COMMS GROUP LTD - Annual Report 2021

==> picture [129 x 502] intentionally omitted <==

==> picture [133 x 321] intentionally omitted <==

==> picture [338 x 321] intentionally omitted <==

==> picture [133 x 337] intentionally omitted <==

==> picture [338 x 337] intentionally omitted <==

==> picture [129 x 342] intentionally omitted <==

==> picture [49 x 188] intentionally omitted <==

For the year ended 30 June 2021

Comms Group Limited ACN 619 196 539

Consolidated Financial Report – for the year ended 30 June 2021

Directors’ Report	6
Auditor’s Independence Declaration	19
Consolidated Statement of Profit or Loss and Other Comprehensive Income	20
Consolidated Statement of Financial Position	21
Consolidated Statement of Changes in Equity	22
Consolidated Statement of Cash Flow	23
Notes to the Consolidated Financial Statements	24
Directors’ Declaration	57
Independent Auditor’s Report	58
ASX additional information	63
Corporate Directory	66

Comms Group | 2021 Annual Report 1

Key business highlights

Corporate & Strategic

Comms Group Ltd became the new name for the Group from November 2020.
Successfully acquired Next Telecom (January 2021) and Binary Networks (April 2021) and conditionally acquired Switched On Australia (August 2021).
Through successful capital raisings to assist funding of acquisitions, a variety of new institutional investors and funds have been introduced to the Group’s shareholder base.
Corporate restructuring and rationalisation has continued for both existing and acquired systems, improving our ability to deliver and manage a better customer experience.

Customers & Sales

The Group has won a number of new key customers during the year and seen services to a number of both local and international customers expand on the back of its Microsoft Teams offering.
Aquisitions completed during the year and expansion in services to overseas customers has resulted in a more diverse customer base.
During the second half the Group’s sales pipeline has continued to strengthen as the acceptance of cloud based communications continues to grow.

Financial

Significant increase in group revenue to $25.2m and Underlying EBITDA to $3.2m, driven by acquisitions succcessfully completed during the year.
Net group assets $28.0m including net working capital $4.6M and cash at bank $5.5M.
Whilst Covid-19 has provided headwinds to organic growth, through strong margin and operating expense management the Group has managed to maintain earnings of the Commschoice business.
Successfully completed a $6.3m capital raising by January 2021.

==> picture [227 x 128] intentionally omitted <==

----- Start of picture text -----

FY21 Group Revenue $'m
30.0
25.0
20.0
15.0
10.0
5.0
–
CommsChoice Next Telecom Binary Networks Group
----- End of picture text -----

==> picture [227 x 129] intentionally omitted <==

----- Start of picture text -----

FY21 Group Underlying Earnings $'m
3.5
3.0
2.5
2.0
1.5
1.0
0.5
_ CommsChoice Next Telecom Binary Networks Group
----- End of picture text -----

Comms Group | 2021 Annual Report 2

Comms Group brand journey

==> picture [517 x 479] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Acknowledging our cloud roots and|
|2020|better reflecting our growth strategy and|
|expanding global capabilities, the Group|
|November 2020|
|was renamed|Comms Group Limited.|
|Comms Group launched|
|Comms Group acquires SME and|
|Corporate telco|Next Telecom|, nearly|
|2021|
|doubling Group revenues and customer|
|January 2021|numbers and solidifying the Groups|
|presence in the NSW market.|
|Comms Group acquires layer 2 data|
|and internet provider|Binary Networks|,|
|2021|
|significantly increasing our Victorian|
|April 2021|presence in terms of customer numbers,|
|sales force and network infrastructure.|
|Comms Group conditionally acquires|
|SME telco|Switched On Australia|,|
|2021|
|further strengthening its|
|August 2021|Victorian presence.|

----- End of picture text -----

Comms Group | 2021 Annual Report 3

Group and brand realignment

Holding Company

==> picture [293 x 90] intentionally omitted <==

==> picture [277 x 76] intentionally omitted <==

SME Brands Global, Enterprise & Wholesale Brand

==> picture [224 x 143] intentionally omitted <==

==> picture [223 x 143] intentionally omitted <==

SME Brands consolidating under the Next Telecom brand name

==> picture [273 x 136] intentionally omitted <==

Comms Group | 2021 Annual Report 4

Key new clients and clients with expanded offerings

==> picture [121 x 34] intentionally omitted <==

==> picture [79 x 37] intentionally omitted <==

==> picture [125 x 43] intentionally omitted <==

==> picture [46 x 44] intentionally omitted <==

==> picture [67 x 44] intentionally omitted <==

==> picture [110 x 38] intentionally omitted <==

==> picture [107 x 33] intentionally omitted <==

==> picture [125 x 57] intentionally omitted <==

==> picture [79 x 41] intentionally omitted <==

==> picture [125 x 27] intentionally omitted <==

==> picture [109 x 54] intentionally omitted <==

==> picture [88 x 64] intentionally omitted <==

==> picture [136 x 34] intentionally omitted <==

==> picture [110 x 51] intentionally omitted <==

==> picture [105 x 46] intentionally omitted <==

==> picture [109 x 46] intentionally omitted <==

==> picture [113 x 62] intentionally omitted <==

==> picture [119 x 18] intentionally omitted <==

Comms Group | 2021 Annual Report 5

Directors’ Report

Your directors present their report on the consolidated entity consisting of Comms Group Limited (the “Company”) and the entities it controlled (collectively “Comms Group” or the “Group”) for the financial year ended 30 June 2021.

Directors and company secretary

The following persons were directors of the Company during the financial year up to the date of this report:

JA Mackay Appointed 11 October 2017 PJ McGrath Appointed 11 October 2017 BJ Jennings Appointed 11 October 2017 CE Bibby Appointed 2 October 2019 RM O’Hare Appointed 1 February 2021

The company secretary is Andrew Metcalfe, (FGIA, GAICD, CPA). Andrew was appointed to the position of company secretary on 27 October 2017. Andrew is a Fellow of the Governance Institute of Australia (formerly Chartered Secretaries Australia) and a Member of the Australian Institute of Company Directors. Andrew operates through his specialist governance company, Accosec & Associates, providing company secretarial services and advises on corporate governance matters for a number of ASX listed, public and private companies and not for profit organisations. He manages the ASIC and ASX regulatory functions and governance platform of Comms Group in Australia.

Principal activities

Comms Group is an information and communication technology (ICT) business, providing a comprehensive range of telco and IT related managed services. Comms Group services clients in Australia and internationally including New Zealand and Singapore.

The principal continuing activities of Comms Group is providing hosted voice, data, enterprise networks and cloud-based communication and communication enablement services to business customers in Australia and internationally.

For the year ended 30 June 2021, Comms Group derived revenue from the sale of the above-mentioned communications services. These fees consist of recurring charges for access to facilities and capabilities, as well as consumption charges for variable usage of those facilities. Revenue was also derived from the installation and sale of hardware, equipment and consulting services to support the primary products of the business.

There were no significant changes in the nature of the activity of Comms Group during the reporting period.

Dividends

The Directors have resolved not to pay a final dividend for the year ending 30 June 2021.

Review of operations

The year ended 30 June 2021 has been another positive year for the Group with growth in both revenue and underlying earnings as well as the addition of a number of key customers. Group revenues were up by 30% to $25.2m, assisted by the inclusion of revenues from the acquisitions of Next Telecom Pty Ltd and Binary Networks Pty Ltd for part of the year. Underlying EBITDA was $3.2m which was a 20% increase on the prior year result. This continues the trend of increased profit established last year.

The Group continued to focus on managing its cost base efficiently and supplier cost management in particular was strong. Revenue in the key Wholesale and Enterprise segment increased in the year which was a positive result with good sales particularly in the Unified Comms space and to a number of international corporations. Overall, profit contribution in the CommsChoice business increased due to improved gross margins. This combined with the profit from acquired businesses resulted in a strong increase in both Gross Profit and Underlying EBITDA.

The Group raised equity capital of $5.9m net of transaction costs during the year, strengthening its Balance Sheet to include $5.5m cash at bank as at 30 June 2021. The Group also announced two key acquisitions during the year being Next Telecom Pty Ltd and Binary Networks Pty Ltd that are explained in detail in the Annual Report. A combination of equity issues and cash were used to fund these acquisitions. A third acquisition was announced in early August 2021 being Switched On Australia, subject to a number of conditions. A key objective of the acquisitions is to increase the Group’s critical mass in the domestic SME and Corporate customer segments and to build a stronger base in the important Melbourne market.

Additional senior management were added to the Group in the year. An experienced Group Chief Operating Officer joined the business in Sydney along with experienced senior management added to the business in Sydney and Melbourne as a result of key acquisitions. Additional key sales and business development staff were also added in Sydney, Melbourne and Singapore.

Comms Group was one of the first providers globally to offer Microsoft Teams calling, launching its offering in August 2018. The Group continued to deliver advanced Unified Communications solutions to businesses during the year and we were pleased this year to be awarded business with a number of global enterprise customers. We continued to expand our leading Microsoft teams global telephony platform into additional countries, particularly in the Asia Pacific region. We also added additional partners and wholesale customers who are using our global network to provide key services to their own customers.

The Group was one of the first providers globally to provide additional value added communications solutions to its core Microsoft Teams calling platform. These include an market leading PCI compliant cloud-based call recording solution, Microsoft Teams native contact centre applications

Comms Group | 2021 Annual Report 6

Directors’ Report

Review of operations (continued)

and call analytics solutions.

We see the Microsoft Teams calling solution as a key platform for corporate and enterprise customers to build their Unified Communications solution and gain the agility and efficiency of the benefits offered. We intend to continue to invest in additional products and systems integration in order to bring additional benefits to our customers and continue our market leading position.

We intend to bring our SME and mid-market Corporate businesses under the one common Group and management team and brand this as “Next Telecom”. Next Telecom is synonymous with excellent customer service and leading edge products being one of the pre-eminent providers of fibre optic based data services today. We believe common products and services, systems and processes will lead to efficiency gains, synergies and a better overall customer experience. We intend to expand our domestic reach to other key states across Australia, where possible, through organic and acquisitive growth.

In the Wholesale and Enterprise area, we will be known in Australia and internationally as “Comms Group”. The key focus in wholesale is the provision of wholesale telephony products and services including SIP voice, CTS (call termination services) and our global platform products such as the wholesale provision of Microsoft Teams calling in multiple countries. In the Enterprise space, we are focused on the delivery of Unified Communications solutions to Australian and global / multi-national corporations (MNCs) both direct and through partners. Our goal is to be a leading provider with a particular depth of experience and key partners throughout the Asia Pacific region - one of the most challenging regions for Unified Communications around the world.

Following shareholder approval at the 2020 Annual General Meeting held on 24 November 2020, the Group changed it’s name from CommsChoice Group Limited to Comms Group Limited. Whilst still recognising the origins of the Group, this name better represents the overall business as it looks to expand into other segments of the telecommunications industry.

We would like to thank our dedicated employees across Australia, the Philippines and Singapore who have worked tirelessly throughout challenging conditions with the Covid-19 pandemic and who continued to deliver excellent service to our valued customers. We also thank our customers for their business and continued loyalty through the year and we look forward to supporting new customers in the year ahead.

Comms Group | 2021 Annual Report 7

==> picture [7 x 43] intentionally omitted <==

----- Start of picture text -----

Auckland
----- End of picture text -----

==> picture [34 x 343] intentionally omitted <==

==> picture [80 x 124] intentionally omitted <==

==> picture [47 x 54] intentionally omitted <==

==> picture [18 x 95] intentionally omitted <==

----- Start of picture text -----

Existing and planned MS Teams nodes
----- End of picture text -----

Directors’ Report

Group result

The Group result for the period of trading is comprised as follows:

Reporting period	Statutory FY21	Statutory FY20
Tradingentities	Full year results	Full Year results
Parent company	Full year results	Full year results

Total revenue from ordinary activities for the year was $25.2m, representing an increase of $5.9m over the prior reporting period.

A reconciliation of Underlying EBITDA from operations to the reported profit before tax from operations in the consolidated statement of comprehensive income is tabled below:

statement of comprehensive income is tabled below:
30 June 2021	30 June 2020
$M	$M
Revenue 25.2	19.3
Reported profit before tax 0.7	1.3
Add: net finance costs(1) 0.1	0.1
Add: depreciation and amortisation(1) 1.1	0.8
EBITDA 1.9	2.2
Add: share based payments 0.3	0.1
Add: Restructuringcosts -	0.2
Less: property rent as paid 0.1	-
Add: business acquisition and integration costs 0.9	-
Underlying EBITDA 3.2	2.5

(1) Includes lease depreciation as per AASB 16

(2) Rent expensed within 12 months of lease expiration

The underlying EBITDA from operations are non-IFRS measures that are presented to provide an understanding of the underlying performance of the Group’s operations. In the opinion of the Directors, the Group’s underlying EBITDA reflects the results generated from ongoing operating activities which excludes non-operating adjustments that are considered to be non-cash or non-recurring in nature. These items are included in the Group’s consolidated statutory result but excluded from the underlying result. The non-IFRS financial information is unaudited. However, the numbers have been extracted from the financial statements which have been subject to review by the Company’s auditor.

Earnings per share

Profit per share for the period is as follows:

Earnings per share Profit per share for the period is as follows:
	30 June 2021	30 June 2020
Net profit after tax ($m)	0.58	2.59
Profit per share (cents)	0.22	1.39
Diluted earnings per share (cents)	0.22	1.39

Net profit (loss) after tax (ex-amortisation and impairment) ($m)	1.70	3.37
Earnings per share (cents)	0.66	1.81
Diluted earnings per share (cents)	0.66	1.81

Comms Group | 2021 Annual Report 9

Directors’ Report

Business restructuring and simplification

The Group has continued to restructure and simplify its businesses during the year including the rationalisation and consolidation of management systems inherited at the time of listing in December 2017 and those of the acquisitions finalised during the year. Further opportunities exist to consolidate and rationalise the business’ organisational structure including with those of acquired businesses, that will provide the basis for improving the Group’s cost base, pursuing a wider range of business development opportunities and improve the customer service being delivered.

Acquisition of new businesses

The acquisition of Next Telecom Pty Ltd was completed on 29 January 2021. Established in 2008 Next Telecom is a telecommunications service provider servicing the medium size corporate business market in Australia with offices in Sydney. The business offers NBN products, corporate fibre, cloud IP telephony, managed IT services, security offerings and other telecommunications services.

The acquisition of Binary Networks Pty Ltd was completed on 1 April 2021. Binary Networks services SME’s primarily in Victoria and has advanced on-line real-time ordering and automation capability which will be added to the existing Group’s brands to accelerate organic growth. Binary delivers immediate Layer 2 data network roll-out to the Group, with key Points of Presence “PoPs” in Sydney, Melbourne and Brisbane, to add additional products, enable an uptick in gross margin and enhanced capabilities in terms of service ordering, automation and overall enhancement in terms of quality of service.

Operating segment

The Group has one operating segment under AASB 8 Operating Segments. This reflects the way the business is monitored and resources are allocated. The revenue from two customers each contributed 10% and 11% respectively of total revenue for the year. The Group’s revenues from external customers are predominantly domiciled in Australia.

Significant changes in the state of affairs

Plans announced by Comms Group Limited in June 2019 to restructure its sales and operations areas have been successfully implemented. As reflected in the full year result this restructure has led to a lower cost base that will be carried forward into future years.

In addition to further restructuring during the year that continues to lower the Group’s cost base to be carried forward into future years, the finalisation of the acquisitions of Next Telecom Pty Ltd and Binary Networks Pty Ltd has added significant scale to the business, nearly doubling Group revenues on an annualised basis. Significant opportunities exist to rationalise current and acquired supplier accounts and arrangements and other operating

costs where appropriate, cross-sell existing and acquired product ranges and strengthen the Group’s financial position, to both fund future opportunities and withstand adverse events such as the Covid-19 pandemic.

Events since the end of the financial year

On 9 August 2021 the Group executed a Business Sale and Purchase Agreement to purchase the business and assets of Switched On – Victoria Pty Ltd (SwitchedOn). SwitchedOn is a Victorian based provider of cloud-based telecommunications to primarily SME customers with annual revenues of approximately $2.6m and underlying earnings of $1.0m. Consideration includes a cash payment of upfront $3.655m and a deferred cash payment payable twelve months from completion of up to $0.645m dependent upon the business’ revenues in the first twelve months from completion. The acquisition includes the employment of the vendor for a minimum period of twelve months.

The initial accounting for this business combination is yet to be complete and, as such, disclosures in relation to the fair value of the assets and liabilities acquired and the composition of any goodwill arising on acquisition cannot reliably me made at the date of this report.

Whilst the impact of the Coronavirus (COVID-19) pandemic is ongoing, should the situation not worsen, the potential impact, positive or negative, after the reporting date is not expected to increase. The impact will be dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

There have been no other significant matters or circumstances not otherwise dealt with in this report between the reporting date and the date the financial statements were approved for issue that will significantly affect the operation of the Group, the results of those operations or the state of affairs of the Group or subsequent financial years.

Likely developments and expected results of operation

Likely developments in the operations of the Group have been included in the Review of Operations section of this report. The Group is presently focused on additional restructuring that will enhance and consolidate existing management systems, leading to further cost efficiencies and gains beyond those generated in the year ended 30 June 2021.

Environmental regulation

The Group’s operations are not regulated by any significant environmental regulations under Australian Commonwealth or State law.

Commsroup | 2021 Annual Report 10

Directors’ Report

Information on directors

The following information is current as at the date of this report.

==> picture [95 x 91] intentionally omitted <==

John Angus Mackay

Independent NonExecutive Chairman

Qualifications: BA (Admin/ Economics), AM

Experience and Expertise: John has over 15 years’ experience as chairman and director of major listed and unlisted companies across the communications, utilities, health, construction and education sectors.

Other current directorships: None

Former directorships (last 3 years): Chairman of Speedcast International Ltd (ASX: SDA) Director of Energy Action Ltd (ASX: EAX)

Special

responsibilities: Member of the People and Culture Committee Member of the Audit Compliance and Risk Management Committee

Interest in shares at 30 June 2021: 1,656,250

==> picture [95 x 91] intentionally omitted <==

Peter McGrath

Executive Director and Chief Executive Officer

Qualifications: B.Eng, MBA

Experience and Expertise: Peter’s business career spans 30 years in telecommunications, ICT and corporate advisory, with over 20 years in senior leadership positions. Peter has been involved in leadership as CEO of a number of major Australian telecommunications firms and he also has extensive experience in equity capital markets and corporate finance.

Other current directorships: None

Former directorships (last 3 years): None

Special

responsibilities: Member of the Audit Compliance and Risk Management Committee

Interest in shares at 30 June 2021: 14,024,813

==> picture [95 x 91] intentionally omitted <==

Benjamen Jennings

Claire Bibby Non-Executive Independent Director

Ryan O’Hare Non-Executive Director

Non-Executive Director

Experience and Expertise:

Qualifications: B.Comm, L.L.B. (Hons)

Qualifications: B.Bus, CA

Ryan has founded a number of highly successful companies starting with CorpTEL Communications, which in 1998 became one of the largest privately owned telecommunication companies in Australia before its sale to AAPT, People Telecom in 2000 that is now part of the Vocus Group and Next Telecom, this is no now part of Comms Group. Ryan also founded & chairs one of Australia’s largest SME energy only retailers, Next Business Energy.

Experience Experience and Expertise: and Expertise: Benjamen has spent Claire is a highly almost 18 years as an experienced lawyer accountant working in with over 25 years’ both commercial and experience as general public practice roles counsel, Executive and in both Australia and Non-Executive the United Kingdom. Director with ASX, multinational, private Benjamen established and NFP organisations, middle market advisory spanning dispute firm Jennings Partners resolution, corporate, Chartered Accountants commercial, property, in early 2009 to provide insurance, financial commercial advisory, services, fund mergers and acquisition, management, finance, income taxation, and IP, IR and litigation.

Benjamen established middle market advisory firm Jennings Partners Chartered Accountants in early 2009 to provide commercial advisory, mergers and acquisition, income taxation, and Finance Director/ Chief Financial Officer services to SME businesses, venture capital and private equity groups.

Other current directorships: Arowana Holdings Ltd (ASX:AWN)

Other current directorships: None

Former directorships (last 3 years): None

Other current directorships: None

Former directorships (last 3 years): None

Special

Former directorships (last 3 years): None

Special

responsibilities: Chairwoman of the responsibilities: Member of the Audit People and Culture Committee Compliance and Risk Management Member of the Audit Committee

Special

responsibilities: Chairman of the Audit Compliance and Risk Management Committee

Member of the Audit Compliance and Risk Management Committee

Interest in shares at 30 June 2021: 45,227,300 of which 41,459,300 are escrowed

Interest in shares at 30 June 2021: 270,334

Interest in shares at 30 June 2021: 15,257,192

CommsGroup | 2021 Annual Report 11

Directors’ Report

Board and Committee Meetings

During the financial year, the Directors held eight Board meetings, five Audit, Compliance and Risk Management Committee meetings and two People and Culture Committee meetings. Each Director’s attendance at those meetings during the year were as follows:

==> picture [512 x 151] intentionally omitted <==

----- Start of picture text -----

Board Audit, Risk & Compliance People & Culture
Committee Committee
Directors Eligible to Attended Eligible to Attended Eligible to Attended
attend attend attend
John Mackay 8 8 5 5 2 2
Peter McGrath 8 8 5 5 2 2
Benjamen Jennings 8 8 5 5 - -
Claire Bibby 8 8 5 5 2 2
Ryan O’Hare 4 4 1 1 - -
----- End of picture text -----

Insurance of officers and indemnities

During the year, the Company paid a premium of $115,196 to insure the directors and company secretary of the Group.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Group. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Comms Group | 2021 Annual Report 12

Directors’ Report

Remuneration Report (audited)

This Remuneration Report details remuneration information as it applies to Comms Group and its controlled entities for the year ended 30 June 2021 in accordance with the requirements of the Corporations Act 2001 (the Act) and has been audited as required by section 308 (3C) of the Act. The report details the remuneration arrangements for the Comms Group’s key management personnel (KMP).

The report is structured as follows:

(a) Key management personnel (KMP) covered in this report
(b) Principles used to determine nature and amount of remuneration
(c) Details of remuneration
(d) Share based compensation
(e) Service agreements
(f) Additional disclosures relating to KMP

(a) Key management personnel covered in this report

has coherent remuneration policies and practices to attract and retain executives and directors who will create value for shareholders;
observes those remuneration policies and practices; and
fairly and responsibly rewards executives having regard to the performance of the Company, the performance of the executives and the general external pay environment.

In carrying out its duties the Nomination and Remuneration Committee will assess the appropriateness of the nature and amount of remuneration on an annual basis, by reference to relevant local employment market conditions. The overall objective is to ensure maximum stakeholder benefits from the attraction and retention of a high quality executive team. The Nomination and Remuneration Committee forms its own independent decisions on KMP remuneration.

The key principles which govern the Company’s remuneration framework are to:

Link executive rewards to the creation of shareholder value;

Non-executive and executive directors

(see pages 11 to 12 for details about each director)

John Mackay Non-Executive Chairman Peter McGrath Executive Director, Chief Executive Officer Benjamen Jennings Non-Executive Director Claire Bibby Non-Executive Director Ryan O’Hare Non-Executive Director (commenced 1 February 2021)

Other key management personnel Matthew Beale Chief Financial Officer

(b) Principles used to determine nature and amount of remuneration

Remuneration policy

The Board’s objective is to ensure that Comms Group’s remuneration supports achievement of the Company’s strategy and drives performance and behaviours which are in the Company’s best interests. Remuneration matters will be handled by the Nomination and Remuneration Committee, which is a sub-committee of the Board.

People and Culture Committee

The objective of the People and Culture Committee is to help the Board achieve its objective to ensure the Company:

has a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties;
Provide market competitive remuneration package, with appropriate balance of fixed and variable remuneration;
Ensure variable portion of executive remuneration is dependent upon meeting pre-determined performance objectives;
Allow for Board discretion to be applied, in order to ensure that remuneration outcomes are appropriate for the Company’s circumstances; and
Ensure that performance objectives for variable remuneration are aligned to the drivers of the Group’s success and the achievement of overall business objectives.

Remuneration for key management personnel is linked to the performance of the Group. Directors and key management personnel are issued with share performance rights, which are directly linked to the performance of the Group in the form of share price targets. Remaining short term incentives, in the form of cash bonuses, are paid at the discretion of the People and Culture Committee. The People and Culture Committee is of the view that the above arrangements will continue to improve shareholder wealth over the coming years.

(c) Details of remuneration

Remuneration of Key Management Personnel

Each of the Non-Executive Directors has entered into an appointment letter with the Company, confirming the terms of their appointment, their roles and responsibilities and the Company’s expectations of them as Directors.

Comms Group | 2021 Annual Report 13

Directors’ Report

Under the Company’s Constitution, the Directors decide the total amount paid to all Directors as remuneration for their services as a Director. However, subject to the ASX Listing Rules, the total amount paid to all Non-Executive Directors for their services must not exceed an aggregate maximum amount of $400,000 per annum or such other maximum amount determined by the Company in general meeting.

Independent non-executive director remuneration currently consists of:

For the financial year ended 30 June 2021, to John Mackay for serving as chairman a base fee of $68,448 per annum, to Benjamen Jennings for serving as a director a base fee of $18,265 per annum, to Claire Bibby for serving as a director a base fee of $27,397 per annum and to Ryan O’Hare for serving as a director a base fee of $27,397 per annum; and
Statutory superannuation, equivalent to the Government Superannuation Guarantee amount.

Details of remuneration of the KMPs of the Comms Group is set out in the following table. Cash salary and fees include annual leave entitlements.

==> picture [511 x 484] intentionally omitted <==

----- Start of picture text -----

Share-based
Short-term benefits Post-employment benefits
payments
Year Cash salary Cash Super- Termination Equity- Total
& fees bonus annuation payments settled
performance
rights
$ $ $ $ $ $
Non-executive
Directors
John Mackay 2020 74,156 - 7,045 - 12,320 93,521
2021 68,448 - 6,503 - 11,800 86,751
Benjamen Jennings 2020 3,044 - 289 - 8,214 11,547
2021 18,265 - 1,735 - 7,867 27,867
Claire Bibby 2020 20,548 - 1,952 - - 22,500
2021 27,397 - 2,603 - 13,022 43,022
Ryan O’Hare 2020 - - - - - -
2021 11,416 - 1,084 - - 12,500
Executive Directors
Peter McGrath 2020 302,088 - 21,003 - 73,920 397,011
2021 293,077 112,593 21,694 - 70,800 498,164
Grant Ellison 2020 - - - 33,013 - 33,013
2021 - - - - -
Other KMP
Benjamin Gilbert 2020 20,095 - 6,362 66,971 - 93,428
2021 - - - - - -
Matthew Beale 2020 109,381 - 9,711 - 1,942 121,034
2021 187,899 18,265 20,179 - 39,589 265,932
Patrick Harsas 2020 39,390 - 2,530 - - 41,920
2021 - - - - - -
Total 2020 568,702 - 48,892 99,984 96,396 813,974
Total 2021 606,502 130,858 53,798 - 143,078 934,236
----- End of picture text -----

Comms Group | 2021 Annual Report 14

Directors’ Report

The proportion of remuneration linked to performance and the fixed proportion are as follows:

==> picture [511 x 192] intentionally omitted <==

----- Start of picture text -----

Fixed remuneration At risk
2021 2020 2021 2020
Non-executive Directors
John Mackay 86% 87% 14% 13%
Benjamen Jennings 72% 29% 28% 71%
Claire Bibby 70% 100% 30% -
Ryan O’Hare 100% - - -
Executive Directors
Peter McGrath 63% 81% 37% 19%
Other KMP
Matthew Beale 78% 98% 22% 2%
----- End of picture text -----

Cash bonuses are discretionary and subject to the employees contract. The bonus paid is dependent upon the employees service and company performance, with the level of bonus approximately in line with that paid for the prior year, adjusted for relative changes in the level of financial performance and performance against budget. The amounts payable are approved by the Board of Directors prior to payment.

(d) Share based compensation

Long Term Incentive Scheme

During the year a total of 7,500,000 performance rights have been issued to Directors and Management under the Performance Rights Plan with 1,800,000 rights cancelled before the end of the year. 50% are subject to vesting at either 12.5 cents per share, 15 cents per share or 20 cents per share, earliest of 18 months from grant date. The remainder 50% are subject to vesting at 20 cents per share, 25 cents per share or 30 cents per share, earliest 30 months from grant date.

Set out below are summaries of performance rights issued under the scheme:

==> picture [512 x 295] intentionally omitted <==

----- Start of picture text -----

Vesting price: Balance at Balance at
Grant date Expiry date 18mths / the start of Granted Exercised Forfeited the end of
30 months the year the year
2021
23/07/2019 22/07/2024 $0.125 / $0.20 16,900,000 - - (1,800,000) 15,100,000
28/04/2020 27/04/2025 $0.125 / $0.20 2,900,000 - - - 2,900,000
16/11/2020 15/11/2025 $0.15 / $0.25 - 1,000,000 - - 1,000,000
24/11/2020 23/11/2025 $0.125 / $0.20 - 250,000 - - 250,000
24/11/2020 23/11/2025 $0.15 / $0.25 - 1,250,000 - - 1,250,000
5/02/2021 4/02/2026 $0.20 / $0.30 - 3,000,000 - - 3,000,000
20/04/2021 19/04/2026 $0.20 / $0.30 - 2,000,000 - - 2,000,000
19,800,000 7,500,000 - (1,800,000) 25,500,000
2020
23/07/2019 22/07/2024 $0.125 / $0.20 - 17,600,000 - (700,000) 16,900,000
28/04/2020 27/04/2025 $0.125 / $0.20 - 2,900,000 - - 2,900,000
- 20,500,000 - (700,000) 19,800,000
----- End of picture text -----

Comms Group | 2021 Annual Report 15

Directors’ Report

The weighted average share price during the financial year was $0.084 (2020: $0.058).

The weighted average remaining contractual life of share performance rights outstanding at the end of the financial year was 1.02 years (2020: 1.19 years).

For share performance rights granted during the current financial year, the valuation input models used to determine the fair value at the grant date are as follows:

==> picture [511 x 157] intentionally omitted <==

----- Start of picture text -----

Grant date Expiry date Share price at grant date Vesting price: 18 mths / 30 mths Expected volatility Dividend yield interest rateRisk-free Fair value at grant date: 18 mths / 30 mths
2021
16/11/2020 15/11/2025 $0.092 $0.15 / $0.25 62% - 0.91% $0.074 / $0.054
24/11/2020 23/11/2025 $0.089 $0.125 / $0.20 62% - 0.91% $0.081 / $0.068
24/11/2020 23/11/2025 $0.089 $0.15 / $0.25 62% - 0.91% $0.076 / $0.061
5/02/2021 4/02/2026 $0.090 $0.20 / $0.30 62% - 0.91% $0.059 / $0.055
20/04/2021 19/04/2026 $0.081 $0.20 / $0.30 62% - 0.91% $0.049 / $0.038
----- End of picture text -----

The performance rights will vest provided the following conditions are met:

The employee is continuously employed or continues to provide services to the Company up to the vesting period;
The following applies to 50% of the total number of performance rights that may vest (tranche A):
Comms Group Share price hurdle of either $0.125, $0.15 or $0.20 (whichever is applicable to the employee) achieved during the term. The share price hurdle must be reached on at least 20 consecutive trading days at any time during the term of the performance rights in order to satisfy this hurdle. The minimum vesting period is 18 months from grant date;
The following applies to 50% of the total number of performance rights that may vest (tranche B):
Comms Group Share price hurdle of either $0.25, $0.20 or $0.30 (whichever is applicable to the employee) achieved during the term. The share price hurdle must be reached on at least 20 consecutive trading days at any time during the term of the performance rights in order to satisfy this hurdle. The minimum vesting period is 30 months from grant date.

The exercise price is $nil and the expiry date is 5 years after the grant date of the performance rights.

Issue of shares

There was no issue of shares to directors or other KMP as part of compensation during the year.

Issue of options

There was no issue of options to directors or other KMP as part of compensation during the year.

(e) Service agreements

Director related entity remuneration

Benjamen Jennings is a director of Jennings Partners Chartered Accountants which has provided accounting and bookkeeping services to the Group. Total fees paid by the Group for the year ended 30 June 2021 was $Nil (2020: $2,097). There was no fee outstanding as trade payables as at 30 June 2021.

Benjamen Jennings is a director of Outforce Pty Ltd, which provide business process outsourcing services. Total amounts paid by the Group for the year ended 30 June 2021 were $449,435 (2020: $435,380). There was no fee outstanding as trade payables as at 30 June 2021.

Ryan O’Hare is a Director of Next Business Energy Pty Ltd, which provides power to Next Telecom. Total amounts paid by the Group for the year ended 30 June 2021 were $10,167. There was no fee outstanding as trade payables as at 30 June 2021.

All transactions with these entities have been made on an arms-length basis.

Comms Group | 2021 Annual Report 16

Directors’ Report

Chief Executive Officer (CEO) and Managing Director employment contract

Comms Group has entered into an executive contract with Peter McGrath to govern his employment with the Group as CEO which includes:

No fixed term;
Base salary of $300,000 per annum plus statutory superannuation entitlements;
Maximum short term incentive of 35% of base salary plus superannuation entitlements primarily based on achievement of agreed KPIs if set by the by the People and Culture Committee and the Board, otherwise primarily based on the employees own performance and the financial performance of the Group relative to budget and the prior year
9,000,000 performance rights under the performance Rights Plan, 50% subject to vesting at 12.5 cents per share, earliest of 18 months from grant date and 50% subject to vesting at 20 cents per share, earliest 30 months from grant date;
The right to terminate the CEO’s employment is nine months’ notice by Comms Group and six months notice by the CEO. Either party may elect to terminate employment in case of change of control and termination payment in the event of a change of control is nine months payment; and
Non-compete restrictions on the employee for a period of up to six months post-employment.

Chief Financial Officer (CFO) employment contract

Comms Group has entered into an executive contract with Matthew Beale to govern his employment with the Group as Chief Financial Officer (CFO) which includes:

total compensation of $210,000 per annum (including superannuation entitlements);
500,000 performance rights under the performance Rights Plan, 50% subject to vesting at 12.5 cents per share, earliest of 18 months from grant date and 50% subject to vesting at 20 cents per share, earliest 30 months from grant date;
1,000,000 performance rights under the performance Rights Plan, 50% subject to vesting at 15 cents per share, earliest of 18 months from grant date and 50% subject to vesting at 25 cents per share, earliest 30 months from grant date;
Maximum short term discretionary incentive of $30,000 per annum primarily based on the employees own performance and the financial performance of the Group to budget and the prior year;
The right to terminate the CFO’s employment is four months’ notice by the Group and three months’ notice by the CFO. In the event termination occurs within twelve months of a change of control, then the Group gives six months’ notice; and
No non-compete restrictions post-employment.

(f) Additional disclosures relating to KMP

Shareholding

Key Management Personnel equity disclosures relate only to equity instruments of the Company.

The number of shares held in the Company during the year by each director or KMP of the Group including their relevant interests, is set out below:

==> picture [511 x 173] intentionally omitted <==

----- Start of picture text -----

Ordinary shares held 30 June Total shares compensation Granted as Received on grant movements - Other held 30 June Total shares Total shares at date of
2020 during the year of rights purchases 2021 this report
John Mackay 1,406,250 - - 250,000 1,656,250 1,656,250
Peter McGrath 9,950,638 - - 4,074,175 14,024,813 14,024,813
Benjamen 14,092,642 - - 1,164,550 15,257,192 15,525,089
Jennings
Claire Bibby 8,334 - - 262,000 270,334 270,334
Ryan O’Hare - - - 45,227,300 45,227,300 45,227,300
Matthew Beale 621,854 - - 1,363,936 1,985,790 1,985,790
Total 26.079,718 - - 52,341,961 78,421,679 78,689,576
----- End of picture text -----

Comms Group | 2021 Annual Report 17

Directors’ Report

Shares issued on completion of business acquisition

Following the completion of the acquisition of Next Telecom Pty Ltd, Ryan O’Hare was issued 42,026,130 ordinary shares. 21,296,480 shares escrowed for 12 months and 20,729,650 shares escrowed for 18 months.

Following the completion of the acquisition of Binary Networks Pty Ltd, the Vendor Michael Diamond is to be issued 4,000,000 ordinary shares, 50% being issued on the 12 month and 50% on the 24 month anniversary of his employment with Comms Group. The fair value of these shares to be issued at date of acquisition is $304,000.

End of Remuneration Report

Proceedings on behalf of the Company

No person has applied for leave of a Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year.

Non-audit services

BDO Audit Pty Ltd is the Group’s auditor in accordance with section 327 of the Corporations Act 2001.

The Board of Directors, in accordance with advice from the Audit, Compliance and Risk Management Committee are satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed in note 28 do not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed by the Audit, Compliance and Risk Management Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 19.

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 dollar.

Corporate governance statement

Comms Group Limited and the Board are committed to achieving and demonstrating the highest standards of corporate governance. Comms Group Limited has reviewed its corporate governance practices against the Corporate Governance Principles & Recommendations (3rd edition) published by the ASX Corporate Governance Council.

The 2021 corporate governance statement reflects the corporate governance practices in place throughout the 2021 financial year. The 2021 corporate governance statement which is approved at the same time as the Annual Report can be viewed at https://www.commschoice.com/about/investors/corporate-governance.

This report is made in accordance with a resolution of directors.

==> picture [118 x 45] intentionally omitted <==

John Mackay Director Sydney 25 August 2021

Comms Group | 2021 Annual Report 18

Tel: +61 2 9251 4100 Level 11, 1 Margaret St Fax: +61 2 9240 9821 Sydney NSW 2000 www.bdo.com.au Australia

==> picture [74 x 29] intentionally omitted <==

DECLARATION OF INDEPENDENCE BY GRANT SAXON TO THE DIRECTORS OF COMMS GROUP LIMITED

As lead auditor of Comms Group Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been:

No contraventions of the auditor independence requirements of the Corporations Act 2001 relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Comms Group Limited and the entities it controlled during the period.

==> picture [79 x 36] intentionally omitted <==

Grant Saxon Director

BDO Audit Pty Ltd

Sydney, 25 August 2021

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

Comms Group | 2021 Annual Report 19

Comms Group Ltd Consolidated Statement of Profit or Loss and Other Comprehensive Income

==> picture [512 x 570] intentionally omitted <==

----- Start of picture text -----

Notes 30 June 30 June
2021 2020
$ $
Revenue 4 25,120,500 19,129,717
Other income 108,768 210,407
25,229,268 19,340,124
Cost of sales (13,751,812) (10,109,554)
Employee benefits expense 5 (6,169,988) (4,344,775)
Administration expenses (1,218,543) (780,594)
Sales & marketing expenses (788,002) (451,578)
Information technology expenses (776,516) (898,862)
Professional fees (463,649) (231,832)
Property expenses (147,608) (62,529)
Other expenses (54,804) (74,709)
Restructuring costs 5 - (166,200)
Finance expenses 5 (56,914) (97,933)
Depreciation & amortisation 5 (1,126,889) (794,524)
Profit before income tax 674,543 1,327,034
Income tax (expense) / benefit 6 (106,254) 1,248,035
Profit for the period 568,289 2,575,069
Other comprehensive income
Foreign currency translation 13,399 13,729
Total comprehensive profit attributable
581,688 2,588,798
to shareholders
Earnings per share for profit from continuing operations attributable
to the ordinary equity holders of the company:
Cents Cents
Basic profit per share 21 0.22 1.39
Diluted profit per share 21 0.22 1.39
----- End of picture text -----

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

Comms Group | 2021 Annual Report 20

Comms Group Ltd Consolidated Statement of Financial Position

==> picture [511 x 593] intentionally omitted <==

----- Start of picture text -----

Notes 30 June 30 June
2021 2020
Current assets $ $
Cash and cash equivalents 5,497,266 2,407,437
Trade and other receivables 8 4,103,837 1,765,515
Other current assets 9 807,062 649,542
Total current assets 10,408,165 4,822,494
Non-current Assets
Property, plant & equipment 10 102,128 79,623
Right of use asset 11 1,466,598 1,067,636
Goodwill 12 15,614,886 9,202,013
Other intangible assets 12 8,081,230 2,812,976
Deferred tax assets 13 1,996,794 1,955,015
Total non-current assets 27,261,636 15,117,263
Total assets 37,669,801 19,939,757
Current liabilities
Trade and other payables 14 3,882,465 2,201,001
Deferred revenue 16 1,003,348 1,029,735
Provisions 17 462,814 293,657
Other liabilities 15 365,003 388,139
Income tax payable 89,341 -
Total current liabilities 5,802,971 3,912,532
Non-current liabilities
Provisions 17 258,445 102,175
Deferred tax liability 18 2,374,673 1,018,263
Other liabilities 15 1,251,936 897,014
Total non-current liabilities 3,885,054 2,017,452
Total liabilities 9,688,025 5,929,984
Net assets 27,981,776 14,009,773
Equity
Share capital 19 40,626,371 32,988,263
Share based payment reserves 20 409,253 489,453
Foreign currency translation reserve 3,558 (9,841)
Accumulated losses (18,057,406) (19,458,102)
Total Equity 27,981,776 14,009,773
----- End of picture text -----

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

Comms Group | 2021 Annual Report 21

Comms Group Ltd Consolidated Statement of Changes in Equity

==> picture [512 x 616] intentionally omitted <==

----- Start of picture text -----

Share capital Share-based Foreign Accumulated Total
payments currency losses
reserves translation
reserve
$ $ $ $
Balance at 1 July 2019 29,692,931 2,192,919 - (22,472,794) 9,413,056
Profit for the period to 30 June 2020 - - - 2,575,069 2,575,069
Reclassification to reserves from retained - - (23,570) 23,570 -
earnings
Translation reserve - - 13,729 - 13,729
Other comprehensive income - - - - -
Total comprehensive income for the period - - (9,841) 2,598,639 2,588,798
Transactions with owners in their capacity
as owners:
Contributions to equity net of transaction 1,870,719 - - - 1,870,719
costs
Deferred consideration 1,424,613 (1,840,666) - 416,053 -
Share based payments - 137,200 - - 137,200
Balance at 30 June 2020 32,988,263 489,453 (9,841) (19,458,102) 14,009,773
Balance at 1 July 2020 32,988,263 489,453 (9,841) (19,458,102) 14,009,773
Profit for the period to 30 June 2021 - - - 568,289 568,289
Translation reserve - - 13,399 - 13,399
Other comprehensive income - - - - -
Total comprehensive income for the period - - 13,399 568,289 581,688
Transactions with owners in their
capacity as owners:
Transfer of expired warrants - (340,290) - 340,290 -
to retained earnings
Contributions to equity net 5,967,575 - - - 5,967,575
of transaction costs
Shares issued to vendors (note 26) 7,162,650 - - - 7,162,650
Expiry of equity-settled contingent (492,117) - - 492,117 -
consideration
Share based payments - 260,090 - - 260,090
Balance at 30 June 2021 45,626,371 409,253 3,558 (18,057,406) 27,981,776
----- End of picture text -----

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Comms Group | 2021 Annual Report 22

Comms Group Ltd Consolidated Statement of Cash Flows

==> picture [511 x 489] intentionally omitted <==

----- Start of picture text -----

Notes 30 June 30 June
2021 2020
Cash flows from operating activities $ $
Receipts from customers (inclusive of GST) 27,126,021 21,915,316
Payments to suppliers and employees
(26,150,663) (19,974,052)
(inclusive of GST)
Interest received 621 5,887
Interest paid (56,914) (97,933)
Income tax paid (28,410) (362,398)
Net cash inflow from operating activities 7 890,655 1,486,820
Cash flows from investing activities
Software purchase and IT systems (547,648) (507,528)
Payments for property, plant & equipment (20,261) (19,111)
Payments for purchase of businesses, 26 (2,710,399) -
net of cash acquired
Net cash outflow from investing activities (3,278,308) (526,639)
Cash flows from financing activities
Lease payments (392,617) (404,047)
Proceeds from the issue of shares,
5,870,099 1,870,719
net of transaction costs
Net repayments of borrowings - (385,864)
Net cash inflow from financing activities 5,477,482 1,080,808
Net increase in cash and cash equivalents 3,089,829 2,040,989
Cash and cash equivalents at the beginning
2,407,437 366,448
of the period
Cash and cash equivalents at end of period 5,497,266 2,407,437
----- End of picture text -----

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

Comms Group | 2021 Annual Report 23

==> picture [554 x 638] intentionally omitted <==

----- Start of picture text -----

Note Page
1 Corporate information 25
2 Summary of significant accounting policies 25
3 Segment reporting 31
4 Revenue 32
5 Individually significant profit or loss items 33
6 Income tax expense 34
7 Reconciliation of profit after tax to net operating activities 35
8 Trade and other receivables 35
9 Other current assets 37
10 Property, plant and equipment 37
11 Right of use assets 39
12 Intangibles 40
13 Deferred tax asset 42
14 Trade and other payables 42
15 Other liabilities 43
16 Deferred revenue 43
17 Provisions 43
18 Deferred tax liability 44
19 Share capital 44
20 Reserves 45
21 Earnings per share 46
22 Share based payments 47
23 Financial risk management 48
24 Commitments and contingencies 50
25 Entities within the consolidated group 50
26 Business combinations 50
27 Events after reporting date 54
28 Auditor’s remuneration 54
29 Related party transactions 55
30 Parent entity information 56
----- End of picture text -----

Comms Group | 2021 Annual Report 24

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

1 Corporate Information

The consolidated financial statements and notes represent those of Comms Group Limited (the “Company”) and its controlled entities (collectively, the “Group”) for the year ended 30 June 2021. The financial statements are presented in Australian dollars, which is the Group’s functional and presentation currency.

Comms Group Limited is a company limited by shares, incorporated and domiciled in Australia. The Company was listed on the Australian Securities Exchange (ASX) on 21 December 2017 and is the ultimate parent entity in the Group.

With effect from 25 November 2020, the name of the Company was changed from CommsChoice Group Limited to Comms Group Limited.

A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements.

The financial report was authorised for issue by the Board of Directors on 25 August 2021.

2 Summary of significant accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements.

(a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Accounting Standards and Interpretations issued by the Australian Standards Board (AASB) and the Corporations Act 2001. Comms Group is a for-profit entity for the purpose of preparing the financial statements.

(i) Compliance with IFRS

The Financial statements of Comms Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) Historical cost convention

The financial statements have been prepared under the historical cost convention unless otherwise indicated.

(iii) New standards and interpretations adopted

The Group has adopted all new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current period.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at

30 June 2021 and the results of all subsidiaries for the year then ended. The Company 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 gained by 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 changes 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.

A list of controlled entities is contained in note 25 to the financial statements.

(c) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, liabilities incurred to the former owners of the acquired business, equity interests issued by the group, fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Comms Group | 2021 Annual Report 25

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognised in profit or loss.

Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value.

The Group adjusts the remaining effective useful life of its assets to better reflect their actual usage and future economic benefit.

(iii) Goodwill and other indefinite life intangible assets

The Group 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 12. 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.

(iv) Recognition of deferred tax assets

The Group formed a tax consolidated group under Australian taxation law during the year. Historical losses accumulated by the operating subsidiaries in the group prior to and since acquisition by the Group have now been recognised in full as a deferred tax asset, in accordance with tax loss recoupment rules.

The Board has made a judgement to recognise a deferred tax asset in respect of current year tax losses and black hole expenditure.

(v) Business combinations

(d) Critical accounting estimates and judgements

Accounting estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,

by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk

of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Allowance for expected credit losses

The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates and forward looking information, including accounting for the potential impacts of the COVID-19 pandemic.

(ii) Estimation of useful lives of assets

The Group reviews the estimated useful lives of property plant and equipment at the end of each financial year.

As discussed in (c) above, business combinations are initially accounted for at fair value on acquisition. The assessment of fair value can be provisional depending upon the date of the acquisition and the reporting end 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.

(vi) Fair value measurement hierarchy

The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective.

The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.

Comms Group | 2021 Annual Report 26

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

(vii) Coronavirus (COVID-19) pandemic

Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.

The total price that is contracted to be paid for the above transactions are allocated to the contract stages and recognised as follows:

Services which include - hosted voice, data and enterprise networks and cloud based communication enablement services are recognised over time on a straight line basis, as the services are rendered: and
Hardware sales are recognised at the point in time where delivery has been made and control has been transferred to the customer.

(ii) Interest

Bank interest is recognised when received.

(viii) Incremental borrowing rate

Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the Group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.

(e) Revenue recognition

The Group recognises revenue as follows:

(i) Revenue from customers

Revenue recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Contracts with customers can be summarised into the following distinct and separate transactions (there is no bundling of hardware, installation and monthly ongoing fees). The key driver for keeping these separate is efficiency of working capital; meaning it is advantageous to invoice separately upfront hardware and installation costs rather than finance them internally for later recovery from the monthly usage charges. By keeping the performance obligations separate it reduces the working capital drain on the business whilst making separation of transactions easier to identify for revenue recognition):

Voice network income;

(iii) Other income

Other income is recognised when it is received or when the right to receive payment is established.

(f) Income tax

The Group formed a tax consolidated group under Australian taxation law year and income tax has been accounted for on that basis. The income tax expense or credit for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting year and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Data network income; and
Managed services income.

Comms Group | 2021 Annual Report 27

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(i) Investment allowances and similar tax incentives

Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to qualifying expenditure (eg Research and Development Tax Incentive regime in Australia or other investment allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax expense.

(g) Cash and cash equivalents

For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other shortterm, 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, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Statement of Financial Position.

(h) Trade 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 15-30 days. They are presented as current assets.

The Group 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.

See note 8 for further information about the Group’s accounting for trade receivables.

(i) Deferred revenue

Deferred revenue represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer.

(j) Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting year in which they are incurred.

Depreciation is calculated using the straight-line or diminishing value method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. The depreciation rates used for each class of depreciable assets are follows:

	Method	Rate
Computer equipment	Straight line	25 - 33%
Leasehold improvements	Diminishingvalue	13%
Furniture and fittings	Diminishingvalue	15-40%
Motor vehicles	Straight line	8%

Comms Group | 2021 Annual Report 28

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2 (l)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

(k) Right of use asset

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.

(l) Intangible assets

(i) Goodwill

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units (CGU) that are expected to benefit from the business combination in which the goodwill arose.

Goodwill is measured as described in note 2 (c).

(ii) Customer contracts and brand

Customer contracts and brand acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.

(iii) Internally generated software

All assets reported as internally generated software are held at cost less accumulated amortisation and impairment losses. Intangibles include costs in relation to the development of software systems and products where future benefits are expected to exceed these costs. Costs capitalised include external direct costs of materials and service and direct payroll and payroll-related costs of employees’ time spent on the project during the development phase.

Software and product development costs are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset.

Amortisation is calculated on a straight-line basis on all internally generated software products commencing from the time the asset is ready for use over the useful life of the asset not exceeding 5 years in any case.

The useful lives of these intangible assets are assessed to be either finite or indefinite.

Where amortisation is charged on assets with finite lives, this expense is taken to the consolidated statement of comprehensive income in the expense category ‘depreciation and amortisation’.

Intangible assets with a finite life are tested for impairment where an indicator of impairment exists and in the case of indefinite life intangibles annually, either individually at the CGU level or groups of CGU’s. This requires an estimation of the recoverable amount of the CGU’s to which the intangible with finite life is allocated. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Gains or losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss.

(iv) Amortisation

Amortisation is calculated on a straight-line basis on all intangibles commencing from the time the asset is ready for use. The estimated useful life of intangibles is as follows:

• Customer contracts and brands 7-10 years

• Internally generated software 5 years

(m) Impairment of assets

Goodwill and 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 assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Comms Group | 2021 Annual Report 29

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cashgenerating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(n) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of reporting period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(o) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the year of the facility to which it relates.

Borrowing are removed from the Consolidated Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as other income or finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(p) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset

are capitalised during the period of time that is required to complete and prepare the asset for its intended use for sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred.

(q) Lease liabilities

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate.

Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. Variable lease payments are only included in measuring the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

The Group recognised expenses for short term leases and low value leases on a straight line basis, in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.

(r) Provisions

Provisions for legal claims, service warranties and other obligations are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required

Comms Group | 2021 Annual Report 30

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

to settle the present obligation at the end of the reporting year. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(s) Employee benefits

(i) Short term employee benefits

Liabilities for employee benefits expected to be settled wholly within 12 months of reporting date are measured at the amounts expected to be paid when the liabilities are settled. These liabilities are presented as current employee benefit obligations in the balance sheet.

The Group has a short term benefit plan in place where the employee will be eligible to receive a short term incentive benefit of up to the Maximum Short Term Incentive amount in respect to the forecast period, and each year following the end of the Forecast Period, subject to the employees achievement of the KPI’s as assessed by the People and Culture Committee.

(ii) Other long-term employee benefits

Employee benefits not expected to be settled wholly 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.

(iii) Defined contribution superannuation expense

Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.

(iv) 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.

(v) Employee performance rights

The fair value of rights granted is recognised as an employee benefit expense with the corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the rights granted including any market performance conditions (eg the entity’s share price), including the impact of any service and non-market performance vesting performance conditions (eg sales growth targets), and including the impact of any non-vesting conditions.

(t) Contributed equity

Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities 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.

(u) Dividends

Dividends will be recognised when declared during the financial year and no longer at the discretion of the Company.

(v) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of 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 taxation authority is included with other receivables or 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 taxation authority, are presented as operating cash flow.

(w) Earnings per share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to members of the Group, excluding any costs of servicing equity other than ordinary shares, divided by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

3 Segment reporting

(i) Identification of reportable operating segments

The consolidated entity is organised into one operating segment under AASB 8 Operating Segments. The single operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources.

The Group’s revenues from external customers and non-current assets are predominantly domiciled in Australia.

Comms Group | 2021 Annual Report 31

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

4 Revenue

4 Revenue For the year ended 30 June 2021
	Consolidated	Consolidated
	30 June 2021	30 June 2020
Sales revenue	$	$
Voice revenue	14,675,827	12,639,346
Data revenue	5,523,471	4,156,904
Managed service revenue	4,921,202	2,333,467
	25,120,500	19,129,717

Disaggregation of revenue

The Group derives its revenue from the delivery of hosted voice, data and enterprise networks and cloud based communication enablement services that is recognised over the term of the contract. The table above provides a breakdown of revenue by major business line. As disclosed in note 3, the Group has one operating segment.

The disaggregation of revenue from contracts with customers is as follows:

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Revenue from telecommunications and managed services	24,561,211 18,843,374
Revenue from sale / lease of hardware and software licenses	559,289 286,343
	25,120,500 19,129,717

Revenue from direct customers	18,471,176 13,566,713
Revenue from wholesale customers	6,649,324 5,563,004
	25,120,500 19,129,717

Comms Group | 2021 Annual Report 32

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

5 Individually significant profit or loss items

The Group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance of the Group.

==> picture [512 x 421] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Restructuring costs consist of the following expenses
Employee benefits - 76,200
Onerous lease - 10,000
IT software - 80,000
Total restructuring costs - 166,200
Depreciation & amortisation
Depreciation expense 40,846 30,800
Depreciation - right of use assets 325,442 325,580
Amortisation - customer contracts 530,495 309,988
Amortisation - brand 142,734 124,044
Amortisation - software 87,372 4,112
Total depreciation & amortisation 1,126,889 794,524
Interest Expense
Interest expense - 25,129
Interest on lease liability 56,914 72,804
Total interest expense 56,914 97,933
Other costs
Share based payments 260,090 137,200
Superannuation guarantee expense 445,610 336,045
Acquisition costs 582,116 -
----- End of picture text -----

Comms Group | 2021 Annual Report 33

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

6 Income tax expense

==> picture [512 x 463] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Income tax expense / (benefit)
Current tax 252,914 -
Deferred tax - origination and reversal of temporary differences 460,263 (437,696)
Deferred tax - recognition of prior year losses (606,923) (810,339)
Total income tax (benefit) 106,254 (1,248,035)
The Group has tax losses available for use of $3,415,583 including $2,334,319 relating to tax losses not recognised in the prior
year which have now been brought to account on the Statement of Financial Position.
Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Reconciliation of income tax expense/(benefit)
and tax at the statutory rate
Profit before income tax 674,543 1,327,034
At the Group's statutory income tax rate of 26% (June 2020: 27.5%) 175,381 364,934
Tax effect amounts which are not deductible / (taxable)
in calculating taxable income:
Non-deductible expenses 77,533 46,491
Application of carried forward losses not previously
(252,914) (849,121)
accounted for
Recognition of deferred tax assets for carried forward
(354,009) (810,339)
tax losses not previously accounted for
Deferred tax - origination and reversal of temporary differences 460,263 -
Income tax expense / (benefit) 106,254 (1,248,035)
----- End of picture text -----

Comms Group | 2021 Annual Report 34

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

7 Reconciliation of profit after income tax to net cash from operating activities

==> picture [512 x 302] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Profit for the period 568,289 2,575,069
Adjustments for:
Share based payments 260,090 137,200
Depreciation and amortisation 1,126,889 794,524
1,955,268 3,506,793
Change in assets and liabilities:
(Increase) / decrease in receivables (657,315) 306,001
(Increase) / decrease in inventory 19,578 -
(Increase) / decrease in deferred tax 8,781 (1,248,035)
Increase / (decrease) in tax payables 26,250 (362,399)
Increase / (decrease) in payables (352,266) (357,746)
Increase / (decrease) in provisions (103,529) (267,607)
Increase / (decrease) in other working capital (6,112) (90,187)
Net cash inflow/(outflow) from operating activities 890,655 1,486,820
----- End of picture text -----

8 Trade and other receivables

8 Trade and other receivables
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Trade receivables	4,179,523 1,836,808
Less: provision for impairment of receivables	(75,686) (71,293)
	4,103,837 1,765,515

Other receivables	- -
Total trade and other receivables	4,103,837 1,765,515

(i) Classification of trade and other receivables

Trade receivables are amounts due from customers for goods or services performed in the ordinary course of business. Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in the active market. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally settled within 30 days and therefore are all classified as current.

Comms Group | 2021 Annual Report 35

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

8 Trade and other receivables (continued)

(ii) Fair values of trade and other receivables

Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as the fair value.

The expected credit losses (ECL) model directs the approach to determine the allowance for ECL on trade receivables to the lifetime ECL as there is no financing component in the receivable, nor is it a lease receivable.

This requires an allowance matrix be established that takes into account historical observed default rates which is adjusted for forward looking estimates.

Default rates do not exist in a structured or repetitive form. The nature of the service provided reduces the risk of default as opposed to a dispute. This is because;

Credit ratings being applied on all contract wins;
The ability to stop or disrupt telecom services for non-payment. For small businesses their phone (and phone number) is a vital tool for business survival. For larger businesses the phone or cloud based network is key to how they provide services and operate; and
Disrupting payment is preceded by unpaid bill notices, the last ones which set out that non-payment activity is registered with a credit rating agency.

Based on what has been observed, the following allowance matrix has been determined:

The ageing of the receivables and allowance for expected credit losses are as follows:

More than 90 days due: 14%

The ageing of the receivables and allowance for expected credit losses are as follows:

==> picture [510 x 143] intentionally omitted <==

----- Start of picture text -----

Expected credit Carrying Allowance for expected
loss rate amounts credit losses
2021 2020 2021 2020 2021 2020
% % $ $ $ $
Not overdue - 0.14 2,757,860 1,625,850 - 1,626
0 to 1 months overdue - 1 763,468 88,992 - 890
1 to 3 months overdue - 5 107,795 32,847 - 1,642
Over 3 months overdue 14 75 550,400 89,119 75,686 67,135
4,179,523 1,836,808 75,686 71,293
----- End of picture text -----

Whilst some customers in industries more affected by the business challenges of the COVID-19 pandemic have experienced a fall in call volumes, through a greater focus on agreed credit terms and an extension to terms for some customers the Group has been able to minimise any credit losses to date.

The expected credit loss rate of 14% of over 3 month overdue amounts is effected by the inclusion of a significant amount from a major customer acquired as part of the acquisition of Next Telecom. The amount receivable is considered collectable. Movements in expected credit losses of receivables are as follows:

Movements in expected credit losses of receivables are as follows:
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Openingbalance	71,293 94,526
Addition - business combination	34,855 -
Provision for expected credit losses recognised duringthe year	- 92,033
Receivables written off duringthe year as uncollectible	(9,030) (115,266)
Unused amount reversed	(21,431) -
Closing balance	75,687 71,293

Comms Group | 2021 Annual Report 36

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

9 Other current assets

9 Other current assets For the year ended 30 June 2021
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Prepayments	496,054 492,119
Accrued revenue	13,865 23,982
Security deposits	247,708 133,441
Inventory	49,435 -
	807,062 649,542

10 Property, plant and equipment

==> picture [512 x 268] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Computer Equipment 142,539 62,322
Less: Accumulated Depreciation (117,555) (34,549)
24,984 27,773
Leasehold Improvements 33,045 25,832
Less: Accumulated Depreciation (18,455) (8,906)
14,590 16,926
Office Furniture and Equipment 182,845 21,679
Less: Accumulated Depreciation (133,400) (4,004)
49,445 17,675
Motor Vehicles 33,117 33,117
Less: Accumulated Depreciation (20,008) (15,868)
13,109 17,249
Total property, plant and equipment 102,128 79,623
----- End of picture text -----

Comms Group | 2021 Annual Report 37

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

10 Property, plant and equipment (continued)

==> picture [512 x 182] intentionally omitted <==

----- Start of picture text -----

Computer Leasehold Office furniture & Motor vehicles Total
equipment improvements equipment
Consolidated $ $ $ $ $
Balance at 1 July
15,834 15,932 23,814 66,358 121,938
2019
Additions 26,113 8,452 - - 34,565
- -
Disposals (2,330) (43,750) (46,080)
Reclassifications 4,126 - (4,126) - -
Depreciation
(15,970) (7,458) (2,013) (5,359) (30,800)
expense
Balance at
27,773 16,926 17,675 17,249 79,623
30 June 2020
----- End of picture text -----

==> picture [511 x 194] intentionally omitted <==

----- Start of picture text -----

Computer Leasehold Office furniture & Motor vehicles Total
equipment improvements equipment
Consolidated $ $ $ $ $
Balance at 1 July
27,773 16,926 17,675 17,249 79,623
2020
Additions - business 2,737 2,333 42,981 - 48,051
combination
Additions 11,134 7,213 1,914 - 20,261
- -
Disposals (1,361) (3,600) (4,961)
Depreciation
(16,660) (10,521) (9,525) (4,140) (40,846)
expense
Balance at
24,984 14,590 49,445 13,109 102,128
30 June 2021
----- End of picture text -----

Comms Group | 2021 Annual Report 38

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

11 Right of use assets

11 Right of use assets For the year ended 30 June 2021
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Land and buildings - right of use	1,985,701 1,362,299
Less: Accumulated depreciation	(532,961) (317,050)
	1,452,740 1,045,249

Plant and equipment - right of use	30,917 30,917
Less: Accumulated depreciation	(17,059) (8,530)
	13,858 22,387

	1,466,598 1,067,636

The consolidated entity leases buildings for its offices under agreements of one, three and five years. The leases have various escalation clauses. If renewed, the terms of the leases are renegotiated. The consolidated entity also leases equipment under agreements of between three to five years.

CommsGroup | 2021 Annual Report 39

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

12 Intangibles

==> picture [511 x 398] intentionally omitted <==

----- Start of picture text -----

Customer Brand [(1)] Goodwill [(1)] Software Internally Capital Other Total
contracts generated work in
software progress
Consolidated $ $ $ $ $ $ $ $
Cost
Balance at
6,411,000 3,574,000 18,033,456 2,966,065 246,750 260,778 13,154 31,505,203
30 June 2020
Additions
- business 4,841,145 747,597 6,412,874 - - - 800 12,002,417
combination
Additions during - - - 23,774 - 523,873 - 547,647
the period
Transfers during - - - - 384,696 (384,696) - -
the period
Balance at
11,252,145 4,321,597 24,446,330 2,989,839 631,446 399,955 13,954 44,055,266
30 June 2021
Accumulated
amortisation
and Impairment
Balance at -
(5,027,522) (2,647,918) (8,831,444) (2,966,064) (4,112) (13,154) (19,490,214)
1 July 2020
Additions
- business (108,335) - - - - - - (108,335)
combination
Amortisation - - - -
(530,496) (142,734) (87,372) (760,601)
expense
Balance at
5,585,792 1,530,945 15,614,886 23,775 539,962 399,955 800 23,696,116
30 June 2021
----- End of picture text -----

(1) Incorporates provisional accounting for Next Telecom Pty Ltd and Binary Networks Pty Ltd business combinations (refer note 26).

Determination of CGU’s

For the purposes of assessing the Group’s intangible assets, management has identified three cash-generating units (CGUs) that make up the Group. These have been taken as Comms Group Ltd as it stood at 31 December 2020 and the businesses acquired of Next Telecom Pty Ltd and Binary Networks Pty Ltd. These three entities and businesses independently generate cash flows that are largely independent of the cash flows generated by each other.

Goodwill is allocated to the following cash generating units:

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Comms Group Limited	9,202,012 9,202,012
Next Telecom Pty Ltd	5,684,416 -
Binary Networks Pty Ltd	728,458 -
	15,614,886 9,202,012

Comms Group | 2021 Annual Report 40

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

The CGU’s have been defined based on the underlying integrated business (Comms Group as at 31 December 2020) and individual businesses (Next Telecom and Binary Networks).

The recoverable amounts of the CGU were determined based on a value-in-use calculation, reflecting management forecasts for the first year and longer range projections for years two to five. Cash flows beyond the five-year period are extrapolated using a suitable growth rate determined by management, not exceeding the anticipated long-term average growth rate for the business in which the CGU operates.

The budget and projections used represent management’s current projected growth expectations including for the acquisition of the businesses of Next Telecom and Binary Networks and their integration within the overall Group. In determining such assumptions, factors such as competitive dynamics, market opportunities, synergies (both realised and unrealised) and cost control were all contemplated.

The key assumptions management have used in forecasting cash flow projections over the five-year period are as set out below. During the period management have held constant from the prior year, short term growth projections and assumptions for value in use calculations, as a result of the stabilisation of economic challenges from the COVID-19 pandemic. Under these conditions, the recoverable amounts of the CGUs exceed their carrying amounts and no impairment has been recognised.

Key assumptions used for value-in-use calculations

When testing for impairment, the discounted future cash flows are assessed to determine the value-in-use of the CGU. The recoverable amount under the value-in-use method is then compared to the carrying value of the CGU to evaluate whether there is any impairment.

Management used the following key assumptions in determining the recoverable amounts of its intangible assets:

==> picture [512 x 140] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Comms Group|Next Telecom|Binary Networks|
|Revenue growth|3.0%|3.0%|3.0%|
|Gross Margin|50.8% to 52.0%|33.8%|47.5%|
|Wage and Operating expenses growth|2.5%|2.5%|2.5%|
|Weighted average cost of capital (WACC)|12.3%|12.3%|12.3%|
|Terminal growth rate|2.5%|2.5%|2.5%|
|Risk factor to free cashflows|5.0%|5.0%|5.0%|
|Long term annual capital expenditure|$0.05m|$0.03m|$0.05m|

----- End of picture text -----

Sensitivity analysis

As disclosed in Note 2(m), management have made judgements and estimates in respect of impairment testing of goodwill and other indefinite life intangibles. Should these judgements and estimates not occur the carrying amounts may decrease. The key sensitivities are as follows (all other assumptions remaining constant), movements of which may then require an impairment charge in the CGU.

==> picture [511 x 112] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Key sensitivity|
|Revenue growth|Discount rate|Risk factor on free|
|Cash Generating Unit|to decrease|increase to|cashflows to increase|
|to below|more than|to more than|
|Comms Group Ltd|1.80%|14.28%|21.00%|
|Next Telecom Pty Ltd|-0.70%|17.53%|37.00%|
|Binary Networks Pty Ltd|2.30%|13.52%|15.00%|

----- End of picture text -----

Management believes that other reasonable changes in the key assumptions on which the recoverable amount is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount.

Comms Group | 2021 Annual Report 41

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

13 Deferred tax asset

==> picture [512 x 302] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Deferred tax asset comprises temporary differences attributable to:
Temporary differences 851,475 1,007,407
Carried forward losses 888,052 810,339
Acquisitions during the year 95,221
Amounts recognised in equity for capital raising 162,046 137,269
Deferred tax asset 1,996,794 1,955,015
Movements in deferred assets:
Opening balance 1,955,015 443,205
Debited/(credited) to:
- Relating to prior year losses brought on 606,923 810,339
- Relating to temporary differences (757,839) 701,471
- Amounts recognised in equity for capital raising 97,474 -
- Acquisitions 95,221 -
Closing balance 1,996,794 1,955,015
----- End of picture text -----

14 Trade and other payables

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Trade payables	1,969,406 578,187
Accrued expenses	1,318,552 1,179,905
Payroll liabilities	345,326 224,708
GST liabilities	202,993 186,956
Other payables	46,188 31,245
	3,882,465 2,201,001

Trade payables are unsecured and are usually paid within 30 days of recognition.

The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.

Comms Group | 2021 Annual Report 42

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

15 Other liabilities

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Current liabilities
Lease liabilities	365,003 388,139
Non-current liabilities
Lease liabilities	1,251,936 897,014

16 Deferred revenue

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Deferred revenue	1,003,348 1,029,735
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below:

Openingbalance	1,029,735 666,985
Payments received in advance	843,027 908,596
Transfer to revenue – included in openingbalance	(869,414) (545,846)
Closing balance	1,003,348 1,029,735

17 Provisions

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Current liabilities
Annual leave	462,814 293,657
	462,814 293,657
Non-current liabilities
Longservice leave	258,445 102,175

Comms Group | 2021 Annual Report 43

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

18 Deferred tax liability

18 Deferred tax liability For the year ended 30 June 2021
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Movements in deferred liabilities:
Openingbalance	1,018,263 754,488
Debited/(credited) to:
- profit or loss	(44,663) 263,775
- intangible assets acquired on acquisition	1,401,073 -
	2,374,673 1,018,263

19 Share capital

Consolidated 30 June 2021 Shares	Consolidated 30 June 2020 Shares	Consolidated 30 June 2021 Consolidated 30 June 2020 $ $
Ordinary Shares - fully paid 340,329,715	191,392,259	45,626,371 32,988,263

Movements in ordinary share capital

==> picture [512 x 330] intentionally omitted <==

----- Start of picture text -----

Date Shares $
Opening balance 1 July 2019 136,839,360 29,692,931
Shares issued in lieu of fees for contracting party 1 July 2019 2,437,500 97,500
Shares issued for restructuring costs 24 July 2019 45,400,000 1,816,000
Less: transaction costs arising on share issues 24 July 2019 - (102,781)
Claims retention shares issued to vendors 16 October 2019 5,698,450 1,424,613
Shares issued to employee 6 February 2020 1,016,949 60,000
Balance 30 June 2020 191,392,259 32,988,263
Opening balance 1 July 2020 191,392,259 32,988,263
Equity raising 22 December 2021 46,678,574 3,709,287
Less: transaction costs arising on share issues 22 December 2021 - (206,361)
Add: tax effect of transaction costs arising 22 December 2021 - 53,653
on share issues
Equity raising 29 January 2021 31,446,426 2,540,717
Less: transaction costs arising on share issues 29 January 2021 - (173,540)
Add: tax effect of transaction costs arising on share issues 31 January 2021 - 43,820
Acquisition of subsidiary [(1)] 31 January 2021 70,812,456 6,670,533
Balance 30 June 2021 340,329,715 45,626,371
----- End of picture text -----

Comms Group | 2021 Annual Report 44

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

(i) Issue of shares on the acquisition of Next Telecom Pty Ltd subject to voluntary escrow conditions: 50,082,806 shares escrowed for 12 months commencing from completion of acquisition (29 January 2022) and 20,729,650 shares escrowed for 18 months commencing from completion of acquisition (29 July 2022).

Issue costs of $379,901 which were directly attributable to the issue of the shares during the year have been netted against the deemed proceeds in equity.

(i) Ordinary shares

Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of 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 holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote.

Capital risk management

The consolidated entity’s objectives when managing capital are 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.

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 capital risk management policy remains unchanged from the prior year.

20 Share based payments reserve

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Openingbalance	489,453 2,192,919
Share performance rights issued	260,090 137,200
Transfer to retained earnings	(340,290) (416,053)
Deferred consideration	- (1,424,613)
Share based payments reserve	409,253 489,453

Share-based payment reserve is used to recognise deferred consideration for the acquisition of subsidiaries together with the value of equity benefits provided to employees and directors as part of their remuneration. The deferred consideration was finalised in the period ending June 2020 with the issue of 5,698,450 shares at listing price of $0.25 per share and the remaining amount of $416,053 being transferred to retained earnings.

The 3,508,156 warrants each having an exercise price of $0.3125 issued to Grant Ellison following the completion of the acquisition of Commschoice Pty Ltd expired on 21 December 2020. The fair value of these warrants of $340,290 was transfered to retained earnings.

Comms Group | 2021 Annual Report 45

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

21 Earning per share

Reconciliation of earnings used in calculating profit per share

==> picture [512 x 275] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Profit attributable to the ordinary equity holders of the company 568,289 2,575,069
Weighted average number of ordinary shares used
257,500,852 185,776,474
as the denominator in calculating earnings per share
Adjustments for calculation of diluted earnings per share:
Retention shares issued on acquisition of subsidiary 997,260 -
Performance rights on issue 25,500,000 19,800,000
Adjustment for performance rights that are not dilutive (25,500,000) (19,800,000)
Weighted average number of ordinary shares used
258,498,112 185,776,474
as the denominator in calculating earnings per share
Cents Cents
Basic earnings per share 0.22 1.39
Diluted earnings per share 0.22 1.39
----- End of picture text -----

There is no dilution impact arising from outstanding deferred consideration shares, warrants, options and performance related shares.

Comms Group | 2021 Annual Report 46

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

22 Share based payments

Long Term Incentive Scheme

During the year a total of 7,500,000 performance rights have been issued to Directors and Management under the Performance Rights Plan with 1,800,000 rights cancelled before the end of the year. 50% are subject to vesting at either 12.5 cents per share, 15 cents per share or 20 cents per share, earliest of 18 months from grant date. The remaining 50% are subject to vesting at 20 cents per share, 25 cents per share or 30 cents per share, earliest 30 months from grant date. The number on issue as at 30 June 2021 are as follows.

==> picture [512 x 296] intentionally omitted <==

The weighted average share price during the financial year was $0.084 (2020: $0.058).

The weighted average remaining contractual life of share performance rights outstanding at the end of the financial year was 1.02 years (2020: 1.19 years).

For share performance rights granted during the current financial year, the valuation input models used to determine the fair value at the grant date are as follows:

==> picture [511 x 157] intentionally omitted <==

Comms Group | 2021 Annual Report 47

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

The performance rights will vest provided the following conditions are met:

The employee is continuously employed or continues to provide services to the Group up to the vesting period;
The following applies to 50% of the total number of performance rights that may vest (tranche A):
Comms Group Share price hurdle of either $0.125, $0.15 or $0.20 (whichever is applicable to the employee) achieved
- during the term. The share price hurdle must be reached on at least 20 consecutive trading days at any time during the term of the performance rights in order to satisfy this hurdle. The minimum vesting period is 18 months from grant date;
The following applies to 50% of the total number of performance rights that may vest (tranche B):
Comms Group Share price hurdle of either $0.25, $0.20 or $0.30 (whichever is applicable to the employee) achieved during the term. The share price hurdle must be reached on at least 20 consecutive trading days at any time during the term of the performance rights in order to satisfy this hurdle. The minimum vesting period is 30 months from grant date.

The exercise price is $nil and the expiry date is 5 years after the grant date of the performance rights.

Warrants issued

The 3,508,156 warrants each having an exercise price of $0.3125 issued to Grant Ellison following the completion of the acquisition of Commschoice Pty Ltd expired on 21 December 2020.

23 Financial risk management

The Group’s financial instruments consist of cash at bank, trade and other receivables, trade and other payables and a loan facility.

The main risks arising from the Groups financial instruments are interest rate risk, liquidity risk and credit risk. The Board has delegated the responsibility for assessing and monitoring financial risk to management. Management monitors these risks daily.

(i) Interest rate risk

The Groups interest bearing financial assets expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows.

(ii) Liquidity risk

Liquidity risk represents the Group’s ability to meet its contractual obligations as they fall due. The Group regularly monitors current and expected cash requirements to ensure that it maintains sufficient reserves of cash and adequate funding from banks to meet its liquidity requirements in the short and longer term.

The Directors of the Company regularly review the Group’s cash flow projections prepared by management.

Comms Group | 2021 Annual Report 48

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

==> picture [512 x 413] intentionally omitted <==

----- Start of picture text -----

1 year 1-5 Over Total Carrying
or less years 5 years contractual amount
flows
$ $ $ $ $
Financial assets
As at 30 June 2020
Trade and other receivables 1,765,515 - - - 1,765,515
Cash at bank 2,407,437 - - - 2,407,437
Total financial assets 4,172,952 - - - 4,172,952
As at 30 June 2021
Trade and other receivables 4,103,837 - - - 4,103,837
Cash at bank 5,497,266 - - - 5,497,266
Total financial assets 9,601,103 - - - 9,601,103
Financial liabilities
As at 30 June 2020
Trade and other payables 2,201,001 - - - 2,201,001
Lease liabilities 388,139 897,014 1,285,153
Total financial liabilities 2,589,140 897,014 - - 3,486,154
As at 30 June 2021
Trade and other payables 3,882,465 - - - 3,882,465
Lease liabilities 365,003 1,251,936 1,616,939
Total financial liabilities 4,247,468 1,251,936 - - 5,499,404
----- End of picture text -----

Bank overdraft and leasing facility

The Group has a secured business overdraft facility with the Commonwealth Bank of Australia for up to $350,000 and approved leasing facility of $600,000.

(iii) Credit risk

The Group has no significant exposure to credit risk. For credit sales the Group only trades with recognised creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Ageing analysis and ongoing credit evaluation are performed on the financial condition of the Group’s customers and where appropriate, an allowance for expected credit losses is raised. In addition, receivable balances are monitored on an ongoing basis so that the Group’s exposure to bad debts is not significant.

Credit terms for all customers are 15 to 30 days from month end. Customers are considered to be in default after 30 days with collection processes then taking place (subject to telecommunication industry regulations).

Comms Group | 2021 Annual Report 49

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

24 Commitments and contingencies

The Group has no contingent liabilities or capital commitments at 30 June 2021 (30 June 2020: $6,010).

25 Entities within the consolidated group

The following entities are included within the Consolidated Group:

==> picture [511 x 260] intentionally omitted <==

----- Start of picture text -----

Country of % Consolidated
Entity Name
incorporation 2021
Comms Group Ltd (parent, previously CommsChoice Group Ltd) Australia 100%
CommsChoice Pty Ltd Australia 100%
Telegate Pty Ltd Australia 100%
Commschoice Operations Pty Ltd Australia 100%
Commschoice Australia Pty Ltd Australia 100%
TelAustralia Pty Ltd Australia 100%
Woffle Pty Ltd Australia 100%
Syntel Pty Ltd Australia 100%
Comms Group (International) Pte Ltd (previously Telegate Singapore Pte Ltd) Singapore 100%
SingVoip Pte Ltd Singapore 100%
Next Telecom Pty Ltd Australia 100%
Binary Networks Pty Ltd Australia 100%
Binary Wholesale Pty Ltd Australia 100%
----- End of picture text -----

26 Business combinations

Next Telecom acquisition

On 15 December 2020 Comms Group entered into a binding share purchase agreement, to acquire 100% of the shares of Next Telecom Pty Ltd (“Next Telecom”). The acquisition was completed on 29 January 2021 at which time Comms Group took control of the acquired business per the terms of the share purchase agreement.

Next Telecom provides a full range of telecommunication services including:

Cloud hosted IP telephony: sophisticated voice and video platform with functionality of a traditional phone system with a host of additional features;
Voice, SIP trunking, business mobile services and inbound telephony services;
NBN products, fibre services and international data services; and
Managed services and network security solutions.

Total purchase price is $8.82m and includes upfront cash $1.67m, $6.67m of Comms Group scrip issued at $0.0942 per share escrowed for 12-18 months from the date of completion and deferred consideration of $0.49m assessed at the time of completion.

The Company has funded the upfront cash consideration from proceeds received from the capital raising of December 2020 and the balance of the upfront consideration of $6.67m has been funded by the issue of Comms Group scrip to the vendors of Next Telecom.

Comms Group | 2021 Annual Report 50

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

The acquisition provides a significant increase in scale, product offerings and overall customer base for the existing Comms Group business. Next Telecom has a complementary customer base, expanding and diversifying Comms Group’s existing customer base with significantly less reliance on any one customer, particularly in the Corporate and SME sector. There is also significant product and technology fit across Voice, Data and Managed Services. The acquisition will also provide significant opportunities in regards to synergies and the ability to cross-sell each other’s complementary product and service offerings.

Next Telecom contributed $6.18m to Group revenue and $0.41m to Group net profit before tax from the date of acquisition to 30 June 2021. For the financial year ended 30 June 2021, as a standalone entity revenue was $15.20m and total profit before tax was $0.19m.

The Group has incurred acquisition related costs of $0.46m to settlement.

The purchase price of $8.82m has been allocated on a provisional basis as set out below, to the assets acquired and liabilities assumed in the business combination.

==> picture [374 x 437] intentionally omitted <==

----- Start of picture text -----

|||
|---|---|
|Total|
|$|
|Cash and cash equivalents|306,280|
|Trade receivables|1,672,532|
|Other assets|101,772|
|Intangible assets customer contracts|3,861,401|
|Intangible assets brands|666,974|
|Property, plant & equipment|18,763|
|Deferred tax assets|70,033|
|Trade and other payables|(1,635,242)|
|Employee provisions|(219,565)|
|Other liabilities|(456,509)|
|Income tax payable|(94,152)|
|Deferred tax liability on customer contracts and brands|(1,153,336)|
|Net asset acquired|3,138,951|
|Goodwill|5,684,416|
|Acquisition-date fair value of the total consideration|8,823,367|
|Cash used to acquire businesses, net of cash acquired:|
|Acquisition-date fair value of the total consideration|8,823,367|
|Less: shares issued as consideration|(6,670,534)|
|Less: deferred consideration|(492,116)|
|Less: cash and cash equivalents|(306,280)|
|Net cash used|1,354,437|

----- End of picture text -----

Trade receivables acquired comprise gross contractual amounts due of $1.67m and Comms Group, based on its best estimate at the acquisition date, expects to collect the entire amount.

The initial accounting for customer contracts, brands and goodwill has been determined provisionally, whilst additional information in relation to the analysis and validation of transitioning customers is obtained, and final purchase price allocation is yet to be determined.

Goodwill of $5.7m is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

Comms Group | 2021 Annual Report 51

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

Binary Networks Pty Ltd acquisition

On 1 April 2021 Comms Group entered into a binding share purchase agreement, to acquire 100% of the shares of Binary Networks Pty Ltd and Binary Wholesale Pty Ltd (“Binary”) at which time Comms Group took control of the acquired business per the terms of the share purchase agreement.

Comms Groups’ acquisition of Binary has further strengthened its position in the market and brings significant technology platforms, systems and talent to the business. The acquisition is consistent with the Group’s previous advised strategy namely:

Binary services SMEs in Australia and expands the Group’s footprint.
Binary has advanced on-line real-time ordering and automation capability which will be added to the existing Group’s brands to accelerate organic growth.
Binary delivers immediate Layer-2 data network roll-out to the group, with key Points of Presence (‘PoPs’) in Sydney, Melbourne and Brisbane, to add additional products and enhanced capabilities in terms of service ordering, automation and an overall enhancement in terms of quality of service.
Binary has strong engineering capabilities with data networks, advanced voice services and IP.
Enables expansion of head office personnel and strengthens sales capabilities including the appointment of Michael Diamond (vendor and CEO of Binary) as Head of Systems & M&A Systems Integration which will assist with future acquisitions.

The purchase price includes cash consideration of $1.43m paid upfront to the vendor. As part of the share sale agreement, Comms Group will also issue shares to the vendor issued at $0.09 per share to be issued 50% on the 12 month and 50% on the 24 months anniversary of Michael Diamond’s employment with Comms Group.

In accordance with AASB 3 the issue of shares to Michael Diamond has been treated as a share-based payment with a total cost of $0.30m over the 24 month period, as the issue of shares is dependent on his ongoing involvement. $0.05m has been included in employee expenses in the Consolidated Statement of Profit and Loss for period ended 30 June 2021.

Binary Networks contributed $0.52m to Group revenue and $0.07m to Group profit before tax from the date of acquisition to 30 June 2021. For the financial year ended 30 June 2021 as standalone entity total revenue was $2.14m and total profit before tax was $0.05m.

The Company has incurred acquisition related costs of $0.12m.

The purchase price of $1.43m has been provisionally allocated as set out below, to the assets acquired and liabilities assumed in the business combination.

Comms Group | 2021 Annual Report 52

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

==> picture [374 x 386] intentionally omitted <==

----- Start of picture text -----

|||
|---|---|
|Total|
|$|
|Cash and cash equivalents|76,222|
|Trade receivables|9,354|
|Other assets|36,152|
|Intangible assets customer contracts|872,207|
|Intangible assets brands|80,624|
|Property, plant & equipment|29,292|
|Deferred tax assets|25,189|
|Trade and other payables|(103,641)|
|Employee provisions|(40,233)|
|Other liabilities|(33,300)|
|Income tax payable|(403)|
|Deferred tax liability on customer contracts and brands|(247,736)|
|Net asset acquired|703,727|
|Goodwill|728,457|
|Acquisition-date fair value of the total consideration|1,432,184|
|Cash used to acquire business, net of cash acquired:|
|Acquisition-date fair value of the total consideration|1,432,184|
|Less: cash and cash equivalents|(76,222)|
|Net cash used|1,355,962|

----- End of picture text -----

Trade receivables acquired comprise gross contractual amounts due of $9,354 and Comms Group, based on its best estimate at the acquisition date, expects to collect the entire amount.

The initial accounting for customer contracts, brands and goodwill has been determined provisionally, whilst additional information in relation to the analysis and validation of transitioning customers is obtained, and the final purchase price allocation is yet to be determined.

Goodwill of $0.728m is attributable mainly to expected synergies and assembled workforce arising from the acquisition.

Comms Group | 2021 Annual Report 53

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

27 Events after reporting date

The initial accounting for this business combination is yet to be complete and as such, disclosures in relation to the fair value of the assets and liabilities acquired and the composition of any goodwill arising on acquisition cannot reliably be made at the date of this report.

There have been no other significant matters or circumstances not otherwise dealt with in this report between the reporting date and the date the financial statements were approved for issue that will significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.

28 Auditor’s remuneration

The auditor of Comms Group is BDO Audit Pty Ltd. The disclosures below include amounts received or due and receivable by BDO East Coast Partnership, BDO Audit Pty Ltd and their respective related entities.

	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Remuneration of auditor BDO & related entities
Audit and review of financial statements	112,433 124,000
Non-audit fees: Taxation services	20,547 29,111
Non-audit fees: Financial due diligence	67,000 -
	199,980 153,111

Comms Group | 2021 Annual Report 54

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

29 Related party transactions

Parent entity

Comms Group Limited is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 25.

Key management personnel

Disclosures relating to key management personnel are set out in the remuneration report included in the directors’ report.

Compensation

The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below:

entity is set out below:
	Consolidated 30 June 2021 Consolidated 30 June 2020
	$ $
Short-term employee benefits	737,360 568,702
Post-employment benefits	53,798 148,876
Share-based payments	143,078 96,396
Total key management personnel remuneration	934,236 813,974

Transactions with related parties

Benjamen Jennings is a director of Jennings Partners Chartered Accountants that has provided accounting and bookkeeping services to the Group. Total fees paid by the Group for the period to 30 June 2021 were $Nil (2020: $2,097). For the period to 30 June 2021 Jennings Partners Chartered Accountants purchased communication services from the Group of $17,927 (2020: $15,574).

Ryan O’Hare is a Director of Next Business Energy Pty Ltd, which provides power to Next Telecom. Total amounts paid by the Group from the date of acquisition to 30 June 2021 were $3,645. For the period from acquisition to 30 June 2021 Next Business Energy paid rent to the Group of $40,155 and acquired telecommunication services from the Group of $29,412.

Receivable from and payable to related parties

As at 30 June 2021 Jennings Partners Chartered Accountants owes $1,489 for communication services provided to that date.

As at 30 June 2021 Next Business Energy Pty Ltd owes $5,148 for telecommunication services provided to that date.

Loans to/from related parties

None.

Deferred consideration available with related parties

None.

Comms Group | 2021 Annual Report 55

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

30 Parent entity information

Set out below is the supplementary information about the parent entity.

==> picture [512 x 286] intentionally omitted <==

----- Start of picture text -----

Consolidated Consolidated
30 June 2021 30 June 2020
$ $
Statement of profit or loss and other comprehensive income
Total comprehensive loss for the year (1,392,483) (394,252)
Statement of financial position
Current assets 4,714,760 3,970,987
Total assets 23,620,830 12,206,852
Current liabilities 97,246 569,640
Total liabilities 516,763 569,640
Net assets 23,104,067 11,637,212
Equity
Issued capital 45,504,411 32,919,958
Share based payment reserve 409,252 489,453
Retained earnings (22,809,596) (21,772,198)
Total equity 12,104,067 11,637,212
----- End of picture text -----

Guarantees entered into by the parent entity No guarantees have been provided by the parent for the subsidiaries.

Contingent liabilities entered into by the parent entity

The parent entity had no contingent liabilities as at 30 June 2021.

Capital commitments – property plant and equipment

The parent entity had no capital commitments for plant and equipment as at 30 June 2021.

Comms Group | 2021 Annual Report 56

Directors’ Declaration

In the Directors’ opinion:

1. the financial statements and notes, as set out on pages 20 to 56, are in accordance with the Corporations Act 2001 and:
(a) comply with the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
(b) comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements: and
(c) give a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
the directors have been given the declarations required by s295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer.

This declaration is made in accordance with a resolution of the Directors.

On behalf of the Board

==> picture [118 x 45] intentionally omitted <==

John Mackay Director

Sydney 25 August 2021

Comms Group | 2021 Annual Report 57

Tel: +61 2 9251 4100 Level 11, 1 Margaret St Fax: +61 2 9240 9821 Sydney NSW 2000 www.bdo.com.au Australia

==> picture [74 x 29] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT

To the members of Comms Group Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Comms Group Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, 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 report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001 , including:

(i) Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; 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 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 the directors of the Company, would be in the same terms if given to the 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.

Comms Group | 2021 Annual Report 58

==> picture [75 x 29] intentionally omitted <==

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter Accounting for business combinations

As disclosed in Note 26 of the financial report; the Group completed the acquisition of Next Telecom Pty Ltd and Binary Networks Pty Ltd during the financial year.

The audit of the accounting treatment for these transactions is considered a key audit matter, given the acquisitions were material to the Group and involved elements of significant complexity and judgement, including;

Determination of the fair value of the consideration transferred, including elements of contingent consideration relating to an earn out mechanism; and
Determination of the fair value of the assets and liabilities acquired, including identifiable intangible assets and goodwill.

How the matter was addressed in our audit Our audit procedures in order to address this key audit matter included, but were not limited to;

Obtaining and reviewing the executed Share Purchase Agreement, and other key documents, to understand the key terms and conditions of the transactions;
Performing an assessment of the fair value of the consideration transferred, agreeing to relevant supporting information and challenging key assumptions applied in determining the fair value of the consideration transferred;
Evaluating the fair value of the identifiable assets and liabilities acquired, agreeing balances recognised at acquisition date to supporting documentation;
Assessing the Group’s estimation of the fair value of the identifiable intangible assets acquired, including;
Evaluating the methodology applied by management in determining the fair value of the assets;
Reviewing and challenging the key assumptions applied in deriving the fair value of the assets and liabilities, as assisted by our valuation experts;
Reviewing the provisionally accounted allocation of the purchase price across the identifiable assets and liabilities of the businesses, ensuring any excess consideration is recognised as goodwill on acquisition.
Ensuring the disclosures within the financial report are adequate in light of the requirements within AASB 3 Business Combinations .

Comms Group | 2021 Annual Report 59

==> picture [74 x 29] intentionally omitted <==

Key audit matter

Impairment of Intangible Assets

The Group recognises a material balance of goodwill and other intangible assets as a result of historical business combinations within the Commschoice Group, as detailed in Note 12 to the financial statements.

This matter is considered significant to our audit given the material nature of these intangible assets to the Group, and the addition of further material balances as a result of business combinations completed during the financial year.

The assessment of impairment for intangible assets within the identified CGU involves critical accounting estimates and judgements, specifically in relation to forecast revenue and cash flows, which is affected by future market and economic conditions.

As a result of their impairment testing, management concluded that no impairment charge is required on the goodwill and other intangible assets as at 30 June 2021.

How the matter was addressed in our audit

Our audit procedures in order to address this key audit matter included, but were not limited to;

Evaluating management’s assessment of the cashgenerating units (‘CGUs’), ensuring this is consistent with our understanding of the Group and internal reporting;
Evaluating the discounted cash flow (‘DCF’) model prepared by management to determine the value in use of the CGUs. This included challenging and substantiating the key assumptions made by management, such as forecast revenue growth, operating costs and discount rates;
Consulting with BDO valuation experts in order to assess the reasonableness of the methodology applied throughout the model and the discount rate;
Performing sensitivity analysis on the DCF model in order to assess the impact of changes to the key assumptions in the model on the value in use of the CGUs; and
Ensuring disclosure in the financial statements is adequate and meets the requirements of Australian Accounting Standards.

As a focus of our audit work, we assessed the value in use calculations prepared by management, ensuring that the carrying value of these assets at 30 June 2021 is not in excess of its recoverable amount.

Comms Group | 2021 Annual Report 60

==> picture [75 x 29] intentionally omitted <==

Key audit matter

How the matter was addressed in our audit

Revenue recognition

Revenue recognition has been a key focus of our audit, due primarily to the material nature of the balance as disclosed at Note 4 to the financial statements and the importance of the revenue balance to the users of the financial statements.

Further, the complexity of the Group’s billing systems and the presence of manual journal entries to recognise amounts from these billing systems in the financial statements has resulted in an increased amount of auditor focus in gaining assurance on revenue recognition for the year-ended 30 June 2021.

Our audit procedures in order to address this key audit matter included, but were not limited to;

Performing a reconciliation of the billing system to the general ledger, investigating significant reconciling items or manual adjustments;
Substantively testing a sample of individual revenue items recognised during the period to supporting documentation, including evidence of service delivery and payment;
Performing substantive analytical procedures in relation to the Group’s key sources of revenue, assessing revenue and gross margins against our expectations; and
Ensuring revenue recognition policies are adequate and meet the requirements of AASB 15 Revenue from Contracts with Customers .

Other information

The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Comms Group | 2021 Annual Report 61

==> picture [75 x 29] intentionally omitted <==

In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or 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.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf

This description forms part of our auditor’s report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 13 to 18 of the directors’ report for the year ended 30 June 2021.

In our opinion, the Remuneration Report of Comms Group Limited, for the year ended 30 June 2021, 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.

BDO Audit Pty Ltd

Grant Saxon Director

Sydney, 25 August 2021

Comms Group | 2021 Annual Report 62

Comms Group Limited ASX Additional Information 30 June 2021

ASX Additional Information

Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is listed below.

The information is current as at 9 August 2021.

Distribution of shareholders

Securities

Fully paid ordinary shares

Fully paid ordinary shares escrowed 12 months to 29/01/2022

Fully paid ordinary shares escrowed 18 months to 29/07/2022

Analysis of numbers of equity holders by size holding:

==> picture [511 x 23] intentionally omitted <==

----- Start of picture text -----

Total holders Number of shares Percentage
----- End of picture text -----

1 to 1,000	16	2,714	0.00
1,001 to 5,000	26	100,738	0.03
5,001 to 10,000	82	641,071	0.19
10,001 to 100,000	297	13,077,731	3.84
100,001 and over	257	326,507,461	95.94
	678	340,329,715	100.00

Comms Group | 2021 Annual Report 63

Comms Group Limited ASX Additional Information 30 June 2021

Equity Security Holders

Twenty largest quoted equity security holders

Equity Security Holders Twenty largest quoted equity security holders
	Number held Percentage of total shares issued
NASHAR PTY LIMITED	41,459,300 12.182%
GJFE INVESTMENTS PTY LTD	17,657,693 5.188%
MR MARK LAWRENCE MANION	15,668,161 4.604%
BLUECOCO INVESTMENT PTY LTD	12,207,545 3.587%
MR PETER MCGRATH & MRS JANICE MCGRATH	10,440,610 3.068%
JENNINGS GROUP INVESTMENTS PTY LTD	10,062,289 2.957%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	9,628,159 2.829%
GMNM CONSULTING PTY LTD	9,377,864 2.756%
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	8,615,423 2.531%
ORACLE TELECOM PTY LTD	7,833,636 2.302%
BASEJUMP PTY LTD	7,110,573 2.089%
BOVIDAE CAPITAL PTY LTD	6,832,264 2.008%
MR MATTHEW WILLIAM BURGE	6,714,068 1.973%
BOVIDAE SF PTY LTD	5,363,066 1.576%
CS FOURTH NOMINEES PTY LIMITED	5,189,682 1.525%
VIE DE L'EAU PTY LTD	5,077,897 1.492%
CS THIRD NOMINEES PTY LIMITED	5,027,612 1.477%
TTOR PTY LTD	4,817,308 1.415%
MR BENJAMEN JAMES JENNINGS	3,767,857 1.107%
DR & LC FLYNN NOMINEES PTY LIMITED	3,500,000 1.028%
Total securities of top 20 holdings	196,351,007 57.694%

Substantial shareholders

Substantial shareholders
	Number held Percentage of total shares issued
NASHAR PTY LTD	41,459,300 12.18%
MR GRANT ELLISON	24,444,920 7.18%
GRIEG & HARRISON PTY LTD	19,516,000 5.73%

Marketable parcel of ordinary shares

There were 80 shareholders holding less than a marketable parcel of 345,695 ordinary shares.

Comms Group | 2021 Annual Report 64

Comms Group Limited ASX Additional Information 30 June 2021

Unquoted equity securities

Unquoted equity securities
	Number on issue Number of holders
Performance rights	25,500,000 23

Voting rights

The voting rights attached to ordinary shares are set out below:

Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Performance rights

No voting rights.

Comms Group | 2021 Annual Report 65

Corporate Directory

Directors	John Mackay – Independent Non-Executive Chairman
	Peter McGrath – Executive Director and Chief Executive Officer
	Benjamen Jennings – Non-Executive Director
	Claire Bibby – Non-Executive Director
	Ryan O’Hare – Non-executive Director (appointed 1 February 2021)
Secretary	Andrew Metcalfe
Notice of Annual General Meeting	The Annual General Meeting of Comms Group Limited
	will be held online and pending government advice at BDO meeting rooms,
	1 Margaret Street Sydney NSW 2000
	time 11.00 am
	date 23 November 2021
Registered Office	Level 6, 56 Clarence Street
	Sydney NSW 2000
Principal place of business	Level 6, 56 Clarence Street
	Sydney NSW 2000
Share register	Boardroom Pty Limited
	Level 12, 225 George Street
	Sydney NSW 2000
Auditor	BDO Audit Pty Ltd
	Level 11, 1 Margret Street
	Sydney NSW 2000
Solicitors	HWL Ebsworth
	Level 14, Australia Square, 264 – 278 George Street
	Sydney NSW 2000
Bankers	Commonwealth Bank of Australia
Stock exchange listing	Comms Group Limited shares are listed on the Australian Securities Exchange
	(ASX code: CCG)
Website	www.commschoice.com

Comms Group | 2021 Annual Report 66

==> picture [544 x 703] intentionally omitted <==

[email protected] www.commsgroup.global

==> picture [134 x 36] intentionally omitted <==

AI assistant

COMMS GROUP LTD — Annual Report 2021

64618_rns_2021-08-25_6ab91d23-5256-4fd7-ac09-9241d1e037bd.pdf

Contents

Key business highlights

Corporate & Strategic

Customers & Sales

Financial

Comms Group brand journey

Group and brand realignment

Key new clients and clients with expanded offerings

Directors’ Report

Directors and company secretary

Principal activities

Dividends

Review of operations

Review of operations (continued)

Group result

Earnings per share

Business restructuring and simplification

Acquisition of new businesses

Operating segment

Significant changes in the state of affairs

Events since the end of the financial year

Likely developments and expected results of operation

Environmental regulation

Information on directors

Special

Special

Non-Executive Director

Special

Special

Special

Board and Committee Meetings

Insurance of officers and indemnities

Remuneration Report (audited)

(a) Key management personnel covered in this report

Non-executive and executive directors

(b) Principles used to determine nature and amount of remuneration

Remuneration policy

People and Culture Committee

(c) Details of remuneration

Remuneration of Key Management Personnel

Directors’ Report

Independent non-executive director remuneration currently consists of:

Directors’ Report

(d) Share based compensation

Long Term Incentive Scheme

Directors’ Report

Issue of shares

Issue of options

(e) Service agreements

Director related entity remuneration

Directors’ Report

Chief Executive Officer (CEO) and Managing Director employment contract

Chief Financial Officer (CFO) employment contract

(f) Additional disclosures relating to KMP

Shareholding

Shares issued on completion of business acquisition

End of Remuneration Report

Proceedings on behalf of the Company

Non-audit services

Auditor’s independence declaration

Rounding of amounts

Corporate governance statement

DECLARATION OF INDEPENDENCE BY GRANT SAXON TO THE DIRECTORS OF COMMS GROUP LIMITED

Comms Group Ltd Consolidated Statement of Profit or Loss and Other Comprehensive Income

Comms Group Ltd Consolidated Statement of Financial Position

Comms Group Ltd Consolidated Statement of Changes in Equity

Comms Group Ltd Consolidated Statement of Cash Flows

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

1 Corporate Information

2 Summary of significant accounting policies

(a) Basis of preparation

(i) Compliance with IFRS

(ii) Historical cost convention

(iii) New standards and interpretations adopted

(b) Principles of consolidation

(c) Business combinations

Comms Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2021

COMMS GROUP LTD Annual Report 2021