CPT GLOBAL LIMITED — Annual Report 2013

Aug 29, 2013

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CPT Global Limited and Controlled Entities

ABN 16 083 090 895

Preliminary Final Report

for the year ended 30 June 2013

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Contents

Operational Review
-Chairman’s Statement	3
-Managing Director’s Review	5
Consolidated Statement of Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Preliminary Final Report	12
Compliance Statement	13

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Chairman’s Statement

Dear Fellow CPT Global Shareholder,

CPT Global delivered a small profit in the 2013 financial year as operating conditions remained difficult in both our Australian and international markets. However the year was very much a story of two halves with a much improved revenue and profit delivered in the second half which more than offset the disappointing loss recorded in the first half. This better second half result was driven by a significant turnaround in the performance of our international operations and in particular the North American business. CPT has finally begun to reap rewards from the extensive pipeline of potential business which we have built over a number of years in the international markets. We are now focused on maintaining the improved recent performance and in particular realising the benefit of our ongoing global business development activities.

CPT’s strategy is to grow IT service revenue in all our regions, improve our margins and control costs. Our business development activities remain a very high priority and over the past twelve months our Managing Director Gerry Tuddenham and his team have spent a substantial amount of time driving the sales efforts in Australia, Europe, North and South America, and Asia.

Our Australian operations have traditionally been the backbone of CPT’s business and also home to many of our expert IT resources particularly in CPT’s home State of Victoria where four of our top ten clients are based. Revenues across the Australian business were lower in 2013 as major clients continued to focus on cost reduction and as a result profit margins also remained under pressure. The ongoing tough and very competitive nature of the Australian IT market reinforces CPT’s strategy of using its local IT experts to build a major presence in the international markets. The benefits to CPT have been to reduce its exposure to the difficult Australian IT market and to invest offshore at a time when the Australian currency was strong. While the Australian business remains very important to CPT’s future we will not compromise on our margins to chase business and therefore revenues are not expected to show substantial growth until general market conditions improve.

The exciting news for CPT is that during 2013 we began to see some improved returns from our long term investment in the international operations. Despite continuing difficult economic conditions, CPT increased second half offshore revenue driven by the better performance of our US operations and in Europe where a number of significant client engagements commenced. By building our presence in the international markets CPT is seeking to grow and provide a more consistent and sustained stream of profits which are now all the more attractive as the Australian dollar weakens. During 2013 the size and quality of CPT’s international client base developed further and we are moving towards a position of critical mass where potentially around half of our revenue will come from our offshore operations. Furthermore during the year CPT restructured the management of the international business in order to strengthen and better co-ordinate client service and resource utilisation and also established some global client relationships where CPT will provide services to these clients across the world. Further good progress has been made in Asia where we are working with existing clients and also successfully completed our first client engagement in mainland China.

In 2013 our revenue declined by around 11% with falls across both Australia and Europe partially offset by growth in the US. However second half revenue increased by 10% over the poor first half result when a number of European clients delayed commencement of client engagements. CPT delivered a 2013 net profit after tax of $0.3m compared to $0.6m in the prior year but again this comprised a loss of $1.0m in the first half against a substantially improved profit of $1.3m in the second half. Given the lower profit and need to retain cash to fund our overseas growth CPT will not pay a dividend in 2013. Last year CPT paid a dividend of 1.5 cents per share (fully franked). CPT ended the financial year with cash of $1.2m and no debt.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Chairman’s Statement

Over a number of years CPT has pursued a strategy of taking its world recognised expert IT resources to major international markets in order to diversify away from the Australian IT market and to build a growing and more consistent stream of profits for shareholders. Despite winning the Victorian Governor’s Export award for the IT sector three times the financial rewards for CPT have been far slower to realise in part due to the continued uncertainty caused in international markets by the Global Financial Crisis and also the long and often frustrating sales cycle for our services. However during 2013 it seems that we may finally be seeing evidence that the tide is turning and that CPT’s substantial efforts in developing relationships with many of the world’s most significant companies are finally to be rewarded with the conversion of this potential into more sustainable and significant revenue and profits. The poor overall result in 2013 masks a major turnaround in fortunes between the first and second halves which if continued will finally see the prospect of satisfactory returns being delivered to our shareholders for the investment we have made in developing our international operations. While it would always have been an easy option for CPT to pull back from its offshore expansion activities your Board believes that CPT shareholders may now be on the cusp of realising attractive rewards from the pursuit of these opportunities. Our growing offshore business together with a lower Australian dollar will potentially deliver more than 50% of CPT’s revenue over the next year or so and deliver the critical mass required for sustainable and improved profits.

In closing I would like to thank my fellow directors and all of CPT Global’s staff, under the tireless leadership of our Managing Director, Gerry Tuddenham, for their ongoing contribution to CPT’s performance in a continuing difficult global economic environment. CPT has a strong team of technically skilled, long term loyal staff and consultants, many of whom are leaders in their field, and who remain committed to serving our clients’ needs globally. During 2013 my confidence has grown that the risks and challenges that we have faced as a Company over recent years are receding and that CPT’s shareholders are now well placed to be rewarded through more sustainable and attractive returns generated from our business.

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Fred S. Grimwade Chairman

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Fellow Shareholders,

The 2012/13 financial year was a year of two halves, as CPT Global continued its investment in the International markets through tough economic conditions. Whilst the Australian market held its own in the first half, revenues and profits from the International business fell, due to the completion of a number of projects and the continued delays in the commencement of new projects and engagements. Investments in developing new markets (Asia and South America) further strained the first half results.The second half however saw a major turnaround in all facets of CPT’s business as new International projects commenced and engagements occurred in each of CPT’s International markets. Unfortunately revenues in the Australian business fell away due to local market pressures, thereby negating the full impact of the turnaround in the International business on CPT’s overall result. We strongly believe that our recent achievements in the International markets coupled with the sharp fall in the Australian currency, places CPT in a strong position to capitalise on previous International business expansion investments, to not only reduce the impact of the slowing Australian market, but to establish a more healthy financial outlook for the company as a whole.

Operating and Financial Review

In a tight Australian market, revenue fell by 13% from 2011/12 as large corporates and government departments cut back on their IT spend, with some financial institutions offshoring activities to lower cost countries and government spending curtailed due to the forthcoming election. This reduction was experienced in each of the Australian markets. Contract margins were maintained at levels consistent with those achieved in 2011/12.

International revenue fell by 7% compared to prior year levels with the North American operation increasing revenues by 16% while the European operation revenues decreased by 33%, due to the deferral of two major client contracts, which have now commenced. However during 2013, significant improvement occurred in the second half, as revenues increased by 145% when compared to the first half. Contract margins fell by approximately 8% in comparison to those earned in 2012, due to a reduction in phase 2 activities in the year.

CPT Global’s revenue for the year ended 30 June 2013 was $35.1 million, an 11% decrease on the previous year’s revenue of $39.5 million.

CPT Global’s net profit after tax for the year ended 30 June 2012 was $0.3m (a first half loss of $1m and a second half profit of $1.3m). This was a reduction of $0.3m on the 30 June 2012 result.

No dividend has been declared for the financial year.

Basic earnings per share amounted to 0.88 cents per share (diluted earnings also 0.88 cents per share).

CPT Global’s balance sheet reflected net tangible assets of $5.44m as at 30 June 2013 ($5.56m 30 June 2012) with net cash holdings of $1.2m at 30 June 2013 ($1.1m 30 June 2012).

Strategy

The company’s business strategy is to hold our current position in the Australian market as it remains tight, while continuing the International expansion, capitalizing on our previous market development investments and the falling value of the Australian dollar.

The Australian market position will be maintained by focusing on two key areas. Firstly, from a sales and market standpoint, we will continue to focus our efforts on ‘blue chip’ companies which will continue to have significant IT service requirements. Secondly, the services provided to our

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CPT Global Limited and Controlled Entities - Preliminary Final Report

clients will be high value solution based services which focus on quality outcomes rather than services which have gradually become commoditised. This will lead CPT being more selective about the projects taken on and less enticed by competitive lower margin projects, which will ultimately result in the achievement of higher margins.

For the International business, we will continue leveraging the business development investments of the past and the global account relationships which have been established, to further expand into the global market. Many of the initial phase 1 exploratory cost reduction assignments which have already been undertaken, will lead to the more lucrative phase 2 engagements where substantial savings are identified and passed on to clients. Ultimately, this will lead to a growing annuity revenue base by taking on long term engagements at the completion of the phase 2 assignments to protect client cost efficiencies on an ongoing basis. Margins will increase as the number of phase 2 engagements increase, as these typically provide the company with its largest reward for services provided. As the value of the Australian dollar returns to more realistic levels, International profits will provide the group with significantly higher profit contributions than in recent years.

As we penetrate new markets such as Asia and South America, we will continue to leverage existing business partnerships and Austrade to properly qualify opportunities and subsequently engage with new clients. Global accounts where CPT has already provided successful outcomes, will be used to expand CPT’s footprint into new regions of existing clients.

Continued growth of the Australian Capacity Planning and Performance Tuning Centre of Excellence will add to the scale and flexibility of the company’s service offering by enhancing the capability of remotely providing service simultaneously to a range of overseas clients in various geographic locations.

Our People

CPT maintains a truly flexible workforce in terms of the number of resources available and the locations they work around the world. While each CPT location maintains a nucleus of professionals to provide clients with ongoing contact, resources are augmented from the global resource pool and the Capacity Planning and Performance Tuning Centre of Excellence in Australia, to suit client and project needs. CPT staff are continually kept abreast of technical developments through focus group contact, structured training programs and informal training sessions This ensures capabilities are maintained at the appropriate level. All of this has led to our enhanced ability to deliver a better service more efficiently on a global scale.

Outlook

We consider the short term outlooks for the Australian and International businesses to be quite different.

The Australian market is expected to remain tough for the foreseeable future. We expect that Australian revenues will remain flat in 2014, with margins being achieved at similar levels, as the provision of high value services will counteract the continued margin pressures. Costs will continue to be tightly managed to preserve local profits.

CPT’s International market is expected to expand in 2014. Revenues should increase as a result of new client engagements and increased opportunities from global accounts. Margins should increase as the proportion of phase 2 success fee engagements increase as a percentage of total revenue. The overall contribution from the International business will be enhanced by the fall in value of the

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Australian dollar.

A key driver to the success over the next financial year will continue to be the timing of engagement commencements. We believe that our resourcing model can gear up quickly to respond to the opportunities as they arise. Your Board understands the formula for success and is confident it will deliver on the objectives of the next year of CPT’s strategic plan.

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Gerry Tuddenham Managing Director

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Consolidated Statement of Comprehensive Income

YEAR ENDED 30 JUNE 2013 Notes	2013 2012 $'000 $'000
Revenue Other income Salaries and employee benefits expense Consultants benefits expense Depreciation and amortisation expenses Insurance expense Finance costs Lease expenses Other expenses PROFIT BEFORE INCOME TAX INCOME TAX (EXPENSE) / REVENUE PROFIT AFTER INCOME TAX Other Comprehensive Loss: Items that may be subsequently reclassified to comprehensive income Exchange differences on translating foreign controlled entities Total Other Comprehensive Loss for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR PROFIT ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED Basic earnings per share (cents per share) 3 Diluted earnings per share (cents per share) 3	35,082 39,450 31 22 (2,902) (3,562) (27,336) (30,570) (165) (148) (237) (251) (203) (58) (482) (484) (3,082) (4,008)
	706 391 (384) 217 322 608 (188) (65)
	(188) (65)
	134 543
	322 608
	134 543
	0.88 1.66 0.88 1.66

The Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Preliminary Final Report.

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Consolidated Statement of Financial Position

AT 30 JUNE 2013

AT 30 JUNE 2013
	2013 2012 $'000 $'000
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Unbilled revenue Current Tax Asset Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Deferred tax assets Property, plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Current tax liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liability Other long term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY	1,197 1,114 6,043 7,051 3,758 3,866 98 246 399 403
	11,495 12,680 1,225 855 76 170 7,600 7,341
	8,901 8,366 20,396 21,046
	6,544 7,674 141 116
	6,685 7,790 150 - 525 354
	675 354 7,360 8,144
	13,036 12,902
	12,075 12,075 68 256 893 571
	13,036 12,902

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Consolidated Statement of Changes in Equity

YEAR ENDED 30 JUNE 2012 Balance at 1 July 2011 Comprehensive Income Profit for the year Other comprehensive loss Total comprehensive income/(loss) for the year Transactions with owners, in their capacity as owners Share based payments Dividends paid or provided for Total transactions with owners, in their capacity as owners Balance at 30 June 2012 Balance at 1 July 2012 Comprehensive Income Profit for the year Other comprehensive loss Total comprehensive income/(loss) for the year Transactions with owners, in their capacity as owners Share based payments Dividends paid or provided for Total transactions with owners, in their capacity as owners Balance at 30 June 2013	$'000 $'000 $'000 Issued capital Retained Equity Ordinary Earnings Reserve	$'000 $'000 Foreign Currency Translation Reserve Total
	12,075 880 1,690 - 608 - - - -	(1,369) 13,276 - 608 (65) (65)
	- 608 -	(65) 543
	- - - (917)	- - (917)
	- (917) -	- (917)
	12,075 571 1,690	(1,434) 12,902
	12,075 571 1,690 - 322 - - - -	(1,434) 12,902 - 322 (188) (188)
	- 322 -	(188) 134
	- - -	- -
	- - -	- -
	12,075 893 1,690	(1,622) 13,036

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Consolidated Statement of Cash Flows

YEAR ENDED 30 JUNE 2013

YEAR ENDED 30 JUNE 2013
	2013 2012 $'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Finance costs Income tax paid NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, software NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Repayments of borrowings Payment of dividends on ordinary shares NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD Add opening cash & cash equivalents brought forward Effects of exchange rate changes on cash and cash equivalents CLOSING CASH AND CASH EQUIVALENTS CARRIED FORWARD	37,456 40,890 (36,068) (39,014) 7 1 (64) (58) (430) (402)
	901 1,417
	(330) (91)
	(330) (91)
	(15) (38) - (917)
	(15) (955)
	556 371 1,114 884 (473) (141)
	1,197 1,114

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Notes to the Preliminary Final Report

YEAR ENDED 30 JUNE 2013

1. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES

(a) Dividends paid during the year Current year interim Franked dividends (0.0c per share) (2012: 1.5c per share) Previous year final Franked dividends (0.0c per share) (2011: 1.0c per share) (b) Dividends proposed and not recognised as a liability  Franked dividends (0.0c per share) (2012: 0.0c per share)	2013 2012 $'000 $'000 - 551 - 366
	- 917
	- -

2. EVENTS AFTER THE BALANCE SHEET DATE

(a) On 26[th] August 2013 CPT Global Limited announced its intention to extend the on-market share buy back for a further twelve months until 27[th] August 2014. A maximum of 3,000,000 shares may be bought back during the buy back period, which will run from 27th August 2009 until 27th August 2014.

3. EARNINGS PER SHARE (a) The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Net profit Adjustments: Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of options outstanding Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share	2013 2012 $'000 $'000 322 608 - -
	322 608
	Number of shares Number of shares 36,716,364 36,716,364 - - 36,716,364 36,716,364

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CPT Global Limited and Controlled Entities - Preliminary Final Report

Compliance Statement

This preliminary final report has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board.

The preliminary final report covers the economic entity of CPT Global Limited and Controlled Entities, and CPT Global Limited as an individual parent entity. CPT Global Limited is a listed public company, incorporated and domiciled in Australia.

The preliminary final report of CPT Global Limited and Controlled Entities, and CPT Global Limited as an individual parent entity have been prepared in accordance with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety. This report, and the accounts on which it is based, use the same accounting policies.

This report gives a true and fair view of the matters disclosed.

This report is based on accounts which are in the process of being audited.

CPT Global Limited has a formally constituted audit committee.

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Elliot Opolion (Company Secretary)

30 August 2013

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