Exhibit 99.2
NetComm Wireless Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the half year ended 31 December 2018
31 Dec 2018 | 31 Dec 2017 | |||||
Note | $000 | $000 | ||||
Revenue from the sale of goods | 94,307 | 88,580 | ||||
Change in inventories of finished goods and work in progress | 20,464 | 476 | ||||
Raw materials consumed | (79,014) | (56,839) | ||||
Employee benefits | (16,751) | (15,385) | ||||
Administrative expenses | 3a, 3b | (6,861) | (4,013) | |||
Other expenses | 3c | (3,831) | (3,618) | |||
Depreciation and amortisation expense | (7,429) | (5,815) | ||||
OPERATING INCOME | 885 | 3,386 | ||||
Finance income | 37 | 41 | ||||
Finance costs | (7) | (7) | ||||
NET FINANCE INCOME | 30 | 34 | ||||
PROFIT BEFORE INCOME TAX | 915 | 3,420 | ||||
Income tax benefit | 1,394 | 255 | ||||
PROFIT AFTER INCOME TAX | 2,309 | 3,675 | ||||
Attributable to equity holders of the parent | 2,309 | 3,675 | ||||
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OTHER COMPREHENSIVE INCOME | ||||||
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: | ||||||
Exchange differences arising on translation of foreign operations | 131 | (49) | ||||
Net change in the fair value of cash flow hedges recognised in equity | (188) | 157 | ||||
Income tax relating to components of other comprehensive income | 175 | (47) | ||||
Other comprehensive income for the period (net of tax) | 118 | 61 | ||||
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD | 2,427 | 3,736 | ||||
Attributable to equity holders of the parent | 2,427 | 3,736 | ||||
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EARNINGS PER SHARE: | ||||||
Basic earnings per share (cents per share) | 1.58 | 2.51 | ||||
Diluted earnings per share (cents per share) | 1.58 | 2.51 |
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated Statement of Financial Position
As at 31 December 2018
31 Dec 2018 | 30 June 2018 | |||||
Note | $000 | $000 | ||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | 17,362 | 27,349 | ||||
Trade and other receivables | 23,717 | 32,757 | ||||
Inventories | 39,337 | 18,873 | ||||
Other assets | 2,923 | 2,395 | ||||
Total current assets | 83,339 | 81,374 | ||||
| ||||||
Non-current assets | ||||||
Property, plant and equipment | 12,363 | 11,183 | ||||
Contract assets | 1,922 | 2,600 | ||||
Deferred tax assets | 8,676 | 7,271 | ||||
Goodwill | 896 | 896 | ||||
Other intangible assets | 33,718 | 29,790 | ||||
Totalnon-current assets | 57,575 | 51,740 | ||||
TOTAL ASSETS | 140,914 | 133,114 | ||||
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LIABILITIES | ||||||
Current liabilities | ||||||
Trade and other payables | 48,144 | 42,943 | ||||
Contract liabilities | 248 | - | ||||
Employee benefit | 2,515 | 2,502 | ||||
Income tax liability | 327 | 356 | ||||
Other current liabilities | 2,217 | 2,593 | ||||
Total current liabilities | 53,451 | 48,394 | ||||
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Non-current liabilities | ||||||
Provisions | 772 | 534 | ||||
Totalnon-current liabilities | 772 | 534 | ||||
TOTAL LIABILITIES | 54,223 | 48,928 | ||||
NET ASSETS | 86,691 | 84,186 | ||||
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EQUITY | ||||||
Issued capital | 5 | 65,059 | 65,059 | |||
Reserves | 2,531 | 2,335 | ||||
Retained earnings | 19,101 | 16,792 | ||||
TOTAL EQUITY | 86,691 | 84,186 | ||||
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The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
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Consolidated Statement of Changes in Equity
For the half year ended 31 December 2018
Ordinary Shares | Retained Earnings | Foreign Currency Translation Reserve | Foreign Exchange Hedging Reserve | Options and Share Rights Reserve | Total | |||||||||
Note | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||
BALANCE AT 1 JULY 2018 | 65,059 | 16,792 | 99 | (173) | 2,409 | 84,186 | ||||||||
Profit for the period | - | 2,309 | - | - | - | 2,309 | ||||||||
Exchange difference on translation of foreign operations | - | - | 131 | - | - | 131 | ||||||||
Foreign exchange hedging (Net of tax) | - | - | - | (13) | - | (13) | ||||||||
Total comprehensive income for the period | - | 2,309 | 131 | (13) | - | 2,427 | ||||||||
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Recognition of movement in Share Appreciation Rights | - | - | - | - | 78 | 78 | ||||||||
BALANCE AT 31 DECEMBER 2018 | 65,059 | 19,101 | 230 | (186) | 2,487 | 86,691 | ||||||||
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Ordinary Shares | Retained Earnings | Foreign Currency Translation Reserve | Foreign Exchange Hedging Reserve | Options and Share Rights Reserve | Total | |||||||||
Note | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||
BALANCE AT 1 JULY 2017 | 65,059 | 8,811 | 319 | - | 1,389 | 75,578 | ||||||||
Loss for the period | - | 3,675 | - | - | - | 3,675 | ||||||||
Exchange difference on translation of foreign operations | - | - | (49) | - | - | (49) | ||||||||
Foreign exchange hedging (Net of tax) | - | - | - | 111 | - | 111 | ||||||||
Total comprehensive loss for the period | - | 3,675 | (49) | 111 | - | 3,737 | ||||||||
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Recognition of issuance of Share Appreciation Rights | - | - | - | - | 528 | 528 | ||||||||
BALANCE AT 31 DECEMBER 2017 | 65,059 | 12,486 | 270 | 111 | 1,917 | 79,843 |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement of Cash Flows
For the half year ended 31 December 2018
31 Dec 2018 | 31 Dec 2017 | |||||
Note | $000 | $000 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Receipts from customers | 113,592 | 86,836 | ||||
Payments to suppliers and employees | (111,258) | (87,121) | ||||
Finance costs | (7) | (7) | ||||
Income taxes paid | (413) | (145) | ||||
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | 1,914 | (437) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Interest received | 37 | 41 | ||||
Acquisition of property, plant and equipment | (3,701) | (1,017) | ||||
Acquisition of intangible assets | (8,237) | (7,561) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (11,901) | (8,537) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Repayment of borrowings | - | (13) | ||||
NET CASH USED IN FINANCING ACTIVITIES | - | (13) | ||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS HELD | (9,987) | (8,987) | ||||
Cash and cash equivalents at beginning of financial period | 27,349 | 22,125 | ||||
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL PERIOD | 17,362 | 13,138 |
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 1 – Significant Accounting Policies
Statement of compliance
The half-year financial report are for the 6 months ended 31 December 2018. They have been prepared in accordance with IAS34 “Interim Financial Reporting” as issued by the International Accounting Standards Board. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (IFRS), and should be read in conjunction with the consolidated financial statements for the year ended 30 June 2018.
Basis of preparation
The financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selectednon-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.
The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company’s 2018 annual financial report for the financial year ended 30 June 2018 other than as disclosed below.
The accounting policies are consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board.
When preparing the interim financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.
The judgements, estimates and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty were the same as those applied in the Group’s last annual financial statements for the year ended 30 June 2018. The only exception is the estimate of the provision for income taxes which is determined in the interim financial statements using the estimated average annual effective income tax rate applied to thepre-tax income of the interim period.
Revenue Recognition
The Group early adopted IFRS 15: Revenue from Contracts with Customers from 1 July 2015.
Revenue from the sale of goods, including communications and networking devices, are recognised at the time goods are dispatched to customers.
Revenue from a contract to provide services is recognised when the service is provided to the customer.
Revenue is measured at the fair value of consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Finance income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
All revenue is stated net of the amount of goods and services tax (GST).
IFRS 9 – Financial Instruments
IFRS 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of IAS 39.
The Group has adopted IFRS 9 from 1 July 2018 and will not restate comparative information as permitted by the Standard.
(i) Classification and Measurement
The Group did not have any impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. Financial assets the Group holds at fair value continue to be measured at fair value. Trade and other receivables are held to collect contractual cash flows and these contractual cash flows are solely payments of principle and interest. These receivables are measured at amortised cost.
(ii) Impairment
IFRS 9 introduced an expected credit loss model when assessing impairment of financial instruments. For the Group, this resulted in a change in how the impairment of trade receivables is assessed.
The revised methodology for calculation of impairment did not have a significant impact on the Group’s financial statements.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
IFRS 9 – Financial Instruments (Continued)
(iii) Hedge Accounting
All open hedge relationships as at the balance date will continue. There were no changes to designations or reclassifications between Profit and Loss and Cash Flow Hedge Reserve under the new standard.
Note 2 – Segment Information
The Group has two reporting segments: Telecommunications Infrastructure Equipment and Industrial Internet of Things (IIoT) formerly known as M2M and the Broadband business. In identifying its operating segments, management generally follows the Group’s product mix, which represent the main products and services provided by the Group.
Following the commencement of rolling out the Network Termination Device Business, the information reported to the Chief Decision Maker for the purposes of resource allocation and assessment of segment performance, is separate financial information on each operating segment, being the Broadband business, the M2M business and the Network Termination Device Business. In accordance with IFRS 8, for financial statements presentation purposes, the M2M business and the Network Termination Device Business operating segments have been aggregated into asingle reportable segment of M2M taking into account the following factors:
• | these operating segments have similar economic characteristics; |
• | the nature of the products and their production process is similar; |
• | the type of customer for these services is similar; |
• | the methods used to distribute the products are similar; |
• | the long-term gross profit margins are similar; and |
• | the regulatory environment is similar. |
As a result of the above, the Directors have determined there are two reportable segments, being the Broadband business and the Telco Infrastructure Equipment and IIOT (M2M) business.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 2 – Segment Information (continued)
The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods under review:
Broadband | Teleco | Consolidated | ||||
Business | Infrastructure | Segment Result | ||||
Equipment & | ||||||
For 31 December 2018 | IIOT | |||||
Revenue | 10,680 | 83,627 | 94,307 | |||
Depreciation & Amortisation | (345) | (7,084) | (7,429) | |||
Operating Income | (805) | 1,690 | 885 | |||
Finance Income | - | - | 37 | |||
Finance Cost | - | - | (7) | |||
GROUP PROFIT BEFORE TAX | - | - | 915 | |||
Income tax benefit | - | - | 1,394 | |||
CONSOLIDATED PROFIT FOR THE PERIOD | - | - | 2,309 | |||
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Broadband | Teleco | Consolidated | ||||
Business | Infrastructure | Segment Result | ||||
Equipment & | ||||||
For 31 December 2017 | IIOT | |||||
Revenue | 13,465 | 75,115 | 88,580 | |||
EBITDA | 1,027 | 8,174 | 9,201 | |||
Depreciation & Amortisation | (270) | (5,545) | (5,815) | |||
EBIT | 757 | 2,629 | 3,386 | |||
Finance Income | - | - | 41 | |||
Finance Cost | - | - | (7) | |||
GROUP PROFIT BEFORE TAX | - | - | 3,420 | |||
Income tax benefit | - | - | 255 | |||
CONSOLIDATED PROFIT FOR THE PERIOD | - | - | 3,675 |
The revenue reported above represents revenue generated from external customers. Intersegment revenues represent transfers between segments which are eliminated on consolidation.
No segment assets and liabilities are disclosed because there is no measure of segment assets or liabilities regularly reported to the chief decision maker.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 3 – Expenses
Included in expenses are the following specific items.
(a) Distribution and selling expenses
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Distribution and selling costs | 2,183 | 698 | ||
TOTAL DISTRIBUTION AND SELLING COSTS | 2,183 | 698 | ||
(b) Administrative expenses
| ||||
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Insurance expenses | 804 | 663 | ||
Legal and professional fees | 871 | 855 | ||
Travel expenses | 1,518 | 1,232 | ||
Contractor costs | 1,485 | 565 | ||
TOTAL ADMINISTRATIVE EXPENSES | 4,678 | 3,315 | ||
(c) Other expenses
| ||||
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Advertising and marketing | 665 | 457 | ||
Property expenses | 1,690 | 1,475 | ||
Other expense | 1,476 | 1,686 | ||
TOTAL OTHER EXPENSES | 3,831 | 3,618 |
Note 4 – Dividends
No dividends were paid, recommended for payment nor declared during the reporting period.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 5 – Issuances, Repurchases and Repayments of Equity Securities
Issued Capital at 31 December 2018 amounted to $65,058,928 (146,329,906 ordinary shares). There were no issues, repurchases and repayments of debt securities or equity securities in the half year.
Note 6 – Events Occurring After Reporting Date
On the 22nd February the Group announced its proposed acquisition by Casa Systems Inc. for a cash consideration of $1.10 per share and entered into a scheme of arrangement with Casa. Following the successful shareholder vote on the 18th June 2019 and subsequent court approval on the 20th June 2019 the scheme became effective. Implementation of scheme occurred on 1 July 2019 and following that the Group was removed from the official list of Australian Stock Exchange Limited on 2 July 2019.
Due to the acquisition andde-listing of the company from the ASX the Group had to escalate a charge of $0.4 million in relation to Share Appreciation Rights (SAR’s) issued to its Key Management Personnel as the SARs were cancelled.
During the second half of financial year 2019, the Group recorded an impairment provision of $2.8 million against the carrying values of its capitalised development assets which are classified as intangibles. The impairment related to a specificpre-launch project for which the Group couldn’t materialise orders which were contractually committed and hence deemed the asset impaired. Casa System’s, the parent company of the Group (US based and NASDAQ listed entity) applies US GAAP and under its accounting policies all development costs are expensed.
The Group had the following director appointments and retirements since the reporting date and to the date of this report:
Name
| Officeholder position
| Appointment date
| Cease date
| |||
Clint Bell | Company Secretary | 2 July 2018 | ||||
Lucy Xie | Director | 8 August 2019 | ||||
Maurizio Nicolelli | Director | 8 August 2019 | ||||
Scott Bruckner | Director | 1 July 2019 | ||||
Steven Collins | Director | 1 July 2019 | ||||
Peter Beveridge | Company Secretary | 2 July 2018 | ||||
Ken Boundy | Director | 21 November 2018 | ||||
Ken Sheridan | Director | 28 June 2019 | ||||
David Spence | Director | 1 July 2019 | ||||
David Stewart | Director | 1 July 2019 | ||||
Jacqueline Korhonen | Director | 27 August 2018 | 1 July 2019 | |||
Justin Milne | Chairman | 1 July 2019 | ||||
Stuart Black | Director | 1 July 2019 | ||||
Christopher Last | Company Secretary | 5 July 2019 | ||||
Timo Brouwer | Director | 1 July 2019 | 8 August 2019 |
Other than the matters described above, there were no other subsequent events.
Note 7 – Contingent Liabilities
The Group has provided certain guarantees totalling $6,754,826 for rental and performance bonds as at 31 December 2018 (30 June 2018: $3,790,328).
There were no other contingent liabilities in existence at 31 December 2018 requiring disclosure in the financial statements.
Non quantifiable contingencies
At any time during the normal course of business the Group’s entities can be subject to claims or threatened claims none of which were material to be reported in the financial statements.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 8 – Acquisition of Subsidiary
There were no acquisitions of controlled entities during the period.
Note 9 – Fair Value Hierarchy
IFRS 13 requires disclosure of fair value measurements by level of the fair value hierarchy. NetComm Wireless Limited’s cash flow hedges are classed as level 2 as the inputs for fair value measurement are based on observable market data (observable inputs).
The Group’s financial assets and financial liabilities measured and recognised at fair value at 31 December 2018 on a recurring basis are as follows:
Forward Exchange Options USD 2,000,000 Forward
Exchange Contracts USD 8,190,610
Measurement of fair value of forward contracts
The Group’s foreign currency forward contracts are not traded in active markets. The fair values of most of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates and are included in Level 2 of the fair value hierarchy.
The Group did not measure any financial assets or financial liabilities at fair value on anon-recurring basis as at 31 December 2018.
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Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 10 – Related Party Transactions
In prior year, NetComm Wireless Limited executed an agreement with nbn for the supply of Distribution Point Units (DPUs) in the nbn FTTC network. Mr Justin Milne is the Chairman of NetComm Wireless Limited and a Director of the nbn. Mr Milne recused himself from all Board discussions in relation to the execution of this agreement in line and accordance with the protocol the Group has in place.
The following aggregate receipts for goods and services occurred with the above party:
31 Dec 2018 | 31 Dec 2017 | |||||
$000 | $000 | |||||
RECEIPTS FOR GOODS & SERVICES (EXCLUDING GST): |
| |||||
Receipts for goods and services from entities with common key management personnel | 52,167 | 45,424 | ||||
Note 11 – Cash Flow Information
Reconciliation of cash flow from operations with profit/(loss) after income tax.
|
| |||||
31 Dec 2018 | 31 Dec 2017 | |||||
$000 | $000 | |||||
PROFIT FOR THE HALF YEAR | 2,309 | 3,675 | ||||
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NON-CASH FLOWS IN PROFIT: |
| |||||
Depreciation and amortisation | 7,429 | 5,815 | ||||
Interest income disclosed as investing cash flow | (37) | (41) | ||||
Change in the fair value of cash flow hedges | (13) | 111 | ||||
Foreign exchange translation differences | 131 | (49) | ||||
Share right reserve | 78 | 528 | ||||
| ||||||
CHANGES IN OPERATING ASSETS AND LIABILITIES: |
| |||||
Decrease/(Increase) in trade and other receivables | 9,040 | (9,551) | ||||
(Increase)/Decrease in inventories | (20,464) | (475) | ||||
(Increase)/Decrease in other assets | (528) | 2,619 | ||||
(Increase)/Decrease in deferred tax assets | (1,405) | (484) | ||||
Increase/(Decrease) in trade and other payables | 5,447 | (4,250) | ||||
(Decrease)/Increase in other liabilities | (295) | 1,574 | ||||
(Decrease)/Increase in income tax liability | (29) | 136 | ||||
Increase/(Decrease) in provisions | 251 | (45) | ||||
NET CASH PROVIDED BY/(USED IN) FROM OPERATING ACTIVITIES | 1,914 | (437) |
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Directors’ Declaration
In the opinion of the Directors:
• | the attached financial statements and notes comply with IAS 34 Interim Financial Reporting as issued by International Accounting Standards Board; |
• | the attached financial statements and notes give a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance for the financial half-year ended on that date; and |
• | There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. |
Signed in accordance with a resolution of directors.
On behalf of the Directors
Steve Collins
Director
|
Sydney, 15 August 2019 |
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