More annual reports from Uniti Group:
2020 ReportPeers and competitors of Uniti Group:
Rogers Communications ABOUT THIS REPORT
The Annual Report 2020 is a summary of Uniti’s
operations, activities and financial position for the 12
month period to 30 June 2020.
Uniti Group Limited is the parent company of the Uniti
group of companies. In this report, unless otherwise
stated, references to “Uniti”, “the Group”, “the
Company”, “we”, “our” and “us” refer to Uniti Group
Limited and its controlled entities.
In this report, references to the financial year refer to
the period 1 July to 30 June unless otherwise stated.
All dollar figures are expressed in Australian dollars,
unless otherwise stated.
Our Corporate Governance Statement, detailing our
compliance with the ASX Corporate Governance
Council’s “Corporate Governance Principles &
Recommendations – 4th Edition” can be found online
at our website via http://unitigrouplimited.com.
REPORT OBJECTIVES
This report meets our governance and compliance
requirements and has been written to provide
shareholders and interested parties with clear, easy
to understand information on the Company and its
performance in FY20.
ADDITIONAL INFORMATION
This report can also be found online via
www.unitigrouplimited.com
KEY DATES
Financial Year End
30 June 2020
Annual General Meeting
22 October 2020
Please refer to our website for further detail:
www.unitigrouplimited.com
2
UNITI GROUP LIMITED ANNUAL REPORT 2020 CONTENTS
Operational Highlights
Chairman’s Letter
CEO‘s Message
Operating & Financial Review
Directors’ Report
Remuneration Report (Audited)
Auditor’s Independence Declaration
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
4
5
7
9
20
27
39
40
97
98
102
105
3
UNITI GROUP LIMITED ANNUAL REPORT 2020 HIGHLIGHTS OF A TRANSFORMATIONAL YEAR
UNDERLYING EBITDA
UNDERLYING EBITDA
FY19
FY20
REVENUE
REVENUE
FY19
FY20
FY19
FY20
OPERATING CASHFLOW
OPERATING CASHFLOW
OPERATING CASHFLOW
OPERATING CASHFLOW
FY19
FY20
OPERATING CASHFLOW
OPERATING CASHFLOW
UNDERLYING EBITDA EXIT RUN-RATE
UNDERLYING EBITDA EXIT RUN-RATE
FY19
FY20
OPERATING CASHFLOW
OPERATING CASHFLOW
3 TRANSFORMATIONAL
ACQUISITIONS
3 PILLARS ESTABLISHED
EXPERIENCED, HIGH CALIBRE
EXECUTIVE TEAM EMBEDDED
ENTERED ASX300
UPGRADED EARNINGS
GUIDANCE 3 TIMES
OPERATING CASHFLOW
OPERATING CASHFLOW
PROPOSED ACQUISITION OF
OPTICOMM LIMITED (ASX: OPC)
WELL PROGRESSED
(1) Represents annualised June exit run-rate EBITDA less any acquisition and restructure costs and share based payments.
4
UNITI GROUP LIMITED ANNUAL REPORT 2020 CHAIRMAN’S LETTER
To all our valued shareholders,
I am very pleased to report that in this last year we have
been successful in executing on our strategy to build
businesses that are profitable and scalable in each of our
declared “three pillars” of strategic growth, each of which
operates as a separate business unit (‘BU’) - Wholesale
& Infrastructure, Specialty Services and Consumer &
Business Enablement.
Our focus over the last 12 months has been to continue
to build on the momentum of FY19, aggressively pursuing
growth and generating positive returns for shareholders.
We have achieved this through organic growth as well as
through acquisitions, and the success our executive team
has achieved in seamlessly integrating these acquisitions.
In the first half of FY20 we completed three significant
acquisitions, which have transformed the financial
performance of Uniti (as outlined in the table below).
The acquisitions of LBNCo and OPENetworks have
allowed Uniti to successfully establish its private fibre
infrastructure business operating wholesale access
services across a large, growing national footprint of
connected premises. The acquisition of 1300 Australia
has considerably bolstered the scale and earnings
performance of the Specialty Services BU and further
diversified Uniti’s revenue and cashflow sources.
In the second half of FY20, Uniti did not make any
new acquisitions and focused on business integration
and profitable organic growth. Pleasingly, through this
focused attention from our executive team, and despite
the challenges of the COVID-19 pandemic, Uniti has
continued to perform above expectations across each
BU, resulting in two upgrades to the original FY20
underlying proforma earnings guidance announced in
December 2019.
At the core of Uniti’s philosophy is a commitment to
deliver on our purpose of “giving customers the best
connection possible” by delivering high quality, diversified
telecommunications products and services in order to
produce strong and growing returns for our shareholders.
The Uniti Board is confident that we are well placed to
build a stronger, larger, more profitable and diversified
business, with a market capitalisation expected to
be eligible for S&P ASX200 Index inclusion once the
acquisition of OPC completes.
FY20 has been a terrific year for Uniti, with the transition
from a loss-making, fledgling newly listed company with
underlying EBITDA of $(0.9) million in FY19 to a group of
substance and capability generating underlying EBITDA
in FY20 of $26.5 million. We enter the new financial year
with $189.2 million of cash, an EBITDA run rate of $41
million1 (prior to the OPC acquisition) and a pipeline of
potential acquisition targets that are on strategy.
Uniti’s recently announced acquisition of OptiComm
Limited (‘OPC’), which at the date of this report remains
subject to OPC’s shareholders voting in favour of the
proposed scheme of arrangement, accelerates our
strategy in private fibre infrastructure ownership and will
deliver the next phase of growth for Uniti’s shareholders.
Shareholders can expect to benefit from the significant
value creation of this transformational transaction
and from the combined scale and capabilities that the
acquisition will deliver to Uniti. This transaction is not
expected to complete until early October 2020, assuming
the various outstanding customary conditions are satisfied.
These achievements have been the result of the
excellent performance of our executive team and
all our employees, led by Michael Simmons, and the
collaboration, expertise, and oversight from the Board.
On behalf of the Board, I thank all Uniti employees for
their commitment, hard work and contribution to what has
been an outstanding year for Uniti.
(1) Represents annualised June 2020 exit run-rate EBITDA less any acquisition and restructure costs and share based payments.
5
UNITI GROUP LIMITED ANNUAL REPORT 2020 CHAIRMAN’S LETTER continued
To our Board of Directors, thank you for your focused,
collaborative and considered approach to what we have
achieved in FY20 and I look forward with anticipation,
and some excitement, to continuing to enhance the
performance, prospects and value of the Uniti business
in FY21.
I would like to thank you, our shareholders, for your
outstanding support over the past year, enabling Uniti to
execute on its strategy through acquisition. Your support
for our equity capital raisings is much appreciated. Your
Board and executive leadership team are committed
to continuing to accretively deliver shareholder returns
through aggressively executing on our organic and
inorganic growth plans.
Yours sincerely,
Graeme Barclay
Chairman
Profit & Loss
$’000
Revenue
EBITDA (Reported)
EBITDA (Underlying)1
Cash Flow
$’000
Operating Cash Flow
Capital expenditure
EBITDA (Underlying)1 less capital expenditure
FY20
58,216
16,055
26,530
FY19
$ change
14,336
43,880
(5,499)
(884)
21,554
27,414
FY20
21,644
FY19
254
(8,243)
(1,950)
18,286
(2,834)
$ change
21,390
(6,294)
21,120
(1) Underlying EBITDA is Reported EBITDA less acquisition and restructure costs of $5.9 million and share based payments of $4.6 million. A full
reconciliation of statutory to underlying results is included in the Operating and Financial Review section of this report.
6
UNITI GROUP LIMITED ANNUAL REPORT 2020
CEO’s MESSAGE
To all our valued shareholders,
It is with much pride I write to you with our Company’s and
my second CEO Annual Message.
>
The first Annual Report for our Company in FY19, which
was for a period of less than 6 months since listing on the
ASX, highlighted we had achieved the listing, established a
high calibre Board of Directors and Executive, transformed
the Company to positive operating profits and cash flow and,
most importantly, set the platform for sustainable growth
in net profits and cash flow as well as shareholder wealth.
Strategic acquisitions in line with our clearly stated “three
pillars” growth strategy was central to these outcomes.
In my second Annual Message to you, I am very pleased to
tell you that we have continued to grow earnings and cash
flows both through organic growth and through further
acquisitions within each pillar.
Our Company’s strategy and goal is to invest in businesses
which have high growth capability, high margins and free
cash generation, in markets where further acquisitions can be
made and integrated quickly within the respective business
unit, deliver the identified earnings accretion at acquisition
and continue earnings growth organically after acquisition.
Your Board and Executive have continued to execute this
clearly defined strategy and have delivered well in excess of
our stated ambitions for the year ended 30 June 2020!
In the first half of FY20, we acquired five businesses
operating in the construction of fibre to the premise
(‘FTTP’) networks primarily in greenfields housing
which created the Wholesale & Infrastructure (‘W&I’)
pillar within Uniti. The five businesses (LBNCo, Pivit,
Club Links, Capital Fibre Networks, Openetworks)
were quickly fully integrated within the W&I pillar and
by Q4 FY20 were delivering the identified earnings
accretion and achieving organic growth ahead of
expectations post acquisition and integration.
> Also in H1 FY20, we acquired 1300 Australia within
the Specialty Services pillar and by March 2020 we
had once again integrated within the pillar delivering
a 40% increase in acquired earnings, exceeding the
forecast earnings accretion to shareholders providing
evidence the Uniti Group strategy was working.
> At our December half year results we announced the
transformation of Uniti was underway with underlying
EBITDA for the half of $7.2 million (pcp negative $1.6
million), reported EBITDA $2.3 million (pcp negative
$5.6 million), a Pro Forma annual EBITDA of $32
million and an exit underlying EBITDA run rate2 at
December 2019 of $33 million, being the financial
results of December annualised. For the first half, Free
Cash Flow (after capex) was 71% of underlying EBITDA.
> The second half of FY20 was important to your
I thought the 2019 financial year would be one of the more
memorable years when we look back in time on the history
of Uniti. Fortunately, I was wrong. In the 2020 financial year,
the Company executed on strategy but at an even faster
pace than previously. There is a long list of achievements in
2020, the most notable of which include the following:
>
> We finished calendar year 2019 as the best performed
IPO of 2019 with a share price increase since listing of
530% and a market capitalisation of $510 million.
> By the end of the financial year, we were admitted to the
ASX300 Index - less than 18 months from listing at an
initial offer price of $0.25, and approximately $30 million
market capitalisation.
Board and Executive. We focused on integration
of the acquired businesses in CY19, realisation of
identified efficiencies of acquisitions, implementing
organic revenue growth and the subsequent earnings
accretion to shareholders. It happened!
In H2 FY20, we did not make an acquisition and
against a backdrop of COVID-19, we achieved a 25%
organic growth in earnings for the second half. During
the half, we announced to the market two profit
upgrades. The exit run rate annualised underlying
EBITDA1 was $41 million compared to the same
measure at December 2019 of $33 million and Pro
Forma underlying EBITDA in December (after the last
acquisition) of $32 million. Annualised EBITDA for H2
was approximately $38 million.
(1) Represents annualised exit run-rate EBITDA less any acquisition and restructure costs and share based payments
7
UNITI GROUP LIMITED ANNUAL REPORT 2020 CEO’s MESSAGE continued
> The Company has continued to invest in fibre
infrastructure network builds, principally FTTP
networks in greenfields housing which has been a
large contributor to organic earnings growth. Despite
extensive capital investment in telecommunications
infrastructure, we have maintained high cash
generation relative to profits. Free Cash Flow for
H2 is approximately 74% of underlying EBITDA up
on the prior half of 71% despite increased absolute
expenditure. Operating cash flow for Q4 FY20 was
$10.1 million which highlights continued strong cash
management when compared to the $41 million exit
run rate annualised underlying EBITDA at June.
We have finished the 2020 Financial Year in a fantastic
position poised to replicate in FY21 and beyond in the
following way:
> our operating model is now proven - the pillar strategy
works “integrate within, not across”
> all acquisitions are delivering above expectations and
acquisition multiples are effectively lower
> all businesses are fully integrated within the business
unit and delivering growth
>
the identified market segments for investment and
operations are in growth
>
future acquisitions can be integrated with confidence
> we are delivering cash earnings not just EBITDA - free
cash as high as 70% of EBITDA
> high cash generation and cash on hand at financial year
end of $41M (excluding recent capital raises)
> addressable markets for organic growth and potential
acquisitive growth is evident and deliverable
>
the Board, Executives and Team are in place to
continue replication
> we are financially strong to support organic growth and
earnings accretive acquisitions aligned to strategy
This fantastic position established towards the end of FY20,
presented the opportunity for your Board and Executive to
embark on what I think was aptly called Project 2020.
An agreement to acquire OptiComm Limited, via a Scheme
of Arrangement, was signed before 30 June 2020. The
Scheme is now well under way and we are confident of
completion in early October 2020.
8
OptiComm will be the largest acquisition we have made, at
a price of $532 million, and the largest earnings contributor
with FY20 EBITDA of $39 million recently announced by
OptiComm.
We estimate synergies post acquisition of approximately
$10M which will equate to an EBITDA acquisition multiple
just over 10 times.
The acquisition of OptiComm will be transformational in
earnings contribution and increase in market capitalisation.
Subject to market conditions, we are hopeful Uniti will
transform to a billion dollar market capitalisation and see
our entry into the ASX200.
OptiComm will also be transformational in terms of the
market growth opportunities we will be able to pursue
which we expect will transition into greater absolute
earnings growth in amount and rate into the future.
Finally, I would like to thank my Chairman, our Directors,
my fellow Executives and all our Employees for their
enormous contribution toward creating a wonderful
year and financial outcome for our shareholders. It was
and continues to be trying business conditions with the
impact of COVID-19 but notwithstanding our Company
has continued to function at or above expectations and we
have been able to ensure all our highly valued members of
Uniti have remained safe.
I also thank you our shareholders. During FY20 we
undertook a number of capital raisings to enable strategic
acquisitions and on each occasion the support was
significant and all offers to acquire new shares in Uniti were
oversubscribed and furthermore we welcomed many new
shareholders to Uniti.
Yours sincerely,
Michael Simmons
Chief Executive Officer
UNITI GROUP LIMITED ANNUAL REPORT 2020
OPERATING & FINANCIAL REVIEW
GROUP OPERATING
PERFORMANCE
Overview of operations
Uniti Group Limited (ASX: UWL) (‘Uniti’) is a diversified
provider of telecommunications services. Uniti operates
three distinct Business Units (‘BU’), each aligned to a pillar
of strategic growth and led by a separate Chief Executive
and leadership team. The BU’s operate as independent
businesses and each has it’s own business plan including
legal, financial targets. Each BU is supported by a shared
services function for commonly applied functions including
governance, financial and risk management, corporate
IT, communications and project management. Uniti’s
Managing Director & Chief Executive Officer, Executive
Director, Chief Operating Officer and Chief Financial
Officer (and associated employees) are included within the
Corporate Services team.
Uniti listed on the ASX in February 2019 with a stated
strategy of becoming a leading provider of niche
telecommunications services, via both organic growth and
inorganic growth through acquisitions of businesses. Uniti
has brought together an experienced board of directors
and executive team to organically build the business and
to support the identification, execution, integration and
growth of the sizeable pool of acquisition opportunities
across the ‘three pillars’ of strategic growth.
The product offerings, markets and brands are outlined in
the table overleaf.
During the period ended 30 June 2020, Uniti reorganised
its operating segments to align with the “three pillars”
operating model and to reflect the diversification of the
Group’s portfolio following the acquisitions completed
during the year. Consequently, the one operating segment
as reported in the financial year ended 30 June 2019,
being the provision of telecommunications services to
residential and business customer has been split into
three new segments. The three segments are Wholesale &
Infrastructure; Specialty Services; and Consumer & Business
Enablement. Comparative balances have been restated to
reflect the updated reporting structure.
Wholesale & Infrastructure
Uniti’s Wholesale & Infrastructure (‘W&I’) business
unit is engaged in the design, installation, operation,
and maintenance of FTTP open access wholesale
telecommunications ‘last mile’ network infrastructure
operating mainly in greenfields new housing
developments in broadacre residential estates and
multiple dwelling units throughout Australia.
W&I carries out the following activities:
> The construction of FTTP telecommunications
networks capable of delivering super-fast broadband,
voice services, pay and free to air TV services and other
media, security, monitoring and ancillary services which
can be carried on FTTP networks. Revenues generated
from this activity are one-off and project based.
> The wholesale sale of broadband and voice services
on the FTTP networks constructed and owned by W&I
businesses (or to a lesser extent constructed by W&I,
owned by a third party and operated by W&I) to retail
service providers (‘RSP’) who on-sell those services to end
users, being residents and businesses in dwellings within
the broadacre estates and multi dwelling unit complexes.
This revenue is recurring in nature commencing as
services are connected to the network by RSPs.
> The construction and supply of integrated
communication network (‘ICN’) and services that are
carried over the FTTP networks and deliver a number of
applications and outcomes useful in managing security,
access, monitoring and communicating in environments
often termed as smart buildings or communities as well
as delivery of various media services.
For further information on the financial performance of the
division, please refer to Divisional Performance section.
Specialty Services
Specialty Services provides premium voice services over
13, 1300, 1800 calling services. The services include a
value-added software as a service data analytics and call
tracking application, as well as the leasing of phonewords
on these numbers. The go-to-market brand for phone
words is 1300 Australia.
1300 Australia is Australia’s market leader in phone words,
holding the largest inventory of phonewords nationally,
with approximately 11,000 phonewords available for
lease, of which more than 4,000 are currently leased to
customers on an annuity basis.
9
UNITI GROUP LIMITED ANNUAL REPORT 2020
OPERATING & FINANCIAL REVIEW continued
The Specialty Services service portfolio and in particular
Phonewords have infrastructure-like characteristics
providing high margin and are highly cash generative. For
further information on the financial performance of the
division, please refer to Divisional Performance section.
Consumer & Business Enablement
Uniti’s Consumer & Business Enablement (‘CBE’) business
unit provides telecommunications products and services
including broadband and voice services on a mixture of
owned wireless infrastructure and resold fibre access
networks. CBE has a focus on the resale of various private
fibre networks as well as being a reseller of nbnTM for
customer retention purposes only. CBE operates and
maintains the Uniti wireless network infrastructure and
provides wireless broadband services to retail end-
users on a vertically integrated basis across its wireless
infrastructure.
For further information on the financial performance of the
division, please refer to Divisional Performance section.
BUSINESS UNITS
Wholesale &
Infrastructure
Specialty Services
Consumer & Business
Enablement
Fibre Networks
Infrastructure Ownership
Wholesale Services
Phonewords
Inbound Services
Data Analytics
Wireless & Fibre
Broadband Services
TODAY’S
MARKET
> Builders
> Developers
> Strata
> Wholesale Network
> Small to Medium Business
> Consumer
> Corporate
> Small Business
> Third Party Retailers
TODAY’S
BRANDS
10
UNITI GROUP LIMITED ANNUAL REPORT 2020 UNITI GROUP LIMITED ANNUAL REPORT 2020
GROUP OPERATING PERFORMANCE continued
Underlying results overview
$’000
Revenue
Operating expenses1
Underlying EBITDA2
Depreciation and amortisation3
Underlying EBIT4
Net finance costs
Underlying net profit before tax
FY20
FY19
$ change
% change
58,216
(31,686)
26,530
(4,267)
22,263
(595)
21,668
14,336
(15,220)
(884)
(5,214)
(6,098)
(872)
43,880
(16,466)
27,414
947
28,361
277
(6,970)
28,638
306%
108%
3,101%
(18%)
465%
(32%)
411%
(1) Operating expenses refers to network and hardware expense of $13.8 million (2019: $6.6 million), employee benefits expense of $17.4 million
(2019: $9.3 million) and other expenses of $10.9 million (2019: $3.9 million) less significant items of $10.5 million (2019: $4.6 million).
(2) EBITDA refers to earnings before interest, tax, depreciation and amortisation.
(3) Depreciation and amortisation refers to reported depreciation and amortisation expense less amortisation of acquired customer base intangible
of $2.6 million (2019: $0.5 million).
(4) EBIT refers to earnings before interest and tax.
Reconciliation of reported to underlying results
$’000
Underlying EBITDA
Significant items
Acquisition and restructure costs1
Share based payments
IPO expenses
Reported EBITDA
Depreciation and amortisation
Finance costs
Impairment of right-of-use assets
Tax 2
Reported net profit after tax
FY20
FY19
$ change
% change
26,530
(884)
27,414
3,101%
(5,894)
(4,581)
-
16,055
(6,853)
(595)
-
7,314
(211)
(3,311)
(1,093)
(5,499)
(5,753)
(872)
(1,407)
-
(5,683)
(1,270)
1,093
21,554
(1,100)
277
1,407
7,314
15,921
(13,531)
29,452
2,693%
38%
100%
392%
19%
(32%)
100%
-%
218%
(1) Relates to $5.2 million of costs incurred for the acquisition of LBNCo Pty Ltd and its related entities (LBNCo), OPENetworks Pty Ltd (OPEN),
1300 Australia Pty Ltd (1300 Australia) and its related entities, and the proposed acquisition of OptiComm Limited and its related entities. Also
includes restructure costs of $0.7 million in FY20. Acquisition costs incurred during FY19 are in relation to the acquisition of Call Dynamics Pty
Ltd and Fone Dynamics Pty Ltd and its related entities.
(2) The tax benefit represents the recognition of income tax losses incurred by Uniti and certain acquired companies from prior periods and the
movement in the deferred tax assets and liabilities on the acquired companies joining the tax consolidated group. The transition to significant
profits before tax in the year has meant that the realisation of accumulated losses being recouped against current and future taxable income
is more certain, requiring the recording of the deferred tax asset for these losses. During FY20, the Group recorded a taxable income, utilising
$7.6m (tax affected: $2.3m) of the prior period and transferred in losses. The Group losses are utilised initially, with transferred in losses from
acquisitions subsequently utilised against taxable income in accordance with their available fraction. As at 30 June 2020, the balance of the
available losses is $8.1m (tax affected: $2.4m), which will be utilised in future periods in accordance with their available fraction. The residual
tax income is a result of movements across deferred tax asset and liabilities.
11
OPERATING & FINANCIAL REVIEW continued
GROUP OPERATING PERFORMANCE continued
Revenue and underlying EBITDA overview
Discussion of the factors driving revenue and underlying EBITDA are contained in the commentary on divisional
performance. Revenue, underlying EBITDA, EBIT and net profit after tax for the financial year to June 2019 have been
adjusted to accommodate changes in the reporting structure in FY20. As a number of acquisitions were completed
during the period, comparative information may not be presented. Similarly, results presented below may represent a
contribution for part of FY20 depending on when businesses were acquired. For further information on the financial
performance of the division please refer to Divisional Performance section.
$’000
Revenue
Wholesale & Infrastructure
Specialty Services
Consumer & Business Enablement
Intercompany1
Unallocated2
Underlying EBITDA
Wholesale & Infrastructure
Specialty Services
Consumer & Business Enablement
Unallocated2
FY20
FY19
$ change
% change
58,216
14,336
43,880
306%
22,351
20,969
24,004
(9,432)
324
26,530
14,525
11,752
4,779
(4,526)
-
704
13,591
-
41
(884)
-
191
689
(1,764)
22,351
20,265
10,413
(9,432)
283
27,415
14,525
11,561
4,090
(2,761)
-%
2,879%
77%
-%
690%
3,101%
-%
6,053%
593%
156%
(1) Intercompany revenue is eliminated on consolidation and relates primarily to recurring charges from the W&I business unit to the CBE business
unit for the provision of wholesale telecommunications services.
(2) Unallocated revenue represents interest income earned in relation to cash and cash equivalents. Unallocated costs include corporate services
costs and board costs.
Discussion of the factors driving revenue and underlying EBITDA are contained in the commentary on divisional performance.
Statement of financial position
$’000
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Net tangible assets
Current ratio
12
FY20
FY19
199,171
254,948
454,119
24,356
8,069
32,425
421,694
22,345
28,973
51,318
13,891
11,557
25,448
25,870
215,667
8.2
4,950
1.6
UNITI GROUP LIMITED ANNUAL REPORT 2020 GROUP OPERATING PERFORMANCE continued
Our balance sheet is in a strong position with net assets of $421.7 million, net tangible assets of $215.7 million and zero
debt on balance sheet as at 30 June 2020. Current assets increased by $176.8 million to $199.2 million across the year.
A core driver of this increase is our cash position, which increased by $170.0 million, mainly driven by the proceeds from
the issue of shares as part of the proposed OptiComm acquisition and a strong operating cash performance of $21.6
million. Non-current assets increased by $226.0 million to $254.9 million, mainly driven by acquisition activity generating
$161.3 million goodwill and a further $61.0 million in property, plant and equipment and other intangible assets. Current
liabilities increased by $10.5 million to $24.4 million. The increase is again, mainly driven by assets and liabilities acquired
through business combinations.
Non-current liabilities decreased by $3.5 million to $8.1 million. Uniti fully repaid the outstanding balance of the South
Australia Financing Authority loan of $2.5 million to provide flexibility to implement a new debt facility in FY21 as part of
the funding sources for the OptiComm acquisition.
Cash flows
$’000
Operating cash flow
Investing activities
Financing activities
Net movement in cash
Cash and cash equivalents at the end of the period
FY20
21,644
FY19
254
(176,460)
(12,461)
324,835
170,019
189,150
30,491
18,284
19,131
Cash flows have improved significantly compared to prior year. Net operating cash inflows has risen substantially from
the contribution of the acquisitions completed during the year and the highly cash generative nature of the businesses
acquired across the period supported by the organic growth achieved. Investing activities includes $168.3 million relating
to businesses acquired, with the residual $8.2 million relating to capital expenditure (refer overleaf for details). Financing
activities includes $328.3 million cash generated from share issues throughout the year, net of share issue costs. During
the year Uniti fully repaid loans outstanding with the South Australian Financing Authority of $2.5 million. In addition,
$1 million in payments on leases relating primarily to office leases and rent expenses for tower assets, used in the Uniti
Wireless business, were made to further reduce loan liabilities.
Capital expenditure
2020 - $’000
Growth
Maintenance
Total capital expenditure
2019 - $’000
Growth
Maintenance
Total capital expenditure
Wholesale &
Infrastructure
Specialty
Services
Consumer & Business
Enablement
6,077
677
6,754
76
50
126
1,140
223
1,363
Wholesale &
Infrastructure
Specialty
Services
Consumer & Business
Enablement
-
-
-
-
-
-
1,833
117
1,950
TOTAL
7,293
950
8,243
TOTAL
1,833
117
1,950
13
UNITI GROUP LIMITED ANNUAL REPORT 2020
Key performance indicators
Metrics
ARPU2
Sites
Gross margin %
Active premises
Connected premises
Contracted lots
(1) LBNCo Pty Ltd and its related entities
and OPENetworks Pty Ltd were
acquired on 1 October 2019 and 1
November 2019, respectively.
(2) Average revenue per user.
FY20
$48.47
84%
519
39,476
98,143
40,054
FY191
n/a
n/a
n/a
n/a
n/a
n/a
OPERATING & FINANCIAL REVIEW continued
DIVISIONAL PERFORMANCE
Wholesale & Infrastructure
Earnings summary
$’000
Revenue
Recurring
Developer
EBITDA2
EBITDA margin %
Capital expenditure
Underlying EBITDA less capital expenditure
Underlying EBITDA less capital expenditure / EBITDA %
FY20
22,351
20,169
2,182
14,525
65%
(6,755)
7,770
53%
FY191
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$ change
% change
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1) LBNCo Pty Ltd and its related entities and OPENetworks Pty Ltd were acquired on 1 October 2019 and 1 November 2019, respectively.
(2) EBITDA refers to earnings before interest, tax, depreciation and amortisation. The reported net profit after tax for the business unit for FY20 is $13.2
million (2019: n/a) and represents EBITDA less depreciation expense of $1.3 million (2019: n/a). Please refer to Note 3 for the reconciliation of reported
EBITDA to reported net profit after tax for each segment.
W&I delivered strong results for FY20 with improved organic revenue and earnings growth driven by an increase in active premises
since the acquisition date of 1 October 2019. Throughout FY20, less than 10% of revenue was non-recurring in nature, demonstrating
the strong self-sustaining recurring revenue stream in the W&I business model. EBITDA margins have increased from 55% since
acquisition to 65% as a result of integration efficiencies and synergies and achieved organic growth in the W&I business unit.
Specialty Services
Earnings summary
$’000
Revenue
EBITDA2
EBITDA margin %
Capital expenditure
Underlying EBITDA less capital expenditure
Underlying EBITDA less capital expenditure / EBITDA %
FY20
FY191
$ change
% change
20,969
11,752
56%
(126)
11,626
99%
704
191
27%
-
191
20,265
11,561
29pp
126
2,879%
6,053%
107%
-%
11,435
5,987%
100%
(1pp)
(1%)
(1) Fone Dynamics Pty Ltd and Call Dynamics Pty Ltd were acquired on 1 June 2019 and 1300 Australia Pty Ltd was acquired on 16 December 2019.
(2) EBITDA refers to earnings before interest, tax, depreciation and amortisation. The reported net profit after tax for the business unit for FY20 is $9.8
million (2019: $0.2 million) and represents EBITDA less depreciation expense of $1.9 million (2019: $0.0 million) and finance costs of $0.0 million
(2019: nil). Please refer to Note 3 for the reconciliation of reported EBITDA to reported net profit after tax for each segment.
The Specialty Services BU delivered solid results for FY20. Cost synergies and organic growth have been realised
as part of the successful integration of Fone Dynamics, Call Dynamics, and 1300 Australia. The EBITDA margin has
improved from 27% to 56%, driven by the addition of the higher margin 1300 Australia business, pricing changes, cross
selling opportunities and cost benefits realised through integration. The Specialty Services business unit is highly cash
generative, with 99% free cashflow conversion.
14
UNITI GROUP LIMITED ANNUAL REPORT 2020 DIVISIONAL PERFORMANCE continued
Consumer & Business Enablement
Earnings summary
$’000
Revenue
EBITDA2
EBITDA margin %
Capital expenditure
Underlying EBITDA less capital expenditure
Underlying EBITDA less capital expenditure / EBITDA %
(1) Fuzenet Pty Ltd was acquired on 11 February 2019.
FY20
FY191
$ change
% change
24,004
13,591
4,779
20%
(1,363)
3,416
71%
689
5%
(1,950)
(1,261)
(183%)
10,413
4,090
15pp
(587)
4,677
254pp
77%
593%
300%
(30%)
371%
139%
(2) EBITDA refers to earnings before interest, tax, depreciation and amortisation. The reported net profit after tax for the business unit for FY20 is $0.7
million (2019: negative $7.1 million) and represents EBITDA less depreciation expense of $3.7 million (2019: $5.7 million) and finance costs of $0.4
million (2019: $0.7 million). FY19 also includes an impairment of right-of-use asset for $1.4 million. Please refer to Note 3 for the reconciliation of
reported EBITDA to reported net profit after tax for each segment.
CBE revenue has increased by $10.4 million on the prior period to $24.0 million, primarily driven by a full financial year
contribution from the Fuzenet business acquired in February 2019. A renewed focus on ensuring exceptional customer
service has resulted in strong customer retention and higher customer acquisition numbers particularly in the latter part
of the year on resold fibre networks. Connected customers to the CBE managed wireless infrastructure have continued
to decline in FY20 as CBE has repositioned business operations to the more highly demanded fibre networks which also
produce better cash margins after capital expenditure. As a result, the CBE business unit delivered strong EBITDA growth
of $4.1 million, from $0.7 million in FY19 to $4.8 million in FY20 and a marked reduction in capital expenditure and
increase in cash generation.
15
UNITI GROUP LIMITED ANNUAL REPORT 2020 OPERATING & FINANCIAL REVIEW continued
GROUP OUTLOOK
Group strategy
Uniti has a clear strategy built around its “three-pillar”
focus and has significant growth ambitions, which
it plans to achieve through a combination of strong
organic growth and an accretive acquisition strategy.
Organic Growth
Organic revenue and profit growth are evident in the
individual business unit financial results in FY20 and
consequently, in the group financial results, since its
listing.
This strong organic growth is attributable to a number of
factors including:
>
investing in identified market segments or pillars
within the telecommunications industry where
competition is not intense, the products and services
are in demand and growth and returns are high.
This has created three business units with a natural
organic growth capability.
> acquiring businesses within each strategic pillar
which are an ideal fit aligning with the business
activities undertaken within that business unit.
This results in immediate benefits through cost
efficiencies, speedy integration and improved organic
growth contributed largely by increased scale,
efficiency and market presence.
>
>
the acquisition of businesses within a business
unit with similar or naturally associated products
generating high cash margins resulting in self-
funding organic revenue growth better than pre
acquisition.
the focus on three business units with the
characteristics of high growth, margins and cash
generation contributes to enhanced products,
customer service, innovation and a more efficient go
to market to contribute to organic growth.
Acquisition Growth
In addition to the successful execution of the organic
growth plans for increasing market share in each market
that Uniti participates in, is the continued acquisition of
new businesses, ideally positioned to become part of
one of the “three pillars” and the consequent effective
integration of the acquisitions within the respective
business unit.
Uniti’s intention to pursue an acquisition strategy to
complement organic growth in each of its business
units is deliberate, focusses squarely on rewarding its
shareholders and is designed to achieve the following
objectives:
> build capability (people, process, platforms);
> add sustainable, expandable earnings to the business;
> add diversity to revenues and earnings; and
> add scale, and consequently deliver operating
efficiencies.
Each of Uniti’s acquisitions to date has satisfied the
above objectives, and has also met the following criteria
which are systematically applied to any contemplated
acquisition:
> aligns with Uniti’s stated strategy and fits within one
of its business units for strategic growth;
> provides products with high profit margins and is
highly cash generative to deliver its shareholders
incremental
> has the ability to quickly grow organically;
> provides high cash generation to ensure certainty
of cash payback and accretive returns to its
shareholders; and
>
is fairly priced.
16
UNITI GROUP LIMITED ANNUAL REPORT 2020 GROUP OUTLOOK continued
Wholesale & Infrastructure
Specialty Services
W&I primarily owns the network that is constructed and
installed on behalf of third parties. Ownership of the
network generates recurring revenue streams as end
user services are connected to the network by RSPs.
As a result of the acquisitions undertaken in 2019, the
W&I business unit has achieved operating scale in the
construction and operation of FTTP telecommunications
networks in this market.
As of 30 June 2020, W&I has built to 519 developments
across Australia with approximately 98,000 Connected
Premises built and over 40,000 of these Connected
Premises classified as Active Premises with active
broadband and/or telephone being provided by an RSP
(in respect of which W&I receives monthly recurring
access and capacity revenue).
W&I has a contracted pipeline of new developments
in different stages of construction with approximately
40,000 premises contracted to have fibre infrastructure
installed in the next two to three years.
W&I’s business strategy includes capitalising on these
opportunities and expanding network construction
and operation beyond the Greenfields residential
development market into adjacent markets such as
retirement living, lifestyle communities and commercial
and industrial precincts. W&I is also well positioned to
be the smart building/smart city enabler in this market
following recent success in providing converged services
over the FTTP networks being deployed. This market
continues to evolve and open up new opportunities for
private networks to be constructed and operated on a
wholesale basis.
Specialty Services strategy is to increase market share,
mainly in the enterprise and corporate markets, through
delivering a combination of an expanded suite of products
and services, and competitive pricing. This strategy is
complemented by a modern self-service platform and
value-added features, ensuring better utilisation of existing
infrastructure, and the introduction of carriage services
across the phoneword customer base.
Consumer & Business Enablement
During FY20, CBE has been focused on reselling
services on the private fibre networks with which it has
an interconnect. These networks have the requisite
criteria aligned to the organic growth strategy with less
competition and better margins than nbnTM. CBE is a
reseller of the nbnTM network but only as a default to
minimize customer churn on relocation.
Uniti identified the opportunity for organic growth in
enabling third parties to operate in the RSP market
reselling the various FTTP networks constructed in
Australia and interconnected by CBE.
CBE is ideally positioned, through its investment in
the interconnect, digital customer acquisition and the
enhancement of the customer experience with its
own on-shore call centre operations, to provide these
enablement services to smaller RSPs, thereby removing
the barriers to entry for those players, and for non-telco
operators wanting to offer their customers access to
broadband as part of their suite of products.
17
UNITI GROUP LIMITED ANNUAL REPORT 2020 OPERATING & FINANCIAL REVIEW continued
GROUP OUTLOOK continued
Summary of key risks
The following information sets out the major risks that the Company is exposed to. It excludes specific financial risks that
are identified in the commentary around the financial performance of the company. These risks may affect Uniti’s financial
performance, financial position, cash flows, distributions, growth prospects and share price.
The risks below are identified to assist investors in understanding the nature of the risks faced by Uniti and the industry in
which it operates. Uniti manages and seeks to mitigate these risks through internal review and control processes at the Board
and management level.
Competition
risks
Supplier and
technology
risks
Regulatory
risks
Uniti faces competition for customers from several alternative suppliers of broadband internet connectivity
services, including other resellers of nbnTM and mobile operators currently delivering 4G cellular services
and soon to deliver 5G cellular services in these markets. Further, the fixed wireless market opportunity
exists primarily because it offers a competitive service to that provided to certain Fibre to the Node (FTTN)
customers on nbnTM. If there was a change to nbnTM’s technology solutions or pricing strategies that made
the nbnTM more competitive, this could have a materially adverse impact on Uniti’s ability to attract FTTP
network construction and the consequent acquisition of and/or retention of sufficient customers and to
generate sufficient revenues and profitability to provide a return to investors.
Uniti relies on the use of third-party hardware and software technologies to deliver its products and services.
These technologies are required to continually perform to expected standards, without disruption or
cessation. Uniti’s success will depend on its ability to access technology and respond quickly to changes
in a cost-effective manner. The extent to which recent changes in the security stance from the Australian
Government in relation to equipment and components sourced from some countries may impact on Uniti’s
existing plans or requirements to refresh its network, is still uncertain.
Uniti also relies on key business relationships to deliver its services such as IP transit, backhaul, high sites or
equipment. A disruption in the supply of, or prices associated with, equipment or services utilised by Uniti
may have a negative impact on the business.
Certain equipment used by Uniti sourced from overseas, the cost of which is dependent on foreign
exchange rates. Uniti’s ability to pass on or recover the impact of adverse currency movements is uncertain.
Uniti operates in a highly regulated environment, with strong penalties for non-compliance, including
undertakings or the imposition of substantial civil and criminal penalties. Possible further changes to
existing regulation in addition to those recently enacted, including the introduction of the Regional
Broadband Services levy from 1 January 2021, and the Statutory Infrastructure Provider (SIP) regime,
as well as the proposed amendments to the Telecommunications in New Developments (TIND) policy
may impose substantial risks to both Uniti’s business and increased compliance costs. Uniti is not able
to predict the nature or impact of future policies and any such changes are beyond Uniti’s control,
which could impose a range of risks upon Uniti in the future. Uniti utilises class license spectrum and is
subject to and must comply with laws, regulations and government policies. If changes occur to existing
policies and legislation, then Uniti could be adversely affected.
18
UNITI GROUP LIMITED ANNUAL REPORT 2020 GROUP OUTLOOK continued
Network and
operational
disruption
Operational
and growth
risks
Design,
construction and
development
risks
General
economic
conditions
Uniti depends on the performance, reliability and availability of its technology platform, including its online
led customer service platform, call centre and communications systems. There is a risk that these platforms
and systems may be adversely affected by a number of factors, including damage, equipment faults, power
failure, computer viruses, malicious interventions such as hacking, natural disasters. Events of that nature
may adversely impact the availability of Uniti’s technology platform or website.
Uniti is exposed to risks associated with the rollout of its network, outages and loss of customer services.
There is a risk that the implementation of the Uniti’s growth strategies will be subject to delays or
cost overruns, and there is no guarantee that these strategies will generate growth. Furthermore, the
implementation of these growth strategies may lead to changes to the Uniti’s business or the customer
experience which may result in unintended adverse consequences if such changes affect customers’
willingness to buy the Company’s products.
Any delays or unexpected costs associated with the design, construction, and development of any of Uniti’s
W&I fibre optic telecommunications infrastructure or any changes in funding arrangements with developers
may harm Uniti’s growth prospects, future operating results and financial condition.
Delays or unexpected costs can be dictated by external factors such as decisions by developers to vary,
delay or cancel developments or industry price increases affecting components, labour or other aspects
of the design, construction and development stages. Whilst this risk is largely outside Uniti’s control, the
risk is actively managed through visibility over the timing and completion of projected developments and
keeping appraised of market conditions.
In light of recent global macroeconomic events, including the impact of COVID-19, Australia has
experienced a significant economic recession which could impact the development and construction
of new housing projects and/or vacancy rates in residential, commercial or retail premises, and the
Uniti’s ability to attract and retain customers, to invest sufficiently to develop, adopt and integrate the
latest technologies into existing infrastructure, and to secure and maintain third party suppliers for
IT and network infrastructure over whom Uniti may have no direct operational or financial control.
These economic disruptions may adversely impact the Uniti’s earnings and assets, as well as the
value of Uniti shares.
19
UNITI GROUP LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT
BOARD OF DIRECTORS
The names and details of the directors of Uniti during FY20 and at the date of this report are as follows:
Graeme Barclay
John Lindsay
Kathy Gramp
Independent Non-Executive Chairman
Independent Non-Executive Director
Independent Non-Executive Director
Committee Membership: Member
of the Audit & Risk Committee
and Member of Nomination &
Remuneration Committee
Committee Membership: Member
of the Audit & Risk Committee and
Chair of Nomination & Remuneration
Committee
Committee Membership: Chair of the
Audit & Risk Committee and Member
of Nomination & Remuneration
Committee
Other listed Directorships
(last 3 years): Codan Limited
Godfreys Limited (resigned May 2018)
Kathryn Gramp is an experienced
company director with more than
20 years’ experience, across a
diverse range of industries including
commercial radio, digital media and
technology and consumer centric
organisations.
She spent 22 years at Austereo Ltd,
including her appointment as Chief
Financial Officer since 2003, and was a
member of the Executive Committee.
Kathy’s current roles include being
a non-executive director of Codan
Limited (ASX:CDA) and the Australian
Institute of Company Directors.
Kathy is a Fellow of the Australian
Institute of Company Directors and
Chartered Accountants Australia
and New Zealand and holds a BA in
Accountancy from The University of
South Australia.
Other listed Directorships
(last 3 years): Codan Limited
Other listed Directorships
(last 3 years): Redflow Limited
John Lindsay is a telecommunications
industry expert with a career in
the telecommunications industry
spanning over 25 years with past
roles including CTO at iiNet Ltd, CTO
and Regulatory and Corporate Affairs
Manager at Internode Pty Ltd and
a Director of the Internet Industry
Association. John is currently a
director of the Telecommunications
Industry Ombudsman, TIO Ltd and
of Redflow Ltd (ASX:RFX). He is also
a director of a number of private
companies including Ultraserve Pty
Ltd and jtwo solutions Pty Ltd.
John is a graduate member of the
Australian Institute of Company
Directors.
BSA Limited (resigned December 2019)
Graeme Barclay is an experienced
commercial executive and qualified
Chartered Accountant with more than
35 years’ experience in professional
services and in the broadcast and
telecommunications sector.
Graeme has held a number of
executive level positions both locally
and internationally including as
Executive Director in Macquarie
Group’s infrastructure team,
Chairman of Transit Wireless LLP
(United States of America), and
Group Chief Executive Officer of BAI
Communications for 11 years to 2013.
Between 2014 and 2020, Graeme has
held various positions including CEO
and Chairman of Nextgen Networks,
Chairman of Metronode Data Centers,
CEO of Axicom Group Holdings and
has been a non-executive director of
ASX listed Codan Limited (ASX:CDA)
since 2015.
Graeme is an economics graduate
from St Andrews University, a member
of the Australian Institute of Company
Directors, a member of the Institute
of Chartered Accountants in Scotland,
a member of Chartered Accountants
Australia and NZ, and a fellow of FINSIA.
20
UNITI GROUP LIMITED ANNUAL REPORT 2020 Vaughan Bowen
Michael Simmons
Executive Director
Other listed Directorships
(last 3 years): Vocus Group Limited
(resigned 6 March 2018)
Group Managing Director & Chief
Executive Officer
Other listed Directorships
(last 3 years): None
Vaughan Bowen is a highly successful
business builder, M&A practitioner &
philanthropist. As founder of ASX100
telecommunications company M2
Group (which became part of Vocus
Group, following a merger in 2016),
Vaughan took M2 from start-up to a
business valued at greater than $2B,
with more than 3,000 team members,
nearly 1 million customer services
across Australia & New Zealand and
owner of household names including
Dodo, iPrimus and Commander.
During the M2 journey, Vaughan led
the identification, vendor negotiation
and acquisition of more than 30
companies.
In 2012, Vaughan founded, seeded
and served as Chairman of the Telco
Together Foundation (‘TTF’), the
Australian telco industry’s only united
charitable entity, endorsed by the
federal government’s Department of
Communications. In only a few years,
TTF has raised several million dollars
for various disadvantaged communities
and implemented national programs
for the benefit of the not-for-profit
sector as a whole, including carrier
unified text message giving.
Michael Simmons is a seasoned
media and telecommunications
executive who brings more than 40
years’ industry experience to Uniti. He
contributes considerable experience
in building ASX listed businesses within
the telecommunications and media
sectors, gained through various roles
over the period. Prior to joining Uniti,
Michael held chief executive roles at
Vocus Group Limited, TPG Telecom
(previously SPTelemedia Group)
and TERRiA (a telecommunications
consortium of infrastructure-based
telecommunications carriers (including
TPG) as well as other roles within those
businesses prior to being appointed
chief executive.
Michael has also had numerous board
and advisory roles within the telco and
media sectors, most notably a four-
and-a-half-year advisory role with AAPT
prior to its acquisition by TPG Telecom,
and a 8 year term as a non-executive
director of M2 Group Limited, which
merged with Vocus Group Limited in
2016. Shortly after joining the Vocus
board, Michael stepped away as a
Director to take on an executive role
as Chief Executive of the Enterprise,
Wholesale & Government business
unit and subsequently interim CEO of
Vocus Group.
The 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 financial
year ended 30 June 2020 (“year”).
21
UNITI GROUP LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT continued
Directors interests
The following table sets out each Director’s relevant
interest in shares and options as at 30 June 2020.
ORDINARY SHARES
OPTIONS
Graeme Barclay
Michael Simmons
Kathy Gramp
John Lindsay
4,630,496
5,535,424
458,037
466,052
2,994,121
2,994,121
1,122,795
1,122,795
Vaughan Bowen
10,678,505
2,994,124
Corporate governance
Our Corporate Governance Statement, detailing our
compliance with the ASX Corporate Governance
Council’s “Corporate Governance Principles &
Recommendations – 4th Edition” can be found online at
our website (www.unitigrouplimited.com).
No director has:
> a relevant interest in the shares of any related body
corporate of Uniti Group Limited; or
> a relevant interest in debentures of Uniti; or
>
>
rights or options over shares in, or debentures of,
Uniti; or
rights under a contract that confer a right to call for
or deliver shares in, or debentures of, Uniti.
Full detail of the unissued Ordinary Shares under option
is included in the Remuneration Report, which forms
part of this Directors’ Report.
Shares issued on the exercise
of options
During the financial year, the Group issued 978,153
Ordinary Shares as a result of options being exercised.
Ashe-lee Jegathesan
Chief Operations Officer & Company Secretary LLB
(Hons), GAICD
Appointed 13 March 2020
Ashe-lee Jegathesan is a highly experienced executive
with more than 20 years’ experience, including in the
technology and telecommunication industry. She brings
with her effective leadership and management skills
alongside corporate legal and governance experience to
deliver strong commercial outcomes for the business.
She has also had significant experience in leading
and implementing strategic M&A activity (both local
and cross-border) including the integration of those
acquired businesses.
As Chief Operating Officer for Uniti Group, she is
responsible for day to day management of the business,
functional oversight of Operations (including IT), Legal,
Regulatory & Risk, HR, Corporate Communications
and Investor Relations, and the integration of the
business acquired by Uniti. Prior to this she held the
role of General Counsel & Company Secretary of
Vocus Group Limited. Ashe-lee has received several
awards throughout recent years in recognition of her
achievements, including the inaugural Women in Law
ACLA In-House Award, and has been a finalist on a
number of occasions in both the Australian Law Awards
and Telstra’s businesswoman of the year Award.
Ashe-lee is a graduate of the Institute of Company
Directors (AICD). She also sits on the advisory board for
Archangel, an early stage start-up investment syndicate
based in Australia, and is a member of the Human
Research Ethics Committee for Orima Research.
22
UNITI GROUP LIMITED ANNUAL REPORT 2020 Principal activities
During the financial year the principal continuing
activities of the Group consisted of the provision of
telecommunications services, with ‘three pillars’ of
strategic growth: Wholesale & Infrastructure; Specialty
Services; and Consumer & Business Enablement. Uniti’s
Wholesale & Infrastructure business unit is engaged in
the design, installation, operation, and maintenance of
fibre-based open access wholesale telecommunication
‘last mile’ network infrastructure operating mainly in the
greenfields broadacre residential estates and multiple
dwelling units constructed in new housing markets.
Specialty Services provide premium voice services over
13, 1300, 1800 calling services. The services include a
value-added software as a service data analytics and call
tracking application, as well as the leasing of phonewords
on these numbers. The Consumer & Business Enablement
business unit retails telecommunications products and
services including broadband and voice services across
fibre access networks.
During the financial year the Group’s trading and activities
were significantly improved by the acquisitions of 1300
Australia Pty Ltd, LBNCo Pty Ltd and OPENetworks Pty
Ltd which transformed the Group operations, delivering a
profitable trading position and strong operating cash flows.
Dividends
There were no dividends declared or paid during the
financial year.
Review of Operations
million compared to the prior corresponding period loss
after tax of $7.0 million.
The Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) after adjusting for the significant
items for the year was $26.5 million compared to
negative $0.9 million for the prior corresponding
period. Please refer to the reconciliation of reported to
underlying results in the operating & financial review
section on page 11.
The growth in the operating businesses and the
transactions undertaken has resulted in the Group
trading profitably, with strong cash flow for the financial
year, with the Group well positioned for further growth
in the 2021 financial year.
The 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 retail services, fibre network
construction and operation and the provision of
specialty telecommunications products and services.
In line with this strategy, the Company completed the
acquisitions of LBNCo, OPENetworks and 1300 Australia
in FY20. The transactions were highly earnings accretive
and were a significant contributor to the current
earnings of the Group.
The Group has a strong balance sheet, ownership of
infrastructure businesses, more diverse products and
services and a pipeline of acquisition targets such
that the Directors are highly confident the Group can
capitalise on the work undertaken to date and continue
to grow earnings in the future.
The statutory profit for the consolidated entity after
providing for income tax amounted to $15.9 million (30
June 2019: Loss of $13.5 million).
Significant changes in the
state of affairs
The statutory profit includes significant items consisting
of $5.2 million acquisition costs incurred as part of the
acquisitions of 1300 Australia Pty Ltd, LBNCo Pty Ltd
and OPENetworks Pty Ltd, $4.6 million share-based
expenses relating to shares and options issued during
the year, $0.7 million restructure costs incurred as part
of group reorganisation activity and the recognition of a
tax benefit of $7.3 million.
After adjusting for the significant items the profit after
tax for the consolidated entity for the year was $21.7
On 1 October 2019, the Company acquired 100% of the
ordinary shares of LBNCo Pty Ltd (LBNCo) for the total
consideration of $102.9 million. LBNCo is a provider of
internet and associated telecommunications products and
services principally on fibre networks. LBNCo specialises in
telecommunication services to wholesale and corporate
partners across Australia. The acquisition is strongly aligned
to the Company’s “three pillars” strategic growth agenda,
providing the Company with fibre businesses with high
growth, high margin annuity earnings stream and strong
cash generation despite being an infrastructure builder.
23
UNITI GROUP LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT continued
On 1 November 2019, the Company acquired 100%
of the ordinary shares of OPENetworks Pty Ltd
(OPENetworks) for the total consideration of $27.5
million. OPENetworks is an established, fast-growing
profitable builder and wholesale operator of private
fibre networks, predominately comprised of fibre-to-
the-premises (‘FTTP’) high speed data services to multi-
dwelling units (‘MDU’).
The acquisition is also with aligned the Company’s
“three pillars” strategic growth agenda, providing the
Company with a fibre business with high growth,
high margin annuity earnings stream. OPENetworks
is backed by an established fibre infrastructure
footprint, with nearly 6,000 active wholesale superfast
broadband ports. The business is near identical in
nature to LBNCo and was fully integrated before the
end of the financial year.
On 16 December 2019, the Company acquired 100%
of the ordinary shares of 1300 Australia Pty Ltd (1300
Australia) for the total consideration of $78 million,with
date of economic control being 1 December 2019.
1300 Australia is a market leader in the leasing of
phonewords. The acquisition is highly complementary
with the Company’s Specialty Services business unit
and was fully integrated before the end of the financial
year. It further diversifies Uniti Group revenue and
earnings streams and delivers a significant increase in
earnings and free cash flow.
On 15 June 2020, the Company announced its
intention to acquire OptiComm Limited (ASX: OPC,
OptiComm), a constructor, owner and operator of
open access FTTP infrastructure, providing wholesale
telecommunications services. The transaction
is highly complementary and significant value
creation is expected from the growth opportunities
the combination of the business with the LBNCo
and OPENetworks businesses previously acquired,
provides. The three businesses are very similar and
complementary, all operating in the construction,
operation and maintenance of FTTP networks in
greenfields markets. This will make Uniti a large scale
national private fibre challenger.
Impact of COVID-19
The global impact of the COVID-19 pandemic, and
the advice and responses from health and regulatory
authorities, is continuously developing. The global
economic outlook is facing uncertainty due to the
COVID-19 pandemic which has had and may continue
to have significant impact on capital markets and share
prices.
Uniti may be impacted both by deterioration in
macroeconomic conditions generally and specifically
in relation to its operations. Many of the operational
and general risks highlighted in the Group Outlook
section are likely to be heightened due to the impacts
of the COVID-19 pandemic. To date, COVID-19 has
affected, amongst other things, economic conditions,
employment markets, equity markets, governmental
action, regulatory policy, quarantining, self-isolations
and travel restrictions.
In addition, the COVID-19 global pandemic may
specifically impact the projected growth rate of Uniti’s
W&I business, including from any downturn in the
property market which may lead to a delay in the
construction of new developments and in the signing
of new developer agreements and/ or delay in the
construction of dwellings under these new agreements
and/or increases in vacancy factors, resulting in delays
in the realisation of revenue from these contracts or
connections. There is also a risk that the operations
of Uniti may be interrupted by government enforced
restrictions (such as lockdowns) or other COVID-19
related health concerns.
Although there is a level of inherent uncertainty
as outlined above so far, there has not been any
noticeable adverse impact on the Group’s operations
or profitability. Uniti has not claimed any amounts
under the Australian Government JobKeeper Payment
Scheme.
There were no other significant changes in the state of
affairs of the consolidated entity during the financial year.
24
UNITI GROUP LIMITED ANNUAL REPORT 2020 Matters subsequent to the end of
the financial year
On 15 June 2020, Uniti announced it had entered a
scheme implementation deed with ASX listed OptiComm
Limited (ASX: OPC, OptiComm) under which Uniti will
acquire 100% of the OptiComm shares on issue by way of
a scheme arrangement (Scheme). Since the announcement
on 15 June 2020 and subsequent to 30 June 2020, the
Federal Court has approved the despatch of the Scheme
Booklet and convening of the OptiComm Scheme meeting.
The Scheme Booklet includes an independent’s expert
report which concludes that the Scheme is in the best
interest of OptiComm shareholders, in the absence of a
superior proposal. The directors of OptiComm recommend
that shareholders vote in favour of the Scheme, in the
absence of a superior proposal, and subject to the
independent expert continuing to conclude that the
Scheme is in the best interests of OptiComm shareholders.
Subject to OptiComm shareholders voting in favour of the
Scheme and the Federal Court subsequently approving the
Scheme, implementation of the Scheme is expected to be
completed by early October, at which time Uniti will assume
unconditional control of OptiComm. Included in the FY20
Annual Report is the issuance of share capital of $148.0
million to partially fund the acquisition (net of related share
issue costs of $3.9 million), as well as due diligence and
other acquisition costs of $2.4 million which have been
expensed. Refer also to Note 35 of the financial report.
Meetings of directors
Uniti expects to fund the acquisition cost of $532m
from $270M equity that has already been raised, the
issue of approximately 84 million shares in Uniti as scrip
consideration and from the implementation of a new debt
facility of $150M.
Subsequent to 30 June 2020, Uniti acquired a number of
customer contracts and network assets for a total of $0.7
million from Ultra ISP Pty Ltd.
No other matter or circumstance has arisen since 30 June
2020 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results
of those operations, or the consolidated entity’s state of
affairs in future financial years.
Likely developments and expected
results of operations
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.
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the
year ended 30 June 2020, and the number of meetings attended by each director that held office during the year were:
FULL BOARD
NOMINATION AND
REMUNERATION COMMITTEE
AUDIT AND RISK
COMMITTEE
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
30
29
29
29
30
30
30
30
30
30
4
4
4
2*
4*
4
4
4
4
4
4
4
4
3*
4*
4
4
4
4
4
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Held: represents the number of meetings held during the time the current director held office or was a member of the relevant committee.
* Attended these meetings (or part thereof) as invitee, not member.
25
UNITI GROUP LIMITED ANNUAL REPORT 2020 DIRECTORS’ REPORT continued
Indemnities and insurance
Non-audit services
The Uniti Constitution provides that to the extent permitted
by law and except as may be prohibited by the Corporations
Act, each director and secretary of Uniti (and its subsidiaries)
is indemnified against any liability (other than for legal costs
where the indemnity is limited to reasonable legal costs)
incurred by that person in the performance of their role.
The current and former directors and secretary of Uniti,
as well as the CEO, CFO, and COO are also party to a
customary deed of access and indemnity.
During FY20, Uniti paid a premium in respect of a contract
insuring the directors and officers of Uniti against any
liability that may arise from the carrying out of their
duties and responsibilities to the extent permitted by the
Corporations Act. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of
the deductible or premium.
Auditor indemnity
The Company has not, during or since the financial year,
indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred
by the auditor. During the financial year, the Company has
not paid a premium in respect of a contract to insure the
auditor of the Company or any related entity.
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.
Deed of cross guarantee
A deed of cross guarantee between Uniti and its subsidiary
entities was enacted during the financial year and relief was
obtained from preparing individual financial statements
for the Group under ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785. Under the deed, Uniti
guarantees to support the liabilities and obligations of its
subsidiaries listed above. As its entities are a party to the
deed the income statement and balance sheet information
of the combined class-ordered group is equivalent to the
consolidated information presented in this financial report.
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.
Auditor’s independence declaration
The auditor’s independence declaration for the financial
year ended 30 June 2020 can be found on page 39 of the
financial report and forms part of the Directors Report.
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.
26
UNITI GROUP LIMITED ANNUAL REPORT 2020 REMUNERATION REPORT (Audited)
INTRODUCTORY LETTER FROM JOHN LINDSAY, CHAIR OF
THE NOMINATION & REMUNERATION COMMITTEE
Dear Fellow Shareholders,
On behalf of the Board, I am pleased to present our
Remuneration Report for FY20.
FY20 has been a year focused on establishing the
platform for Uniti to become a diversified provider
of telecommunications services. We achieved this
through an accretive acquisition growth strategy
combined with an organic growth strategy, executing
on both with a laser focus on growing our market
share, revenue, profitability and cash generation.
Over the past 18 months, we have recruited a group of
experienced and passionate telecommunications industry
executives, with a common goal to build a successful
company and grow shareholder value. Each of the
executive team has a strong reputation in their respective
fields, and as leaders in the telecommunications industry,
involving both start-up organisations and multinational
corporations. In order to attract and retain the talent
that we have in our executive ranks, we implemented a
remuneration plan that would represent a combination
of cash and equity commensurate with their experience,
skills and qualifications and with the opportunity and
incentive to grow the business.
As we now move into the next phase of our growth,
we will consider a revision of the senior executive
remuneration plan to apply for financial years beyond
FY21, after seeking external advice and reviewing
practices adopted by other parties commensurate in
size to Uniti. We plan to retain our philosophy of fixed
remuneration being positioned below the median of
our industry peers but the maximum eligible variable
remuneration on achievement of KPI’s being above the
median and skewed toward equity based payments.
We are very proud of the achievements of Uniti this
past year and the manner in which your Board and
leadership team has positioned Uniti to continue to
replicate the accretive growth we have seen since
listing. On behalf of shareholders, I thank our team
for their hard work, commitment and unwavering
focus on achieving our goals. We also thank you,
our shareholders, for your support of the Company
throughout the year.
Yours sincerely,
John Lindsay
Chairman, Nomination and Remuneration Committee
27
UNITI GROUP LIMITED ANNUAL REPORT 2020
REMUNERATION REPORT (Audited) continued
Remuneration report (audited)
Remuneration Framework and Principles
The remuneration report details the key management
personnel (KMP) remuneration arrangements for the
consolidated entity, in accordance with the requirements
of the Corporations Act 2001 and its Regulations.
The Remuneration Report is designed to provide
shareholders with an understanding of the principles
guiding Uniti’s remuneration framework for directors
and executives, the basis of which is its alignment with
shareholders’ interests, as well as ensuring that reward is
linked to performance appropriately. Individual outcomes
for Uniti’s KMP are also outlined in this report.
KMP are those persons having authority and responsibility
for planning, directing and controlling the activities of the
Group, directly or indirectly, including all directors.
In the FY20 year, the following people were assessed to
be KMP:
Directors
Graeme Barclay
Non-Executive Chairman
Kathy Gramp
John Lindsay
Non-Executive Director
(Chair, Audit & Risk Committee)
Non-Executive Director
(Chair, Nomination &
Remuneration
Committee)
Vaughan Bowen
Executive Director
Michael Simmons
Managing Director & Chief
Executive Officer
Executives
Darryl Inns
Chief Financial Officer
Ashe-lee Jegathesan Chief Operating Officer &
Company Secretary
(joined October 2019)
Changes since the end of the reporting period: Nil
Uniti’s remuneration framework is intended to support
Uniti’s ability to attract, motivate and retain high calibre
executives, in a manner which is consistent with Uniti’s
organisational strategy and key value drivers, that
encourages an ownership mindset among KMP and
aligns remuneration outcomes with the achievement
of strategic objectives and the creation of value for
shareholders.
Governance
The Nomination and Remuneration Committee is
responsible for determining and reviewing remuneration
arrangements for KMP.
An agreed set of protocols was put in place to ensure
that the remuneration recommendations would be free
from undue influence from key executive personnel.
These protocols include both executive directors and
executives not being members of the Nomination and
Remuneration Committee and ensuring that although
the Executive Directors and Chief Operating Officer &
Company Secretary are invitees, the Committee meets in
camera regularly.
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
market. The Chairman is not present at any discussions
relating to the determination of his own remuneration.
ASX listing rules require the total aggregate non-
executive directors’ remuneration be determined
periodically by a general meeting of shareholders.
The most recent determination was at the Annual
General Meeting held on 2 November 2018, where the
shareholders approved a maximum annual aggregate
28
UNITI GROUP LIMITED ANNUAL REPORT 2020 is positioned below the market median, compared to
other companies of comparable market capitalisation,
revenues, and financial metrics, relevant to the
executive’s role, knowledge, skills and experience, and
individual performance. Executives 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.
Variable remuneration, consisting of a mix of cash
and share based payments, are awarded to executives
based on specific annual targets being achieved, under
the FY20 Senior Executive Incentive Plan (‘FY20 SEIP’).
These payments are heavily weighted towards share
based payments, to create long term alignment with
shareholders.
In FY19, an Employee Option Plan was established, under
which options were granted to directors and executives,
at the time of Uniti’s listing on the ASX (which were
conditionally approved by shareholders at the 2018
AGM) and subsequently as set out in this report. A copy
of the Plan Rules has been previously disclosed, the key
terms of which are set out below. Since then, Executives
recruited externally to join Uniti also received one-off
option grants (which vest over a three year period from
the date of grant) as part of their recruitment.
remuneration of $350,000. This determination was
prior to Uniti becoming an ASX listed company in
February 2019. Given Uniti’s admission to the S&P
ASX300 in March 2020, and the potential to become
an S&P ASX200 company after the completion of
the OptiComm acquisition (which remains subject to
conditions), the Board intends to seek an increase to this
aggregate limit at the next AGM.
Executive remuneration
Executive remuneration is designed to support the
Group’s organisational strategy and key value drivers,
align remuneration outcomes with shareholders’
interests, encourage an ownership mindset among
executives, and support the attraction, motivation and
retention of talented executives. Uniti 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
the following key components:
> Fixed remuneration consisting of base pay and non-
monetary benefits (and other remuneration such as
superannuation and long service leave);
> Variable remuneration, directly linked to the
performance of the consolidated entity for the year,
consisting of a mix of cash and equity payments.
All incentive payments are at the discretion of the
Nomination and Remuneration Committee.
The combination of these components comprises the
executive’s total remuneration.
The executive’s total remuneration package is highly
leveraged to the long term (as opposed to the short
term) and equity (as opposed to cash) to generate strong
alignment between the Executive team and shareholders,
encourage long-term sustainable decision making
and support our objective of, and ability to, remain
competitive for talent at the senior leadership level.
Fixed remuneration, consisting of base salary,
superannuation and non-monetary benefits, is reviewed
by the Nomination and Remuneration Committee
based on performance and comparable market
levels of remuneration. The base salary component
29
UNITI GROUP LIMITED ANNUAL REPORT 2020 UNITI GROUP LIMITED ANNUAL REPORT 2020
REMUNERATION REPORT (Audited) continued
Employee Option Plan Key Terms
Participants
Current or former (within 12 months prior to the grant being made) employees, directors
(both executive and non-executive) and company secretaries of the Company or its
subsidiaries (other than persons who have been given notice of dismissal for misconduct
or have resigned to avoid such dismissal), as well as contractors or consultants who
provide services to the Company or its subsidiaries.
Fully or partially paid
Options to acquire fully paid ordinary shares.
Issue price
Voting rights and
rights to dividends
or distribution
Share-based payments are issued at the 10-day volume weighted average price of the
Company Shares at that time.
Options granted carry no dividend or voting rights, nor do they carry any rights to
participate in any issue of shares of the Company or any other entity. Shares issued on
the exercise of Options will rank equally with Shares (including the new Shares) in relation
to voting rights, entitlements to participate in distributions and dividends, and future
rights issues, where the record date for determining entitlements falls on or after the date
of allotment.
Minimum holding
period
The Options and Shares acquired from exercising them must be held for a minimum of 3
years from the date the Options are issued unless otherwise determined by the Board.
Vesting conditions as
determined by the Board
in relation to each Option
Other Permitted Vesting
Exercise price
Expiry dates
Continued service over the vesting period.
The Board may in its discretion determine that the Options may vest if a change of
control of the Company occurs, or a takeover or scheme of arrangement, or a merger
or consolidation of the Company into another company occurs, or any other event as
determined by the Board in its discretion.
The exercise price must not be less than the market value of the Share in the
Company at the date of grant of the Option.
An Option will lapse upon the earliest to occur of:
>
the moment immediately after the latest time at which that Option may become
vested (if not an Unvested Option) or the latest time at which that Option may be
exercised (if a Vested Option);
failure to meet vesting conditions;
the participant electing to forfeit their rights, title and interest in the Option;
>
>
> where, in the opinion of the Board, a participant deals with an Option in
Alterations to capital and
reconstructions
contravention of any dealing restriction under the EOP.
If the Company makes any new issue of securities or alterations to its capital by way
of a rights issue, bonus issue or other distribution of capital, reduction of capital or
reconstruction of capital, the Board may make adjustments to the rights attaching to
those Options (including, without limitation, to the number of Shares which may be
acquired on exercise of the Options and the Exercise Price of an Option) on any basis
it deems fit.
30
FY20 remuneration approach
Total annual remuneration for Executive KMP during FY20 consisted of a below market median fixed remuneration
component (comprising base salary and superannuation), a variable remuneration component (the FY20 SEIP), comprising
a mix of cash and share based payments (predominately weighted towards the latter), which was subject to achievement of
certain performance conditions.
The FY20 SEIP consists of the following:
Nature of Plan
Weighting
Cash
Share-based payment
(no restrictions)
Share-based payment
(subject to vesting
conditions)
25%
25%
50%
Participants may convert their cash entitlement to shares at a 5% discount to the
value of each share-based payment share with these additional shares subject to
a 12-month holding lock
Approved payment to be divided by the 10-day VWAP after the date the FY20
Annual Results are announced to market
Approved payment to be divided by the 10-day VWAP after the date the FY20
Annual Results are announced to market and subject to a time based vesting
condition as follows:
> 1/3 to vest 12 months following allocation
> 1/3 to vest 24 months following allocation
> 1/3 to vest 36 months following allocation
Stretch targets
Participants
Where actual performance exceeds the measures, an accelerator will apply subject to an
overall cap of two times the SEIP amount payable in total.
Senior executives by invitation. Non-executive Directors where contribution is considered
to merit inclusion, subject to shareholder approval.
Note: Share based payments will be delivered through the grant of share rights.
The performance measures for the FY20 SEIP are:
Achievement
Achievement of the underlying Group budgeted EBITDA
Achievement of 20% growth in EPS (year on year)
Weighting
50%
50%
Achieved
(as a % of target)
322%
750%1
(1) Actual EPS growth achieved was 150%, which represents 750% achievement against the target of 20%.
31
UNITI GROUP LIMITED ANNUAL REPORT 2020
REMUNERATION REPORT (Audited) continued
These performance measures, based on financial
performance, were specifically designed for FY20, and
were based on Uniti’s strategic plans for its first full financial
year of operations as a listed entity and the growth Uniti
planned to achieve.
The financial targets that were set for Uniti for FY20 were
exceeded many times over and actual performance for the
FY20 year was significantly higher than the financial and
growth targets set by the Board.
Michael Simmons’ performance for FY20 as Managing
Director & CEO has been assessed based on consideration
of his important and significant role in the execution of
strategic objectives of the Group during FY20, including
his leadership, direction and prioritisation of activities. In
addition to the achievement of financial results which
exceeded the original budgeted expectations, Michael
successfully established a fully defined and adaptable
strategy that clearly articulated the pathway for Uniti into
the future. Achievement highlights (which are core to
performance) include:
> Strategic cost position: significant improvements in cost
structures aligned to the longer-term strategy (cost of
goods sold and operating costs).
> Strategy and people: investment in capability in key
strategic pillars for the business – being Wholesale &
Infrastructure, Consumer & Business Enablement and
Specialty Services, and in key shared services roles
including both the CFO and COO functions. Below the
executive level, a step change in capability across the
organisation, especially in the shared services areas, was
implemented.
> Culture: the continued embedding of the renewed
culture program which enhanced communication and
feedback within the organisation and recognises and
rewards exceptional talent.
Michael Simmons demonstrated strong leadership as
evidenced by the significant growth Uniti has experienced in
this first full financial year as a listed company, through the
execution and integration of new acquisitions, which is now
largely complete and resetting key business foundations
required to deliver on the longer-term strategy.
All other executives were assessed on the same financial
measures as the CEO relevant to their responsibilities, with
specific focus on their respective areas of accountability.
This ensured consistency and alignment across key areas of
focus within the Company.
In FY20, the Chairman and the Executive Director each
participated in the FY20 SEIP. Whilst the Board recognises
that it is not common practice for a non-Executive
Chairman to participate in a plan of this nature, in light of
the significant additional time and commitment, leveraging
his specific acquisition experience and involvement in the
number of accretive acquisitions and associated equity
raisings that Uniti prosecuted during FY20, the Board
believes this participation to be fully merited. It should also
be noted that it was particularly important to appoint a
high calibre Chairman with the requisite and specific skills
to guide Uniti’s strategic agenda and its execution by the
executive team over the past 18 months. The Chairman,
the Executive Director and the MD & CEO, subject to
shareholder approval at the next Annual General Meeting,
have elected to receive all of their entitlements under the
FY20 SEIP in the form of share-based payments only.
Voting and comments made at the Company’s 2019
Annual General Meeting (‘AGM’)
At the last AGM, 99.82% of the shareholders who voted, in
person or by proxy, voted to adopt the remuneration report
for the year ended 30 June 2019.
Relationship between remuneration and performance
generally
Executive remuneration is directly linked to Uniti’s financial
performance and aligned with shareholder wealth over the
long term. A summary of the key metrics relating to Uniti’s
earnings and shareholder wealth or Total Shareholder
Returns (TSR) are set out below.
Use of remuneration advisors
Under the provisions of the Committee’s Charter, the
Committee may engage the assistance and advice from
external remuneration advisors. To ensure that any
recommendations made by remuneration consultants
are provided without undue influence being exerted by
Executives, external remuneration consultants deliver their
advice directly to members of the Committee.
Statutory remuneration disclosures
The following tables set out the statutory disclosures
required under the Corporations Act 2001 (Cth),
Corporations Regulations 2001 (Cth) and in accordance with
the relevant Accounting Standards.
32
UNITI GROUP LIMITED ANNUAL REPORT 2020 Details of remuneration
Details of the remuneration of the Directors and other KMP (including comparative data for FY19) who held these
positions during FY20 are set out in the following tables. The amounts shown are equal to the amount expensed in the
Company’s financial statements. Share-based payments to directors, a proportion of which are subject to shareholder
approval at the 2020 AGM, have been recorded in the table below for transparency and completeness.
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
SHARE-
BASED
PAYMENTS
LONG TERM
BENEFITS
NON-
MONETARY
BENEFITS
2020
Cash Salary
& Fees
Cash
Bonus
Share-based
payments
Super-
Annuation
$
$
$
$
Equity
Settled
Options
$
Long Service
Leave
Equity Settled
Shares
Total
Performance
Based
$
$
$
%
Non-Executive Directors:
Graeme Barclay Chairman
Kathy Gramp
John Lindsay
Executive Directors:
Vaughan Bowen
Michael Simmons
Other Key Management Personnel:
Darryl Inns
Ashe-lee Jegathesan1
100,000
70,000
70,000
182,108
286,757
–
–
–
–
–
–
–
–
9,500
6,650
6,650
422,085
160,660
160,660
–
–
–
150,000
200,000
17,352
20,885
1,925,970
422,085
3,052
4,579
–
–
–
–
–
531,585
237,310
237,310
2,278,482
934,306
230,082
168,383
50,000
50,000
50,000
50,000
20,928
15,044
298,520
430,736
3,835
2,721
761
737
654,126
717,621
Total
1,107,330 100,000 450,000
97,009 3,820,716
14,187
1,498 5,590,740
79%
68%
68%
91%
67%
61%
74%
78%
(1) Represents remuneration from 14 October 2019 to 30 June 2020.
2019
Cash Salary
& Fees
$
Cash
Bonus
Non-
Monetary
Super-
Annuation
$
$
$
Equity
Settled
Options
$
Long Service
Leave
Equity Settled
Shares
Total
Performance
Based
$
$
$
%
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
SHARE-
BASED
PAYMENTS
LONG TERM
BENEFITS
NON-
MONETARY
BENEFITS
Non-Executive Directors:
Graeme Barclay Chairman1
Kathy Gramp
John Lindsay
Jules Maussen2
Executive Directors:
Vaughan Bowen3
Michael Simmons4
Sasha Baranikov5
Che Metcalfe5
Other Key Management Personnel:
Darryl Inns6
Total
57,639
65,833
65,833
60,000
62,035
209,916
204,345
195,219
57,019
977,839
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,476
6,254
6,254
–
229,515
72,005
72,005
–
–
–
–
–
614,557
76,820
76,820
–
907,187
220,912
220,912
60,000
5,472
14,595
11,823
12,157
629,999
229,515
–
–
4,967
3,253
1,711
1,711
–
921,835
169,003
169,003
702,473
1,379,114
386,882
378,090
4,738
40,989
4,425
–
107,171
66,769 1,274,028
16,067
2,028,038
4,362,741
93%
67%
67%
–
90%
83%
44%
45%
38%
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.
33
UNITI GROUP LIMITED ANNUAL REPORT 2020
REMUNERATION REPORT (Audited) continued
The cash bonus and the associated short term share based payments are dependent on meeting defined performance measures.
The amounts 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 eligible bonus value was established
at the start of the financial year and amounts payable were determined in August after the end of the financial year by the
Nomination and Remuneration Committee.
Service agreements
Remuneration and other terms of employment for Executive KMP are formalised in service agreements. Details of
these agreements are as follows:
ROLE
DURATION OF
AGREEMENT
TERMINATION
NOTICE BY
UNITI
TERMINATION
NOTICE BY THE
RELEVANT KMP
POTENTIAL TERMINATION BENEFITS
MD & CEO
No Fixed
Term
3 months
3 months
CFO
COO
No Fixed
Term
No Fixed
Term
3 months
3 months
3 months
3 months
Executive
Director
No Fixed
Term
3 months
3 months
Non-solicitation and non-compete clauses.
A termination payment of 3 months’ Fixed Remuneration
(if terminated by the Company).
Statutory leave entitlements.
Non-solicitation and non-compete clauses.
A termination payment of 3 months’ Fixed Remuneration
(if terminated by the Company).
Statutory leave entitlements.
Non-solicitation and non-compete clauses.
A termination payment of 3 months’ Fixed Remuneration
(if terminated by the Company).
Statutory leave entitlements.
Non-solicitation and non-compete clauses.
A termination payment of 3 months’ Fixed Remuneration
(if terminated by the Company).
Statutory leave entitlements.
Executive KMP 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 2020 are set out below:
NAME
DATE
SHARES
ISSUE PRICE
Darryl Inns
Ashe-lee Jegathesan
21 April 2020
21 April 2020
624
604
$1.22
$1.22
$
761
737
34
UNITI GROUP LIMITED ANNUAL REPORT 2020 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:
NUMBER OF
OPTIONS
GRANTED
GRANT
DATE
VESTING DATE
AND EXERCISABLE
DATE
EXPIRY
DATE
EXERCISE
PRICE
TOTAL FAIR
VALUE AT
GRANT DATE
NAME
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
Ashe-lee
Jegathesan
1,229,114
614,557
614,557
267,947
133,973
133,973
307,279
307,278
307,277
66,987
66,987
66,987
307,279
307,278
307,277
66,987
66,987
66,987
819,410
819,410
819,408
178,632
178,632
178,632
1,229,114
614,557
614,557
267,947
133,973
133,973
330,000
330,000
590,000
71,940
71,940
128,620
330,000
330,000
590,000
21 December 2018
30 June 2019
30 June 2020
30 June 2021
5 November 2019 30 June 2019
30 June 2020
30 June 2021
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
30 June 2019
30 June 2020
30 June 2021
30 June 2019
30 June 2020
30 June 2021
30 June 2019
30 June 2020
30 June 2021
30 June 2019
30 June 2020
30 June 2021
31 December 2019
30 June 2020
30 June 2021
31 December 2022
30 June 2023
30 June 2024
31 December 2019
30 June 2020
30 June 2021
31 December 2022
30 June 2023
30 June 2024
30 June 2019
30 June 2020
30 June 2021
30 June 2019
30 June 2020
30 June 2021
31 March 2020
31 March 2021
31 March 2022
31 March 2020
31 March 2021
31 March 2022
30 June 2022
30 June 2023
30 June 2024
30 June 2022
30 June 2023
30 June 2024
31 March 2023
31 March 2024
31 March 2025
31 March 2023
31 March 2024
31 March 2025
21 December 2018
5 November 2019
21 December 2018
5 November 2019
6 August 2019
5 November 2019
21 December 2018
5 November 2019
12 April 2019
5 November 2019
10 September 2019 10 September 2020
10 September 2023
10 September 2021
10 September 2024
10 September 2022
10 September 2025
$0.25
$0.30
$0.38
$1.35
$1.35
$1.35
$0.25
$0.30
$0.38
$1.35
$1.35
$1.35
$0.25
$0.30
$0.38
$1.35
$1.35
$1.35
$0.25
$0.30
$0.38
$1.35
$1.35
$1.35
$0.25
$0.30
$0.38
$1.35
$1.35
$1.35
$0.56
$0.71
$0.86
$1.35
$1.35
$1.35
$1.35
$1.50
$1.65
$171,013
$88,627
$90,243
$201,534
$96,929
$93,577
$42,753
$44,313
$45,121
$50,384
$48,465
$46,789
$42,753
$44,313
$45,121
$50,384
$48,465
$46,789
$864,821
$849,995
$840,994
$143,789
$152,047
$166,361
$171,013
$88,627
$90,243
$201,534
$96,929
$93,577
$89,832
$91,365
$168,411
$59,610
$65,664
$126,326
$244,425
$258,700
$485,923
35
UNITI GROUP LIMITED ANNUAL REPORT 2020 REMUNERATION REPORT (Audited) continued
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.
Options vest based on the provision of service over the vesting period whereby the KMP 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 2020 are set out below.
At the 2019 AGM, shareholders approved the grant of “top-up” options to Directors and other KMP under the Company’s
Employee Share Option Plan. This grant was intended to address the dilution of the number of options held by Directors
and other KMP who were granted options at listing of the Company (or subsequently approved by shareholders), due to
the extent of new issues of shares since the listing of the Company up to the announcement of the year end 30 June
2019 financial results on 30 August 2019. The pro-rata increase in the number of existing unexercised Options held
by Directors and other KMP had the same vesting and expiry periods and carry the same terms and conditions as the
unexpired Options held prior to approval of the pro-rata Options. The exercise price that applied to the new Options
was set at a price that was equal to the 10 days VWAP for the period immediately after the 2019 Financial Results were
released on 30 August 2019, being $1.35 per option.
New executives who joined Uniti other than through acquisition received a one-off option grant at the time they
commenced employment with Uniti. This arrangement was implemented in recognition of the need to attract and
retain a high calibre executive team. The one-off option grant generates a strong alignment with shareholders. The
options also provides a strong retention hook for key talent during the start-up phase by requiring that Executive KMP
remain employed until the end of the vesting period to realise the incentive. The exercise price for these options is
based on the VWAP for the period immediately prior to the commencement of the respective employment.
NAME
VALUE OF OPTIONS
GRANTED DURING
THE YEAR
$
VALUE OF OPTIONS
EXERCISED DURING
THE YEAR
$
VALUE OF OPTIONS
LAPSED DURING
THE YEAR
$
OPTIONS GRANTED
DURING THE YEAR AS A
PERCENTAGE OF TOTAL
REUMERATION
%
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
Ashe-lee Jegathesan
392,040
145,638
145,638
462,197
392,041
251,601
989,048
-
-
-
-
-
89,832
-
-
-
-
-
-
-
-
74%
61%
61%
20%
42%
38%
137%
36
UNITI GROUP LIMITED ANNUAL REPORT 2020 Consolidated entity performance and link to remuneration
In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee have regard
to the following indices in respect of the current financial year. The previous four financial years have not been included
as the comparison is not relevant for the financial year ended 30 June 2020. Uniti was listed in February 2019.
Earnings for FY20 and the previous financial year
$’000
EBITDA
EBIT
Profit after tax
Shareholder wealth
MEASURE
Earnings per share (Basic, in cents)
Earnings per share (Diluted, in cents)
Dividends paid
Operating revenue growth
Share price at 30 June
Market capitalisation at 30 June
FY20
FY19
Statutory
Underlying
Statutory
Underlying
16,055
9,202
15,921
26,530
22,263
21,668
(5,499)
(12,659)
(13,531)
(884)
(6,098)
(6,970)
FY20
FY19
5.81
5.50
(11.60)
(11.60)
-
306%
1.42
615,503,650
-
n/a
1.70
250,869,512
Additional disclosures relating to KMP
Shareholding
The number of shares in the Company held during the financial year by each current director and KMP of the
consolidated entity, including their personally related parties, is set out below:
BALANCE AT THE
START OF THE
YEAR
PURCHASED
UNDER OPTION
PLAN
RECEIVED
AS PART OF
REMUNERATION
PURCHASED ON
MARKET
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR
Ordinary shares
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
2,858,228
307,279
315,279
4,495,337
3,687,342
–
–
–
–
–
211,500
330,000
Ashe-lee Jegathesan
43,051
–
–
–
–
–
–
624
604
1,772,268
150,758
150,773
6,183,168
1,848,082
105,836
–
Total
11,918,016
330,000
1,228
10,210,885
–
–
–
–
–
–
–
–
4,630,496
458,037
466,052
10,678,505
5,535,424
647,960
43,655
22,460,129
37
UNITI GROUP LIMITED ANNUAL REPORT 2020 REMUNERATION REPORT (Audited) continued
Option holding
The number of options over ordinary shares in the Company held during the financial year by each current director and other
KMP of the consolidated entity, including their personally related parties, is set out below:
GRANTED
EXERCISED
EXPIRED/
FORFEITED/OTHER
BALANCE AT THE
END OF THE YEAR
BALANCE AT THE
START OF THE
YEAR
2,458,228
921,834
921,834
2,458,228
2,458,228
1,250,000
–
NAME
Options over ordinary shares
Graeme Barclay
Kathy Gramp
John Lindsay
Vaughan Bowen
Michael Simmons
Darryl Inns
Ashe-lee Jegathesan
Total
Loans
535,893
200,961
200,961
535,896
535,893
272,500
1,250,000
–
–
–
–
–
(330,000)
–
10,468,352
3,532,104
(330,000)
–
–
–
–
–
–
–
–
2,994,121
1,122,795
1,122,795
2,994,124
2,994,121
1,192,500
1,250,000
13,670,456
Uniti has not made, guaranteed or secured, directly or indirectly, any loans in respect of KMP or their close family
members or controlled entities.
Other transactions
There were no transactions of the kind contemplated in item 22 of Regulation 2M.3.03 of the Corporations
Regulations during FY20.
– End of Remuneration Report –
This Directors’ 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
24 August 2020
Sydney
38
UNITI GROUP LIMITED ANNUAL REPORT 2020
AUDITOR’S INDEPENDENCE DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 9671 7001
www.deloitte.com.au
The Board of Directors
Uniti Group Limited
Level 1, 44 Currie Street
Adelaide, SA, 5000
24 August 2020
Dear Board Members
Uniti Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Uniti Group Limited.
As lead audit partner for the audit of the financial statements of Uniti Group Limited for the year
ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Chris Biermann
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
39
39
UNITI GROUP LIMITED ANNUAL REPORT 2020
UNITI GROUP LIMITED ANNUAL REPORT 2020
FINANCIAL REPORT
for the year ended 30 June 2020
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 24 August 2020.
The directors have the power to amend and reissue the financial statements.
40
UNITI GROUP LIMITED ANNUAL REPORT 2020
FINANCIAL REPORT
for the year ended 30 June 2020
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
42
43
44
45
46
97
98
41
UNITI GROUP LIMITED ANNUAL REPORT 2020
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2020
Revenue
Expenses
Network and hardware expense
Employee benefits expense
Depreciation and amortisation expense
Impairment of right-of-use asset
Other expenses
Finance costs
Profit / (Loss) before income tax expense
Income tax income
Profit / (Loss) after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Basic earnings / (loss) per share attributable to owners of Uniti Group
Diluted earnings / (loss) per share attributable to owners of Uniti Group
CONSOLIDATED
2020
$’000
2019
$’000
58,216
14,336
(13,837)
(17,398)
(6,853)
–
(10,926)
(595)
8,607
7,314
(6,619)
(9,297)
(5,753)
(1,407)
(3,919)
(872)
(13,531)
–
15,921
(13,531)
–
–
15,921
(13,531)
CENTS
5.81
5.50
CENTS
(11.6)
(11.6)
NOTE
4
5
5
5
5
5
6
39
39
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
42
UNITI GROUP LIMITED ANNUAL REPORT 2020
STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
CONSOLIDATED
NOTE
2020
$’000
2019
$’000
Assets
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
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Employee benefits
Contingent consideration
Borrowings
Lease liabilities
Provisions
Provision for income tax
Total current liabilities
Non-current liabilities
Trade and other payables
Contract liabilities
Employee benefits
Contingent consideration
Borrowings
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
7
8
9
10
11
12
13
14
6
15
16
17
18
19
19
6
15
16
17
18
19
19
20
21
22
The above statement of financial position should be read in conjunction with the accompanying notes.
189,150
5,981
959
2,073
1,008
19,131
1,507
275
608
824
199,171
22,345
3,044
45,709
206,027
168
254,948
454,119
13,141
2,269
1,076
4,439
–
1,357
184
1,890
4,464
3,589
20,920
–
28,973
51,318
4,668
472
255
6,546
750
1,076
124
–
24,356
13,891
1,411
–
93
2,712
–
3,853
8,069
32,425
421,694
421,812
6,065
(6,183)
421,694
1,500
26
33
2,484
1,725
5,789
11,557
25,448
25,870
46,691
1,283
(22,104)
25,870
43
UNITI GROUP LIMITED ANNUAL REPORT 2020
UNITI GROUP LIMITED ANNUAL REPORT 2020
STATEMENTS OF CHANGES IN EQUITY
for the year ended 30 June 2020
CONSOLIDATED
Balance at 1 July 2018
Loss after income tax expense for the year
Issue of share capital:
Contributions of equity (Note 20)
Transaction costs
Issue of shares to vendors on acquisition:
Issue of shares to Fuzenet vendors
Issues of shares to Call Dynamics vendors
Issues of shares to Pivit vendors
Transactions costs
Other:
Issue of shares to advisor
Issue of shares on conversion of convertible notes
Transaction costs associated with conversion of convertible notes
Share-based payments (Note 40)
Balance at 30 June 2019
CONSOLIDATED
Balance at 1 July 2019
Profit after income tax expense for the year
Issue of share capital:
Contributions of equity (Note 20)
Transaction costs
Issue of shares to vendors on acquisition:
Issue of shares to Fone Dynamics vendors
Issue of shares to LBNCo vendors
Issue of shares to OPENetworks vendors
Issue of shares to 1300 Australia vendors
Issue of shares to Pivit vendors
Transaction costs
Other:
Reserve reclassification
Conversion of share-based payment options
Issue of shares to employees
Transaction costs associated with issue of shares to employees
Share-based payments (Note 40)
Balance at 30 June 2020
ISSUED
CAPITAL
$’000
11,907
–
28,181
(1,483)
26,698
1,650
740
30
(7)
2,413
675
3,123
(153)
2,028
5,673
46,691
ISSUED
CAPITAL
$’000
46,691
–
336,951
(9,115)
327,836
6,652
11,262
9,389
20,000
80
(189)
47,194
(317)
345
115
(52)
–
91
421,812
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
TOTAL
EQUITY
$’000
3,334
(13,531)
28,181
(1,483)
26,698
1,650
740
30
(7)
2,413
675
3,123
(153)
3,311
6,956
(8,573)
(13,531)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,283
1,283
1,283
(22,104)
25,870
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
TOTAL
EQUITY
$’000
1,283
(22,104)
25,870
– 15,921 15,921
–
–
–
–
–
–
–
–
–
–
317
–
–
–
4,465
4,782
6,065
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
336,951
(9,115)
327,836
6,652
11,262
9,389
20,000
80
(189)
47,194
–
345
115
(52)
4,465
4,873
(6,183)
421,694
The above statement of changes in equity should be read in conjunction with the accompanying notes.
44
UNITI GROUP LIMITED ANNUAL REPORT 2020
UNITI GROUP LIMITED ANNUAL REPORT 2020
STATEMENT OF CASH FLOWS
for the year ended 30 June 2020
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 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
Proceeds from disposal of property, plant and equipment
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
Repayment of lease liability
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
NOTE
2020
$’000
2019
$’000
36
32
63,360
(41,725)
324
(561)
246
–
21,644
(165,527)
(2,728)
(7,541)
(702)
38
15,033
(15,926)
41
1,500
(394)
–
254
(9,607)
(904)
(1,816)
(134)
–
(176,460)
(12,461)
20
337,280
–
–
(8,981)
(2,460)
(1,004)
324,835
170,019
19,131
189,150
28,181
3,000
2,938
(1,589)
(2,039)
–
30,491
18,284
847
19,131
45
w
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2020
NOTE 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 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 consolidated entity has adopted AASB 9 from 1 July 2018. The following Accounting
Standards and Interpretations are most relevant to the consolidated entity:
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’). Accounting policies adopted in the
preparation of these financial statements are presented below and have been consistently applied unless stated otherwise.
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.
Principles 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 2020 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.
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UNITI GROUP LIMITED ANNUAL REPORT 2020
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’).
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue from contracts with customers is recognised when or as the Group satisfies a performance obligation in the
contract when the Group transfers a promised good or service (ie an asset) to a customer.
Revenue from these sales is recognised based on the price specified in the contract. No element of financing is deemed
present as the sales are made with a credit term between 30-90 days, which is consistent with market practice.
Revenue is recognised in accordance with the following five-step process:
1. Identifying the contract with the customer.
2. Identifying the performance obligations in the contract.
3. Determining the transaction price.
4. Allocating the transaction price to the performance obligations in the contract.
5. Recognising revenue as and when the performance obligations are satisfied.
The following is a description of principal activities from which the Group generates its revenue.
Broadband and fibre access networks
For the Wireless revenue stream, there are two performance obligations, the delivery of hardware to facilitate
connection and the delivery of internet services. 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. 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 wireless broadband services is recognised monthly over the expected life of the contract, including any expected
extensions of the service. The typical length of a contract for wireless broadband services is 20 months.
The provision of fibre communications services does require installation of network infrastructure and the
performance obligation is the delivery of the services. Revenue from the provision of fibre communications services
is recognised each month the service is made available to the customer. Revenue from installation services is treated
as a Connection or Activation Revenue (refer below).
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. Packages may include internet and home phone bundles. The consideration is allocated between separate
products and services in a bundle based on their stand- alone selling prices for items that can be sold separately. The
stand-alone selling prices for items that can be sold separately 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.
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NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
Telecommunication services
Revenue from the provision of telecommunication services relating to the provision of SMS and voice services and
1300 number leasing is recognised over time as the customer simultaneously receives and consumes the benefit of
the service. The services offered to customers each represent distinct performance obligations. The transaction price
is fixed monthly amounts for 1300 numbers and variable based on usage for SMS services.
Recurring network revenues
Revenue from the provision of network operations services includes recurring network operations revenue received
from retail service providers for network access in the form of a monthly wholesale charge. Network operations
revenue is recognised over time as the services are rendered.
Developer revenue
Services to developers as contracted customers are considered a distinct performance obligation enabling the
developer to discharge its regulatory requirements in seeking approval to assign titles on properties with an established
broadband network connection.
The associated revenue may be recognised over time, over the project life as costs are incurred, on the basis that the
benefit of the construction is received and consumed as the construction is performed.
Developer revenue is recognised across the project life, which is typically 9 months, on a monthly basis.
This differs to developer billing, which is recognised with billing milestones largely based on practical completion.
Interest revenue
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.
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).
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
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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 > 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.
Uniti 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.
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UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
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.
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
5 years
Diminishing Value basis
Plant and equipment
3-8 years
Straight Line basis
Software
5 years
Straight Line basis
Network Infrastructure
4-40 years
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.
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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 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 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 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 based on 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
USEFUL LIFE
DEPRECIATION METHOD
Buildings
2 to 10 years
Straight line basis
Network Infrastructure
2 years to 20 years
Straight line basis
Plant and Equipment
Motor Vehicles
4 to 5 years
8 years
Diminishing value basis
Diminishing value basis
The lease liability is initially 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.
Lease 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
> 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.
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UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
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.
Extension options
Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility.
The Group assesses at lease commencement whether it is reasonably certain to exercise the options if there is a
significant event or significant change in circumstances within its control.
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.
Impairment of financial assets
The Group recognises loss allowances for expected credit loss (ECL) on financial assets measured at amortised cost.
The Group measures loss allowances at an amount equal to lifetime ECLs. 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 to estimate lifetime ECL for similar financial assets.
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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 When determining whether the credit risk of a financial asset has increased significantly since initial recognition and
when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the
Group’s historical experience and informed credit assessment and including forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.
The Group considers a financial asset to be in default when:
> the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions; or
> the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the
reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period
considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash
flows that the Group expects to receive). The impact of COVID-19 on the allowance for calculation for expected
credit losses calculation was assessed as at 30 June 2020. Please refer to Note 8.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A
financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
> significant financial difficulty of the borrower or issuer
> a breach of contract such as a default or being more than 90 days past due
> the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise
> it is probable that the borrower will enter bankruptcy or other financial reorganisation or
> the disappearance of an active market for a security because of financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering financial asset in its entirety or a portion thereof. The Group expects no significant recovery from the
amount written off. However, financial assets that are written off could still be subject to enforcement activities in
order to comply with the Group’s procedures for recovery of amounts due.
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.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Unit (CGU).
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UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value
in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying amount of assets in the
CGU on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
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.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to
be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
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NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 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 is 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 is 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 vesting conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total
fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee
and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Fair value measurements
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.
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UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
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.
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 is seen as
value adding relative to the current company’s share price at the time of the investment.
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.
56
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing
investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is
less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference
is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of
the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and 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.
57
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 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.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the
accounting policy stated in Note 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.
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.
Impact of COVID-19
As noted in the Review of Operations in the Directors’ Report, the Board and management have considered the
impact of COVID-19 on the consolidated entity’s operations and financial performance, and have noted that there
were no significant changes in the state of affairs of the consolidated entity during the financial year. In particular,
Uniti’s business has been resilient to date. Uniti has not claimed any amounts under the Australian Government
JobKeeper Payment Scheme.
In preparing the consolidated financial report, management has considered the impact of COVID-19 on the
various balances in the financial report, including the carrying values of trade receivables, as well as balances and
accounting estimates for which cash flow forecasts are required to be prepared, such as impairment assessments
of goodwill and brand names. Management determined that there was no significant impact of COVID-19 on the
abovementioned balances and accounting estimates.
58
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 3. OPERATING SEGMENTS
Identification of reportable operating segments
Segment information is based on the information that management uses to make decisions about operating
matters and allows users to review operations through the eyes of management. Operating segments represent the
information reported to the chief operating decision makers (CODM), being the Board of Directors, for the purposes
of resource allocation and assessment of segment performance. Any new acquisitions will be made to complement
the business units.
Major customers
There were no major customers in 2020 or 2019 that contributed more than 5% of revenue.
Operating segments
The directors have chosen to organise the Group around the three main business units in which the Group operates.
Specifically, the Group’s reportable segments under AASB 8 are as follows:
> Consumer & Business Enablement.
> Wholesale & Infrastructure.
> Specialty Services.
The reportable segments represent the group’s cash-generating units for impairment testing purposes, with
corporate income (interest) and costs being allocated to the three cash-generating units. The chief decision maker
for the reporting segments are the CEOs of each of the ‘three pillars’.
59
UNITI GROUP LIMITED ANNUAL REPORT 2020 ww
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2020
NOTE 3. OPERATING SEGMENTS continued
Segment revenues and results
CONSOLIDATED – 2020
Revenue
EBITDA (Reported)
WHOLESALE &
INFRASTRUCTURE
$’000
SPECIALTY
SERVICES
$’000
CONSUMER &
BUSINESS
ENABLEMENT
$’000
UNALLOCATED1
$’000
INTER-
COMPANY2
$’000
TOTAL
$’000
22,351
20,969
24,004
324
(9,432) 58,216
14,525
11,752
4,779
(15,001)
Depreciation and amortisation
(1,283)
(1,916)
(3,654)
Net finance costs
-
(29)
Profit / (Loss) before income tax expense
13,242
9,807
Income tax expense
-
-
Profit / (Loss) after income tax expense
13,242
9,807
(403)
722
-
722
-
(163)
(15,164)
7,314
(7,850)
-
-
-
-
-
-
16,055
(6,853)
(595)
8,607
7,314
15,921
(1) Unallocated revenue represents interest income earned in relation to cash and cash equivalents. Unallocated costs include corporate services
costs, board costs, share-based payment expenses and acquisition costs.
(2) Intercompany revenue is eliminated on consolidation and relates primarily to recurring charges from the W&I business unit to the CBE business
unit for the provision of wholesale telecommunications services.
CONSOLIDATED – 2019
Revenue
EBITDA (Reported)
Depreciation and amortisation
Net finance costs
Impairment of right-of-use asset
Profit / (Loss) before income tax expense
Profit / (Loss) after income tax expense
WHOLESALE &
INFRASTRUCTURE
$’000
SPECIALTY
SERVICES
$’000
CONSUMER &
BUSINESS
ENABLEMENT
$’000
UNALLOCATED1
$’000
TOTAL
$’000
-
-
-
-
-
-
-
704
191
(8)
-
-
183
183
13,591
689
(5,745)
(658)
(1,407)
(7,121)
(7,121)
41
14,336
(6,379)
(5,499)
-
(5,753)
(214)
(872)
-
(1,407)
(6,593)
(13,531)
(6,593)
(13,531)
(1) Unallocated revenue represents interest income earned in relation to cash and cash equivalents. Unallocated costs include corporate services
costs, board costs, share-based payment expenses and acquisition costs.
Geographical segments
The consolidated entity operated in only one geographical segment during 2020 and 2019, being Australia.
60
ww
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 4. REVENUE
Revenue from contracts with customers
Sale of goods
Rendering of services – Broadband and fibre access networks
Rendering of services – Telecommunications services
Rendering of services – Recurring network revenues
Developer revenues
Other revenue
Interest revenue
Other revenue
CONSOLIDATED
2020
$’000
2019
$’000
37
23,462
20,576
10,989
2,182
57,246
324
646
970
191
13,400
704
–
–
14,295
41
–
41
58,216
14,336
Revenue from contracts with customers is recognised over time, excluding sale of goods.
61
NOTE 4. REVENUE continued
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
CONSOLIDATED – 2020
Major product lines
Broadband and fibre access networks
Telecommunications services
Recurring network revenues
Developer revenues
Sale of goods
Geographical regions
Australia
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
WHOLESALE &
INFRASTRUCTURE
$’000
SPECIALTY
SERVICES
$’000
CONSUMER &
BUSINESS
ENABLEMENT
$’000
INTER-
COMPANY1
$’000
–
–
–
20,576
20,086
2,182
–
–
–
–
23,797
–
–
–
37
(335)
–
(9,097)
–
–
TOTAL
$’000
23,462
20,576
10,989
2,182
37
22,268
20,576
23,834
(9,432)
57,246
22,268
22,268
–
22,268
22,268
20,576
20,576
–
20,576
20,576
23,834
23,834
37
23,797
23,834
(9,432)
(9,432)
–
(9,432)
(9,432)
57,246
57,246
37
57,209
57,246
(1) Intercompany revenue is eliminated on consolidation and relates primarily to recurring charges from the W&I business unit to the CBE business
unit for the provision of wholesale telecommunications services.
CONSOLIDATED – 2019
Major product lines
Broadband and fibre access networks
Telecommunications services
Sale of goods
Geographical regions
Australia
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
WHOLESALE &
INFRASTRUCTURE
$’000
SPECIALTY
SERVICES
$’000
CONSUMER &
BUSINESS
ENABLEMENT
$’000
INTER-
COMPANY
$’000
–
–
–
–
–
–
–
–
–
–
704
–
704
704
704
–
704
704
13,400
–
191
13,591
13,591
13,591
191
13,400
13,591
–
–
–
–
–
–
–
–
–
TOTAL
$’000
13,400
704
191
14,295
14,295
14,295
191
14,104
14,295
62
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 5. EXPENSES
Profit before income tax includes the following specific expenses:
Network and hardware expense
Network and hardware expense
Employee benefits expense
Share-based payments expense
Depreciation and plant and equipment write off expenses
Leasehold improvements
Plant and equipment
Right-of-use assets
Total depreciation
Amortisation
Customer contracts
Software
Other intangibles
Total amortisation
Total depreciation and amortisation
Impairment of right-of-use asset
Impairment of Network Assets
Other expenses
Restructure costs
Acquisition costs
Other
Total other expenses
Finance costs
CONSOLIDATED
2020
$’000
2019
$’000
13,837
6,619
4,581
3,311
28
3,127
813
3,968
2,586
220
79
2,885
6,853
–
4,274
840
5,114
539
100
–
639
5,753
–
1,407
707
5,187
5,032
10,926
–
211
3,708
3,919
Interest and finance charges paid/payable
595
872
63
UNITI GROUP LIMITED ANNUAL REPORT 2020 w
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2020
NOTE 6. TAX BALANCES
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Aggregate income tax benefit
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30% (2019: 27.5%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Net deferred tax assets and liabilities brought to account
Tax losses utilised
Tax loss not recognised
Customer contract amortisation
Share-based payments
Other items
Income tax benefit
Deferred tax assets not brought to account
Unrecognised deferred tax relating to tax losses
Unrecognised deferred tax relating to temporary differences
CONSOLIDATED
2020
$’000
2019
$’000
1,890
(9,204)
(7,314)
–
–
–
8,607
2,582
(13,531)
(3,721)
(9,204)
(2,281)
–
–
1,629
(40)
(7,314)
–
–
2,457
139
910
215
–
–
–
–
3,345
653
3,998
The tax benefit represents the recognition of income tax losses incurred by Uniti and certain acquired companies
from prior periods and the movement in the deferred tax assets and liabilities on the acquired companies joining
the tax consolidated group. The transition to significant profits before tax in the year has meant that the realisation
of accumulated losses being recouped against current and future taxable income is more certain, requiring the
recording of the deferred tax asset for these losses. During FY20, the Group recorded a taxable income, utilising
$7.6 million (tax affected: $2.3 million) of the prior period and transferred in losses. The Group losses are utilised
initially, with transferred in losses from acquisitions subsequently utilised against taxable income in accordance
with their available fraction. As at 30 June 2020, the balance of the available losses is $8.1 million (tax affected:
$2.4 million), which will be utilised in future periods in accordance with their available fraction. The residual tax
income is a result of movements across deferred tax asset and liabilities.
64
w
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 6. TAX BALANCES continued
Movements in deferred tax balances
NET
OPENING
BALANCE
$’000
RECOGNISE
IN PROFIT
OR LOSS
$’000
RECOGNISED
DIRECTLY TO
EQUITY
$’000
ACQUISITIONS
$’000
NET CLOSING
BALANCE $’000
DEFERRED
TAX ASSETS
$’000
DEFERRED
TAX
LIABILITIES
$’000
BALANCE AT 30 JUNE
CONSOLIDATED – 2020
Trade and other receivables
Intangible assets
Provisions and accruals
Deferred Income
Lease liability
Blackhole expenditure
–
–
–
–
–
–
728
72
475
1,187
650
3,675
Tax losses carried forward
– 2,417
–
9,204
–
–
–
–
–
–
–
–
–
728
728
–
(9,036)
(8,964)
–
(8,964)
–
–
–
–
–
475
1,187
650
3,675
2,417
475
1,187
650
3,675
2,417
–
–
–
–
–
(9,036)
168
9,132
(8,964)
NOTE 7. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Cash on deposit
CONSOLIDATED
2020
$’000
–
7,499
181,651
189,150
2019
$’000
1
894
18,236
19,131
Cash and cash equivalents include $148 million net proceeds from the institutional entitlement offer, which will be used
to partially fund the Company’s proposed acquisition of OptiComm Limited, subject to satisfaction of the final Scheme
of Arrangement conditions. Cash on deposit includes $1.7 million cash secured bank guarantees. These guarantees are
required until November 2020.
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
189,150
189,150
19,131
19,131
65
NOTE 8. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Other receivables
CONSOLIDATED
2020
$’000
7,563
(2,428)
5,135
846
5,981
2019
$’000
2,082
(575)
1,507
–
1,507
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
%(1)
1%
25%
50%
100%
CARRYING
AMOUNT 2020
$’000
ALLOWANCE FOR EXPECTED
CREDIT LOSSES 2020
$’000
4,139
591
514
2,319
7,563
(97)
(117)
(182)
(2,032)
(2,428)
(1) Specific debtors balances have been excluded from the general provision where there is a degree of certainty around the recoverability of
these debts or Uniti is not exposed to any credit risk.
Opening balance
Additional provisions recognised
Additions as part of Business Combinations
CONSOLIDATED
2020
$’000
575
260
1,593
2,428
2019
$’000
–
120
455
575
Allowance for expected credit losses
The allowance for expected credit losses are determined using a provision matrix and excludes debtors based on
specific assessment. The consolidated entity has recognised a loss of $260,000 (2019: $120,000) in Other expenses
in respect of the expected credit losses for the year ended 30 June 2020.
Impact of COVID-19 on the allowance for expected credit losses calculation:
Management acknowledge that there is a level of uncertainty in the economy at present. However, the
telecommunications industry is insulated to a degree due to the essential nature of the services the Group provides.
In addition, demand for internet services and bandwidth has increased, further emphasising the importance
of telecommunications services. Furthermore, the construction industry has continued to operate during the
COVID-19 restriction period and we have not noted a decline in revenues due to any pandemic related factors.
Management has employed a level of conservatism when assessing current and forecast credit conditions and
considered this when determining the default rate on debtors’ balances.
66
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 9. CURRENT ASSETS – INVENTORIES
Customer premise and network equipment
Provision for stock obsolescence
CONSOLIDATED
2020
$’000
969
(10)
959
NOTE 10. CURRENT ASSETS – DEPOSITS AND PREPAYMENTS
Deposits
Security deposits
Prepayments
NOTE 11. CURRENT ASSETS – CONTRACT ASSETS
Contract assets
NOTE 12. NON-CURRENT ASSETS – RIGHT-OF-USE ASSETS
Office leases – at cost
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
2020
$’000
75
57
1,941
2,073
CONSOLIDATED
2020
$’000
1,008
1,008
CONSOLIDATED
2020
$’000
1,974
(1,071)
903
83
(59)
24
5,261
(3,180)
2,081
117
(81)
36
2019
$’000
285
(10)
275
2019
$’000
26
3
579
608
2019
$’000
824
824
2019
$’000
1,233
(664)
569
130
(61)
69
6,886
(3,112)
3,774
94
(42)
52
3,044
4,464
67
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 12. NON-CURRENT ASSETS – RIGHT-OF-USE ASSETS continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2018
Additions
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
Additions
Additions through business combinations
(Note 32)
Disposals
Remeasurement (4)
Depreciation expense
Balance at 30 June 2020
OFFICE
LEASES
$’000
1,605
54
–
(861)
–
(88)
(141)
569
–
526
–
195
(387)
903
PLANT AND
EQUIPMENT
$’000
NETWORK
INFRASTRUCTURE
$’000
88
–
–
–
–
–
(19)
69
–
–
–
(28)
(17)
24
5,709
804
(1,407)
(683)
–
–
(649)
3,774
–
–
–
(1,314)
(379)
2,081
MOTOR
VEHICLES
$’000
490
–
–
–
(407)
–
(31)
52
–
–
–
23
(39)
36
TOTAL
$’000
7,892
858
(1,407)
(1,544)
(407)
(88)
(840)
4,464
–
526
–
(1,124)
(822)
3,044
(1) In prior year, as a result of the annual review for impairment, non-performing towers were identified and an impairment charge of $1.4 million was booked.
(2) In prior year, the remaining expected lease term was adjusted resulting in revaluation of the associated right-of-use-asset value.
(3) In prior year, vehicles owned by the Group were reclassified as Plant and Equipment as they are owned and controlled by the Group.
(4) During the year, remeasurement in the lease liability has resulted in the change in the carrying value of the right-of-use assets.
NOTE 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 – at cost
Less: Accumulated depreciation
68
CONSOLIDATED
2020
$’000
219
(99)
120
1,484
(588)
896
50,543
(5,850)
44,693
45,709
2019
$’000
219
(72)
147
1,227
(756)
471
7,503
(4,532)
2,971
3,589
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 13. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2018
Additions
Reclassification of asset type
Additions through business combinations (Note 32)
Disposals
Depreciation expense
Balance at 30 June 2019
Additions
Additions through business combinations (Note 32)
Measurement period adjustments (Note 32)
Disposals
Reclassification of asset type
Remeasurements (1)
Depreciation expense
Balance at 30 June 2020
LEASEHOLD
IMPROVEMENTS
$’000
PLANT AND
EQUIPMENT
$’000
NETWORK
INFRASTRUCTURE
$’000
169
4
–
–
–
(26)
147
–
–
–
–
–
–
(27)
120
342
5
407
218
(339)
(162)
471
166
463
(242)
(31)
-
272
(203)
896
4,571
2,132
–
354
–
(4,086)
2,971
8,864
35,856
-
-
(187)
(1,112)
(1,699)
44,693
TOTAL
$’000
5,082
2,141
407
572
(339)
(4,274)
3,589
9,030
36,319
(242)
(31)
(187)
(840)
(1,929)
45,709
(1) During the year, the base asset value for customer premise equipment (CPE) was adjusted based on the active customer list as at 30 June 2020.
NOTE 14. NON-CURRENT ASSETS – INTANGIBLES
Goodwill
Less: Impairment
Customer contracts – at cost
Less: Accumulated amortisation
Software – at cost
Less: Accumulated amortisation
Other intangible assets
Less: Accumulated amortisation
Brand
Trademarks
CONSOLIDATED
2020
$’000
176,011
–
176,011
26,051
(2,934)
23,117
1,681
(428)
1,253
1,178
(79)
1,099
4,524
23
4,547
2019
$’000
13,451
–
13,451
7,070
(539)
6,531
1,305
(625)
680
235
–
235
–
23
23
206,027
20,920
69
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 14. NON-CURRENT ASSETS – INTANGIBLES continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
CONSOLIDATED
Balance at 1 July 2018
Additions
Additions through business
combinations (Note 32)
Amortisation expense
Balance at 30 June 2019
Additions
Additions through business
combinations (Note 32)
Measurement period
adjustments (Note 32)
Reclassification of asset type
Remeasurement
Amortisation expense
GOODWILL
$’000
CUSTOMER
CONTRACTS
$’000
BRANDS
$’000
SOFTWARE
$’000
OTHER
INTANGIBLE
ASSETS
$’000
TRADEMARKS
$’000
TOTAL
$’000
–
–
–
–
13,451
7,070
–
13,451
–
(539)
6,531
174
–
–
–
–
–
–
216
62
502
(100)
680
452
–
23
212
–
235
76
–
23
–
–
23
–
216
108
21,235
(639)
20,920
702
161,327
20,367
1,695
330
1,231
–
184,950
1,233
(1,560)
2,829
–
–
–
–
–
(2,395)
–
–
–
–
23
–
(232)
–
(23)
(341)
(79)
–
–
–
–
2,502
–
(341)
(2,706)
Balance at 30 June 2020
176,011
23,117
4,524
1,253
1,099
23
206,027
Impairment testing
Goodwill acquired through business combinations and brands have been allocated for impairment testing purposes
to the following cash-generating units:
> Consumer & Business Enablement.
> Wholesale & Infrastructure.
> Specialty Services.
The recoverable amount of the CGU has been determined by a value-in-use calculation using a discounted cash
flow model, based on a 5 year projected cash flow and terminal value. The cash flow projections are based on
financial estimates approved by the Board for the 2021 financial year and Management’s view on the further four
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. Corporate
charges were allocated to each business unit based on the percentage of the business unit’s underlying EBITDA in
comparison to the Group.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
70
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 14. NON-CURRENT ASSETS – INTANGIBLES continued
The following key assumptions were used in the discounted cash flow model:
KEY ASSUMPTIONS
Discount rate (post tax)
Terminal value growth rate
WHOLESALE &
INFRASTRUCTURE
SPECIALTY SERVICES
CONSUMER & BUSINESS
ENABLEMENT
7.8%
3%
8.5%
3%
8.7%
3%
Other key assumptions used in the calculation are:
> Five-year cashflow forecasts, of which the initial year is the board approved budget.
> Capital expenditure five-year forecast.
> The discount rate used in 2019 was 10.8% (post tax) across the single CGU.
The discount rate has been determined using the estimated weighted average cost of capital which incorporates
both the cost of debt and the cost of capital, using a benchmark gearing level. The resulting discounted cash flow
exceeded the carrying value of goodwill on the company’s balance sheet.
Carrying amounts and recoverable amounts by business units for FY20 are disclosed in the table below:
KEY ASSUMPTIONS
Carrying amount – goodwill
Carrying amount – intangible assets
WHOLESALE &
INFRASTRUCTURE
$‘000
SPECIALTY SERVICES
$‘000
CONSUMER & BUSINESS
ENABLEMENT
$‘000
97,852
2,088
70,833
23,381
7,326
3,272
Impact of COVID-19 on impairment testing
Management has considered any potential impacts from COVID-19 when assessing the recoverable amount of the
CGU. The Group may be impacted both by deterioration in macroeconomic conditions generally and specifically in
relation to its operations. To date, COVID-19 has affected, amongst other things, economic conditions, employment
markets, equity markets, governmental action, regulatory policy, quarantining, self-isolations and travel restrictions.
In addition, the COVID-19 global pandemic may specifically impact the projected growth rate of Uniti’s W&I business,
including any downturn in the property market which may lead to a delay in the construction of new developments and
in the signing of new developer agreements and/or delay in the construction of dwellings under these new agreements,
resulting in delays in the realisation of revenue from these contracts. There is also a risk that the operations may be
interrupted by government enforced restrictions (such as lockdowns) or other COVID-19 related health concerns.
Although there is a level of inherent uncertainty as outlined above, there has not been any noticeable adverse impact
on the group’s operations or profitability as further discussed below. We note that telecommunications remains an essential
service and the current environment has led to increased demand for telecommunications products and services.
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.
71
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 15. CURRENT AND NON-CURRENT LIABILITIES
– TRADE AND OTHER PAYABLES
Current liability
Trade payables
Other payables
Accrued expenses
Non-current liability
Unearned Grant Income – South Australia Financing Authority Grant
CONSOLIDATED
2020
$’000
2019
$’000
5,601
2,164
5,376
13,141
1,411
1,411
3,630
204
834
4,668
1,500
1,500
Unearned Income of $1.4 million (2019: $1.5 million) was received in the prior year from the South Australia Financing
Authority but not yet recognised. This income will be brought to account as revenue progressively as grant income
criteria are met.
Refer to Note 23 for further information on financial instruments.
NOTE 16. CURRENT AND NON-CURRENT – CONTRACT LIABILITIES
Current liability
Customer contract liabilities
Non-current liability
Customer contract liabilities
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
Revenue recognised from acquired balance
Revenue deferred during the year
CONSOLIDATED
2020
$’000
2019
$’000
2,269
472
–
2,269
26
498
498
1,178
(472)
(1,178)
2,243
2,269
569
348
(550)
–
131
498
72
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 16. CURRENT AND NON-CURRENT – CONTRACT LIABILITIES continued
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 $2.3 million as at 30 June 2020 ($0.5 million as at 30 June 2019) and is expected to
be recognised as revenue in future periods as follows:
Within 12 months
1 – 2 years
2 – 5 years
CONSOLIDATED
2020
$’000
2,269
–
–
2,269
2019
$’000
472
26
–
498
NOTE 17. CURRENT AND NON-CURRENT LIABILITIES – EMPLOYEE BENEFITS
Employee benefits – current
Employee benefits – non-current
CONSOLIDATED
2020
$’000
1,076
93
1,169
2019
$’000
255
33
288
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
CONSOLIDATED
2020
$’000
295
2019
$’000
64
73
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 18. CURRENT AND NON-CURRENT LIABILITIES – CONTINGENT
CONSIDERATION
Current liability
Contingent consideration for Fone Dynamics acquisition
Contingent consideration for LBNCo acquisition
Non-current liability
Contingent consideration for Call Dynamics acquisition
Contingent consideration for Fone Dynamics acquisition
Contingent consideration for LBNCo acquisition
CONSOLIDATED
2020
$’000
2019
$’000
1,747
2,692
4,439
–
–
2,712
2,712
6,546
–
6,546
630
1,854
–
2,484
The total contingent consideration for LBNCo and Fone was measured at fair value as at 30 June 2020.
Refer to Note 23 for further information on contingent consideration.
NOTE 19. CURRENT AND NON-CURRENT LIABILITIES – BORROWINGS
Current liability
South Australia Financing Authority loan
Other loans
Lease liabilities
Non-current liability
South Australia Financing Authority loan
Lease liabilities
Refer to Note 23 for further information on financial instruments.
CONSOLIDATED
2020
$’000
2019
$’000
–
–
1,357
1,357
–
3,853
3,853
735
15
1,076
1,826
1,725
5,789
7,514
74
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 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
2 – 5 years
Network Infrastructure
2 – 10 years
Plant and Equipment
4 – 5 years
Motor Vehicles
8 years
2 – 5 years
2 – 10 years
None
None
Assets pledged as security
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.
NOTE 20. EQUITY – ISSUED CAPITAL
Ordinary shares – fully paid
433,453,275
147,034,060
421,812
46,691
CONSOLIDATED
2020
SHARES
2019
SHARES
2020
$’000
2019
$’000
75
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 20. EQUITY – ISSUED CAPITAL continued
CONSOLIDATED
DATE
SHARES
ISSUE PRICE
$’000
30 June 2018
2,953,017
DETAILS
Balance
Issue of share capital:
Issue of shares (IPO)
Issue of shares (Placement)
Share issue transaction costs
Issue of shares to vendors on acquisition:
Issue of shares to Fuzenet vendor
Issue of shares to Call Dynamics vendor
Issue of shares to Pivit vendor
Share issue transaction costs
Other:
Issue of shares
Share Split (15.1059917 for 1)
Issue of shares to convertible note holders
Issue of shares to key management personnel
Share issue transaction costs
Balance
Issue of share capital:
Issue of shares (Placement)
Issue of shares (Retail entitlement offer)
Issue of shares (Retail entitlement offer)
Issue of shares (Placement)
Issue of shares (Retail entitlement offer)
Issue of shares (Retail entitlement offer)
Issue of shares (Placement)
Share issue transaction costs
Issue of shares to vendors on acquisition:
Issue of shares to Pivit vendor
Issue of shares to Fone Dynamics vendor
Issue of shares to LBNCo vendor
Issue of shares to OPENetworks vendor
Issue of shares to 1300 Australia vendor
Issue of shares to Pivit vendor
Share issue transaction costs
13 February 2019
5 June 2019
Various
13 February 2019
31 May 2019
7 June 2019
Various
7 September 2018
7 December 2018
13 February 2019
13 February 2019
Various
30 June 2019
26 August 2019
26 August 2019
20 September 2019
11 December 2019
11 December 2019
27 December 2019
24 June 2020
Various
4 July 2019
12 August 2019
30 September 2019
31 October 2019
16 December 2019
8 May 2020
Various
52,724,212
15,000,000
n/a
67,724,212
6,600,000
978,100
32,401
n/a
7,610,501
75,000
42,713,183
17,845,993
8,112,154
n/a
68,746,330
147,034,060
15,548,988
19,131,363
48,803,240
26,505,383
17,105,166
8,795,543
108,480,884
n/a
244,370,567
56,196
12,556,059
9,384,755
6,492,425
12,345,682
140,550
n/a
40,975,667
94,828
648,153
330,000
n/a
n/a
1,072,981
11,907
13,181
15,000
(1,483)
26,698
1,650
740
30
(7)
2,413
675
n/a
3,123
2,028
(153)
5,673
46,691
18,659
22,958
58,564
42,939
27,710
14,249
151,873
(9,116)
327,836
80
6,652
11,262
9,389
20,000
–
(189)
47,194
115
161
184
(317)
(52)
91
$0.25
$1.00
n/a
n/a
$0.25
$0.76
$0.93
n/a
n/a
$9.00
n/a
$0.175
$0.25
n/a
n/a
n/a
$1.20
$1.20
$1.20
$1.62
$1.62
$1.62
$1.40
n/a
n/a
$1.42
$0.53
$1.20
$1.45
$1.62
–
n/a
n/a
$1.22
$0.25
$0.56
n/a
n/a
n/a
Other:
Issue of shares under employee shares
Conversion of share-based payment option on exercise
Conversion of share-based payment option on exercise
Reserves reclassification
Share issue transaction costs
20 April 2020
19 June 2020
25 June 2020
Various
Balance
30 June 2020
433,453,275
n/a
421,812
76
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 20. EQUITY – ISSUED CAPITAL continued
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.
Reconciliation to proceeds from issue of shares
Issue of Shares
Issue of shares to vendor on business acquisition
Repayment of contingent consideration
Share-based payments and reserve reclassification
NOTE 21. EQUITY – RESERVES
Share Option reserve
CONSOLIDATED
2020
$’000
384,477
(40,747)
(6,652)
202
337,280
2019
$’000
36,427
(2,390)
–
(5,856)
28,181
CONSOLIDATED
2020
$’000
6,065
6,065
2019
$’000
1,283
1,283
Share Option reserve
The reserve is used to recognise the fair value of share-based payments, in particular options issued to Directors and
Senior Management.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
CONSOLIDATED
Balance at 30 June 2018
Options Issued
Balance at 30 June 2019
Options Issued
Reserve reclassification
Balance at 30 June 2020
TOTAL
$’000
–
1,283
1,283
4,465
317
6,065
77
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 22. EQUITY – ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial year
Profit / (Loss) after income tax expense for the year
Accumulated losses at the end of the financial year
NOTE 23. FINANCIAL INSTRUMENTS
CONSOLIDATED
2020
$’000
2019
$’000
(22,104)
(8,573)
15,921
(13,531)
(6,183)
(22,104)
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 limited transactions denominated in foreign currency and is exposed to limited
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.
Price risk
The consolidated entity is not exposed to any significant price risk. Most 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 for FY19.
The consolidated entity had no loans outstanding as at 30 June 2020 (2019: $2.5 million).
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 using 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 impact of COVID-19 on the allowance for calculation for expected credit losses calculation was assessed as at
30 June 2020. Please refer to Note 8.
78
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 23. FINANCIAL INSTRUMENTS continued
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.
Cash and cash equivalents
Credit risk related to balances with banks and other financial institutions is managed by the Board.
The Group held cash and cash equivalents of $189.2 million as at 30 June 2020 and $19.1 million as at 30 June 2019.
The cash and cash equivalents are held with bank and financial institution counterparties, which are rated A to AA-,
based on Standard & Poor’s ratings.
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the
short maturities of the exposures. The Group considers that its cash and cash equivalents have low credit risk based
on the external credit ratings of the counterparties. The Group uses a similar approach for assessment of ECLs for
cash and cash equivalents to those used for debt securities.
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
2020
$’000
–
–
2019
$’000
209
209
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.
79
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 23. FINANCIAL INSTRUMENTS continued
CONSOLIDATED – 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Contingent consideration
Interest-bearing – fixed rate
Right of use liability
Total non-derivatives
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
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
–
–
–
5,601
7,540
–
–
4,439
2,712
–
–
–
–
–
–
8.21%
1,058
18,638
921
3,633
1,887
1,887
2,934
2,934
5,601
7,540
7,151
6,800
27,092
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
2,690
4,580
66
792
71
792
30
990
–
–
3,630
1,038
9,030
9,986
167
2,574
Total non-derivatives
13,400
4,735
3,710
4,580
26,425
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
The interest expense on lease liabilities incurred in FY20 was $432,000 (2019: $660,000).
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
80
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 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
LEVEL 2
LEVEL 3
Measurements based on quoted
prices (unadjusted) in active
markets for identical assets or
liabilities that the entity can access
at the measurement date.
Measurements based on inputs
other than quoted prices included
in Level 1 that are observable for
the asset or liability, either directly
or indirectly.
Measurements based on
unobservable inputs for the asset
or liability.
CONSOLIDATED – 2020
Liabilities
Contingent consideration
LEVEL 1
$’000
LEVEL 2
$’000
–
–
–
–
LEVEL 3
$’000
7,151
7,151
TOTAL
$’000
7,151
7,151
There were no transfers between levels during the financial year. The fair value of assets and liabilities classified as level
three is determined by the use of models incorporating unobservable inputs and assumptions. Included within the $7.1
million balance above is $5.4 million contingent consideration for the LBNCo acquisition. This has been calculated based
on amounts expected to be settled using estimated constructed and activated port numbers, developer revenue and
new development fee amounts.
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
Equity settled options
CONSOLIDATED
2020
$
2019
$
1,657,330
977,839
97,009
14,187
66,769
16,067
3,822,214
3,302,066
5,590,740
4,362,741
81
UNITI GROUP LIMITED ANNUAL REPORT 2020
ww
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2020
NOTE 26. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu,
the auditor of the company, its network firms and unrelated firms:
CONSOLIDATED
2020
$
2019
$
Audit services – Deloitte Touche Tohmatsu (2019: HLB Mann Judd Audit (SA) Pty Ltd)
Audit or review of the financial statements
170,000
64,798
Other services – Deloitte Touche Tohmatsu (2019: HLB Mann Judd Audit (SA) Pty Ltd)
Preparation of Independent limited Assurance Report for Listing
Review of forecast for IPO
File access fees
–
–
8,950
96,411
55,000
–
178,950
216,209
NOTE 27. CONTINGENT ASSETS
There are no Contingent assets as at 30 June 2020.
NOTE 28. CONTINGENT LIABILITIES
The consolidated entity has given bank guarantees as at 30 June 2020 of $1,651,000 on a term deposit and to
various landlords (2019: $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
CONSOLIDATED
2020
$’000
2019
$’000
126
–
–
25
Uniti has entered into a scheme implementation deed with ASX listed OptiComm Limited (ASX: OPC, OptiComm)
under which Uniti will acquire 100% of the OptiComm shares on issue by way of a scheme arrangement (Scheme).
Subject to OptiComm shareholders voting in favour of the Scheme and the Federal Court subsequently approving
the Scheme at the second court hearing to be held on 18 September 2020, the transaction is scheduled to be
implemented on 30 September 2020, at which time Uniti will assume unconditional control of OptiComm. Uniti’s
acquisition consideration of $532 million will be settled via $407 million cash consideration and the issue of 84
million Uniti shares. Uniti has already raised $270 million from an equity rights issue and has executed a binding term
sheet for a new $150 million debt facility to fund the balance of the cash consideration payable.
82
ww
UNITI GROUP LIMITED ANNUAL REPORT 2020
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
2020
$
2019
$
497,389
599,420
5,455
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)
110,674
178,267
CONSOLIDATED
2020
$
2019
$
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.
83
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
Share-based payments option reserve
Accumulated losses
Total equity
PARENT
2020
$’000
(6,351)
(6,351)
2019
$’000
(14,515)
(14,515)
PARENT
2020
$’000
169,892
411,595
8,004
13,155
422,130
5,749
2019
$’000
18,350
46,478
3,331
21,592
46,691
1,283
(29,439)
(23,088)
398,440
24,886
Contingent liabilities
The parent entity has given bank guarantees as at 30 June 2020 of $1,651,000 on a term deposit and to various
landlords (2019: $24,600 to various landlords).
Capital commitments
Uniti has entered into a scheme implementation deed with ASX listed OptiComm Limited (ASX: OPC, OptiComm)
under which Uniti will acquire 100% of the OptiComm shares on issue by way of a scheme arrangement (Scheme).
Subject to OptiComm shareholders voting in favour of the Scheme and the Federal Court subsequently approving
the Scheme at the second court hearing to be held on 18 September 2020, the transaction is scheduled to be
implemented on 30 September 2020, at which time Uniti will assume unconditional control of OptiComm. Uniti’s
acquisition consideration of $532 million will be settled via $407 million cash consideration and the issue of 84
million Uniti shares. Uniti has already raised $270 million from an equity rights issue and has executed a binding term
sheet for a new $150 million debt facility to fund the balance of the cash consideration payable.
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
84
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS
On 1 October 2019, Uniti Group Limited acquired 100% of the ordinary shares of LBNCo Pty Ltd (LBNCo). The
acquired business contributed revenues of $18.1 million and profit after tax of $9.9 million to the consolidated entity
for the period from 1 October 2019 to 30 June 2020. Disclosure of the full year contributions for revenue and profit
after tax for LBNCo is impracticable 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 and reported
in relation to the acquisition of LBNCo were provisional as at 31 December 2019. The final values are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Inventories
Right-of-use assets
Plant and equipment
Software
Brand valuation
Trade payables
Other payables
Contract liabilities
Employee benefits provision
Lease liability
Contingent consideration
Net deferred tax liability
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
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
FINAL
$’000
2,556
3,321
502
588
402
28,033
190
664
(2,398)
(950)
(1,573)
(1,566)
(508)
(5,404)
(768)
23,089
79,811
102,900
91,542
11,358
102,900
91,542
(2,556)
88,986
85
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS continued
Reconciliation:
Goodwill at 31 December 2019
Measurement period adjustments:
Cash and cash equivalents
Trade receivables
Prepayments
Brand valuation
Other payables
Contract liabilities
Net deferred tax liability
Net assets acquired
Goodwill at 30 June 2020
FINAL
$’000
79,811
5
(169)
(4)
175
(378)
696
(37)
288
79,523
86
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS continued
On 1 November 2019, Uniti Group Limited acquired 100% of the ordinary shares of OPENetworks Pty Ltd (OPENetworks).
The acquired business contributed revenues of $3.7 million and profit after tax of $2.2 million to the consolidated entity
for the period from 1 November 2019 to 30 June 2020. Disclosure of the full year contributions for revenue and profit
after tax for OPENetworks is impracticable 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 and reported
in relation to the acquisition of OPENetworks were provisional as at 31 December 2019. The final values are as follows:
Cash and cash equivalents
Trade receivables
Inventories
Right-of-use assets
Plant and equipment
Software
Customer contracts
Brand valuation
Trade payables
Other payables
Net deferred tax liability
Employee benefits provision
Lease liability
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Shares issued/to be issued in lieu of cash paid
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
FINAL
$’000
245
365
473
124
8,122
140
1,573
132
(17)
(21)
(413)
(325)
(120)
10,278
17,727
28,005
18,616
9,389
28,005
18,616
(245)
18,371
87
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS continued
Reconciliation:
Goodwill at 31 December 2019
Measurement period adjustments:
Cash and cash equivalents
Trade receivables
Customer contracts
Brand valuation
Trade payables
Other payables
Contract liabilities
Employee benefits provision
Net deferred tax liability
Net assets acquired
Goodwill at 30 June 2020
FINAL
$’000
17,727
(1)
(25)
(412)
134
(2)
(48)
(301)
(30)
83
(602)
18,329
88
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS continued
On 16 December 2019, Uniti Group Limited acquired 100% of the ordinary shares of 1300 Australia Pty Ltd (1300 Australia).
The acquired business contributed revenues of $11.0 million and profit after tax of $6.8 million to the consolidated entity
for the period from 1 December 2019 to 30 June 2020. Disclosure of the full year contributions for revenue and profit
after tax for 1300 Australia is impracticable 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 and reported
in relation to the acquisition of 1300 Australia were provisional as at 31 December 2019. The final values are as follows:
Cash and cash equivalents
Trade receivables
Prepayments
Intangible assets
Other assets
Plant and equipment
Customer contracts
Brand valuation
Trade payables
Other payables
Deferred tax liability
Employee benefits provision
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
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
FINAL
$’000
2,500
873
568
88
55
164
17,977
887
(896)
(1,823)
(5,158)
(307)
14,928
64,616
79,544
59,544
20,000
79,544
59,544
(2,500)
57,044
89
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 32. BUSINESS COMBINATIONS continued
Reconciliation:
Goodwill at 31 December 2019
Measurement period adjustments:
Trade receivables
Intangible assets
Customer contracts
Brand valuation
Trade payables
Other payables
Deferred tax liability
Employee benefits provision
Net assets acquired
Goodwill at 30 June 2020
Payment for purchase of business, net of cash acquired
Acquisition of 1300 Australia
Acquisition of LBNCo
Acquisition of OPENetworks
Other – asset purchase and contingent consideration payment
FINAL
$’000
64,616
(272)
1,140
1,229
(297)
(7)
10
(622)
(40)
1,141
63,475
2020
$’000
57,044
88,986
18,371
164,401
1,126
165,527
90
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 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
1300 Holdings Pty Ltd
1300 Australia Pty Ltd
Alpha Phone Words Pty Ltd
LBNCo Holdings Pty Ltd
LBNCo InterCo Pty Ltd
LBNCo BidCo Pty Ltd
LBN Co Pty Ltd
Service Elements Pty Ltd
Link Us Pty Ltd
Capital Fibre Networks Pty Ltd
OPENetworks Pty Ltd
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
FDX Infotech Pty Ltd
Fuzeconnect Pty Ltd
LK Internet Pty Ltd
Uniti Wireless Limited
Uniti Broadband Limited
PRINCIPAL PLACE OF BUSINESS/
COUNTRY OF INCORPORATION
2020
2019
OWNERSHIP INTEREST
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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%
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%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
91
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 34. DEED OF CROSS GUARANTEE
A deed of cross guarantee between Uniti Group Limited and its entities listed above was enacted during the financial year
and relief was obtained from preparing individual financial statements for the Group under ASIC Corporations (Wholly-
owned Companies) Instrument 2016/785. Under the deed, Uniti Group Limited guarantees to support the liabilities
and obligations of its subsidiaries listed above. As its entities are a party to the deed the income statement and balance
sheet information of the combined class-ordered group is equivalent to the consolidated information presented in this
financial report.
NOTE 35. EVENTS AFTER THE REPORTING PERIOD
On 15 June 2020, Uniti announced it had entered a scheme implementation deed with ASX listed OptiComm
Limited (ASX: OPC, OptiComm) under which Uniti will acquire 100% of the OptiComm shares on issue by way of a
scheme arrangement (Scheme). Since the announcement on 15 June 2020 and subsequent to 30 June 2020, the
Federal Court has approved the despatch of the Scheme Booklet and convening of the OptiComm Scheme meeting.
The Scheme Booklet includes an independent’s expert report which concludes that the Scheme is in the best interest
of OptiComm shareholders, in the absence of a superior proposal. The directors of OptiComm recommend that
shareholders vote in favour of the Scheme, in the absence of a superior proposal, and subject to the independent expert
continuing to conclude that the Scheme is in the best interests of OptiComm shareholders. Subject to OptiComm
shareholders voting in favour of the Scheme and the Federal Court subsequently approving the Scheme at the second
court hearing to be held on 18 September 2020, the transaction is scheduled to be implemented on 30 September 2020,
at which time Uniti will assume unconditional control of OptiComm. Included in the FY20 Annual Report is the issuance
of share capital of $148.0 million to partially fund the acquisition (net of related share issue costs of $3.9 million), as well
as due diligence and other acquisition costs of $2.4 million which have been expensed.
Subsequent to 30 June 2020, the Group has acquired customer contracts and network assets for a total of
$0.7 million from Ultra ISP Pty Ltd.
Impact of COVID-19:
The global impact of the COVID-19 pandemic, and the advice and responses from health and regulatory authorities,
is continuously developing. The global economic outlook is facing uncertainty due to the COVID-19 pandemic
which has had and may continue to have significant impact on capital markets and share prices.
In addition, the COVID-19 global pandemic may specifically impact the projected growth rate of Uniti’s W&I business,
including any downturn in the property market which may lead to a delay in the construction of new developments
and in the signing of new developer agreements and/or delay in the construction of dwellings under these new
agreements, and/or increased vacancy rates, resulting in delays in the realisation of revenue from these contracts.
There is also a risk that the operations of Uniti may be interrupted by government enforced restrictions (such as
lockdowns) or other COVID-19 related health concerns. Uniti has not claimed any amounts under the Australian
Government JobKeeper Scheme during the financial year or subsequent to 30 June 2020.
Although there is a level of inherent uncertainty as outlined above, there has not been any noticeable adverse
impact on the Group’s operations or profitability. Telecommunications remains an essential service and the current
environment has led to increased demand for telecommunications products and services.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs
in future financial years.
92
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 36. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH
FROM OPERATING ACTIVITIES
Profit/(Loss) after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Impairment of right-of-use assets
Profit on disposal of plant and equipment
Write-off of assets
Transaction costs for business acquisitions
Grant receipt
Share-based payments
Non-cash share expense
Income tax expense
Change in operating assets and liabilities:
(Increase)/Decrease in trade and other receivables
Decrease in inventories
(Increase) in deposits and prepayments
(Increase) in contract assets
(Decrease)/Increase in trade and other payables
(Decrease) in employee benefits
(Decrease)/Increase in other provisions
Increase/(Decrease) in customer contract liability
Net cash from operating activities
NOTE 37. NON-CASH INVESTING AND FINANCING ACTIVITIES
Equity-settled contingent consideration
Shares issued under employee share plan
Options issued under employee option plan
CONSOLIDATED
2020
$ ‘000
6,276
115
4,465
10,856
CONSOLIDATED
2020
$ ‘000
2019
$ ‘000
15,921
(13,531)
6,853
–
(3)
57
5,168
–
4,465
115
(7,314)
(487)
216
(344)
(184)
(1,960)
(1,417)
(35)
593
21,644
5,753
1,407
–
–
–
1,500
3,311
675
–
733
1
(250)
–
830
(229)
124
(70)
254
2019
$ ‘000
2,390
2,028
1,283
5,701
93
UNITI GROUP LIMITED ANNUAL REPORT 2020 NOTE 38. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
CONSOLIDATED
Balance at 1 July 2018
Net cash from/(used in) financing and operating activities
Acquisition of right-of-use assets
Remeasurement of lease liability (Note 12)
Balance at 30 June 2019
OTHER
LOANS
$’000
151
(136)
–
–
15
SAFA
LOAN
$’000
–
2,460
–
–
2,460
Net cash from/(used in) financing and operating activities
(15)
(2,460)
Acquisition of right-of-use assets
Remeasurement of lease liability (Note 12)
Balance at 30 June 2020
–
–
–
–
NOTE 39. EARNINGS PER SHARE
Profit/(Loss) after income tax
Profit/(Loss) after income tax attributable to the owners of Uniti Group Limited
BANK
LOANS
$’000
LEASE
LIABILITY
$’000
209
(209)
–
–
–
–
–
–
–
TOTAL
$’000
9,275
961
563
8,915
(1,154)
563
(1,459)
(1,459)
6,865
9,340
(989)
(3,464)
628
628
(1,294)
(1,294)
5,210
5,210
CONSOLIDATED
2020
$ ‘000
15,921
15,921
2019
$ ‘000
(13,531)
(13,531)
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
274,015,626
116,503,906
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
15,690,104
–
Weighted average number of ordinary shares used in calculating diluted
earnings per share
289,705,730
116,503,906
On the 28th November 2018, Uniti processed a share split providing 15.1056 shares for every 1 share previously held.
The 30 June 2019 shares used represent the shares on issue at the time adjusted for the share split for comparison.
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
CENTS
CENTS
5.81
5.50
(11.6)
(11.6)
94
NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTE 40. SHARE-BASED PAYMENTS
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. 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. Options vest based on the provision of service over the vesting period whereby the employee becomes
beneficially entitled to the option on vesting date. Options are exercisable by the holder from the vesting date.
Set out below are summaries of options granted under the plan:
2020
GRANT DATE
EXPIRY DATE
21/12/2018
30/06/2022
21/12/2018
21/12/2018
13/02/2019
13/02/2019
13/02/2019
13/03/2019
13/03/2019
13/03/2019
13/03/2019
13/03/2019
13/03/2019
13/03/2019
15/04/2019
15/04/2019
15/04/2019
10/09/2019
10/09/2019
10/09/2019
18/10/2019
18/10/2019
18/10/2019
5/11/2019
5/11/2019
5/11/2019
5/11/2019
5/11/2019
5/11/2019
5/11/2019
27/04/2020
27/04/2020
30/06/2023
30/06/2024
30/06/2022
30/06/2023
30/06/2024
31/12/2022
30/06/2023
30/06/2024
30/06/2022
30/06/2023
30/06/2024
30/06/2025
31/03/2022
31/03/2023
31/03/2024
10/09/2023
10/09/2024
10/09/2025
18/10/2023
18/10/2024
18/10/2025
30/06/2022
31/12/2022
31/03/2023
30/06/2023
31/03/2024
30/06/2024
31/03/2025
26/04/2024
26/04/2025
27/04/2020
26/04/2026
Balance as at 30 June
EXERCISE
PRICE
BALANCE AT THE
START OF THE
YEAR
GRANTED
EXERCISED
EXPIRED/
FORFEITED/
OTHER
BALANCE AT
THE END OF
THE YEAR
$0.25
$0.30
$0.38
$0.25
$0.31
$0.38
$0.25
$0.30
$0.38
$0.17
$0.25
$0.30
$0.38
$0.56
$0.71
$0.86
$1.35
$1.50
$1.65
$1.62
$1.77
$1.92
$1.35
$1.35
$1.35
$1.35
$1.35
$1.35
$1.35
$1.38
$1.53
$1.68
3,072,786
1,843,670
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
660,000
660,000
930,000
200,000
200,000
250,000
669,868
178,632
71,940
580,551
71,940
580,551
128,620
80,000
80,000
–
–
–
(648,153)
–
–
–
–
–
–
–
–
–
(330,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(200,000)
(200,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,072,786
1,843,670
1,843,670
277,780
925,933
925,933
819,410
819,410
819,410
200,000
200,000
–
–
–
330,000
590,000
660,000
660,000
930,000
200,000
200,000
250,000
669,868
178,632
71,940
580,551
71,940
580,551
128,620
80,000
80,000
– 90,000
–
– 90,000
14,046,155
5,432,102
(978,153)
(400,000)
18,100,104
95
UNITI GROUP LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
NOTE 40. 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
13/03/2019
13/03/2019
21/12/2018
13/02/2019
13/03/2019
13/03/2019
15/04/2019
5/11/2019
5/11/2019
5/11/2019
5/11/2019
EXPIRY DATE
30/06/2022
30/06/2022
30/06/2022
30/06/2023
30/06/2023
30/06/2023
31/12/2022
30/06/2023
31/03/2023
30/06/2022
30/06/2023
31/12/2022
31/03/2023
2020
NUMBER
2019
NUMBER
3,072,786
3,072,786
925,933
200,000
200,000
1,843,670
925,933
819,410
819,410
330,000
669,868
580,551
178,632
71,940
925,933
–
–
–
–
–
–
–
–
–
–
–
10,638,133
3,998,719
The weighted average option exercise price of all unexercised options on issue at the end of the financial year is
$0.68 (2019: $0.34)
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4 years
(2019: 4.5 years).
For the options granted during the current financial year, the valuation model inputs used to determine the fair value
at the grant date, are as follows:
GRANT DATE
EXPIRY DATE
SHARE PRICE
AT GRANT
DATE
EXERCISE
PRICE
EXPECTED
VOLATILITY
DIVIDEND
YIELD
RISK-FREE
INTEREST
RATE
FAIR VALUE AT
GRANT
DATE
10/09/2019
18/10/2019
5/11/2019
5/11/2019
27/04/2020
10/09/2023
10/09/2024
10/09/2025
18/10/2023
18/10/2024
18/10/2025
30/06/2022
30/06/2023
30/06/2023
31/12/2022
30/06/2023
30/06/2024
31/03/2024
31/03/2025
26/04/2024
26/04/2025
26/04/2026
$1.32
$1.32
$1.32
$1.52
$1.52
$1.52
$1.50
$1.50
$1.50
$1.50
$1.50
$1.50
$1.50
$1.50
$1.38
$1.38
$1.38
$1.35
$1.50
$1.65
$1.62
$1.77
$1.92
$1.35
$1.35
$1.35
$1.35
$1.35
$1.35
$1.35
$1.35
$1.38
$1.53
$1.68
77%
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%
0.0%
0.82%
0.82%
0.82%
0.88%
0.88%
0.88%
0.77%
0.77%
0.77%
0.77%
0.77%
0.77%
0.77%
0.77%
0.23%
0.23%
0.23%
$0.74
$0.78
$0.82
$0.83
$0.89
$0.94
$0.75
$0.72
$0.70
$0.80
$0.85
$0.93
$0.91
$0.98
$0.77
$0.81
$0.85
96
for the year ended 30 June 2020UNITI GROUP LIMITED ANNUAL REPORT 2020
DIRECTORS’ DECLARATION
for the year ended 30 June 2020
In 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 2020 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Group 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
24 August 2020 Sydney
97
UNITI GROUP LIMITED ANNUAL REPORT 2020 UNITI GROUP LIMITED ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
for the year ended 30 June 2020
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Collins Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001
Australia
Tel: +61 3 9671 7000
Fax: +61 3 9671 7001
www.deloitte.com.au
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 subsidiaries (the “Group”)
which comprises the consolidated balance sheet as at 30 June 2020, the consolidated statement of profit or loss
and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
directors of the Company, would be in the same terms if given to directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report for the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
98
98
UNITI GROUP LIMITED ANNUAL REPORT 2020
Key Audit Matter
How the scope of our audit responded to the Key Audit
Matter
Assessment of the recoverability of goodwill
Refer to note 14
Our procedures included, but were not limited to:
As at 30 June 2020, the Group had goodwill totalling $176
million. The recoverability of goodwill is subject to judgement
in determining assumptions and estimates involved in
evaluating the recoverable amounts of the cash generating
units (“CGUs’). The CGUs disclosed are:
Consumer & Business Enablement;
•
• Wholesale & Infrastructure; and
•
Specialty Services.
As disclosed in note 14, management applied a ‘value in use’
approach for all CGUs. Under this approach, discounted cash
flow models were prepared, which included significant
judgements and estimates relating to:
•
•
•
Future cash flows for each CGU;
Discount rates; and
Terminal value growth rates.
Changes to these assumptions can impact the recoverable
amount determined for each CGU.
•
•
•
Assessing the design and implementation of key controls
relating to the preparation of the value-in-use models;
Assessing the determination of the Group’s CGUs based on
our understanding of the nature of the Group’s businesses
and how independent cash flows are derived;
Agreeing forecast cash flows to the latest Board approved
budget and assessing the accuracy of management’s
forecasting;
• With the assistance of our valuation specialists we:
o
o
o
o
o
Assessed management’s value-in-use methodology;
Challenged key assumptions, including forecast
growth rates by comparing them to historical results
and economic forecasts including the impact of
COVID-19;
Evaluated the discount rate used by assessing the
cost of capital for each CGU by comparison to market
data such as IBISWorld industry reports;
Tested the mathematical accuracy of the valuation
model; and
Assessed management’s sensitivity analyses around
key assumptions and estimates used in the valuation
model.
We also assessed the appropriateness of the disclosures included in
the notes to the financial statements.
Accounting for acquisitions in the current period
Refer to note 32
Our procedures included, but were not limited to:
The Group acquired several businesses during the 30 June
2020 financial year and finalised the accounting for certain
acquisitions that were provisionally accounted at 30 June
2019.
Significant judgement is involved in relation to acquisition
accounting including:
•
•
Determining the fair value of acquired tangible
assets such as network infrastructure; and
Identifying and valuing intangible assets acquired
in the business combination such as customer
relationships and brand names.
Changes in the above matters can impact the amount of
goodwill recognised for each of the respective acquisitions.
•
•
Reviewing the sale agreements to understand key terms
and conditions;
Assessing the procedures performed by management
regarding the identification and valuation of acquired assets
and liabilities, including intangible assets;
• With the assistance of our valuation specialists we:
o
o
o
Assessed the third party valuations utilised by
management in their determination of fair value of
assets acquired;
Evaluated the methodology and assumptions used by
the third party in the valuation performed; and
Assessed the competence and objectivity of the third
party.
We also assessed the appropriateness of the disclosures included in
the notes to the financial statements.
Other Information
The Directors are responsible for the other information. The other information comprises the Operational
Highlights, Chairman’s Letter, CEO’s Message, Operating & Financial Review, Directors’ Report, Shareholder
Information, Corporate Directory, ASX Announcement and Investor Presentation which we obtained prior to the
date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not and will 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 identified
above 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 on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
When we read the Other Information, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and use our professional judgement to determine the
appropriate action.
99
99
UNITI GROUP LIMITED ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
for the year ended 30 June 2020
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 to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
100
100
UNITI GROUP LIMITED ANNUAL REPORT 2020
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 38 of the Directors’ Report for the year ended
30 June 2020.
In our opinion, the Remuneration Report of Uniti Group Limited, for the year ended 30 June 2020, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Chris Biermann
Partner
Chartered Accountants
Melbourne, 24 August 2020
101
101
SHAREHOLDER INFORMATION
30 June 2020
ASX 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 2020 (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
NUMBER OF HOLDERS OF ORDINARY SHARES
ORDINARY SHARES
968
1,232
707
1,095
202
4,204
594,562
3,324,529
5,389,430
31,366,093
477,707,527
518,382,141
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
NUMBER HELD
% OF TOTAL SHARES ISSUED
National Nominees Ltd
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Limited
Cornish Group Investments Pty Ltd
Capital J Investments Pty Ltd
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