COMMS GROUP LTD — Interim / Quarterly Report 2019

Feb 25, 2019

APPENDIX 4D

Under ASX Listing Rule 4.2A

Current reporting period 1 July 2018 to 31 December 2018 Prior corresponding period 1 July 2017 to 31 December 2017

1. RESULTS FOR ANNOUNCEMENT TO THE MARKET

	Increase/Decrease	Change %	To \$'000
Revenue from continuing operations	9,719	1022%	10,670
Loss from ordinary activities after tax attributable to members	2,584	n/a	(742)
Net loss for the period attributable to members	2,584	n/a	(742)

Dividend

No dividend has been declared.

Operating and Financial Review

CommsChoice Group Limited listed on the ASX on 21 December 2017 following the formation of the operational trading Group on 15 December 2017.

The Group's statutory loss before tax of \$934,352 has been influenced by the restructuring costs of \$589,928, together with the amortisation of the acquired intangible assets of \$981,652. Underlying EBITDA is \$661,967.

	\$000
Statutory loss for the period before income tax	(934)
Add back: Depreciation and amortisation	982
Finance charges	24
EBITDA	72
Add back: Restructuring costs	590
Underlying EBITDA	662

Earnings per share for the period is as follows:

	Cents per security
Loss per share	(0.68)
Diluted loss per share	(0.68)

Underlying earnings per share (ex-amortisation, restructuring) – net of tax
Earnings per share	0.37
Diluted earnings per share	0.29

2. NET TANGIBLE ASSET PER SECURITY

Net tangible assets per ordinary share: (1.45) cents per share (2017: nil). The Group has negative tangible assets as at 31 December 2018.

3. ENTITIES OVER WHICH CONTROL HAS BEEN GAINED DURING THE PERIOD

None

4. OTHER

Additional Appendix 4D disclosure requirements and further information including commentary on significant features of the operating performance, results of segments, trends in performance and other factors affecting the results for the current period are contained in the Half-Year Financial Report 2018, and Press Release.

The consolidated financial statements contained within the Half-Year Financial Report 2018, of which this report is based upon, have been reviewed by BDO.

CommsChoice Group Limited Interim Financial Report For the half year ended 31 December 2018
ACN 619 196 539

Directors' report

Your directors present their report on the consolidated entity consisting of CommsChoice Group Limited (the "Company") and the entities it controlled at the end of, or during, the financial half year end 31 December 2018.

Directors

The following persons were directors of the Company during the whole of the financial halfyear up to the date of this report, unless otherwise stated:

J A Mackay - Independent Non Executive Chair

P J McGrath - Independent Non Executive Director

C G Petricevic - Non Executive Director (resigned 19 November 2018)

B J Jennings - Non Executive Director

G J F Ellison - Executive Director

S M Bell - Non Executive Director

Principal activities

CommsChoice Group is an information and communication technology (ICT) business, providing a comprehensive vendor agnostic ICT managed service. CommsChoice Group services clients in Australia and internationally including New Zealand and Singapore.

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

In the half-year ended 2018. CommsChoice 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 was no significant change in the nature of the activity of the CommsChoice Group during the reporting period.

Dividends

The Directors have resolved not to pay an interim dividend for the period ending 31 December 2018.

Review of operations

The CommsChoice Group was formed on 15 December 2017 with the acquisition of five information, communication and technology companies by Commschoice Group Limited. On 21 December 2017 the combined group was listed on the Australian Securities Exchange.

The Group's statutory loss after tax amounted to \$742,141 (31 December 2017: loss of \$3,326,138). The December 2017 comparative results included the 16 days to 31 December 2017 for the operating subsidiaries plus the 6 months to 31 December 2017 for the parent entity.

The Group generated revenue of \$10,670,032 in revenue during the period and an EBITDA of \$72,040. Excluding restructuring costs of \$589,928, underlying EBITDA was \$661,968.

A reconciliation of underlying EBITDA from continuing operations to the reported loss before tax from continuing operations in the consolidated statement of profit or loss and comprehensive income is tabled below:

	SOOO
Loss before income tax
Add back: Depreciation and amortisation
Finance charges
FRITDA
--------------------------------------- Add back: Restructuring costs
Underlying EBITDA

Earnings per share

Earnings per share for the period is as follows:

	Cents per security
Loss per share	(0.68)
Diluted loss per share	(0.68)
Underlying earnings per share (ex-amortisation, restructuring) - net of tax
Earnings per share	. በ 37
Diluted earnings per share	O 29

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 Group's revenues from external customers are predominately domiciled in Australia.

Significant changes in the state of affairs

There have been no significant changes in the state of affairs of the Group.

Events since the end of the financial year

Since 31 December 2018 and following the expiration of the purchase escrow period, the Board has approved the release of the Claims Retention shares where no outstanding claims have been identified.

The escrow period for the shares issue to the vendors of the acquired businesses expired on 21 December 2018.

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected the CommsChoice Group's operations, results or state of affairs, or may do so in future years.

Insurance of officers and indemnities

During the period, CommsChoice Group Ltd incurred a premium of \$52,600 to insure the directors and secretaries 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 CommsChoice Group. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

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 3.

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

Ben Jennings Director

Sydney 26 February 2019

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

As lead auditor for the review of CommsChoice Group Limited for the half-year ended 31 December 2018, I declare that, to the best of my knowledge and belief, there have been:

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

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

Grant Saxon Partner

BDO East Coast Partnership

Sydney, 26 February 2019

CommsChoice Group Limited
ACN 619 196 539 Consolidated financial report - for the half year ended 31 December 2018

Contents	Page
Consolidated statement of profit or loss and other comprehensive income	5
Consolidated statement of financial position	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	8
Notes to the consolidated financial statements	9
Directors' declaration	16
Independent auditor's review report to the members	17

CommsChoice Group Limited Consolidated statement of profit or loss and other comprehensive income
For the half year ended 31 December 2018

	Notes	31 December	31 December
		2018	2017
		\$	\$
Revenue	3	10,660,419	944,497
Other income		9,613	6,210
		10,670,032	950,707
Cost of sales		(5,944,706)	(665, 484)
Employee benefits expense		(2,320,471)	(241, 875)
Share based payments to management and directors	4		(2,200,000)
Discount on note conversion	4		(250,000)
Administration expenses		(871, 639)	(218, 837)
Sales & marketing expenses		(196, 299)	(49, 094)
Information technology expenses		(428, 921)
Professional fees		(76, 878)	(965, 124)
Property expenses		(143, 317)	(11, 919)
Other expenses		(25, 834)	(38, 902)
Restructuring costs	4	(589, 928)
Finance expenses		(24, 739)	(6, 310)
Depreciation & amortisation		(981, 652)	(38,086)
Loss before income tax		(934, 352)	(3,734,924)
Income tax benefit		192,211	408,786
Loss for the period		(742, 141)	(3,326,138)
Other comprehensive income
Total comprehensive profit or loss attributable to shareholders		(742, 141)	(3,326,138)
Loss per share for profit from continuing operations attributable to the ordinary equity holders of the company: Basic loss per share	12	Cents (0.68)	Cents (59.2)
Diluted loss per share	12	(0.68)	(59.2)

The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.

CommsChoice Group Limited
Consolidated statement of financial position
As at 31 December 2018

	Notes	31 December	30 June
		2018	2018
Current assets		\$	\$
Cash and cash equivalents		1,255,171	1,705,251
Trade and other receivables	5	988,659	1,316,466
Other current assets	6	1,370,754	837,229
Total current assets		3,614,584	3,858,946
Non-current Assets
Investments		1,991	1,991
Property, plant & equipment		138,619	203,043
Intangible assets	7	29,051,422	29,497,991
Deferred tax assets		1,031,045	1,031,045
Total non-current assets		30,223,077	30,734,070
Total assets		33,837,661	34,593,016
Current liabilities
Trade and other payables	8	2,395,562	2,774,868
Deferred revenue		603,093	269,681
Provisions	9	489,058	270,212
Income tax payable		358,263	361,138
Total current liabilities		3,845,976	3,675,899
Non-current liabilities
Provisions	9	125,823	116,903
Deferred tax liability		2,364,681	2,556,892
Other liabilities		28,806	28,806
Total non-current liabilities		2,519,310	2,702,601
Total liabilities		6,365,286	6,378,500
Net assets		27,472,375	28,214,516
Equity
Share capital	10	26,304,269	26,274,193
Share based payment reserves		4,934,898	6,214,974
Accumulated losses		(3,766,792)	(4, 274, 651)
Total Equity		27,472,375	28,214,516

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

$\mathbb{R}^2$

$\bar{\gamma}$

CommsChoice Group Limited
Consolidated statement of changes in equity
For the half year ended 31 December 2018

Notes	Share capital	Share-based payments reserves	Accumulated losses	Total
	\$	\$	\$	\$
24,750,114 340,291 6,866,692 1,250,000 24,750,114 8,456,983 6,214,974 26,274,193 6,214,974 26,274,193 (1,250,000) (30, 076) 30,076 26,304,269 4,934,898	(191, 973)	(191, 973)
Loss for the period to 31 December 2017			(3,326,138)	(3,326,138)
Other comprehensive income
Balance at 1 July 2017 Total comprehensive loss for the period Transactions with owners in their capacity as owners: Balance at 31 December 2017 Balance at 1 July 2018 Transactions with owners in their capacity as owners: Balance at 31 December 2018	(3,518,111)	(3,518,111)
Contributions to equity net of transaction costs				24,750,114
Warrants issued				340,291
Deferred consideration				6,866,692
Director bonus				1,250,000
			(3,518,111)	29,688,986
			(4,274,651)	28,214,516
Loss for the period to 31 December 2018			(742, 141)	(742, 141)
Other comprehensive income
Total comprehensive loss for the period			(5,016,792)	27,472,375
Transfer to retained earnings			1,250,000
Deferred consideration
			(3,766,792)	27,472,375

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

CommsChoice Group Limited
Consolidated statement of cash flows
For the half year ended 31 December 2018

$\hat{\mathcal{A}}$

		31 December	31 December
	Notes	2018 \$	2017 \$
Cash flows from operating activities
Receipts from customers (inclusive of GST)		12,097,444	267,802
Payments to suppliers and employees (inclusive of GST)		(12, 117, 396)	(643, 019)
Interest paid		(24, 739)
Income tax (paid) / refund		(2, 875)	28,370
Net cash (outflow) from operating activities	11	(47, 566)	(346, 847)
Cash flows from investing activities
Software purchase and IT systems		(331, 715)
Payments for property, plant & equipment		(29, 125)
Payment for acquisition of subsidiaries, net of cash acquired			(1,978,957)
Payment to suppliers for IPO, pre-IPO and transaction related costs		(41, 675)	(973, 663)
Net cash (outflow) from investing activities		(402, 514)	(2,952,620)
Cash flows from financing activities
Proceeds from issue of convertible notes net of fees			957,000
Other IPO share raising costs			(1, 246, 707)
Proceeds from IPO			7,500,000
Net repayment of borrowings			(298,069)
Net cash in flows from financing activities			6,912,224
Net (decrease) / increase in cash and cash equivalents		(450,080)	3,612,757
Cash and cash equivalents at the beginning of the period		1,705,251	138,235
Cash and cash equivalents at end of period		1,255,171	3,750,992

$\sim 10^{-1}$

1 General information

This half year financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with any public announcements made by CommsChoice Group Limited during the half year reporting period.

The financial statements cover CommsChoice Group Limited as a consolidated entity consisting of CommsChoice Group Limited and the entities it controlled at the end of, or during, the half year. The financial statements are presented in Australian dollars, which is CommsChoice Group Limited's functional and presentation currency.

CommsChoice Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

50 New Street Ringwood VIC 3134 Australia

A description of the nature of the entity's operations and its principal activities is included in the directors' report on page 1, which is not part of these financial statements.

These condensed interim financial statements were approved for issue on 26 February 2019. The directors have the power to amend and reissue the financial statements.

2 Significant accounting policies

This condensed consolidated interim financial report for the half year ended 31 December 2018 has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.

This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2018 and any public announcements made by the CommsChoice Group during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted

The CommsChoice Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Standards Board (AASB) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations do not have any significant impact on the financial performance or position of the Group during the financial half year ended 31 December 2018 and are not expected to have any significant impact for the full financial year ending 30 June 2019.

Any new or amended Accounting Standards and Interpretations that are not yet mandatory have not been early adopted.

Going concern

For the financial half year, the Group made a loss before tax of \$934,352 (31 December 2017: loss before tax of \$3,734,924) and had a net cash outflow from operating activities of \$47,564 (31 December 2017: net cash outflow of \$346,847) and had net current liabilities of \$231,393. These conditions represent a material uncertainty in relation to going concern.

The Directors believe the going concern assumption is appropriate due to the following factors:

• the current period result includes one off restructuring costs of \$589,928 associated with the business integration
• based on management's forecasts the Group has available sufficient resources to continue to meet its debts as and when they fall due.
• The Group has in place a number of significant customer contracts which are expected to create organic revenue growth to sustain the business going forward.

CommsChoice Group Limited Notes to the Consolidated Financial Statements For the half year ended 31 December 2018

In the event that the forecasts are not achieved, significant uncertainty would exist as to whether the Group will continue as a going concern and, therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial statements.

The financial statements do not include adjustments relating to the recoverability and classification of recorded assets amounts, nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

3 Revenue

	31 December 2018 31 December 2017
		S.
Sale of goods and services	10.660.419	944.497

AASB 15 Revenue from Contracts with Customers ('AASB 15')

AASB 15 is a new standard which replaces AASB 118 Revenue and AASB 111 Construction Contracts. AASB 15 establishes a principle-based approach for goods, services, and construction contracts, which requires identification of discrete performance obligations within a transaction and an associated transaction price allocation to those obligations. Revenue is recognised only when the performance obligation is satisfied and the control of goods or services is transferred, typically at the point of sale. The Group adopted AASB 15 during the current year, using the modified retrospective approach, which requires a cumulative catch-up adjustment to retained earnings and no restatement of comparative amounts. The Group performed a detailed assessment of the impact of AASB 15 in accordance with the five-step model. The timing and amount of revenue recognised was consistent with existing accounting standards as a majority of transactions are for sale of telecommunication services where no judgement is required in assessing when the performance obligation is satisfied and transfer of control occurs. Accordingly, no adjustment to retained earnings has been made.

4 Individually significant profit or loss items

	31 December 2018	31 December 2017
	\$	\$
Share based payments		2,200,000
Discount on note conversion on IPO		250,000
Professional fees and administration costs relating to IPO and acquisition of subsidiaries		973.663
Restructuring and integration costs	289,089
Onerous lease expense	300.839
	589,928	3,423,663

5 Trade and other receivables

	31 December 2018	30 June 2018
	\$	\$
Trade receivables	1,080,708	1,846,882
Less: provision for impairment of receivables	(94, 526)	(532, 522)
	986,182	1,314,360
Other receivables	2.477	2,106
Total trade and other receivables	988,659	1,316,466

AASB 9 Financial Instruments ('AASB 9')

AASB 9 is a new standard which replaces AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 (2014) superseded AASB 9 (2013) and introduced a new expected credit loss impairment model for financial assets and a new classification and measurement category 'fair value through other comprehensive income' for certain debt and equity instruments. This amendment became effective in the current year and the Group adopted the amendment. An assessment was performed on the impact of the expected credit loss impairment model and the new classification and measurement category. Based on the assessment, the Group concluded that the impact on transition to AASB 9 (2014) was not material. Accordingly, no comparative amounts have been adjusted.

6 Other current assets

	31 December 2018	30 June 2018
	\$	\$
Prepayments	840,095	512,123
Accrued revenue	331,686	170,001
Security deposits	168,935	126,567
Inventory	30,038	28,538
	1,370,754	837,229

7 Intangibles

	Customer contracts	Brand	Goodwill	Software	Other	Total
Cost	\$	\$	\$	\$	\$	\$
Balance at 1 July 2018	6,411,000	3,574,000	17,871,894	2,487,364	41,770	30,386,028
Fair value adjustment on acquisition final accounting			161,562		(28, 616)	161,562
Reclassification of fixed assets software to intangibles				76,903		76,903
Additions during the period				305,309		276,693
Balance at 31 December 2018	6,411,000	3,574,000	18,033,456	2,869,576	13,154	30,901,186
	Customer
	contracts	Brand	Goodwill	Software	Other	Total
Accumulated amortisation	\$	\$	\$	\$	\$	\$
Balance at 1 July 2018	(494, 312)	(192, 898)		(200, 827)		(888, 037)
Reclassification of fixed assets software to intangibles				(9,200)		(9,200)
Amortisation expense	(457, 929)	(178, 700)		(315, 898)		(952,527)
Balance at 31 December 2018	5,458,759	3,202,402	18,033,456	2,343,651	13,154	29,051,422

8 Trade and other payables

	31 December 30 June 2018 2018
	\$	\$
Trade payables	1,620,576	1,680,444
Accrued expenses	179,803	354,347
Other payables	595,184	740,077
	2,395,562	2,774,868

9 Provisions

	31 December 2018
	\$	$\sim$ \$
Current liabilities
Annual leave	247,116	270,212
Onerous lease	241,942
	489,058	270,212

Non-current liabilities
Long service leave	125.823	116.903

10 Share capital

	31 December 2018	30 June 2018	31 December 2018	30 June 2018
	Shares	Shares	\$	S
Ordinary Shares - fully paid	108,832,523	108,712,221	26,304,269	26,274,193
	Date	Shares	\$
Movements in ordinary share capital

Opening balance	1 July 2018	108.712.221	26.274.193
Completion accounts shares issued	5 September 2018	120,302	30,076
Balance 31 December 2018		108,832,523	26.304.269

11 Reconciliation of operating loss after income tax to net cash from operating activities

	31 December	31 December
	2018	2017
	S	\$
Loss for the period	(742, 141)	(3,326,138)
Adjustments for:
Transaction costs relating to IPO and acquisition of subsidiaries	41,675	973,663
Share based payments		2,200,000
Discount on convertible note issue		250,000
Depreciation and amortisation	981,652	38,086
	281,186	135,611
Change in assets and liabilities:
Decrease in receivables	(300, 976)
(Increase) in inventory	(1,499)
Decrease in payables	(380, 726)
Decrease in provisions	227,766
Decrease in other including acquired working capital	126,683	(482, 458)
Net cash outflow from operating activities	(47, 566)	(346, 847)

12 Loss per share

Reconciliation of earnings used in calculating loss per share

	31 December 2018 \$	31 December 2017 \$
Loss attributable to the ordinary equity holders of the company	(742, 141)	(3,326,138)
Weighted average number of ordinary shares used as the denominator in calculating earnings per share Adjustments for calculation of diluted earnings per share:	108,788,716	5,622,357
Deferred shares
Weighted average number of ordinary shares used as the denominator in calculating earnings per share	108,788,716	5,622,357
	Cents	Cents
Basic loss per share	(0.68)	(59.2)
Diluted loss per share	(0.68)	(59.2)

$\overline{a}$

13 Business combinations - final

Summary of acquisition

On 15 December 2017, the company acquired 100% of the issued share capital of the companies as set out below.

Purchase consideration is as follows:

	Cash paid	Ordinary shares issued	Warrants	Deferred consideration	Total purchase consideration
	\$	\$	\$	\$	\$
CommsChoice Pty Limited	1,201,931	6,442,328	340,291	2,760,998	10,745,548
Telegate Pty Ltd (1)	137,026	5,939,596		2,545,541	8,622,163
Oracle Pty Ltd	500,000	1,834,773		786,331	3,121,104
TelAustralia Pty Ltd	100,000	1,171,875		502,232	1,774,107
Woffle Pty Ltd	40,000	633,710		271,590	945,300
	1,978,957	16,022,282	340,291	6,866,692	25,208,222
Shares issued as deferred consideration on issue of completion accounts		1,368,565		(2,258,822)	(890, 257)
Additional shares issued as consideration on issue of completion accounts		87,208			87,208
Total	1,978,957	17,478,055	340,291	4,607,870	24,405,173

⁽¹⁾The consideration paid for Telegate Pty Limited also includes the acquisition of Telegate Singapore Pte Ltd, Syntel Pte Ltd and SingVoip Pte Ltd.

Additional shares issued

Under the Sale and Purchase Agreements a net asset adjustment was required to be calculated by the purchaser and agreed to by the vendor. The exercise is in effect a true-up between the net working capital acquired against a target working capital balance. These shares represent 10% of the purchase consideration. All shares were issued at the \$0.25 per share IPO issue price.

Where the net working capital acquired was higher than the target the purchaser could choose to true-up the difference by way of shares or cash. The company has issued additional shares rather than cash.

Where the net working capital was lower than the target the vendor forfeited the number of shares equal to the working capital shortfall at the \$0.25 per share IPO issue price.

Under the Share and Purchase Agreements, 20% of the share-based consideration was deferred and retained (Claim Retention Shares) for twelve months subject to any warranty claims. The Group is reviewing the warranty claim position on one acquisition and will not release Claim Retention Shares until satisfied. A reliable estimate of any warranty claim resulting from this review cannot be made at this time.

$\ddot{\phantom{a}}$

$\ddot{\phantom{a}}$

Fair value of net assets and goodwill acquired is as follows:

	Total
	S
Cash	90,948
Trade receivables	1,128,433
Prepayments	262,827
Inventories	25,086
Property, plant & equipment	100,204
Intangible assets - software	1,720,567
Intangible assets - customer relationships & brands	9,985,000
Less: deferred tax liability on customer relationships & brands	(2,745,875)
Trade payables	(1,893,512)
Bank overdraft	(89,043)
Other	(1,869,755)
Employee provisions	(343, 163)
Fair value of net identifiable assets acquired	6,371,717
Add: goodwill	18,033,456
Net assets acquired	24,405,173

CommsChoice Group has finalised the fair value adjustments to the assets and liabilities acquired.

$\bar{z}$

The intangible assets that arise from the acquisition of the five businesses include the customer contracts and
branding. The resulting goodwill is attributed to the workforce and the anticipated profitability of the busin

The fair value adjustments mainly relate to provisions against aged trade receivables which are not expected to be recovered.

Directors' declaration

In the Directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, Australian $\bullet$ Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 31 December 2018 and of its performance for the financial half year ended on that date; .
  and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when $\bullet$ they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the Directors

Ben Jennings Director

Sydney 26 February 2019

Level 11, 1 Margaret St Sydney NSW 2000 Australia

INDEPENDENT AUDITOR'S REVIEW REPORT

To the members of CommsChoice Group Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the half-year financial report of CommsChoice Group Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, 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 halfyear then ended, and notes comprising a statement of accounting policies and other explanatory information, and the directors' declaration.

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of the Group is not in accordance with the Corporations Act 2001 including:

• (i) Giving a true and fair view of the Group's financial position as at 31 December 2018 and of its financial performance for the half-year ended on that date; and
• (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Emphasis of matter – Material uncertainty relating to going concern

We draw attention to Note 2 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern and therefore the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our conclusion is not modified in respect of this matter.

Directors' responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year 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 half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Group's financial position as at 31 December 2018 and its financial performance for the half-year ended on that date and complying with Accounting Standard AASB 134

Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor's review report.

BDO East Coast Partnership

Grant Saxon Partner

Sydney, 26 February 2019