUP LIMITED ANNUAL REPORT 2019Operational HighlightsUWL HAS UNDERGONE SIGNIFICANT
CHANGE IN FY19. THE GROUP HAS
POSITIONED ITSELF TO ACHIEVE
GROWTH IN FY20
October 2018
February 2019
February 2019
March 2019
April 2019
Bid placed to acquire
fixed fibre internet
provider, FuzeNet
Uniti Wireless lists
on Australian Stock
Exchange becoming
Uniti Wireless
Limited (UWL).
Opening share price
of .25¢
UWL finalises
FuzeNet acquisition
enabling UWL to
diversify product
offering to include
resold NBN and
private fixed fibre
services
UWL appoints
Vaughan Bowen as
Director of Mergers
& Acquisitions
UWL announces
three strategic
portfolios; Wireless,
Fixed Fibre &
Specialist Products
and announces
plans to aggressively
pursue growth
April 2019
June 2019
June 2019
June 2019
August 2019
UWL announces the
acquisition of Pivit
retail customer base
UWL announces
the acquisition of
specialist inbound
and call tracking
companies, Call
Dynamics and Fone
Dynamics
UWL completes
an oversubscribed
capital raising
of $15m
Michael Simmons
appointed to the
board as Group
Managing Director
and Group CEO
UWL announces
the acquisition of
LBNCo for $100m.
UWL announces
underwritten capital
raise to fund the
acquisition.
2
UNITI GROUP LIMITED ANNUAL REPORT 2019Year in Review“WE HAVE A STRONG BALANCE SHEET
AND A PIPELINE OF POTENTIAL
ACQUISITION TARGETS THAT WILL
CONTINUE TO BOLSTER UWL”
Dear Shareholders,
Our focus this year has been to establish UWL as a listed
company on the ASX, which was achieved in February 2019,
with a capable management team with a clear strategy. We
have significantly strengthened the management team with
the appointment of Michael Simmons as Managing Director
and CEO, and under Michael’s leadership we have added
Vaughan Bowen in the role of Executive Director to lead our
inorganic growth activity and Darryl Inns as group CFO. This
executive team has delivered a significant turnaround in the
performance and in the prospects of UWL, with our second
half result significantly out-performing the first half in EBITDA
and cashflow, as outlined in the table below. In addition, I am
pleased to confirm that the pro-forma EBITDA forecast of $2m
for FY19 was achieved.
Our declared “three pillars” growth strategy clearly defines our
intent to seek organic and inorganic growth in wireless, fibre
and specialty products and markets. In the second half of FY19
we completed four acquisitions – Fuzenet and Pivit to establish
our presence in the fibre market; and Fone Dynamics and Call
Dynamics to establish our specialty products business – with
each of these acquisitions accretively contributing to operating
earnings and positive operating cashflow in the period.
Subsequent to 30 June 2019, your Board announced that
UWL has executed an agreement to acquire 100% of LBNCo
Holdings Pty Limited and contemporaneously announced
an underwritten capital raising to fund the purchase price of
$100m. Through this transaction UWL will become the owner
of private fibre network infrastructure connecting 415 buildings
and broad acre estates Australia-wide to the internet with high
speed connectivity. This acquisition is forecast to be more than
60% accretive for shareholders in EBITDA terms in FY20. We
expect this acquisition to complete in late September.
We enter the new financial year with a strong balance sheet,
with $19.1m of cash, an EBITDA run rate of $6m (prior to the
LBNCo acquisition) and a pipeline of potential acquisition
targets that we will continue to carefully evaluate in terms of fit
with our strategy, earnings potential and level of accretion for
our shareholders.
FY19 has been a busy and eventful year for UWL. I would
like to thank our executive management team for their
commitment, collaboration, expertise, hard work and
enthusiasm, which have all contributed to the success that
UWL has achieved during the short period that it has been a
listed company. I am especially grateful to Michael Simmons
for his leadership of the business through a period of
operational and cultural change, growth via acquisition and for
the financial performance that has been delivered. I extend the
Board’s gratitude to all UWL employees for their contribution
to UWL’s transition during FY19.
To my Board of Directors, thank you for your focused,
collegiate approach to everything that we have achieved and
I look forward to FY20 with great anticipation as UWL seeks
to capitalise on the platform that it has established to deliver
outstanding returns to shareholders.
Finally, to our shareholders, thank you for choosing to
invest in UWL. Your Board and executive leadership team
are committed to profitably and sustainably building upon
the transformative foundations laid since our ASX listing in
February, to the benefit of all UWL shareholders.
Yours sincerely,
Graeme Barclay
Chairman, Uniti Group Limited
PROFIT & LOSS
(000’S)
REVENUE
EBITDA
1H
2H
FY19
FY19
PROFORMA
CASH FLOW
(000’S)
1H
2H
$3,063
$11,273
$14,336
$23,377
OPERATING CASH FLOW ($1,784)
$2,038
FY19
$254
($5,554)
$55
($5,499)
$2,049
CAPEX
($1,432)
($384)
($1,816)
EBITDA (UNDERLYING)
($1,555)
$1,855
$300
$2,049
FREE CASH FLOW
($3,216)
$1,654
($1,562)
3
UNITI GROUP LIMITED ANNUAL REPORT 2019Chairman’s Letter“TRANSFORMATION HAS BEEN MY
SOLE AND DEDICATED FOCUS AND
A KEY TO OUR SUCCESS...”
To you, our valued shareholder,
If you had asked me 12 months ago if I would be delivering
this message, about what is a now a sustainable, profitable,
diversified enterprise, I would have answered “unlikely”. I think
if I was to ask you then if would you be a shareholder in Uniti
today, I suspect your answer may have been similar to mine.
So, it is pleasing that we, the UWL shareholders, are in the
position we are all in today.
I feel very fortunate to be writing to you to deliver my (and
our Company’s) first CEO Message to Shareholders, since
becoming a listed company in February this year.
Whilst it has only been six months since we listed on the
ASX, we have already set a platform upon which to build a
great company. We are in this enviable position because of
a number of people with complementary skills who united
very quickly and have executed on a clearly defined, multi-
dimensional strategy.
Our Chairman, Graeme Barclay; an outstanding individual and
business person, with equally outstanding achievements in
the past, who attracted me to the company. Graeme has and
continues to provide the foundation for where we are today.
Graeme’s considerable experience in mergers and acquisitions
is proving highly valuable, given the importance of that aspect
of our growth strategy.
Our Non Executive Directors, Kathy Gramp and John Lindsay;
Both Kathy and John immediately embraced the restructure
and new vision for our company. They are both exceptional
contributors, who have adopted and supported rapid change
and continue to work hard for all shareholders, above and
beyond that which is typically asked of a non-executive
director.
Vaughan Bowen (“VB”), our Executive Director; The value
VB has brought to our company in a short period of time is
substantial. We have a very exciting and well planned growth
strategy for the future and fundamental to that is acquisitive
growth as well as organic. VB has a career track-record of
identifying and, with the support of the executive leadership
and Board, delivering upon accretive acquisitions. VB’s
energized focus on the numerous opportunities afoot is more
apparent now than at any time in the 10+ years he and I have
worked side-by-side.
Our CFO, Darryl Inns; A very experienced and successful
financial manager of listed companies something I have
had the good fortune to observe first hand for many years.
In addition to being a successful CFO, Darryl has had first-hand
experience in performing due diligence and integration of
acquisitions, having been involved with nearly 30 transactions
in the past. An outstanding leader, today and for the future.
Peter Wildy, our Company Secretary and Financial Controller;
Peter was fundamental in executing on the listing of our
company and continues to provide essential support to Our
Board, CFO and myself.
Our management team and employees who have embraced
change and a new strategy; the now considerably enlarged
UWL management team, will welcome two more proven
performers. Jordan Grives, the entrepreneurial leader of the
Fone Dynamics business acquired in June 2019.
In September this year, we will welcome Steve Picton, CEO
of LBNCo, and his LBNCo team to the the UWL fold. Steve is
a seasoned telecommunications industry executive & proven
business builder. LBNCo is forecast to propel UWL forward
in terms of earnings contribution and fibre infrastructure
penetration. We are all most excited about the growth and
diversification opportunities that LBNCo will bring to UWL
over the coming years.
4
UNITI GROUP LIMITED ANNUAL REPORT 2019CEO’s ReportThe 2019 Financial Year for everybody at Uniti Group was a
six month period of transformation, change, acquisition and
growth. Beginning in January 2019, we worked to achieve the
following;
Throughout the same six month time period, we have also
developed a clearly defined business strategy which we have
already begun to execute with the above acquisitions as we
work to build;
– Essential transformation of the existing UWL wireless
business to reduce cash burn by reducing capex, operating
costs and inefficient capital deployment.
– a wireless infrastructure-based business where
economically viable and expandable to emerging fixed
wireless opportunities in 5G and small cell technology
– To maximise returns on current wireless assets, we shifted
marketing focus to capitalise on customer acquisition more
efficiently.
– a fibre infrastructure-based business where economically
viable and expandable to alternative markets beyond just
consumer.
– Alternative or niche market penetration where returns and
cash generation is high to help support the infrastructure
investment in wireless and fibre.
– Earnings accretive acquisitions to roll up within the
identified verticals
– Listed on the ASX and secured essential funding for change
– Acquired Fuzenet which met the criteria of growth, low
capex and high cash generation, as well as expanding our
products and capability
– Developed a business plan for the future which would
expand the business beyond being just a wireless
infrastructure owner operator principally to consumers.
– Rationlisation and expansion of the management team
With the above actions implemented quickly we were in a
position to execute on growth and we have done so with
equal immediacy including;
– Integrating the FuzeNet & Uniti operations for efficiency
and future growth
– Executed a highly earnings accretive and cash generative
acquisition of Fone Dynamics
– Executed a highly earnings accretive and cash generative
acquisition of Call Dynamics and Easy Inbound
– The proposed acquisition of LBNCo which is highly
earnings accretive and cash generative
5
UNITI GROUP LIMITED ANNUAL REPORT 2019The start we have made on building this company in the past
six months is pleasing and some of our highlights include:
– We are now trading comfortably EBITDA positive
– We met the pro forma forecast EBITDA of $2m
– We are now trading cash flow positive both before and
after capex
– Our exit run rate EBITDA from FY19 coming into FY20 is $6m
– We have substantial cash on the balance sheet ($19m) to
support growth and this cash balance will increase further,
following the equity raising accompanying the LBNCo
acquisition
– We are very well disciplined on cash payback expectations
from all investments we make and financial management
generally
I feel very confident we can continue with the pace we have
demonstrated in the second half of FY19 during FY20. In
addition to our organic growth potential, there are a pipeline
opportunities we have identified to accelerate growth by
acquisition, several of which are at advanced stages of
engagement.
Lastly , but most importantly, I would like to thank you, our
shareholders. Your support in enabling our listing in February,
your support on our recent $15m placement in June your
support of the capital raising to enable the acquisition of
LBNCo, and the support I continue to receive from you as we
go about building a great company, has been fundamental to
our achievements so far.
Our Board and management team are all committed
to building a truly outstanding, high growth, long-term
sustainable company for you, our shareholders!
– We have acquired good businesses who have all met or
exceeded their benchmark earnings accretion expectations
Yours sincerely,
– We have secured substantial and continued support from
financial markets for our strategy, evidenced through our
recent share placement and subsequent LBNCo-related
capital raising
– We are on the verge of closing a major transformational
acquisition of LBNCo, which takes us into fibre
infrastructure ownership in identified markets
Michael Simmons
Chief Executive Officer
– Recent acquisitions have attracted outstanding executives
who will become part of the management team, in
particular, Steve Picton (CEO LBNCo) and Jordan Grives
(CEO Fone Dynamics)
– We now have an exceptional Board and Management team
who are fully united on our “three pillars” growth strategy
6
UNITI GROUP LIMITED ANNUAL REPORT 2019CEO’s Report continuedStrategic Growth Agenda – “Three Pillars”
UWL
Wireless
Fixed Fibre
Specialist Product
T
N
E
R
R
U
C
S
S
E
N
I
S
U
B
S
T
C
U
D
O
R
P
S
T
E
G
R
A
T
&
Uniti Wireless
Fuzenet
Pivit
Call Dynamics
Fone Dynamics
Fixed Wireless
Small Cell MVNO
Private Fibre
Greenfields
Brownfields
Inbound
SMS
Cloud
SDN
Strategic Goals
Strategic Goals
Strategic Goals
1. Expand wireless footprint by
deploying wireless networks
nationally
2. Invest in alternative wireless
technology that will enable
faster, more agile and cost-
efficient rollout
3. Pursue mobile connectivity
solutions by utilising MVNO
and 5G technology
1. Increase market share
1. Pursue acquisitions
in existing fibre markets
through customer
acquisition and build its fibre
infrastructure nationally
2. Invest in complementary
fibre technology to support
wireless network and
infrastructure expansion.
of specialist
telecommunications services
that are high margin and
highly cash generative
2. Pursue niche and emerging
products & markets that are
complementary to core UWL
services
3. Establish exclusivity deals
3. Develop a competitive
with greenfield & brownfield
property managers
capitalising on future market
acquisition opportunities
enterprise offering using
specialist products and
creation of bundled services
77
UNITI GROUP LIMITED ANNUAL REPORT 2019
This Corporate Governance Statement of Uniti Group Limited (the ‘company’) has been prepared in accordance with the
3rd Edition of the Australian Securities Exchange’s (‘ASX’) Corporate Governance Principles and Recommendations of the
ASX Corporate Governance Council (‘ASX Principles and Recommendations’).
This statement has been approved by the company’s Board of Directors (‘Board’) and is current as at 30 August 2019.
The company’s ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant
disclosures in either this statement, the company’s website or Annual Report, has been filed with the ASX on 30 August 2019.
The ASX Principles and Recommendations and the company’s response as to how and whether it follows those
recommendations are set out below.
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1 – A listed entity should disclose:
a. the respective roles and responsibilities of its board and management; and
b. those matters expressly reserved to the board and those delegated to management.
The Board is ultimately accountable for the performance of the company and provides leadership and sets the strategic objectives
of the company. It appoints all senior executives and assesses their performance on at least an annual basis. It is responsible for
overseeing all corporate reporting systems, remuneration frameworks, governance issues, and stakeholder communications.
Decisions reserved for the Board relate to those that have a fundamental impact on the company, such as material acquisitions
and takeovers, dividends and share buy-backs, material profits upgrades and downgrades, and significant closures.
The Board sets objectives, goals and strategic direction along with a policy framework within which management then works.
Management is responsible for implementing Board strategy, day-to-day operational aspects, and ensuring that all risks and
performance issues are brought the Boards attention. They must operate within the risk and authorisation parameters set by
the Board.
Recommendation 1.2 – A listed entity should:
a. undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for
election, as a director; and
b. provide security holders with all material information in its possession relevant to a decision on whether or not to
elect or re-elect a director.
The company undertakes comprehensive reference checks prior to appointing a director, or putting that person forward as a
candidate to ensure that person is competent, experienced, and would not be impaired in any way from undertaking the duties
of director. The company provides relevant information to shareholders for their consideration about the attributes of candidates
together with whether the Board supports the appointment or re-election.
Recommendation 1.3 – A listed entity should have a written agreement with each director and senior executive setting
out the terms of their appointment.
The terms of the appointment of non-executive directors, executive directors and senior executives are agreed upon and set out
in writing at the time of appointment.
Recommendation 1.4 – The company secretary of a listed entity should be accountable directly to the board, through
the chair, on all matters to do with the proper functioning of the board.
The Company Secretary reports directly to the Board through the Chairman and is accessible to all directors.
8
UNITI GROUP LIMITED ANNUAL REPORT 2019Corporate Governance StatementRecommendation 1.5 – A listed entity should:
a. have a diversity policy which includes requirements for the board or a relevant committee of the board to set
measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s
progress in achieving them;
b. disclose that policy or a summary of it; and
c. disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the
board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards
achieving them, and either:
1. the respective proportions of men and women on the board, in senior executive positions and across the whole
organisation (including how the entity has defined “senior executive” for these purposes); or
2. if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender
Equality Indicators”, as defined in and published under that Act.
The company has a diversity policy which requires the Board to set measurable objectives for achieving gender diversity and
to assess the objectives and the company’s progress towards achieving them on an annual basis. The diversity policy aims to
provide a work environment where employees have equal access to career opportunities, training and benefits. It also aims to
ensure that employees are treated with fairness and respect, and are not judged by unlawful or irrelevant reference to gender,
age, ethnicity, race, cultural background, disability, religion, sexual orientation or caring responsibilities. This commitment enables
the company to attract and retain employees with the best skills and abilities.
As at the date of this report, 20% of the organisation were women; and 20% of senior executive positions were occupied by
women. For this purpose, the Board defines a senior executive as a person who makes, or participates in the making of, decisions
that affect the whole or a substantial part of the business or has the capacity to affect significantly the company’s financial standing.
This therefore includes all senior management and senior executive designated positions as well as senior specialised professionals.
No entity within the consolidated entity is a ‘relevant employer’ for the purposes of the Workplace Gender Equality Act 2012 and
therefore Gender Equality Indicators are not required to be disclosed.
Recommendation 1.6 – A listed entity should:
a. have and disclose a process for periodically evaluating the performance of the Board, its committees and individual
directors; and
b. disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting
period in accordance with that process.
The Board reviews its performance annually, as well as the performance of individual Committees and individual directors
(including the performance of the Chairman as Chairman of the Board). The review for the current financial year occurred
on 19 June 2019 and was led by the Chairman. The process included collective Board discussions and individual interviews
conducted by the Chairman. The review of the Chairman’s role was conducted by the Chair of the Audit and Risk Committee.
Recommendation 1.7 – A listed entity should:
a. have and disclose a process for periodically evaluating the performance of its senior executives; and
b. disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting
period in accordance with that process.
The Board conducts an annual performance assessment of the CEO against agreed performance measures determined at the
start of the year. The CEO undertakes the same assessments of senior executives. In assessing the performance of the individual,
the review includes consideration of the senior executive’s function, individual targets, group targets, and the overall performance
of the company. Such reviews were conducted during June 2019.
9
UNITI GROUP LIMITED ANNUAL REPORT 2019Principle 2: Structure the board to add value
Recommendation 2.1 – The board of a listed entity should:
a. have a nomination committee which:
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director,
and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met throughout the period and the
individual attendances of the members at those meetings; or
b. if it does not have a nomination committee, disclose that fact and the processes it employs to address board
succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge its duties and responsibilities effectively.
The Board maintains a combined Nomination and Remuneration Committee, whose members during the financial year, were
as follows:
DIRECTOR’S NAME
EXECUTIVE STATUS
INDEPENDENCE STATUS
Graeme Barclay
Non-Executive Chairman
John Lindsay – Chair
Non-Executive Member
Kathy Gramp
Non-Executive Member
Independent
Independent
Independent
All members are Independent. The Committee members and the Chair are independent.
The Charter of the Committee is available at the company’s website.
The number of Committee meetings held and attended by each member is disclosed in the ‘Meetings of directors’ section of the
Directors’ report.
10
UNITI GROUP LIMITED ANNUAL REPORT 2019Corporate Governance Statement continuedRecommendation 2.2 – A listed entity should have and disclose a board skills matrix setting out the mix of skills and
diversity that the board currently has or is looking to achieve in its membership.
The Board’s skills matrix indicates the mix of skills, experience and expertise that are considered necessary at Board level for
optimal performance of the Board. It is therefore used when recruiting new directors and assessing which skills need to be
outsourced based on the attributes of the current Board members. The existence of each attribute is assessed by the Board as
either, High, Medium or Low.
SKILL CATEGORY
DESCRIPTION OF ATTRIBUTES REQUIRED
Risk and compliance
Identification of key risks to the company related to each key area
of operations. Monitoring of risks, satisfy compliance issues and
knowledge of legal and regulatory requirements.
LEVEL OF
IMPORTANCE
EXISTENCE IN
CURRENT BOARD
High
High
Financial and audit
Strategic
Analysis and interpretation of accounting and finance issues including
assessment and resolution of audit and financial reporting risks,
contribution to budgeting and financial management of projects
and company, assessing and supervising capital management.
Development of strategies to achieve business objectives, oversee
implementation and maintenance of strategies, and identification
and critical assessment of strategic opportunities and threats to
the company.
High
High
High
High
Operating policies
Key issue identification representing operational and reputational
risks and development of policy responses and parameters within
which the company should operate.
Medium
High
Information
technology
Executive
management
Knowledge of IT governance including privacy, data management
and security.
Medium
High
Performance assessments of senior executives, succession
planning for key executives, setting of key performance hurdles,
experience in industrial relations and organisational change
management programmes.
Medium
High
Age and gender
Board aims for equal gender representation and range of
experienced individuals to contribute towards better Board
outcomes.
Medium
Medium
The Board currently believes that its membership adequately represents the required skills as set out in the matrix and therefore
does not intend to seek any new or alternative candidates. External consultants may be brought in with specialist knowledge to
address areas where this is an attributed deficiency in the Board.
11
UNITI GROUP LIMITED ANNUAL REPORT 2019In addition to the specific areas that are required at Board level identified the matrix above, all members of the Board are assessed
for the following attributes before they are considered an appropriate candidate:
BOARD MEMBER ATTRIBUTES
Leadership
Represents the company positively amongst stakeholders and external parties; decisively acts ensuring
that all pertinent facts considered; leads others to action; proactive solution seeker.
Ethics and integrity
Communication
Awareness of social, professional and legal responsibilities at individual, company and community
level; ability to identify independence conflicts; applies sound professional judgement; identifies when
external counsel should be sought; upholds Board confidentiality; respectful in every situation.
Effective in working within defined corporate communications policies; makes constructive and
precise contribution to the Board both verbally and in written form; an effective communicator with
executives.
Negotiation
Negotiation skills which engender stakeholder support for implementing Board decisions.
Corporate governance
Experienced director that is familiar with the mechanisms, controls and channels to deliver effective
governance and manage risks.
Recommendation 2.3 – A listed entity should disclose:
a. the names of the directors considered by the Board to be independent directors;
b. if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is
of the opinion that it does not compromise the independence of the director, the nature of the interest, position,
association or relationship in question and an explanation of why the board is of that opinion; and
c. the length of service of each director.
Details of the Board of directors, their appointment date, length of service and independence status is as follows:
DIRECTOR’S NAME
APPOINTMENT DATE
LENGTH OF SERVICE AT REPORTING DATE
INDEPENDENCE STATUS
Graeme Barclay
20 Sept 2018
John Lindsay
15 May 2018
Kathy Gramp
15 May 2018
Michael Simmons
6 June 2019
Vaughan Bowen
13 March 2019
10 months
15 months
15 months
2 months
5 months
Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Not-Independent Executive
Not-Independent Executive
The Board may determine that a director is independent notwithstanding the length of service or the existence of an interest,
position, association or relationship of the kind identified in the examples listed under Recommendation 2.3 of the ASX Principles
and Recommendations.
Recommendation 2.4 – A majority of the board of a listed entity should be independent directors.
Having regard to the response to Recommendation 2.3 above, there is a 60/40 spilt between independent and not-independent
members of the Board at the reporting date.
Recommendation 2.5 – The Chair of the board of a listed entity should be an independent director and, in particular,
should not be the same person as the CEO of the entity.
Graeme Barclay is Chair of the Board and is considered to be an independent director of the company. Michael Simmons is the
Group CEO.
12
UNITI GROUP LIMITED ANNUAL REPORT 2019Corporate Governance Statement continuedRecommendation 2.6 – A listed entity should have a program for inducting new directors and provide appropriate
professional development opportunities for directors to develop and maintain the skills and knowledge needed to
perform their role as directors effectively.
New directors undertake an induction program coordinated by the Company Secretary that briefs and informs the director on all
relevant aspects of the company’s operations and background. A director development program is also available to ensure that
directors can enhance their skills and remain abreast of important developments.
Principle 3: Act ethically and responsibly
Recommendation 3.1 – A listed entity should:
a. have a code of conduct for its directors, senior executives and employees; and
b. disclose that code or a summary of it.
The company maintains a code of conduct for its directors, senior executives and employees. In summary, the code requires that
each person act honestly, in good faith and in the best interests of the company; exercise a duty of care; use the powers of office
in the best interests of the company and not for personal gain, declare any conflict of interest; safeguard company’s assets and
information and undertake any action that may jeopardise the reputation of company.
That code is available on the company’s website.
Principle 4: Safeguard integrity in corporate reporting
Recommendation 4.1 – The board of a listed entity should:
a. have an audit committee which:
1. has at least three members, all of whom are non-executive directors and a majority of whom are independent
directors; and
2. is chaired by an independent director, who is not the chair of the board,
and disclose:
3. the charter of the committee;
4. the relevant qualifications and experience of the members of the committee; and
5. in relation to each reporting period, the number of times the committee met throughout the period and the
individual attendances of the members at those meetings; or
b. if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement partner.
The Board maintains a combined Audit and Risk Committee, the members of which are:
DIRECTOR’S NAME
EXECUTIVE STATUS
INDEPENDENCE STATUS
Graeme Barclay
John Lindsay
Non-Executive Member
Non-Executive Member
Kathy Gramp – Chair
Non-Executive Chairman
Independent
Independent
Independent
All of the Committee members and the Chair are independent, thereby satisfying this Recommendation.
Details of the qualifications and experience of the members of the Committee is detailed in the ‘Information of directors’ section
of the Directors’ report.
The Charter of the Committee is available at the company’s website.
The number of Committee meetings held and attended by each member is disclosed in the ‘Meetings of directors’ section of the
Directors’ report.
13
UNITI GROUP LIMITED ANNUAL REPORT 2019Recommendation 4.2 – The board of a listed entity should, before it approves the entity’s financial statements for a
financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity
have been properly maintained and that the financial statements comply with the appropriate accounting standards
and give a true and fair view of the financial position and performance of the entity and that the opinion has been
formed on the basis of a sound system of risk management and internal control which is operating effectively.
For the financial year ended 30 June 2019 and the half-year ended 31 December 2018, the company’s CEO and CFO provided
the Board with the required declarations.
Recommendation 4.3 – A listed entity that has an AGM should ensure that its external auditor attends its AGM and is
available to answer questions from security holders relevant to the audit.
The audit engagement partner attends the AGM and is available to answer shareholder questions from shareholders relevant to
the audit.
Principle 5: Make timely and balanced disclosure
Recommendation 5.1 – A listed entity should:
a. have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and
b. disclose that policy or a summary of it.
The company maintains a written policy that outlines the responsibilities relating to the directors, officers and employees in
complying with the company’s disclosure obligations. Where any such person is of any doubt as to whether they possess
information that could be classified as market sensitive, they are required to notify the Company Secretary immediately in the first
instance. The Company Secretary is required to consult with the CEO in relation to matters brought to their attention for potential
announcement. Generally, the CEO is ultimately responsible for decisions relating to the making of market announcements.
The Board is required to authorise announcements of significance to the company. No member of the company shall disclose
market sensitive information to any person unless they have received acknowledgement from the ASX that the information has
been released to the market.
Principle 6: Respect the rights of security holders
Recommendation 6.1 – A listed entity should provide information about itself and its governance to investors via
its website.
The company maintains information in relation to governance documents, directors and senior executives, Board and committee
charters, annual reports, ASX announcements and contact details on the company’s website.
Recommendations 6.2 and 6.3
A listed entity should design and implement an investor relations program to facilitate effective two-way
communication with investors (6.2).
A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at
meetings of security holders (6.3).
In order for the investors to gain a greater understanding of the company’s business and activities, the company schedules
regular interactions between the CEO, CFO and/or Managing Director where it engages with institutional and private investors,
analysts and the financial media. These meetings are not held within a four-week blackout period in advance of the release of
interim or full-year results. The company encourages shareholders to attend its AGM and to send in questions prior to the AGM
so that they may be responded to during the meeting. It also encourages ad hoc enquiry via email which are responded to.
Written transcripts of the meeting are made available on the company’s website.
14
UNITI GROUP LIMITED ANNUAL REPORT 2019Corporate Governance Statement continuedRecommendation 6.4 – A listed entity should give security holders the option to receive communications from, and
send communications to, the entity and its security registry electronically.
The company engages its share registry to manage the majority of communications with shareholders. Shareholders are
encouraged to receive correspondence from the company electronically, thereby facilitating a more effective, efficient and
environmentally friendly communication mechanism with shareholders. Shareholders not already receiving information
electronically can elect to do so through the share registry, Boardroom Limited at boardroomlimited.com.au
Investor Relations
Peter Wildy
Company Secretary
Level 1, 44 Currie St
Adelaide, SA 5000.
Principle 7: Recognise and manage risk
Recommendations 7.1 and 7.2
The board of a listed entity should:
a. have a committee or committees to oversee risk, each of which:
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director,
and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met throughout the period and the
individual attendances of the members at those meetings; or
b. if it does not have a risk committee or committees that satisfy a. above, disclose that fact and the processes it
employs for overseeing the entity’s risk management framework (7.1).
The board or a committee of the board should:
a. review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and
b. disclose, in relation to each reporting period, whether such a review has taken place (7.2).
The Board maintains a combined Audit and Risk Committee. The members of the Committee are detailed in
Recommendation 4.2 above.
The charter of the Risk Committee can be found on the company’s website.
The Audit and Risk Committee is working with management to develop a risk management framework.
15
UNITI GROUP LIMITED ANNUAL REPORT 2019Recommendation 7.3 – Internal Audit
(a)
(b)
improving the effectiveness of its risk management and internal control processes.
if it has an internal audit function, how the function is structured and what role it performs; or
if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually
The Company did not have an internal audit function for the past financial year. Due to the size of the Company, the Board does
not consider it necessary to have an internal audit function.
The Company will employ the following process for evaluating and continually improving the effectiveness of its risk
management and internal control processes:
(i) The Audit and Risk Committee will monitor the need for an internal audit function having regard to the size, location and
complexity of the Company’s operations; and
(ii) the Audit and Risk Committee will periodically undertake an internal review of financial systems and processes where systems
are considered to require improvement these systems are developed.
Recommendation 7.4 – A listed entity should disclose whether it has any material exposure to economic,
environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.
All material risks are announced to the market in accordance with the requirements of the ASX Listing Rules.
Refer to the company’s Annual Report for disclosures relating to the company’s material business risks (including those that could
adversely affect the company’s prospects for future financial years) and how these risks are managed.
Refer to commentary at Recommendations 7.1 and 7.2 for information on the company’s risk management framework.
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1 – The board of a listed entity should:
a. have a remuneration committee which:
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director,
and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met throughout the period and the
individual attendances of the members at those meetings; or
b. if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level
and composition of remuneration for directors and senior executives and ensuring that such remuneration is
appropriate and not excessive.
The Board maintains a combined Nomination and Remuneration Committee. The members of the Committee are detailed in
Recommendation 2.1 above.
Details of the qualifications and experience of the members of the Committee is detailed in the ‘Information of directors’ section
of the Directors’ report.
The Remuneration Committee oversees remuneration policy and monitors remuneration outcomes to promote the interests of
shareholders by rewarding, motivating and retaining employees. The committee’s charter sets out the roles and responsibilities,
composition and structure of the Committee and is available on the company’s website.
The number of Committee meetings held and attended by each member is disclosed in the ‘Meetings of directors’ section of the
Directors’ report.
16
UNITI GROUP LIMITED ANNUAL REPORT 2019Corporate Governance Statement continuedRecommendation 8.2 – A listed entity should separately disclose its policies and practices regarding the remuneration
of non-executive directors and the remuneration of executive directors and other senior executives.
Non-executive directors are remunerated by way of cash fees, superannuation contributions and non-cash benefits in lieu of
fees. The level of remuneration reflects the anticipated time commitments and responsibilities of the position. Executive directors
and other senior executives are remunerated using combinations of fixed and performance based remuneration. Fees and
salaries are set at levels reflecting market rates and performance-based remuneration is linked directly to specific performance
targets that are aligned to both short and long term objectives. Further details in relation to the company’s remuneration policies
are contained in the Remuneration Report, within the Directors’ report.
Recommendation 8.3 – A listed entity which has an equity-based remuneration scheme should: (a) have a policy on
whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise)
which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it.
The use of derivatives or other hedging arrangements for unvested securities of the company or vested securities of the company
which are subject to escrow arrangements is prohibited. Where a director or other senior executive uses derivatives or other
hedging arrangements over vested securities of the company, this will be disclosed.
17
UNITI GROUP LIMITED ANNUAL REPORT 2019GRAEME BARCLAY
NON-EXECUTIVE
CHAIR
Thirty-five years of
experience in professional
services, including
investment banking and
telecommunications.
Previously Managing
Director of BAI
Communications Group.
Previously Non-Executive
Chairman of the Nextgen
group of companies
including the Metronode
datacentre business.
Joined the Board of Uniti
Group Limited in September
2018 and was elected
Chairman at that time.
Currently a Non-Executive
Director of Codan Limited
and BSA Limited.
Currently the CEO of
Axicom Holdings Limited.
MICHAEL SIMMONS
GROUP MANAGING
DIRECTOR & CEO
Forty years’ experience
in the media and
telecommunications industry.
Previously the founding CEO
of TPG Telecom (formerly
SP Telemedia Limited/NBN
Enterprises Pty Ltd).
Previously a non-Executive
Director of M2
Telecommunications Limited
and Managing Director of
Terria (the industry bid to
build NBNCo).
Previously CEO of Vocus
Enterprise, Wholesale
& Government before
becoming CEO of Vocus
Group.
Michael joined Uniti Group
Limited as CEO at the end of
October 2018 and became
Managing Director in
June 2019.
JOHN LINDSAY
NON-EXECUTIVE
DIRECTOR
Significant experience as
CIO and CTO in various
Internet Service Provider
and telecommunication
companies.
Previously CTO if iiNet Ltd
and Internode Pty Ltd.
Previously Director of
Internet Industry Association.
Currently Director of
Telecommunication Industry
Ombudsman Ltd.
Currently Non-Executive
Director of Ultraserve
and Redflow.
John joined the board of Uniti
Group Limited in May 2018.
18
Board of DirectorsUNITI GROUP LIMITED ANNUAL REPORT 2019PETER WILDY
COMPANY SECRETARY
Over 20 years of financial
management experience
in the construction
and information
technology sectors.
Previously CFO of Hostworks
and saw the company
through a public listing and
successful acquisition.
Proven track record
growing revenue and raising
capital through to IPO and
ASX listings.
KATHY GRAMP
NON-EXECUTIVE
DIRECTOR
Twenty years’ experience as
a Company Director across a
diverse range of industries.
Previously held finance
executive roles including
CFO positions in the
commercial radio and digital
media sector.
Currently Non-Executive
Director of Codan Limited.
Currently Non-Executive
Director of Australian
Institute of Company
Directors.
Currently a Fellow of
the Australian Institute
of Company Directors
and Institute of Charted
Accountants.
Kathy joined the board of Uniti
Group Limited in May 2018.
VAUGHAN BOWEN
EXECUTIVE DIRECTOR
Vast experience in
telecommunications industry
having led the identification,
vendor negotiation and
acquisition of more than
30 companies.
Founder of ASX100
company M2 Group that
owned household names
including Dodo, iPrimus
and Commander.
Experienced Company
Director holding various roles
over the past 10 years.
Previous Chairman of Vocus
Group Limited.
Currently the Chairman of the
Telco Together Foundation.
Vaughan joined Uniti
Group Limited in the role of
Executive Director in March
2019 to lead the Company’s
mergers and acquisitions
(“M&A”) activities.
19
UNITI GROUP LIMITED ANNUAL REPORT 2019The directors present their report, together with the financial statements, on the consolidated entity Uniti Group Limited
hereinafter referred to as “the Group” or ‘consolidated entity’ consisting of Uniti Group Limited (referred to hereafter as the
‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2019 (“year”).
Directors
The following persons were directors of the Company during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Graeme Barclay (appointed 20 September 2018) – Chairman
Kathy Gramp
John Lindsay
Vaughan Bowen
(appointed 13 March 2019)
Michael Simmons (appointed 6 June 2019)
Sasha Baranikov
(ceased 14 February 2019)
Che Metcalfe
(ceased 14 February 2019)
Jules Maussen
(ceased 1 August 2018)
Principal activities
During the financial year the principal continuing activities of the Group consisted of the provision of internet and associated
telecommunications products and services.
During the year the Group trading and activities were significantly improved by the acquisitions of Fuzenet Pty Ltd, Fone
Dynamics Pty Ltd and Call Dynamics Pty Ltd which transformed the Group to a profitable trading position with positive operating
cash flows for the month of June 2019.
Dividends
There were no dividends declared or paid during the financial year.
Review of Operations
The statutory loss for the consolidated entity after providing for income tax amounted to $13,531,000 (30 June 2018: Loss of
$4,801,000).
The statutory loss includes significant once off items (from actions and transactions undertaken in the second half of the
year) including costs incurred in listing the Company on the ASX, the acquisition of Fuzenet Pty Ltd, Fone Dynamics Pty Ltd
and Call Dynamics Pty Ltd and partial impairment of fixed wireless assets (non-cash). It also includes approximately $3m of
share based expenses relating to shares and options issued during the year and certain restructuring costs associated with the
rationalisation of existing operations and integration of the acquisitions.
After adjusting for the significant once off items the Loss after Tax for the consolidated entity for the year was $4.1m compared
to the prior corresponding period loss after tax of $4.8m.
The Earnings before Interest, Tax Depreciation and Amortisation (EBITDA) after adjusting for the significant once off items for the
year was $300k compared to negative $1.9m for the prior corresponding period.
In the second half of the year the Group significantly out-performed the first half as a result of the actions and transactions
undertaken in the second half of the year. After adjusting for the significant once off items the EBITDA in the second half of the
year was $1.855m (first half loss of $1.555m).
The actions and transactions undertaken has resulted in the Group now trading profitably and cash flow positively at the end of
the year and positioned the Group for further improvement in the 2020 financial year.
2020
Directors’ ReportUNITI GROUP LIMITED ANNUAL REPORT 2019The Group has a clear strategy for organic growth combined with earnings accretive growth through acquisition centred
around a three pillars segmentation of markets/products being wireless, fibre and specialty telecommunications products and
services provision.
Since the end of the financial year, in line with strategy, the Company has announced the acquisition of LBNCo an owner and
operator of fibre infrastructure providing wholesale telecommunications services. The transaction is highly earnings accretive
based on the FY20 forecast EBITDA of LBNCo and is anticipated to be a significant contributor to future earnings of the Group.
In the second half of the year the Company undertook two capital raisings, initially on listing on the ASX in February 2019 raising
$13.2m (before costs) and a share placement of $15m (before costs) in June 2019. These funds have supported the actions and
transactions of the second half of the year and have also resulted in the Group holding significant cash reserves of approximately
$19.1m and limited debt (approximately $2.5m) at year end.
The Group now has a strong balance sheet, infrastructure businesses, more diverse products and services and a pipeline of
acquisition targets such that Directors are highly confident the Group can capitalise on the work undertaken to date and continue
this growth in to the future.
Significant changes in the state of affairs
On the 13 February 2019 the Company listed on the Australian Securities Exchange (ASX: UWL) and raised approximately $13.2m
(before costs).
On 11 February 2019 the Company, acquired 100% of the ordinary shares of Fuzenet Pty Ltd (FuzeNet) and subsidiary entities for
a total consideration of $10.7m (before costs). FuzeNet is a provider of internet and associated telecommunications products
and services principally on fibre networks which are an alternative to the fibre network provided by the Australian Government
controlled NBNCo Limited (NBNCo).
On 1 June 2019 the Company acquired 100% of the ordinary shares of Fone Dynamics Pty Ltd (Fone Dynamics) and subsidiary
entities for a maximum consideration of $8.4m (before costs). Fone Dynamics is a provider of inbound voice services and SMS
messaging services with a value added analytic call tracking capability.
On 1 June 2019 the company acquired 100% of the ordinary shares of Call Dynamics Pty Ltd (Call Dynamics) for a total
consideration of $2.0m. Call Dynamics is a provider of inbound voice services and its product aligns with the Fone Dynamics
application.
The ASX listing of the company enabled it to undertake the Fuzenet, Fone Dynamics and Call Dynamics acquisitions that have
transformed the operating performance from a business incurring significant losses with negative operating cash flows to a
business that is now trading profitably and generating positive operating cash flows.
On 5 June 2019 the company completed an equity raise of $15m (before costs) from a placement of 15 million shares at
$1.00 per share.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
On 6 August 2019 at an Extraordinary General Meeting of the Company shareholders approved a change of name of the
Company to Uniti Group Limited. Shareholders also ratified the issue of fully paid shares and share options as below:
– Ratification of the issue of Placement Shares
– Ratification of the issue of PPL Shares (in relation to the acquisition of the customer base of Pivit Pty Ltd)
– Ratification of the issue of CDPL Shares (in relation to the acquisition of Call Dynamics Pty Ltd)
– Ratification of the issue of FDPL Shares (in relation to the acquisition of Fone Dynamics Pty Ltd)
– Ratification of the issue of UWL options to Vaughan Bowen
2121
UNITI GROUP LIMITED ANNUAL REPORT 2019On 19 August 2019, the Company announced the acquisition of LBNCo, subject to Conditions Precedent being met. At the
same time the Company announced a fully underwritten placement of shares and a Non-renounceable Rights Issue to raise
in aggregate $100.2m (before costs) to fund the purchase of LBNCo and increase the existing cash reserves of the Group.
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future
financial years.
Likely developments and expected results of operations
There are no other developments other than those listed above that are likely to materially impact the results of operations of the
Group at this time.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Directors
Name:
Title:
Graeme Barclay
Non-Executive Chairman
Qualifications:
MAICD, FFin, MA, CA
Experience and expertise:
Graeme has 35 years of experience in professional services, investment banking and
telecommunications. He is the former Managing Director of BAI Communications group and
former non-executive chairman of the Nextgen group of companies including the Metronode
datacentre business. Graeme joined the Board of Uniti Group Limited in September 2018 and
was elected Chairman at that time. He is currently the CEO of Axicom Holdings Limited.
Other current directorships:
Non-Executive Director of BSA Limited
Non-Executive Director of Codan Limited
Special responsibilities:
Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Interests in shares:
2,858,228 ordinary fully paid shares
Interests in options:
2,458,228
Name:
Title:
Michael Simmons
Managing Director and Chief Executive Officer
Qualifications:
B.Comm
Experience and expertise:
Michael has nearly 40 years of experience in the media and telecommunications industry
as a CEO, Director or CFO over this period. Michael was the founding CEO of TPG Telecom
(formerly SP Telemedia Limited/NBN Enterprises Pty Ltd), a non Executive Director of M2
Telecommunications Limited, Managing Director of Terria (the industry bid to build NBNCo)
and CEO of Vocus Enterprise, Wholesale & Government and CEO of Vocus Group. Michael
joined Uniti Group Limited as CEO at the end of October 2018 and became Managing Director
in June 2019.
Other current directorships:
Special responsibilities:
Nil
Nil
Interests in shares:
3,687,342 ordinary fully paid shares
Interests in options:
2,458,228
2222
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019Name:
Title:
Kathy Gramp
Non-Executive Director
Qualifications:
FAICD, FCA
Experience and expertise:
Kathy has 20 years of experience as a Company Director across a diverse range of industries.
She previously held finance executive roles and was CFO in the commercial radio and digital
media sector. Kathy joined the board of Uniti Group Limited in May 2018.
Other current directorships:
Non-Executive Director of Codan Group Limited
Special responsibilities:
Member of the Nomination and Remuneration Committee
Chairman of the Audit and Risk Committee
Interests in shares:
307,279 ordinary fully paid shares
Interests in options:
921,835
Name:
Title:
John Lindsay
Non-Executive Director
Qualifications:
GAICD
Experience and expertise:
John has significant experience as CIO and CTO in various Internet Service Provider and
telecommunication companies. John joined the board of Uniti Group Limited in May 2018.
Other current directorships:
Non-Executive Director of Redflow Limited
Director Telecommunications Industry Ombudsman Limited (Unlisted)
Special responsibilities:
Chairman of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Interests in shares:
315,279 ordinary fully paid shares
Interests in options:
921,835
Name:
Title:
Qualifications:
Experience and expertise:
Vaughan Bowen
Executive Director
B.Com (NSW)
Vaughan has held various directorships over the past 10 years, was the founder of M2 Group
Limited, Previously Chairman of Vocus Group Limited and is currently the Chairman of the
Telco Together Foundation. Vaughan joined Uniti Group Limited in the role of Executive
Director in March 2019 to lead the Company’s mergers and acquisitions (“M&A”) activities.
Other current directorships:
Special responsibilities:
Nil
Nil
Interests in shares:
4,495,337 ordinary fully paid shares
Interests in options:
2,458,230
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other
types of entities, unless otherwise stated.
Interests in shares and options are stated as at 30 June 2019. Mr Bowen’s options were granted in March 2019 on
commencement of employment, and were approved by shareholders at the company’s EGM held on 6th August 2019.
Company secretary
Peter Wildy (BA Acc, CA) has held the role of Company Secretary since August 2018. Peter is a member of the Institute of
Chartered Accountants. Peter has over 20 years of financial management experience in the construction and information
technology sectors including CFO of Hostworks Group Limited. Peter has a proven track record growing revenue and raising
capital through public offerings and ASX listings.
2323
UNITI GROUP LIMITED ANNUAL REPORT 2019Meetings of directors
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year
ended 30 June 2019, and the number of meetings attended by each director that held office during the year were:
FULL BOARD
NOMINATION AND
REMUNERATION COMMITTEE
AUDIT AND
RISK COMMITTEE
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Jules Maussen
Sasha Baranikow
Che Metcalfe
30
34
34
12
2
–
19
18
30
34
34
12
2
–
19
19
2
2
2
2
2
2
2
2
2
2
2
2
Held: represents the number of meetings held during the time the current director held office or was a member of the relevant committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
– Principles used to determine the nature and amount of remuneration
– Details of remuneration
– Service agreements
– Share-based compensation
– Additional information
– Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the
creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board
of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices:
– competitiveness and reasonableness
– acceptability to shareholders
– performance linkage / alignment of executive compensation
– transparency
2424
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for
directors and executives. The performance of the consolidated entity depends on the quality of its directors and executives.
The remuneration philosophy is to attract, motivate and retain high performing and high quality personnel to the Company’s
board and its executive positions.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive
and complementary and aligned to the strategy of the consolidated entity.
The reward framework is designed to align executive reward to shareholders’ interests. The Board has considered that it should
seek to enhance shareholders’ interests by:
– having economic profit as a core component of plan targets
– focusing on sustained growth in shareholder wealth, consisting of growth in share price primarily, and delivering constant or
increasing return on assets as well as focusing the executive on key non-financial drivers of value
– attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives’ interests by:
– rewarding capability and experience
– reflecting competitive reward for contribution to growth in shareholder wealth
– providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors’
fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration
Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive
directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to
the fees of other non-executive directors based on comparative roles in the external market. The Chairman is not present at any
discussions relating to the determination of his own remuneration.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general meeting.
The most recent determination was at the Annual General Meeting held on 2 November 2018, where the shareholders approved
a maximum annual aggregate remuneration of $350,000.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework has four components:
– base pay and non-monetary benefits
– short-term performance incentives
– long term performance incentives as share-based payments
– other remuneration such as superannuation and long service leave
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the
consolidated entity and comparable market remunerations.
2525
UNITI GROUP LIMITED ANNUAL REPORT 2019Executives may receive their fixed remuneration in the form of cash or other fringe benefits where it does not create any
additional costs to the consolidated entity and provides additional value to the executive.
The short-term incentives (‘STI’) program is designed to align the targets of the Group with the performance hurdles of
executives. STI payments are granted to executives based on specific annual targets and key performance indicators (‘KPI’s’)
being achieved. KPI’s include profit contribution, customer satisfaction, leadership contribution and product management. STI
payments are a mixture of cash and share based payments and executives do have the option to convert cash based payments
to a share based payment measured at the 10 day volume weighted average price of the Company shares at that time.
The long-term incentives (‘LTI’) program is designed to align the targets of the Group with the performance hurdles of executives.
LTI payments are granted to executives based on specific annual targets and key performance indicators (‘KPI’s’) being achieved.
KPI’s include profit contribution, customer satisfaction, leadership contribution and product management. All LTI incentives
are share-based payments. Shares are vested in executives over a period of three years assuming continued employment and
satisfactory performance. Share-based payments are issued at the 10 day volume weighted average price of the Company shares
at that time.
Consolidated entity performance and link to remuneration
Remuneration for executives is directly linked to the performance of the consolidated entity and of the executive. A portion of
cash bonus and incentive payments are dependent on defined budgeted earnings and earnings per share targets being met.
All cash bonus and other incentive payments are at the discretion of the Nomination and Remuneration Committee.
The Nomination and Remuneration Committee is of the opinion that continued improved results will be attributed in part to the
adoption of performance based compensation and is satisfied that improvement will continue to increase shareholder wealth if
maintained over the coming years.
An agreed set of protocols was put in place to ensure that the remuneration recommendations would be free from undue
influence from key management personnel. These protocols include executive directors and executives not being members
of the Nomination and Remuneration Committee.
Voting and comments made at the Company’s 2018 Annual General Meeting (‘AGM’)
As the Company listed on the ASX in February 2019, there was no requirement in the prior year for Shareholders to vote on
the Company’s remuneration report for 2018 at the AGM held in November 2018.
Details of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
Share-based payments, which were performance linked to the completion of the Fuzenet acquisition and the ASX listing,
to Graeme Barclay, John Lindsay, Kathy Gramp and Michael Simmons were approved by shareholders at the EGM of the
Company held on 26 October 2018.
The key management personnel of the consolidated entity during the year consisted of the following:
– Graeme Barclay – Non-Executive Chairman (appointed 20 September 2018)
– Kathy Gramp – Non-Executive Director (appointed 15 May 2018)
– John Lindsay – Non-Executive Director (appointed 15 May 2018)
– Vaughan Bowen – Executive Director (appointed 13 March 2019)
– Michael Simmons – Managing Director and Chief Executive Officer (appointed 15 October 2018)
– Jules Maussen – Non-Executive Director (ceased 1 August 2018)
– Sasha Baranikow – Executive Director (ceased 14 February 2019)
– Che Metcalfe – Executive Director (ceased 14 February 2019)
– Darryl Inns – Group Chief Financial Officer (appointed 15 April 2019)
Changes since the end of the reporting period: Nil
2626
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
CASH
SALARY
AND FEES
$
CASH
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
SHARE-BASED
PAYMENTS
EQUITY-
SETTLED
SHARES
$
EQUITY-
SETTLED
OPTIONS
$
TOTAL
$
PERFORMANCE
BASED
%
2019
Non-Executive Directors:
Graeme Barclay
(Chairman)1
Kathy Gramp
John Lindsay
Jules Maussen2
Executive Directors:
Vaughan Bowen3
Michael Simmons4
Sasha Baranikov5
Che Metcalfe5
57,639
65,833
65,833
60,000
57,604
199,928
204,345
195,219
Other Key Management Personnel:
Darryl Inns6
Total
52,954
959,355
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,476
614,557
229,515
907,187
6,254
76,820
72,005
220,912
6,254
76,820
72,005
220,912
–
–
–
60,000
5,472
–
629,999
693,075
14,595 921,835
229,515
1,365,873
11,823
169,003
12,157
169,003
–
–
385,171
376,379
4,738
–
40,989
98,681
66,769 2,028,038 1,274,028 4,328,190
93%
67%
67%
0%
91%
84%
44%
45%
41%
76%
(1) Represents remuneration from 20 September 2018 to 30 June 2019
(2) Represents remuneration from 1 July 2017 to 1 August 2018
(3) Represents remuneration from 13 March 2019 to 30 June 2019
(4) Represents remuneration from 15 October 2018 to 30 June 2019
(5) Represents remuneration from 1 July 2018 to 14 February 2019 including any termination and leave payments
(6) Represents remuneration from 15 April 2019 to 30 June 2019
Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard
to the satisfaction of performance measures and weightings as described above in the section ‘consolidated entity performance
and link to remuneration’. The maximum bonus values are established at the start of each financial year and amounts payable are
determined in the month after the end of the financial year by the Nomination and Remuneration Committee.
During the year STI and LTI payments were potentially payable to executive directors and executives of the Group. The personnel
entitled to a potential STI and LTI payment have advised the Nomination and Remuneration Committee they have waived 100%
of their entitlement to rewards under STI and/or LTI in respect of the financial year ended 30 June 2019 in light of the poor
trading performance of the Group in the first half of the financial year.
2727
UNITI GROUP LIMITED ANNUAL REPORT 2019SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
CASH
SALARY
AND FEES
$
CASH
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
SHARE-BASED
PAYMENTS
EQUITY-
SETTLED
SHARES
$
EQUITY-
SETTLED
OPTIONS
$
TOTAL
$
PERFORMANCE
BASED
%
2018
Non-Executive Directors:
Kathy Gramp
John Lindsay
Jules Maussen
(Chairman)
Executive Directors:
Sasha Baranikov
Che Metcalfe
Total
–
–
–
182,767
182,767
365,534
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,363
17,363
34,726
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200,130
200,130
– 400,260
–
–
–
0%
0%
0%
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of
these agreements are as follows:
Name:
Title:
Michael Simmons
Managing Director and Chief Executive Officer
Agreement commenced:
15 Oct 2018
Term of agreement:
No Fixed Term
Details:
Base salary for the year ending 30 June 2020 of $300,000 including superannuation, to be
reviewed annually by the Nomination and Remuneration Committee. Three month termination
notice by either party. An annual STI bonus of $200,000 and LTI bonus of $200,000 subject to
Nomination and Remuneration Committee approval and KPI achievement, non-solicitation and
non-compete clauses.
In addition, shares and options listed below, conditional on completion of the Fuzenet acquisition
and listing on the ASX, and approved by Shareholders at an EGM on the 26 October 2018.
Name:
Title:
Vaughan Bowen
Executive Director
Agreement commenced:
13 March 2019
Term of agreement
No Fixed Term
Details:
Base salary for the year ending 30 June 2020 of $200,000 including superannuation, to be
reviewed annually by the Nomination and Remuneration Committee. Three month termination
notice by either party. An annual STI bonus of $150,000 and LTI bonus of $150,000 subject to
Nomination and Remuneration Committee approval and KPI achievement, non-solicitation and
non-compete clauses.
In addition, options listed below were issued at the time of appointment and subsequently ratified
by Shareholders at an EGM on the 6 August 2019.
2828
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019Name:
Title:
Darryl Inns
Group Chief Financial Officer
Agreement commenced:
15 April 2019
Term of agreement:
No Fixed Term
Details:
Base salary for the year ending 30 June 2020 of $250,000 including superannuation, to be
reviewed annually by the Nomination and Remuneration Committee. Three month termination
notice by either party. An annual STI bonus of $100,000 and LTI bonus of $100,000 subject to
Nomination and Remuneration Committee approval and KPI achievement, non-solicitation and
non-compete clauses.
In addition, options listed below were issued at the time of appointment.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation during the year ended 30
June 2019 are set out below:
NAME
DATE
Graeme Barclay
21 December 2018
Kathy Gramp
John Lindsay
21 December 2018
21 December 2018
Michael Simmons
21 December 2018
Che Metcalfe
21 December 2018
Sasha Baranikow
21 December 2018
SHARES
ISSUE PRICE
$
2,458,228
307,279
307,279
3,687,342
676,013
676,013
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
614,557
76,820
76,820
921,835
169,003
169,003
Options
The terms and conditions of each grant of options over ordinary shares as remuneration of directors and other key management
personnel in this financial year or future reporting years are as follows:
NAME
NUMBER OF
OPTIONS
GRANTED
GRANT DATE
VESTING DATE AND
EXERCISABLE DATE
EXPIRY DATE
Graeme Barclay
1,229,114
21 December 2018
30 June 2019
30 June 2022
30 June 2020
30 June 2023
EXERCISE
PRICE
$0.250
$0.300
TOTAL FAIR
VALUE AT
GRANT DATE
$171,013
$88,627
Kathy Gramp
John Lindsay
614,557
614,557
307,279
307,279
307,279
307,279
307,279
307,279
30 June 2021
30 June 2024
$0.375
$90,243
21 December 2018
30 June 2019
30 June 2022
30 June 2020
30 June 2023
$0.250
$0.300
$42,753
$44,313
30 June 2021
30 June 2024
$0.375
$45,121
21 December 2018
30 June 2019
30 June 2022
30 June 2020
30 June 2023
$0.250
$0.300
$42,753
$44,313
30 June 2021
30 June 2024
$0.375
$45,121
Che Metcalfe (2)
184,367
21 December 2018
30 June 2019
30 June 2022
184,367
184,367
30 June 2020
30 June 2023
30 June 2021
30 June 2024
$0.00
$0.00
$0.00
$46,092
$39,178
$34,569
2929
UNITI GROUP LIMITED ANNUAL REPORT 2019NAME
NUMBER OF
OPTIONS
GRANTED
GRANT DATE
VESTING DATE AND
EXERCISABLE DATE
EXPIRY DATE
Sasha Baranikow(2) 184,367
21 December 2018
30 June 2019
30 June 2022
184,367
184,367
30 June 2020
30 June 2023
30 June 2021
30 June 2024
EXERCISE
PRICE
TOTAL FAIR
VALUE AT
GRANT DATE
$0.0
$0.0
$0.0
$46,092
$39,178
$34,569
Vaughan Bowen(1) 819,410
6 August 2019
31 December 2019
31 December 2022
$0.250
$864,821
819,410
819,410
30 June 2020
30 June 2023
$0.300
$849,995
30 June 2021
30 June 2024
$0.375
$840,994
Michael Simmons 1,229,114
21 December 2018
30 June 2019
30 June 2022
614,557
614,557
330,000
590,000
30 June 2020
30 June 2023
30 June 2021
30 June 2024
$0.375
$90,243
31 March 2021
31 March 2024
31 March 2022
31 March 2025
$0.86
$168,411
$0.250
$0.300
$171,013
$88,627
$0.56
$0.71
$89,832
$91,365
Darryl Inns
330,000
12 April 2019
31 March 2020
31 March 2023
(1)
Shareholders ratified the options for Vaughan Bowen on 6 August 2019. The options were approved by the Board as part of Vaughan’s
remuneration package and announced on the 13 March 2019 at the time of appointment.
(2) The options lapsed on cessation of employment during the year.
Options granted carry no dividend or voting rights, nor do they carry any rights to participate in any issues of shares of the
Company or any other entity.
All options were granted over unissued fully paid ordinary shares in the company. The number of options granted was
determined having regard to the satisfaction of performance measures and weightings as described above in the section
‘consolidated entity performance and link to remuneration’. Options vest based on the provision of service over the vesting period
whereby the executive becomes beneficially entitled to the option on vesting date. Options are exercisable by the holder from
the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant date. There are no
amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise.
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part
of compensation during the year ended 30 June 2019 are set out below:
NAME
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Sasha Baranikov
Che Metcalfe
Darryl Inns
VALUE OF OPTIONS
GRANTED DURING
THE YEAR
$
VALUE OF OPTIONS
EXERCISED DURING
THE YEAR
$
VALUE OF OPTIONS
LAPSED DURING
THE YEAR
$
REMUNERATION
CONSISTING
OF OPTIONS
FOR THE YEAR
%
349,883
132,187
132,187
2,555,810
349,883
119,839
119,839
349,608
–
–
–
–
–
–
–
–
–
–
–
–
–
119,839
119,839
–
93%
67%
67%
91%
84%
44%
45%
41%
The options issued to Vaughan Bowen were ratified by Shareholders on 6 August 2019, and therefore according to the
Accounting Standards, were valued at that date. The option issue was approved by the Board as part of Mr Bowen’s employment
package and announced on the 13 March 2019 at the time of his appointment as an executive and director of the Company.
Had the options been valued at the time of approval by the Board, the value would have been $200,262.
3030
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019Additional information
The earnings and share price details of the consolidated entity for the five years to 30 June 2019 have not been included as the
comparison is not relevant for the financial year ended 30 June 2019.
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each current director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below
Ordinary shares
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
Total
BALANCE AT
THE START
OF THE YEAR
RECEIVED
AS PART OF
REMUNERATION
PURCHASED
ON MARKET
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR
–
–
–
–
–
–
–
2,458,228
400,000
307,279
307,279
–
8,000
–
4,495,337
3,687,342
–
–
211,500
6,760,128
5,114,837
–
–
–
–
–
–
–
2,858,228
307,279
315,279
4,495,337
3,687,342
211,500
11,874,965
Option holding
The number of options over ordinary shares in the Company held during the financial year by each current director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
Total
BALANCE AT
THE START
OF THE YEAR
GRANTED
EXERCISED
EXPIRED/
FORFEITED/
OTHER
BALANCE AT
THE END OF
THE YEAR
–
2,458,228
–
–
–
–
–
921,835
921,835
2,458,230
2,458,228
1,250,000
–
10,468,356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,458,228
921,835
921,835
2,458,230
2,458,228
1,250,000
10,468,356
Other transactions with key management personnel and their related parties
Nil
This concludes the remuneration report, which has been audited.
3131
UNITI GROUP LIMITED ANNUAL REPORT 2019
Shares issued on the exercise of options
No Shares have been issued on the exercise of options during the year.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company
against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the
nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the year, the Company has not paid a premium in respect of a contract to insure the auditor of the company or any
related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in Note 26 to the financial statements.
The directors are satisfied, on the advice of the Audit Committee, that the provision of non-audit services during the year, by
the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in Note 26 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
– none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or
auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate
for the company or jointly sharing economic risks and rewards.
3232
Directors’ Report continuedUNITI GROUP LIMITED ANNUAL REPORT 2019Officers of the company who are former partners of
HLB Mann Judd Audit (SA) Pty Ltd
There are no officers of the Company who are former partners of HLB Mann Judd Audit (SA) Pty Ltd.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
Auditor
HLB Mann Judd Audit (SA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Graeme Barclay
Chairman
30 August 2019
Sydney
3333
UNITI GROUP LIMITED ANNUAL REPORT 2019UNITI GROUP LIMITED
ABN 73 158 957 889
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Uniti Group Limited for the year
ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been no
contraventions of:
(a)
the auditor independence requirements as set out in the Corporations Act 2001 in relation to
the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
This declaration is in relation to the Uniti Group Limited and the entities it controlled during the period.
HLB Mann Judd Audit (SA) Pty Ltd
Chartered Accountants
Jon Colquhoun
Director
Adelaide, South Australia
30 August 2019
34
UNITI GROUP LIMITED ANNUAL REPORT 2019Auditor’s Independence Declaration
Contents
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members of Uniti Group Limited
Shareholder Information
36
37
38
39
40
81
82
87
General information
The financial statements cover Uniti Group Limited as a consolidated entity consisting of Uniti Group Limited and the entities
it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Uniti Group
Limited’s functional and presentation currency.
Uniti Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business are:
Registered office
Level 1, 44 Currie Street
Adelaide SA 5000
Principal place of business
Level 1, 44 Currie Street
Adelaide SA 5000
A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 August 2019. The directors
have the power to amend and reissue the financial statements.
35
Financial Reportfor the year ended 30 June 2019UNITI GROUP LIMITED ANNUAL REPORT 2019Revenue
Expenses
Network and Hardware expense
Employee benefits expense
Depreciation and amortisation expense
Impairment of Right of Use Asset
Other expenses
Finance costs
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Basic (loss) per share attributable to owners of Uniti Group
Diluted (loss) per share attributable to owners of Uniti Group
CONSOLIDATED
2019
$’000
14,336
(6,619)
(9,297)
(5,753)
(1,407)
(3,919)
(872)
(13,531)
–
2018
$’000
4,095
(1,341)
(2,906)
(2,064)
–
(1,760)
(825)
(4,801)
–
(13,531)
(4,801)
–
–
(13,531)
(4,801)
CENTS
CENTS
(11.6)
(10.4)
(12.0)
(12.0)
NOTE
4
5
5
5
5
6
38
38
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
36
UNITI GROUP LIMITED ANNUAL REPORT 2019Statement of Profit or Loss and Other Comprehensive Incomefor the year ended 30 June 2019Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Deposits and Prepayments
Contract Assets
Total current assets
Non-current assets
Right of Use Assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract Liabilities
Borrowings
Employee benefits
Provisions
Contingent Consideration
Total current liabilities
Non-current liabilities
Trade and other payables
Contract Liabilities
Borrowings
Employee benefits
Contingent Consideration
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
CONSOLIDATED
2019
$’000
2018
$’000
NOTE
7
8
9
10
11
12
13
14
15
16
19
17
18
15
16
19
17
18
20
21
22
19,131
1,507
275
608
824
847
619
13
209
–
22,345
1,688
4,464
3,589
20,920
28,973
51,318
4,668
472
1,826
255
124
6,546
13,891
1,500
26
7,514
33
2,484
11,557
25,448
25,870
46,691
1,283
(22,104)
25,870
7,892
5,082
216
13,190
14,878
1,325
131
1,233
339
–
–
3,028
–
438
8,042
36
–
8,516
11,544
3,334
11,907
–
(8,573)
3,334
The above statement of financial position should be read in conjunction with the accompanying notes.
37
UNITI GROUP LIMITED ANNUAL REPORT 2019Statement of Financial Positionas at 30 June 2019CONSOLIDATED
Balance at 1 July 2017
Loss after income tax expense for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (Note 20)
Balance at 30 June 2018
CONSOLIDATED
Balance at 1 July 2018
Loss after income tax expense for the year
Transactions with owners in their capacity as owners:
ISSUED
CAPITAL
$’000
5,378
–
6,529
11,907
ISSUED
CAPITAL
$’000
11,907
–
Contributions of equity, net of transaction costs (Note 20)
26,698
Issue of Shares to advisor
Issue of Shares on conversion of convertible notes
Acquisition of Fuzenet
Acquisition of Call Dynamics, net of transaction costs
Acquisition of Pivit customer base, net of transaction costs
Share-based payments (Note 39)
Balance at 30 June 2019
675
2,970
1,650
735
28
2,028
46,691
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
–
–
–
–
(3,772)
(4,801)
–
(8,573)
TOTAL
EQUITY
$’000
1,606
(4,801)
6,529
3,334
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
TOTAL
EQUITY
$’000
–
–
–
–
–
–
–
–
1,283
1,283
(8,573)
3,334
(13,531)
(13,531)
–
–
–
–
–
–
–
26,698
675
2,970
1,650
735
28
3,311
(22,104)
25,870
The above statement of changes in equity should be read in conjunction with the accompanying notes.
38
UNITI GROUP LIMITED ANNUAL REPORT 2019Statements of Changes in Equityfor the year ended 30 June 2019
NOTE
35
32
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Other revenue
Interest and other finance costs paid
Income taxes paid
Net cash from / (used in) operating activities
Cash flows used in investing activities
Payment for purchase of business, net of cash acquired
Payments to suppliers for the business acquisitions
Payments for property, plant and equipment
Payments for intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Proceeds from issue of convertible notes
Share issue transaction costs
Repayment of borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
7
The above statement of cash flows should be read in conjunction with the accompanying notes.
CONSOLIDATED
2019
$’000
15,033
(15,926)
41
1,500
(394)
–
2018
$’000
4,361
(5,586)
–
–
(825)
–
254
(2,050)
(9,607)
(904)
(1,816)
(134)
–
–
(3,887)
–
(12,461)
(3,887)
28,181
3,000
2,938
(1,589)
(2,039)
6,994
151
–
(464)
(399)
30,491
6,282
18,284
847
19,131
345
502
847
39
UNITI GROUP LIMITED ANNUAL REPORT 2019Statement of Cash Flowsfor the year ended 30 June 2019Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
AASB 15 Revenue from Contracts with Customers and AASB 16 Leases have been early adopted by the Group with effect from 1 July 2016.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models
for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to
hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt
investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective
is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as
well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit
or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that
are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income (‘OCI’).
Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce
the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard
requires the portion of the change in fair value that relates to the entity’s own credit risk to be presented in OCI (unless it would create
an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment
with the risk management activities of the entity. New impairment requirements use an ‘expected credit loss’ (‘ECL’) model to recognise
an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to
measuring expected credit losses using a lifetime expected loss allowance is available.
There has been no change in the classification of the Group’s trade and other receivables, trade payables, cash and cash
equivalents, and borrowings – these items continue to be measured at amortised cost.
The Group’s trade and other receivables are subject to AASB 9’s new expended credit loss (ECL) model for recognising and
measuring impairment of financial assets.
The Group has adopted the simplified approach under AASB 9 for calculating the allowance. The collective loss allowance is
determined based on the historical default percentage in each portfolio and adjusted for other current observable and forward-
looking information as a means to estimate lifetime ECL for similar financial assets.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for
for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation
of financial assets and liabilities at fair value through profit or loss.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in Note 31.
40
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statementsfor the year ended 30 June 2019Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Uniti Group Limited (‘company’
or ‘parent entity’) as at 30 June 2019 and the results of all subsidiaries for the year then ended. Uniti Group Limited and its
subsidiaries together are referred to in these financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when
the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred
and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other
comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses
incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated
entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as
the internal reports provided to the Chief Operating Decision Makers (‘CODM’).
Foreign currency translation
The financial statements are presented in Australian dollars, which is Uniti Group Limited’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on
behalf of third parties. The Group recognises revenue when it transfers control over a product or service to a customer.
The following is a description of principal activities from which the Group generates its revenue.
The Group principally generates revenue from providing wireless and fibre broadband services. The provision of wireless
communication services includes initial installation of associated network infrastructure. The typical length of a contract for wireless
broadband services is 20 months. The provision of fibre communication services does not require installation of network infrastructure.
For bundled packages, the Group accounts for individual products and services separately if they are distinct - i.e. if a product or
service is separately identifiable from other items in the bundled package and if a customer can benefit from it. The consideration
is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone
selling prices are determined based on the list prices at which the Group sells the devices and services. For items that are not sold
separately, the Group estimates stand-alone selling prices using the adjusted market assessment approach.
41
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 1. Significant accounting policies continued
Revenue from the provision of wireless broadband services is recognised monthly over the expected life of the contract,
including any expected extensions of the service. Installation of the internet service is not distinct from the provision of internet
service as the customer cannot benefit from either the broadband service or installation alone. The installation and broadband
service are therefore identified as a single performance obligation and the associated revenue is recognised over time.
Revenue from the provision of fibre broadband services is recognised each month the service is made available to the consumer.
Revenue from the provision of telecommunication services relating to the provision of SMS services and 1300 numbers is
recognised each month the service is made available to the customer.
Other Income
Disposal of assets
Revenue from the disposal of other assets is recognised when the group has transferred the risks and rewards of ownership to
the buyer.
All revenue is stated net of the amount of goods and services tax (GST).
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.
Research and Development/Grants
Research and Development incentives and other grant incentives are recognised when grant criteria are met.
Other items of income
Other items of income are recognised when they are received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets
are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
– When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
– When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either
the same taxable entity or different taxable entities which intend to settle simultaneously.
42
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Uniti Group Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated
group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account
for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’
approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany
charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by
the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated
entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after
the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents
also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Contract assets
Contract assets are recognised when the consolidated entity has transferred goods or services to the customer but where the
consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for
impairment purposes.
Inventories
Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of
rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
43
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 1. Significant accounting policies continued
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on both a straight-line basis and a diminishing value basis to write off the net cost of each item of
property, plant and equipment (excluding land) over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Network Infrastructure
4-10 years
3-10 years
4-25 years
Diminishing Value basis
Diminishing Value basis
Straight Line basis
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the
estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to
the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
Leases and Right Of Use Assets
At inception of a contract, the Group assesses whether the contract is ,or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
– the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically
distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution
right, then the asset is not identified;
– the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use;
and
– the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are
most relevant to changing how and for what purpose the asset is used.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the
contract to each lease component on the basis of relative stand-alone prices.
Measurement
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset
or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are summarised below.
In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
CLASS OF RIGHT OF USE ASSET
Buildings
Network Infrastructure
Plant and Equipment
Motor Vehicles
USEFUL LIFE
2 to 10 years
2 years to 20 years
4 to 5 years
8 years
DEPRECIATION METHOD
Straight line basis
Straight line basis
Diminishing value basis
Diminishing value basis
The lease liability is initial measured at present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally the Group uses its incremental borrowing rate as the discount rate.
44
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Lease payments included in the measurement of the lease liability comprise:
– fixed payments, including in-substance fixed payments
– variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
– amounts expected to be payable under a residual value guarantee; and
– the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of the
lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amounts
expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low-value assets (less than $10,000), including IT equipment. The Group recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the
date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not
amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured
at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition
of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible
asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Trademarks
Trademarks owned by group entities are carried at cost less accumulated impairment losses.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 3 years to 6.5 years.
Software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected
benefit, being their finite life of 3 years.
45
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 1. Significant accounting policies continued
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form
a cash-generating unit.
Impairment of Right of Use Assets
The carrying values of Right of Use Assets are reviewed for impairment annually. If an indication of impairment exists, and where
the carrying value of the Right of Use Asset exceeds the estimate recoverable amount, the Right of Use Assets are written down
to their recoverable amount. The assessment includes a review of performing and non-performing towers. Where a tower is
identified as non-performing, the Right of Use Asset associated with that non-performing tower is reduced to its recoverable
amount through an impairment charge.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted.
The amounts are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
Contract liabilities represent the consolidated entity’s obligation to transfer services to a customer and are recognised when
a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right
to consideration (whichever is earlier) before the consolidated entity has transferred the services to the customer.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event,
it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
46
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience
of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date
on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is
determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the
Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the
share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity
receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of
the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss
for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award
is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is
recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is
treated as if they were a modification.
47
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 1. Significant accounting policies continued
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the
absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels
are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable,
with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated
entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest
in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
48
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is
recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable
net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the
acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired,
the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest
in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information
obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine
fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Uniti Group Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
49
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation
to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events, management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking
into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within
the next annual reporting period but may impact profit or loss and equity.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime
expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for
each group. These assumptions include recent sales experience and historical collection rates.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision
is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory
obsolescence.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based
on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; 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:
Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and
therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as Level three is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.
Estimated Customer Life
In prior years, the estimated customer life was assessed to be six years, this has been reassessed to be 20 months, which
management believes more accurately reflects the expected customer life.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its plant and
equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some
other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives,
or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down as the Group
considers this to be a better estimation of likely useful life.
50
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated
in Note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth
rates of the estimated future cash flows.
Employee benefits provision
As discussed in Note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date are
recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the
reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion
and inflation have been taken into account.
Business combinations
As discussed in Note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired,
liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all
available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is
retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities,
depreciation and amortisation reported.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into one operating segment, being the provision of telecommunication services to
residential and business customers
Major customers
There were no major customers in 2019 or 2018 that contributed more than 5% of revenue.
Operating segments
The consolidated entity consisted of only one segment during 2019 and 2018, being telecommunication services to residential
and business customers.
Geographical segments
The consolidated entity operated in only one geographical segment during 2019 and 2018, being Australia.
51
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 4. Revenue
Revenue from contracts with customers
Sale of goods
Rendering of services
Other revenue
Interest revenue
R&D Tax Incentive revenue
Other revenue
Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
CONSOLIDATED – 2019
Major product lines
Internet Service Provider
Telecommunications
Geographical regions
Australia
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
CONSOLIDATED
2019
$’000
191
14,104
14,295
41
–
–
41
2018
$’000
113
3,841
3,954
6
129
6
141
14,336
4,095
$’000
$’000
13,591
704
14,295
14,295
14,295
191
14,104
14,295
3,954
–
3,954
3,954
3,954
113
3,841
3,954
52
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 5. Expenses
Profit before income tax includes the following specific expenses:
Network and Hardware expense
Network and Hardware expense
Depreciation
Leasehold improvements
Plant and equipment
Right of Use Assets
Total depreciation
Amortisation
Customer contracts
Software
Total amortisation
Total depreciation and amortisation
Impairment of Right of Use Asset
Impairment of Network Assets
Finance costs
Interest and finance charges paid/payable
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
CONSOLIDATED
2019
$’000
2018
$’000
6,619
1,341
–
4,274
840
5,114
539
100
639
34
736
1,235
2,005
–
59
59
5,753
2,064
1,407
–
872
825
420
266
3,311
–
53
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 6. Income tax expense
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Deferred tax – origination and reversal of temporary differences
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Customer Contract Amortisation
Share-based payments
Sundry items
Tax Loss not recognised
Income tax expense
Deferred tax assets not bought to account
Unrecognised deferred tax relating to tax losses
Unrecognised deferred tax relating to temporary differences
CONSOLIDATED
2019
$’000
2018
$’000
–
–
–
–
–
–
–
–
–
–
–
–
(13,531)
(3,721)
(4,801)
(1,320)
139
910
215
(2,457)
2,457
–
3,345
653
3,998
–
–
25
(1,295)
1,295
–
1,872
487
2,359
The Group has Deferred Tax Assets as detailed above which have not been brought to account as at this stage. It is not likely
future assessable income will be derived from a nature and of an amount sufficient to enable the benefit to be realised.
54
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 7. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Cash on deposit
CONSOLIDATED
$’000
$’000
1
894
18,236
19,131
1
846
–
847
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement
of cash flows as follows:
Balances as above
Balance as per statement of cash flows
Note 8. Current assets – trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
19,131
19,131
847
847
CONSOLIDATED
$’000
2,082
(575)
1,507
–
1,507
$’000
257
–
257
362
619
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
CONSOLIDATED
0 to 1 months overdue
1 to 2 months overdue
2 to 3 months overdue
Over 3 months overdue
EXPECTED
CREDIT
LOSS RATE
2019
%
1%
25%
50%
100%
CARRYING
AMOUNT
2019
$’000
1,466
40
51
525
2,082
ALLOWANCE
FOR EXPECTED
CREDIT LOSSES
2019
$’000
15
10
25
525
575
55
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 8. Current assets – trade and other receivables continued
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Additions as part of Business Combinations
Closing balance
CONSOLIDATED
2019
$’000
–
120
455
575
2018
$’000
–
–
–
–
Allowance for expected credit losses
The consolidated entity has recognised a loss of $120,000 in profit or loss in respect of the expected credit losses for the year
ended 30 June 2019
Note 9. Current assets – inventories
Customer premise and Network Equipment
Provision for Stock Obsolescence
Note 10. Current assets – deposits and prepayments
Deposits
Security deposits
Prepayments
Note 11. Current assets – contract assets
Contract assets
56
CONSOLIDATED
2019
$’000
285
(10)
275
2018
$’000
13
–
13
CONSOLIDATED
2019
$’000
26
3
579
608
2018
$’000
18
–
191
209
CONSOLIDATED
2019
$’000
824
824
2018
$’000
–
–
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 12. Non-current assets – right of use assets
Office Leases
Less: Accumulated depreciation
Plant and equipment – at cost
Less: Accumulated depreciation
Network Infrastructure – at cost
Less: Accumulated depreciation
Motor Vehicles – at cost
Less: Accumulated depreciation
CONSOLIDATED
2019
$’000
1,233
(664)
569
130
(61)
69
5,479
(1,705)
3,774
94
(42)
52
2018
$’000
2,128
(523)
1,605
130
(42)
88
6,560
(851)
5,709
700
(210)
490
Total Right of Use Assets
4,464
7,892
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2017
Additions
Disposals
Depreciation expense
Balance at 30 June 2018
Additions
Impairment of Right of Use Asset (1)
Revaluation of Right of Use Asset (2)
Reclassification of Asset Type (3)
Disposals
Depreciation expense
Balance at 30 June 2019
OFFICE
LEASES
$’000
PLANT AND
EQUIPMENT
$’000
NETWORK
INFRA-
STRUCTURE
$’000
MOTOR
VEHICLES
$’000
2,023
–
–
(418)
1,605
54
–
(861)
–
(88)
(141)
569
117
–
–
(29)
88
–
–
–
–
–
(19)
69
2,157
4,201
–
(649)
5,709
804
(1,407)
(683)
–
–
(649)
3,774
466
163
–
(139)
490
–
–
–
(407)
–
(31)
52
TOTAL
$’000
4,763
4,364
–
(1,235)
7,892
858
(1,407)
(1,544)
(407)
(88)
(840)
4,464
(1) As a result of the annual review for impairment, non-performing towers were identified and an impairment charge of $1,407,000 was booked.
(2) During the year the remaining expected lease term was adjusted resulting in revaluation of the associated Right of Use Assest value.
(3) During the year vehicles owned by the Group were reclassified as Plant and Equipment as they are owned and controlled by the Group.
57
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 13. Non-current assets – property, plant and equipment
Leasehold improvements – at cost
Less: Accumulated depreciation
Plant and equipment – at cost
Less: Accumulated depreciation
Network Infrastructure
Less: Accumulated depreciation
CONSOLIDATED
2019
$’000
219
(72)
147
1,227
(756)
471
7,503
(4,532)
2,971
3,589
2018
$’000
205
(36)
169
585
(243)
342
5,442
(871)
4,571
5,082
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2017
Additions
Disposals
Depreciation expense (1)
Balance at 30 June 2018
Additions
Reclassification of Asset Type
Additions through business combinations (Note 32)
Disposals
Depreciation expense
Balance at 30 June 2019
LEASEHOLD
IMPROVEMENTS
$’000
PLANT AND
EQUIPMENT
$’000
NETWORK
INFRASTRUCTURE
$’000
138
65
–
(34)
169
4
–
–
–
(26)
147
233
264
–
(155)
342
5
407
218
(339)
(162)
471
1,838
3,407
(93)
(581)
4,571
2,132
–
354
–
(4,086)
2,971
TOTAL
$’000
2,209
3,736
(93)
(770)
5,082
2,141
407
572
(339)
(4,274)
3,589
(1) As a result of the reassessed useful life of a customer contract, from 6 years to 20 months, depreciation of network infrastructure assets
increased by $2,172,000
58
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 14. Non-current assets – intangibles
Goodwill
Less: Impairment
Customer contracts – at cost
Less: Accumulated amortisation
Software – at cost
Less: Accumulated amortisation
Other Intangible Assets
Trademarks
CONSOLIDATED
2019
$’000
13,451
–
13,451
7,070
(539)
6,531
1,305
(625)
680
235
23
258
2018
$’000
–
–
–
–
–
–
312
(96)
216
–
–
–
20,920
216
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2017
Additions
Amortisation expense
Balance at 30 June 2018
Additions
Additions through business
combinations (Note 32)
Amortisation expense
Balance at 30 June 2019
TRADEMARKS
$’000
OTHER
INTANGIBLE
ASSETS
$’000
GOODWILL
$’000
CUSTOMER
CONTRACTS
$’000
SOFTWARE
$’000
TOTAL
$’000
–
–
–
–
23
–
–
23
–
–
–
–
23
212
–
235
–
–
–
–
–
–
–
–
–
–
13,451
–
13,451
7,070
(539)
6,531
125
150
(59)
216
62
502
(100)
680
125
150
(59)
216
108
21,235
(639)
20,920
59
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 14. Non-current assets – intangibles continued
Impairment testing
Goodwill acquired through business combinations have been allocated to a single cash generating unit as the key factors
contributing to the goodwill relate to the synergies between the acquired business and the existing Group.
The recoverable amount of the CGU has been determined by a value-in-use calculation using a discounted cash flow model,
based on a 3 year projection period approved by management. The cash flow projections are based on financial estimates
approved by the Board for the 2020 financial year and a further two years. As part of the annual impairment test for goodwill,
management assesses the reasonableness of growth rate assumptions by reviewing historical cash flow projections as well as
future growth objectives.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model:
– 10.84% (2018: N/A) pre-tax discount rate.
The discount rate has been determined using the weighted average cost of capital which incorporates both the cost of debt and
the cost of capital. The resulting discounted cash flow exceeded the value of goodwill on the company’s balance sheet.
Sensitivity
As disclosed in Note 2, the directors have made judgements and estimates in respect of impairment testing of goodwill.
Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. Management has
considered the possible change in EBITDA and discount rates applied and any change would need to be significant for the
recoverable amount not to exceed the carrying amount.
Note 15. Current and Non-Current liabilities
– trade and other payables
Current Liability
Trade payables
Other payables
Non-Current Liability
Unearned Income – South Australia Financing Authority Grant
CONSOLIDATED
2019
$’000
3,630
1,038
4,668
1,500
1,500
2018
$’000
973
352
1,325
–
–
Unearned Income of $1,500,000 has been received during the year from the South Australia Financing Authority but not yet
recognised. This revenue will be brought to account as revenue progressively as grant income criteria are met.
Refer to Note 23 for further information on financial instruments.
60
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019
Note 16. Current and Non-Current – contract liabilities
Current Liability
Customer Contract liabilities
Non-Current Liability
Customer Contract liabilities
Total
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and previous
financial year are set out below:
Opening balance
Additions as part of Business Combination
Revenue recognised from opening balance (1)
Revenue deferred during the period
Closing balance
CONSOLIDATED
2019
$’000
2018
$’000
472
131
26
26
498
569
348
(550)
131
498
438
438
569
395
–
(110)
284
569
(1) As a result of the reassessed useful life of a customer contract, from 6 years to 20 months, revenue recognised increased by $324,000
For the Wireless revenue stream, there are two performance obligations, the delivery of hardware to facilities connection and the
delivery of internet service. Payments are received as part of the delivery and installation process and then services are settled
monthly. Amounts received in relation to installations is combined with expected monthly payments for the total transaction
price. Installation is not considered to be a performance obligation as the customer does not obtain any benefit at the point of
installation.
For the Fibre revenue stream, the performance obligation is the delivery of internet services. Similarly, for the specialty business,
the performance obligation is the provision of 1300 and SMS services.
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the
reporting period was $498,000 as at 30 June 2019 ($569,000 as at 30 June 2018) and is expected to be recognised as revenue in
future periods as follows:
Within 12 months
1 – 2 years
2 – 5 years
CONSOLIDATED
2019
$’000
472
26
–
498
2018
$’000
131
113
325
569
61
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 17. Current and Non-Current liabilities – employee benefits
Employee benefits – current
Employee benefits – non-current
CONSOLIDATED
2019
$’000
255
33
2018
$’000
339
36
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances.
The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement.
However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued
leave or require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits obligation expected to be settled after 12 months
Note 18. Current and Non-Current liabilities – contingent
consideration
Current Liability
Contingent Consideration for Fone Dynamics Acquisition
Non-Current Liability
Contingent Consideration for Call Dynamics Acquisition
Contingent Consideration for Fone Dynamics Acquisition
CONSOLIDATED
2019
$’000
64
2018
$’000
85
CONSOLIDATED
2019
$’000
6,546
6,546
630
1,854
2,484
2018
$’000
–
–
–
–
–
Subsequent to the end of the financial year the current contingent consideration has been settled through the issue of
12,556,059 shares in Uniti Group Limited as approved by shareholders on 6 August 2019.
The total contingent consideration for both Fone Dynamics and Call Dynamics that could be paid has been accrued as the
company is confident that the entities will meet the criteria for these payments to be made.
Refer to Note 23 for further information on Contingent Consideration.
62
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 19. Current and Non-current liabilities – borrowings
CURRENT
Bank loans
South Australia Financing Authority loan
Right of Use Lease Liability
Lease liability
Other loans
NON-CURRENT
South Australia Financing Authority loan
Right of Use Lease Liability
Lease liability
Other loans
Refer to Note 23 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
South Australia Financing Authority loan
Lease liability
CONSOLIDATED
2019
$’000
–
735
1,020
56
15
2018
$’000
209
–
758
129
137
1,826
1,233
1,725
5,684
105
–
–
7,603
424
15
7,514
8,042
CONSOLIDATED
2019
$’000
–
2,460
161
2,621
2018
$’000
209
–
553
762
63
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 19. Current and Non-current liabilities – borrowings continued
Description of Lease Arrangements
The Group leases land and buildings for its office spaces as well as network infrastructure, plant and equipment and motor
vehicles. The typical lease period of these leases is summarised below. Where leases include an option to renew the lease after
the end of the contract term, the Group assesses at the lease commencement whether it is reasonably certain to exercise the
extension options. It reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant
change in circumstances within its control. Some leases provide for additional rental payments that are based on changes in
consumer price indices.
LEASE CATEGORY
TERM OF LEASE
RENEWAL OPTION AVAILABLE
Buildings
Network Infrastructure
Plant and Equipment
Motor Vehicles
2 – 5 years
2 – 10 years
4 to 5 years
8 years
2 – 5 years
2 – 10 years
None
None
Assets pledged as security
The b ank loan and South Australia Financing Authority (SAFA) loan are secured by a first mortgage over the parent entity assets.
The Bank and SAFA rank equally and have pro-rata claim over the parent entity assets.
The lease liabilities are effectively secured as the rights to the leased asset, recognised in the statement of financial position, revert
to the lessor in the event of default.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
CONSOLIDATED
2019
$’000
2018
$’000
–
–
–
–
–
–
–
209
209
–
209
209
Total facilities
Bank overdraft
Bank loans
Used at the reporting date
Bank overdraft
Bank loans
64
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 20. Equity – issued capital
Ordinary shares – fully paid
147,034,060
2,953,017
46,691
CONSOLIDATED
2019
SHARES
2018
SHARES
2019
$’000
Movements in ordinary share capital
DETAILS
Balance
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Share issue transaction costs
Balance
Issue of shares
DATE
1 July 2017
7 September 2017
21 December 2017
15 January 2018
14 February 2018
SHARES
ISSUE PRICE
2,121,827
2,570
296,500
528,120
4,000
–
$6.46
$8.00
$9.00
$9.00
–
30 June 2018
2,953,017
7 September 2018
75,000
$9.00
Share Split (15.1059917 for 1)
7 December 2018
42,713,183
Issue of shares (IPO)
13 February 2019
52,724,212
Issue of shares to Convertible Note Holders
13 February 2019
17,845,993
Issue of shares to key management personnel
13 February 2019
8,112,154
Issue of shares to Fuzenet Vendors
13 February 2019
6,600,000
Issue of shares to Call Dynamics Vendors
Issue of shares (Placement)
Issue of shares to Pivit Vendor
Share issue transaction costs
Balance
31 May 2019
5 June 2019
7 June 2019
978,100
15,000,000
32,401
–
30 June 2019
147,034,060
$0.25
$0.175
$0.25
$0.25
$0.76
$1.00
$0.93
–
2018
$’000
11,907
$’000
5,377
17
2,372
4,753
36
(648)
11,907
675
–
13,181
3,123
2,028
1,650
740
15,000
30
(1,643)
46,691
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does
not have a limited amount of authorised capital.
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.
Capital risk management
The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it
can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as
total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity will look to raise capital when an opportunity to invest in a business or company was seen as value
adding relative to the current company’s share price at the time of the investment.
65
UNITI GROUP LIMITED ANNUAL REPORT 2019
Note 21. Equity – reserves
Share Option reserve
CONSOLIDATED
2019
$’000
1,283
1,283
2018
$’000
–
–
Share Option reserve
The reserve is used to recognise the fair value of share based payments, in particular options issued to Directors and management.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2017
Options Issued
Balance at 30 June 2018
Options Issued
Balance at 30 June 2019
Note 22. Equity – accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax expense for the year
Accumulated losses at the end of the financial year
Note 23. Financial instruments
SHARE
OPTION
$’000
–
–
–
1,283
1,283
TOTAL
$’000
–
–
–
1,283
1,283
CONSOLIDATED
2019
$’000
(8,573)
(13,531)
(22,104)
2018
$’000
(3,772)
(4,801)
(8,573)
Financial risk management objectives
The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
consolidated entity.
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated
in a currency that is not the entity’s functional currency.
66
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Price risk
The consolidated entity is not exposed to any significant price risk. The majority of customers in each entity sign up to a contract
term with an agreed price.
Interest rate risk
The consolidated entity has limited Interest rate risk, with a fixed rate on the South Australia Financing Authority loan.
The consolidated entity’s loans outstanding, totalling $2,460,000 (2018: $209,000), are principal and interest payment loans.
Quarterly cash outlays of approximately $20,000 (2018: $1,000) per quarter are required to service the interest payments. As the
interest rate is fixed, there is no interest rate risk. In addition, minimum principal repayments of $720,000 (2018: $760,000) are
due during the year ending 30 June 2020 (2018: 30 June 2019).
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a code of credit, including obtaining agency credit information when applicable,
confirming references and setting appropriate credit limits The maximum exposure to credit risk at the reporting date to
recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative
across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking
information that is available.
The consolidated entity does not have a credit risk exposure as there is no single customer that represents a material component
of the outstanding debtor balance. There are no guarantees against receivables but management closely monitors the receivable
balance on a monthly basis and is in regular contact with this customers to mitigate risk.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the
failure of a debtor to engage in a repayment plan and, no active enforcement activity.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans
CONSOLIDATED
2019
$’000
–
–
2018
$’000
209
209
The bank loan was fully repaid during 2019 and the facility has been closed.
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
67
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 23. Financial instruments continued
CONSOLIDATED – 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contingent Consideration
Interest-bearing – fixed rate
Right Of Use Liability
Lease liability
SAFA Loan
Total non-derivatives
CONSOLIDATED – 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – fixed rate
Bank loans
Right of Use Liability
Total non-derivatives
WEIGHTED
AVERAGE
INTEREST
RATE
%
1 YEAR
OR LESS
$’000
BETWEEN
1 AND 2
YEARS
$’000
BETWEEN
2 AND 5
YEARS
$’000
OVER
5 YEARS
$’000
REMAINING
CONTRACTUAL
MATURITIES
$’000
–
–
–
3,630
1,038
6,546
–
–
2,484
8.21%
8.65%
2.57%
1,328
1,388
66
792
71
792
13,400
4,735
–
–
–
2,690
30
990
3,710
–
–
–
4,580
–
–
4,580
3,630
1,038
9,030
9,986
167
2,574
26,425
WEIGHTED
AVERAGE
INTEREST
RATE
%
–
–
8.20%
8.21%
1 YEAR
OR LESS
$’000
BETWEEN
1 AND 2
YEARS
$’000
BETWEEN
2 AND 5
YEARS
$’000
OVER
5 YEARS
$’000
REMAINING
CONTRACTUAL
MATURITIES
$’000
973
352
209
1,236
2,770
–
–
–
–
–
–
–
–
–
1,160
1,160
3,479
3,479
7,565
7,565
973
352
209
13,440
14,974
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
68
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019Note 24. Fair value measurement
Fair value
The fair value of financial assets and liabilities of the group approximate their carrying value.
Fair value hierarchy
The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3: Unobservable inputs for the asset or liability
CONSOLIDATED – 2019
Liabilities
Contingent Consideration
Total liabilities
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
–
–
–
–
9,030
9,030
9,030
9,030
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values
due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest
rate that is available for similar financial liabilities.
Note 25. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is
set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
CONSOLIDATED
2019
$
959
67
–
3,302
4,328
2018
$
365
35
–
–
400
69
UNITI GROUP LIMITED ANNUAL REPORT 2019
Note 26. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by HLB Mann Judd Audit (SA) Pty Ltd,
the auditor of the company, its network firms and unrelated firms:
Audit services – HLB Mann Judd Audit (SA) Pty Ltd
Audit or review of the financial statements
Other services – HLB Mann Judd Audit (SA) Pty Ltd
Preparation of Independent limited Assurance Report for Listing
Other services – network firms
Review of Forecast for IPO
Note 27. Contingent assets
There are no Contingent assets as at 30 June 2019.
CONSOLIDATED
2019
$
2018
$
64,798
30,000
96,411
161,209
9,487
39,487
55,000
55,000
–
–
Note 28. Contingent liabilities
A claim has been lodged in the Federal Court for wrongful dismissal. The Company can not reliably measure any potential liability
that may arise.
The consolidated entity has given bank guarantees as at 30 June 2019 of $24,600 (2018: $24,600) to various landlords.
Note 29. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
25
100
CONSOLIDATED
2019
$
2018
$
70
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019
Note 30. Related party transactions
Parent entity
Uniti Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 33.
Key management personnel
Disclosures relating to key management personnel are set out in Note 25 and the remuneration report included in the
directors’ report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for network tower right of use assets from Axicom Pty Limited
(director-related entity of Graeme Barclay)
Payment for network tower right of use assets from BSA Limited
(director-related entity of Graeme Barclay)
CONSOLIDATED
2019
$
2018
$
599,420
37,337
–
–
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables:
Trade payables to Axicom Pty Limited (director-related entity of Graeme Barclay)
Trade payables to BSA Limited (director-related entity of Graeme Barclay)
178,267
–
–
–
CONSOLIDATED
2019
$
2018
$
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
71
UNITI GROUP LIMITED ANNUAL REPORT 2019
Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Option reserve
Accumulated losses
Total equity
PARENT
2019
$’000
(14,515)
(14,515)
2018
$000
(4,801)
(4,801)
PARENT
2019
$’000
18,350
46,478
3,331
21,592
46,691
1,283
(23,088)
24,886
2018
$000
1,688
14,878
3,028
11,544
11,907
–
(8,573)
3,334
Contingent liabilities
A claim has been lodged in the Federal Court for wrongful dismissal. The Company can not reliably measure any potential liability
that may arise.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1, except for
the following:
– Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
72
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019
Note 32. Business combinations
On 11 February 2019 Uniti Group Limited, acquired 100% of the ordinary shares of Fuzenet Pty Ltd for the total consideration of
$9,947,000. Fuzenet is an Internet Service Provider. The goodwill of $6,496,000 represents the future economic benefit of the
customer contracts and future customer contracts. The acquired business contributed revenues of $6,948,000 and profit after
tax of $1,282,000 to the consolidated entity for the period from 1 February to 30 June 2019. If the acquisition occurred on 1 July
2018, the full year normalised contributions would have been revenues of $16,042,000 and profit after tax of $3,013,000. The
values identified in relation to the acquisition of Fuzenet are provisional as at 30 June 2019.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Plant and equipment
Customer contracts
Trade payables
Other payables
Lease Liability
Accrual for Income Tax Refund
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Shares issued in lieu of cash paid
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Net cash used
FAIR VALUE
$’000
529
851
39
981
3.996
(1,488)
(1,493)
(3)
122
(83)
3,451
6,496
9,947
8,297
1,650
9,947
444
8,297
(529)
7,768
In addition to the cash used to acquire the business, Uniti Group Limited loaned Fuzenet Pty Ltd $1,206,000 to make dividend
and acquisition payments. This loan is not part of the investment price, but is a cash outflow. There was also $3,000 of interest
paid to Fuzenet vendors that was not included as part of the investment price but was a cash outflow. The fair value of trade
receivables is $851,000. The gross contractual amount for trade receivables due is $1,241,000, of which $390,000 is provided for
as expected credit losses that may not be collected.
73
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 32. Business combinations continued
On 1 June 2019 Uniti Group Limited, acquired 100% of the ordinary shares of Fone Dynamics Pty Ltd for the total consideration of
$8,400,000. This is a Telecommunication Service Provider. The goodwill of $5,967,000 represents the future economic benefit of
the customer contracts and future customer contracts. The acquired business contributed revenues of $559,000 and profit after
tax of $151,000 to the consolidated entity for the period from 1 June to 30 June 2019. Disclosure of the full year contributions for
revenue and profit after tax for Fone Dynamics is impractical due to the changes that have occurred during the year readying the
business for sale. Disclosure of the actual results for the full year would be misleading to users. The values identified in relation to
the acquisition of Fone Dynamics are provisional as at 30 June 2019.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Plant and equipment
Contract assets
Customer contracts
Accrual for Income Tax Refund
Trade payables
Other payables
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash payable to vendor
Shares to be issued in lieu of cash paid
Contingent Consideration (Note 18)
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Net cash used/(received)
FAIR VALUE
$’000
103
408
13
450
285
2,139
132
(614)
(434)
(49)
2,433
5,967
8,400
1,854
6,546
8,400
73
–
(103)
(103)
The fair value of trade receivables is $408,000. The gross contractual amount for trade receivables due is $357,000, of which
$51,000 is provided for as expected credit losses that may not be collected.
74
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019On 1 June 2019 Uniti Group Limited, acquired 100% of the ordinary shares of Call Dynamics Pty Ltd for the total consideration of
$2,000,000. This is a Telecommunication Service Provider. The goodwill of $988,000 represents the future economic benefit of
the customer contracts and future customer contracts. The acquired business contributed revenues of $145,000 and profit after
tax of $32,000 to the consolidated entity for the period from 1 June to 30 June 2019. If the acquisition occurred on 1 July 2018,
the full year normalised contributions would have been revenues of $1,567,000 and profit after tax of $145,000. The values
identified in relation to the acquisition of Call Dynamics are provisional as at 30 June 2019.
Details of the acquisition are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Plant and equipment
Contract assets
Customer contracts
Provision for Income Tax
Trade payables
Other payables
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable (Contingent Consideration (Note 18) to vendor
Shares issued/to be issued in lieu of cash paid
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Net cash used
FAIR VALUE
$’000
117
15
–
42
55
934
(17)
(21)
(104)
(9)
1,012
988
2,000
1,260
740
2,000
58
630
(117)
513
The fair value of trade receivables is $15,000. The gross contractual amount for trade receivables due is $15,000, of which $0 is
not expected to be collected.
75
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 33. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in
accordance with the accounting policy described in Note 1:
NAME
Fuzenet Pty Ltd
Fibreworks Pty Ltd
Fone Dynamics Pty Ltd
Call Dynamics Pty Ltd
Uniti Air Pty Ltd
Uniti Health Pty Ltd
Uniti Play Pty Ltd
FDX Holdings Pty Ltd
ACN 619 678 787 Pty Ltd
Infotech Pty Ltd
Fuzeconnect Pty Ltd
LK Internet Pty Ltd
Uniti Wireless Limited
Uniti Broadband Limited
PRINCIPAL PLACE OF BUSINESS/
COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
OWNERSHIP INTEREST
2019
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
2018
%
–
–
–
–
100%
100%
100%
–
–
–
–
–
–
–
Note 34. Events after the reporting period
The Company announced on the 19 August, the acquisition of LBNCo is subject to certain conditions precedent being met.
In addition, the Company announced a fully underwritten Placement and Non-Renounceable Rights Issue to raise $100m to
be used to fund the acquisition and on-going working capital requirements. No other matter or circumstance has arisen since
30 June 2019 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those
operations, or the consolidated entity’s state of affairs in future financial years.
76
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019
Note 35. Reconciliation of profit after income tax to net cash from
operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Impairment of Right of Use Assets
Loss on disposal of plant and equipment
Grant Receipt
Share-based payments
Non Cash Share Expense
Change in operating assets and liabilities:
(Increase)/Decrease in trade and other receivables
(Increase)/Decrease in inventories
(Increase)/Decrease in deposits and prepayments
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in employee benefits
Increase/(Decrease) in other provisions
Increase/(Decrease) in customer contract liability
Net cash from/(used in) operating activities
Note 36. Non-cash investing and financing activities
Acquisition of Subsidiaries
Shares issued under employee share plan
Options issued under employee option plan
CONSOLIDATED
2019
$
2018
$
(13,531)
(4,801)
5,753
1,407
–
1,500
3,311
675
733
1
(250)
830
(229)
124
(70)
254
2,064
–
93
–
–
–
(304)
–
(155)
689
–
190
174
(2,050)
CONSOLIDATED
2019
$’000
2,390
2,028
1,283
5,701
2018
$’000
–
–
–
–
77
UNITI GROUP LIMITED ANNUAL REPORT 2019
Note 37. Changes in liabilities arising from financing activities
CONSOLIDATED
Balance at 1 July 2017
Net cash from/(used in) financing and
operating activities
Acquisition of Right Of Use Assets
Acquisition of plant and equipment by means
of finance leases
Balance at 30 June 2018
Net cash from/(used in) financing and
operating activities
Acquisition of Right of Use Assets
Revaluation of Right of Use Assets
Balance at 30 June 2019
Note 38. Earnings per share
OTHER
LOANS
$’000
SAFA
LOAN
$’000
–
151
–
–
151
–
–
–
–
–
BANK
LOANS
$’000
LEASE
LIABILITY
$’000
256
4,903
TOTAL
$’000
5,159
(248)
4,202
(352)
4,202
(47)
–
–
162
162
209
8,915
9,275
(136)
2,460
(209)
–
–
15
–
–
2,460
–
–
–
(1,154)
563
(1,459)
961
563
(1,459)
6,865
9,340
Loss after income tax
Loss after income tax attributable to the owners of Uniti Group Limited
CONSOLIDATED
2019
$’000
(13,531)
(13,531)
2018
$’000
(4,801)
(4,801)
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
116,503,906
39,925,501
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
14,046,155
–
Weighted average number of ordinary shares used in calculating diluted earnings per share
130,550,061
39,925,501
On the 28th November 2018, Uniti Wireless processed a share split providing 15.1056 shares for every 1 share previously held.
The 30 June 2018 shares used represent the shares on issue at the time adjusted for the share split for comparison.
Basic (loss) per share
Diluted (loss) per share
CENTS
CENTS
(11.6)
(10.4)
(12.0)
(12.0)
78
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019
Note 39. Share-based payments
On 26 October 2018, subject to listing and the acquisition of Fuzenet Pty Ltd, 8,112,154 shares were issued to key management
personnel, with an issue price equal to the final IPO price and subject to maintaining employment, completing IPO and the
acquisition of Fuzenet Pty Ltd. The IPO price was $0.25 per share and therefore a total transactional value of $2,028,038.
A share option plan has been established by the consolidated entity and approved by shareholders at a general meeting,
whereby the consolidated entity may, at the discretion of the Nomination and Remuneration Committee, grant options
over ordinary shares in the company to certain key management personnel of the consolidated entity. The options are
issued for nil consideration and are granted in accordance with performance guidelines established by the Nomination
and Remuneration Committee.
Set out below are summaries of options granted under the plan:
EXERCISE
PRICE
BALANCE AT
THE START
OF THE YEAR
GRANTED
EXERCISED
2019
GRANT DATE
EXPIRY DATE
21/12/2018
30/06/2022
21/12/2018
30/06/2023
21/12/2018
30/06/2024
13/02/2019
30/06/2022
$0.250
$0.300
$0.375
$0.250
13/02/2019
30/06/2023
$0.3125
13/02/2019
30/06/2024
13/03/2019
31/12/2022
13/03/2019
30/06/2023
13/03/2019
30/06/2024
13/03/2019
30/06/2022
13/03/2019
30/06/2023
13/03/2019
30/06/2024
13/03/2019
30/06/2025
15/04/2019
31/03/2022
15/04/2019
31/03/2023
15/04/2019
31/03/2024
$0.375
$0.250
$0.300
$0.375
$0.170
$0.250
$0.300
$0.375
$0.560
$0.710
$0.860
Weighted average exercise price
$0.341
–
3,441,520
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,212,404
2,212,404
925,933
925,933
925,933
819,410
819,410
819,410
200,000
200,000
200,000
200,000
330,000
330,000
590,000
–
15,152,357
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
EXPIRED/
FORFEITED/
OTHER
BALANCE AT
THE END OF
THE YEAR
(368,734)
3,072,786
(368,734)
1,843,670
(368,734)
1,843,670
–
–
–
–
–
–
–
–
–
–
–
–
–
925,933
925,933
925,933
819,410
819,410
819,410
200,000
200,000
200,000
200,000
330,000
330,000
590,000
(1,106,202)
14,046,155
79
UNITI GROUP LIMITED ANNUAL REPORT 2019Note 39. Share-based payments continued
Set out below are the options exercisable, that vested at the end of the financial year:
GRANT DATE
21/12/2018
13/02/2019
EXPIRY DATE
30/06/2022
30/06/2022
2019
NUMBER
3,072,786
925,933
3,998,719
2018
NUMBER
–
–
–
The weighted average share price during the financial year was $0.76 (2018: N/A).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.5 years (2018: N/A).
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant
date, are as follows:
GRANT DATE
EXPIRY DATE
21/12/2018
30/06/2022
30/06/2023
30/06/2024
13/02/2019
30/06/2022
30/06/2023
30/06/2024
06/08/2019 (1)
31/12/2022
30/06/2023
30/06/2024
13/03/2019
30/06/2022
30/06/2023
30/06/2024
30/06/2025
15/04/2019
30/03/2022
30/03/2023
30/03/2024
SHARE PRICE
AT GRANT
DATE
EXERCISE
PRICE
EXPECTED
VOLATILITY
DIVIDEND
YIELD
RISK-FREE
INTEREST
RATE
FAIR VALUE
AT GRANT
DATE
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.17
$0.65
$0.65
$0.65
$0.250
$0.300
$0.375
$0.250
$0.313
$0.375
$0.170
$0.300
$0.375
$0.170
$0.250
$0.300
$0.375
$0.560
$0.710
$0.860
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2.01%
2.01%
2.01%
2.01%
2.01%
2.01%
0.77%
0.77%
0.77%
1.75%
1.75%
1.75%
1.75%
1.51%
1.51%
1.51%
$0.1391
$0.1442
$0.1468
$0.1276
$0.1135
$0.1020
$1.0554
$1.0373
$1.0263
$0.0901
$0.0864
$0.0905
$0.0928
$0.2722
$0.2769
$0.2854
(1)
Shareholders ratified the options for Vaughan Bowen on 6 August 2019. The options were approved by the Board as part of Vaughan’s
remuneration package and announced on the 13 March 2019 at the time of appointment.
80
UNITI GROUP LIMITED ANNUAL REPORT 2019Notes to the Financial Statements continuedfor the year ended 30 June 2019In the directors’ opinion:
– the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
– the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in Note 1 to the financial statements;
– the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at
30 June 2019 and of its performance for the financial year ended on that date; and
– there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Graeme Barclay
Chairman
30 August 2019
Sydney
81
UNITI GROUP LIMITED ANNUAL REPORT 2019Directors’ Declarationfor the year ended 30 June 2019
82
Independent Auditor’s Report to the Members of Uniti Group Limited REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Uniti Group Limited (“the Company”) and its controlled entities (“the Group”), which comprises the statement of financial position as at 30 June 2019, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. UNITI GROUP LIMITED ANNUAL REPORT 2019Independent Auditor’s Reportfor the year ended 30 June 201983
Key Audit Matter How our audit addressed the key audit matter Revenue Recognition Note 1 and Note 4 The Group’s revenue from contracts with customers amounted to $14.34m during the year. Note 1 describes the accounting policies applicable to the Group’s distinct revenue streams. The recognition of revenue and associated customer contract liabilities is considered a key audit matter due to the key judgements involved in determining the total transaction price, including the effects of bundled packages, discounts and the expected customer contract life. Our procedures included, but were not limited to the following: • Assessing the design and effectiveness of internal controls relating to the recognition of revenue transactions. • Review of Group policies for revenue recognition and application thereof in accordance with AASB 15 Revenue from Contracts with Customers. • Performing a combination of tests of controls, substantive analytics and substantive test of details over revenue accounts. • Review and critical assessment of management estimates in relation to expected average customer retention and the related impact on revenue recognition. • Assessing the adequacy of the related disclosures within the financial statements. Business Combinations Note 32 During the year the Group acquired a 100% interest in the following: • Fuzenet Pty Ltd • Fone Dynamics Pty Ltd • Call Dynamics Pty Ltd As a result of the business combination transactions, the Group recognised goodwill of $13.45m. Business combinations is considered a key audit matter due to the significant judgement involved in the recognition and measurement of identifiable assets and liabilities at their fair value. Our procedures included, but were not limited to the following: • Reading the sale and purchase agreements to understand the key terms and conditions. • Considering the Group’s assessment of the application of AASB 3 Business Combinations. • Reviewing the provisional accounting entries associated with the business combinations. • Assessing the methodology applied to recognise the fair value of identifiable assets and liabilities and agreeing to supporting documentation. • Assessing the adequacy of the related disclosures within the financial statements . UNITI GROUP LIMITED ANNUAL REPORT 201984
Share Based Payments Note 39 During the period, the Group issued shares and options to Directors and Employees. The Group have performed calculations to record the related share based payment expense in the statement of profit or loss and other comprehensive income. We considered this area to be a key audit matter due to the judgemental estimates used in determining the valuation of the share based payments. Our procedures included, but were not limited to the following: • Reviewing and assessing the methodology used by the Group in valuing the Share Based Payments. • Reviewing and assessing the key assumptions used in the valuation of options issued during the period including the treatment of vesting conditions. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. UNITI GROUP LIMITED ANNUAL REPORT 2019Independent Auditor’s Reportfor the year ended 30 June 201985
Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. UNITI GROUP LIMITED ANNUAL REPORT 201986
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 24 to 31 of the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Uniti Group Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Audit (SA) Pty Ltd Jon Colquhoun Chartered Accountants Director Adelaide, South Australia 30 August 2019 UNITI GROUP LIMITED ANNUAL REPORT 2019Independent Auditor’s Reportfor the year ended 30 June 2019ASX Additional Shareholder Information
Additional information required by the ASX Listing Rules and not disclosed elsewhere in this report is set out below and was
applicable as at 31 July 2019 (unless otherwise stated).
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
NUMBER OF HOLDERS
OF ORDINARY SHARES
373
768
432
525
135
2,233
64
ORDINARY
SHARES
238,453
2,151,912
3,454,745
15,859,066
94,897,059
116,601,235
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted and unquoted ASX escrow equity securities are listed below:
ORDINARY SHARES
Cornish Group Investments Pty Ltyd
Chash Nominees Pty Ltd
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