CPT GLOBAL LIMITED — Annual Report 2016

Aug 29, 2016

CPT Global Limited ABN 16 083 090 895 and Controlled Entities

Appendix 4E - Preliminary Final Report for the Year Ended 30 June 2016

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Key Information

Key Information
				2016	2015
				A $000's	A $000's
Revenues from ordinary activities	up	2.0%	to	$28,750	$28,196
Net Profit (Loss)before taxattributable to members	up	-44.5%	to	($2,922)	($5,264)
Net Profit (Loss)after taxattributable to members	up	-27.4%	to	($3,673)	($5,056)
DIVIDENDS PAID AND PROPOSED
				Amount per	Franked Amount per
				Security	Security at 30% of Tax
Ordinary Shares:
2014 interim and final				0.0 cents	4.5 cents
2015 interim				0.0 cents	0.0 cents
2015 final				0.0 cents	0.0 cents
There were no dividends recommended or declared for the current		financial year.

DIVIDEND DETAILS
	2016	2015
	A $000's	A $000's
Ordinary Share Capital:
Final dividend paid	-	-
Interim dividend paid	-	-
Final dividend declared	-	-

DIVIDEND REINVESTMENT PLAN

A dividend reinvestment plan was in operation for the final dividend payment from 2014

EARNINGS PER SHARE (EPS)
	2016	2015
Basic EPS	-9.88 cents	-13.75 cents
Diluted EPS	-9.80 cents	-13.64 cents
NTA BACKING
Net tangible asset backing per ordinary security	$0.04	$0.12

COMMENTARY ON THE RESULTS FOR THE PERIOD

Refer to the commentary on the results for the period contained in the "Operating and Financial Review" included within the Managing Directors report.

STATUS OF AUDIT

The accounts are currently in the process of being audited.

CPT Global Limited and Controlled Entities

ABN 16 083 090 895

Preliminary Final Report for the year ended 30 June 2016

cptglobal.com

CPT Global Limited and Controlled Entities – Preliminary Final Report

Contents

Contents
Operational Review
-Managing Director’s Review	3
Consolidated Statement of Comprehensive Income	11
Consolidated Statement of Financial Position	12
Consolidated Statement of Changes in Equity	13
Consolidated Statement of Cash Flows	14
Notes to the Preliminary Final Report	15
Compliance Statement	18

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C PT Global Li m ited and Controlled Enti t ies – Preliminary Final R e port

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M n e ctor’s R evie w anagi g Dir F ellow Shar e holders,

F ollowing t h e announc e ment of our results in FY15 we commenced a process t o review o u r strategy, our s tructure, o u r culture a n d our oper a tions. In or d er to set a c lear direction for the n ext 3-5 yea r s and to en s ure w e capitalis e on market direction t o wards clou d , data anal y tics, mobility and artif i cial intellig e nce, it was the r ight time t o revisit our c orporate c h arter.

W e are in the midst of c ommunicating and embedding our n ew purpos e , mission a n d vision, in t o our customer a nd consult a nt commun i cations and training. O u r roadmap a nd busines s strategy w i ll be refreshed in line w ith o ur new cha r ter.

T he CPT vis i on statement encomp a sses the changes in di r ection we n eed to ma k e in line w ith how di g ital t ransformati o n is now d o minating te c hnology se r vices dema n d in the m a rket.

O ur Visio n Our visio n at CPT i s to be an innovati v e digital a nd IT per f ormance s o lution le a der, delivering co n sistent g r owth in r evenues, dividend s , a nd share price, derived fro m 50 glob a l enterpr i se client s , scalabl e new r e venue streams and partner a lliances t h at capit a lise on opportunities fr o m the sh i ft to cloud, mobile and data driven i n vestments.

E xpertise ha s always be e n at the co r e of the CP T values. W e have how e ver been through a pro c ess to crea t e a f uller set of v alues that d efine our c u lture and p eople. Thes e values have been deri v ed from fe e dback from our c lients, consultants and w orking ses s ions to alig n our missio n , vision and values.

O ur Value s

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In parallel w ith framing our new charter, we h a ve implem e nted a series of chang e s required to stabilise and r einvigorate the busine s s and drive performan c e. This includes taking decisive ac t ion to red u ce unneces s ary e xpenses, l e veraging cl o ud based s o ftware to r un our business faster and recruit i ng talent t o drive our n ew b usiness lines.

F Y16 was a y ear of trans i tion and co m mencing t h e transfor m ation of CP T .

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Highlights of the year

After a challenging 12 months, it is pleasing to report that CPT returned to profitability for the 6 month period to 30 June 2016 with an EBITDA before one-off items* of $0.34m. The EBITDA loss before one-off items (EBITDA) for the full financial year was $1.33m compared to the EBITDA reported for the 31 December 2015 half-year of a loss of $1.67m and the EBITDA at 30 June 2015 of a loss of $1.49m.

*One-off items are: impairment of goodwill, payroll tax refund and write down and provision for WIP recognised as revenue in prior periods.

While we are disappointed that we were not able to return the business to profit for the full financial year, the

highlights of the year were:

• the Australian region experienced 22% revenue growth with major contracts won in the government, semi-government and banking sectors. Revenue recovered to be $0.6m short of the FY14 revenue (see Table 1);

• the Federal and Southern regions within Australia exceeded their revenue and profit budgets for the financial year;

• the North American region recovered from significant delays in the commencement of major projects in the first half of the financial year and the AMEX decision to bring the services CPT had been providing for 10 years in-house to post strong results in the second half of the financial year. Revenue in the second half was $0.9m higher than that achieved in the first half (see Table 2);

• Canada exceeded its profit budget for the financial year and revenue grew 12%;

• a risk/reward contract at a large Chinese bank was successfully completed;

• the Asian region (incorporated in Australia’s results) delivered a solid operating profit and beat budget for the financial year;

• a risk/reward contract was completed in the second half of the financial year in North America and extended into FY17 after the success of the initial engagement;

• the appointment of David Lynch as CEO of Australia and Asia was a significant coup for CPT as we secured one of the region’s leading innovators and CIOs. David’s strengths and experience in operations and leading innovation and digital transformation, will help ensure we continue to transform our business ahead of the needs of our customers in this fast changing environment;

• the signing of 2 further alliance agreements with vendors of world class software tools squarely aimed at enhancing our digital solution capabilities; and

• with the appointment of David Lynch, I was able to spend 4 months overseas working on stabilising the European region so that it returns to profitability in the short term. The results are beginning to show with several new engagements contracted in Europe and a strong pipeline.

Operating and Financial Review

CPT made a loss before tax of $2.9m for the full financial year. The loss was driven by:

• the decline in revenue in Europe of 41% and North America of 16% from FY15 (see Table 1);

• the impairment of goodwill in Europe of $0.6m;

• write downs and provisions for unrecoverable WIP of $0.8m including a provision of $0.3m on WIP in North America that we are still optimistic will be recoverable in FY17;

• a risk/reward engagement with an Italian bank that was closed out early (November 2015) due to a major restructure at the bank which resulted in significant cost cutting and reallocations of resources. Whilst we were able to negotiate an exit that resulted in a breakeven position on the project, the early termination of the engagement had a significant impact on the revenue and profitability of the European region and the consolidated group as this was forecast to be the largest single contract in FY16 and the most profitable contract.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Cost cutting in Europe, North America and head office and revenue growth in Australia were not sufficient to cover the losses in Europe.

However, most of the decline in revenue was experienced in the first half of the financial year and revenue in Australia and North America increased in the second half when compared to the first half (see Table 2).

Table 1

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Revenue by Region - Year on Year
$mil AUD
25
FY14
FY15
20
FY16
15
10
5
0
Australia Europe North America
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Table 2

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Revenue by Region - FY16 Half Comparison
$mil AUD
12 Australia
Europe
10
North
America
8
6
4
2
0
FY16 1st Half FY16 2nd Half
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CPT Global Limited and Controlled Entities – Preliminary Final Report

Europe

After the early close of the contract with the Italian bank there were no major engagements ready to execute and revenue in the second half of FY16 was lower than the first half of FY16 (see Table 2). Conditions in Europe were stabilised in May and June 2016 with four new contracts generating revenue and fixed costs cut further with a reduction in head count. Monthly revenue in June was the 2nd highest for the financial year and represented a significant improvement in performance.

Table 3 shows the reliance Europe has on banking and the challenges experienced in FY15 and FY16.

Table 3

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Revenue by Sector - Europe
$mil AUD
7
FY14
6 FY15
FY16
5
4
3
2
1
0
Banking & Finance Other
Europe
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North America

The first half of FY16 was a challenge in North America, as the start dates of 2 risk/reward contracts were delayed. These engagements were undertaken in the second half of FY16 which is the main reason for revenue in North America being higher in the second half than in the first half (see Table 2).

Overall, revenue decreased by 16% in North America although this wasn’t reflected across the whole region. Activity at CPT’s largest Canadian client increased during FY16, a new risk/reward commenced in the second half and the Canadian business met its profit budget for the financial year. Revenue in Canada grew 12% in FY16. However, the strong performance in Canada was not sufficient to cover the reduction in revenue in the USA. North America was hit hard by AMEX decision to bring the services CPT had been providing for 10 years inhouse. The lost revenue and the need to write-off related WIP had a significant negative impact on revenue and profit for the financial year.

CPT’s challenge continues to be the smoothing of its revenue streams, as the timing of large risk/reward contracts has a significant impact on revenue levels.

Table 4 shows that revenue is concentrated in three sectors but the mix of revenue varies significantly year on year.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Table 4

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Revenue by Sector - North America
$mil AUD
9
FY14
8
FY15
7 FY16
6
5
4
3
2
1
0
Banking & Finance… Healthcare IT&C Other
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Australia

Revenue in Australia grew by 22% in the financial year with 57% of the revenue earnt in the second half (See Tables 1 & 2). We grew revenue across all of our industry sectors compared to FY15, with revenue from government growing 83% and banking and finance continuing its steady climb (see Table 5). The growth in the Australian business is profitable and operational performance has strengthened throughout the financial year. Revenue on a monthly basis has increased from $1.2m to consistently exceed $1.8m.

We are seeing an increase in focus on cost in the banking & finance sector which is putting pressure on our margins. We are addressing the margin pressure by increasing volume and reducing our cost of sales.

The growth in opportunities we expected in the finance & banking and government sectors materialised and we were able to capitalise on these. The pipeline in Australia remains strong so we are optimistic the momentum we have built during FY16 will continue in FY17.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Table 5

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Revenue by Sector - Australia
$mil AUD
12
FY14
FY15
10
FY16
8
6
4
2
0
Banking & Finance Government & Healthcare IT&C Other
Australia Defence
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Financial Results

Financial Performance

CPT Global’s revenue for the year ended 30 June 2016 was $28.8m, a 2.1% increase on the previous year’s revenue of $28.2m.CPT Global’s net loss after tax for the year ended 30 June 2016 was $2.9m, an improvement of $2.3m on the 30 June 2015 result.

The tax expense of $0.9m results from:

• taxes incurred in Brazil in FY16 relating to a risk/reward job for a global bank; and

• the write back of prior year deferred tax assets relating to carried forward tax losses incurred in the UK as it is not probable that future taxable profits will be available against which the tax losses can be utilised.

Basic earnings per share amounted to -10.26 cents per share (diluted earnings -10.18 cents per share).

Financial Position

CPT Global’s balance sheet reflected net tangible assets of $1.5m as at 30 June 2016 ($4.3m at 30 June 2015).

• Unbilled revenue (WIP) has decreased by $2.3m. WIP in Europe and North America decreased by $2.4m as risk/reward contracts at Amex, a global UK bank and an Italian bank were completed during the 2016 financial year. At 30 June 2016 $0.8m of WIP relates to risk/reward contracts. Australian WIP increased by $0.4m on increased revenue.

• Goodwill in Europe of $0.6m was fully impaired at 31 December 2015.

• The $2.2m increase in trade and other payables is largely due to:

• the accrual of tax payable in Canada relating to 2016 and prior periods ($0.8m); and

• an increase in revenue in Australia and Canada which has resulted in an increase in revenue received in advance ($0.4m) and an increase in payments due to consultants, employees & government ($0.8m).

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CPT Global Limited and Controlled Entities – Preliminary Final Report

• Borrowings of $0.8m were drawn down during the year to fund a risk/reward contract in Europe. The drawn facility of $1.0m was repaid from cash flow from the contract.

• Borrowings at year end relate to the debtor funding business provided by Scottish Pacific against the debtors of the Australian business.

Cash Flow

Despite the loss, CPT’s net cash inflow for the financial year resulted in an increase in cash holdings to $3.0m at 30 June 2016 ($0.5m 30 June 2015).

Our strong cash management processes, Australian debtor funding facility, early payment programs with clients in North America, project funding to cover short term cash outflows on risk/reward contracts, prepaid revenue in North America, delays in finalising Canadian tax obligations with the Canadian tax authorities and the increase in revenue in Australia and North America in the second half of FY16 all contributed to CPT being able to manage the cash flow challenges in FY16.

The increase in cash at 30 June 2016 is due to the receipt of $1.3m cash from a US risk/reward project in midJune and the receipt of a $0.9m tax refund in Canada in September 2015 which has been held on deposit to pay Canadian taxes owing of $0.8m.

Capital Management

No dividends will be declared for FY16.

Our debtor funding facility has a limit of $5m of which $0.9m was outstanding at 30 June 2016.

During FY17 our focus will be on growing cash flow from operations to minimise the use of debtor facilities and the associated costs so that we can rebuild our cash position and start paying dividends again.

Our People

All of our employees and consultants have shown great loyalty and dedication to CPT and have adapted to the changes being implemented whilst continuing to deliver the high levels of service to clients and the business we are renowned for. To all CPT people I thank you on behalf of the Board of directors and the executive team for the professional way in which you have continued to deliver the high quality of service to our clients and to the business during a difficult 18 months for CPT and a period of transition and commencing our transformation to becoming a digital services leader.

Strategy

The appointment of a CEO for Australia and Asia of the quality and experience of David Lynch was crucial for CPT to be in a position to develop and implement a strategy to digitally transform our clients as well as capitalise on the growth opportunities in Australia and Asia. David brings 13 years of on the ground Asian experience into CPT and will manage CPT’s business in Asia as well as the transformation of CPT’s Australian operations – the core engine for our company.

Our clients are operating in an environment in which innovation, disruption, digital transformation, speed to market, quality assurance and cost control are driving strategic and operational decision making. David will lead our digital services for the company as a whole, including new products, services and strategic alliances.

To enhance our offering to our clients we are leveraging our existing partnerships and investigating opportunities to partner with world class software vendors and service providers.

With David running the Australian and Asian regions I will be focussing on the international business. My focus is on stabilising the European business and working with our partners to provide CPT with enhanced sales capacity, enhanced reach as well as using our people to open doors with new clients and expand our presence in existing clients. While mainframe has been the backbone of the international business, we are expanding our services into midrange, testing and digital partner alliances.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

The Outlook

While the strategic, structural, cultural and operational changes we are implementing are starting to show results, we still have much work to do to ensure we deliver a consistent return to our shareholders and can start paying dividends again. We are optimistic that the momentum we have built in FY16 will continue into FY17, however, we are also cognisant of the challenges that still lie ahead.

The Australian business is expected to continue to grow, particularly within the banking sector and federal government departments and semi-government organisations. The growth in revenue in these sectors in Australia in FY16 is continuing into FY17 and our pipeline is as strong as we have seen since before the GFC. We expect margin pressure to continue in some industry sectors with increases in volume compensating for the lower margins.

Revenue in the North American business began to grow in the second half of FY16 and we expect the growth to continue into the first quarter of FY17. Our priority is to convert short term risk/reward contracts to long term recurrent revenue to replace the Amex contract. We expect our largest client in North America to maintain FY16 revenue levels.

In Asia we will continue to use our partner model in the short term to identify and convert opportunities. The pipeline in Asia is encouraging and projects will continue to be undertaken on more of a reactive basis in the short term.

There is still uncertainty in Europe about the EU economy which has been exacerbated by concerns with the quality of the loan books of Italian banks and their capital adequacy, terrorist attacks and Brexit. Whilst we haven’t seen any indications in the banking sector in general that suggest spending on IT services is being cut, we are actively monitoring what is a fluid and dynamic situation. The cost cutting and structural changes we have made in Europe mean we are a leaner and more nimble business which will allow us to adjust our strategy quickly as the need arises.

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Gerry Tuddenham Managing Director

August 30, 2016

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Comprehensive Income

YEAR ENDED 30 JUNE 2016 Notes

p YEAR ENDED 30 JUNE 2016 Notes
	2016 2015 $’000 $’000
Revenue Other income Salaries and employee benefits expense Consultants benefits expense Depreciation and amortisation expenses Insurance expense Finance costs Occupancy Costs Other expenses Foreign currency (Losses) Gains Goodwill Impairment (LOSS) / PROFIT BEFORE INCOME TAX INCOME TAX (EXPENSE) / REVENUE (LOSS) / 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) / Income for the year, net of tax TOTAL COMPREHENSIVE (LOSS) FOR THE YEAR (LOSS) / PROFIT ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED TOTAL COMPREHENSIVE (LOSS) / INCOME ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED Basic earnings per share (cents per share) 3 Diluted earnings per share (cents per share) 3	28,750 28,196 326 (118) (3,178) (2,666) (22,419) (22,312) (63) (97) (268) (267) (348) (154) (466) (963) (4,453) (2,983) (173) (1,500) (630) (2,400)
	(2,922) (5,264) (751) 208 (3,673) (5,056) 312 1,125
	312 1,125
	(3,361) (3,931)
	(3,673) (5,056)
	(3,361) (3,931)
	(9.88) (13.75) (9.80) (13.64)

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 2016

AT 30 JUNE 2016
	2016 2014 $’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 Borrowings 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	3,034 458 4,815 4,535 1,925 4,176 18 526 214 363
	10,006 10,058 1,401 1,741 63 18 4,394 5,070
	5,858 6,829 15,864 16,887
	8,574 6,109 905 871
	9,479 6,980 207 429 71 86
	278 515 9,757 7,495
	6,107 9,392
	12,195 12,105 1,248 950 (7,336) (3,663)
	6,107 9,392

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Changes in Equity YEAR ENDED 30 JUNE 2016

YEAR ENDED 30 JUNE 2016	g qy
Balance at 1 July 2014 Comprehensive Income Loss 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 Issue of Shares Total transactions with owners, in their capacity as owners Balance at 30 June 2015 Balance at 1 July 2015 Comprehensive Income Loss 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 Issue of Shares Total transactions with owners, in their capacity as owners Balance at 30 June 2016	$’000 $’000 $’000 $’000 $’000 Issued capital Retained Equity Foreign Currency Translation Ordinary Earnings Reserve Reserve Total
	12,075 1,944 1,695 (1,878) 13,836 - (5,056) - - (5,056) - - - 1,125 1,125
	- (5,056) - 1,125 (3,931)
	- - 8 - 8 - (551) - - (551) 30 - - - 30
	30 (551) 8 - (513)
	12,105 (3,663) 1,703 (753) 9,392
	12,105 (3,663) 1,703 (753) 9,392 - (3,673) - - (3,673) - - - 312 312
	- (3,673) - 312 (3,361)
	- (14) - (14) - - - - - 90 - - - 90
	90 - (14) - 76
	12,195 (7,336) 1,689 (441) 6,107

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Cash Flows

YEAR ENDED 30 JUNE 2016

Consolidated Statement of Cash Flows YEAR ENDED 30 JUNE 2016
	2016 2015 $’000 $’000 32,270 32,140 (29,834) (35,193) 6 10 (345) (154) (125) (1,001)
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 Proceeds from share issue Repayments of borrowings Proceeds from 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
	1,972 (4,198)
	(61) (14)
	(61) (14)
	- 30 (1,025) - 1,059 871 - (551)
	34 350
	1,945 (3,862) 458 2,424 631 1,896
	3,034 458

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Notes to the Preliminary Final Report

YEAR ENDED 30 JUNE 2016

Notes to the Preliminary Final Report YEAR ENDED 30 JUNE 2016
1. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES (a) Dividends paid during the year Current year interim Franked dividends (0.0c per share) (2015: 0.0c per share) Previous year final Franked dividends (0.0c per share) (2015: 1.5c per share) (b) Dividends proposed and not recognised as a liability Franked dividends (0.0c per share) (2015 0.0c per share)	2016 2015 $’000 $’000 - - - 551
	- 551
	- -

2. EVENTS AFTER THE BALANCE SHEET DATE

(a) On 29[th] August 2016 CPT Global Limited announced its intention to extend the on-market share buy back for a further twelve months until 29[th] August 2017. A maximum of 3,000,000 shares may be bought back during the buy back period, which will run from 29[th] August 2016 until 29[th] August 2017.

3. EARNINGS PER SHARE

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 (loss) / 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	2016 2015 $’000 $’000 (3,673) (5,056)
	(3,673) (5,056)
	Number of shares Number of shares 37,177,131 36,759,460 300,000 300,000 37,477,131 37,159,460

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CPT Global Limited and Controlled Entities – Preliminary Final Report

4. INTANGIBLE ASSETS

4. INTANGIBLE ASSETS
Goodwill at cost Accumulated impairment losses Total goodwill Intellectual Property at cost Software at cost Accumulated amortisation Total software Total intangible assets Year ended 30 June 2015 Balance at the beginning of the year Additions Impairment charge Amortisation charge Year ended 30 June 2016 Balance at the beginning of the year Impairment charge Amortisation charge	Goodwill $’000 7,186 - (2,400) -	2016 2015 $’000 $’000 9,659 9,659 (5,502) (4,873) 4,157 4,786 75 75 818 818 (656) (609) 162 209 4,394 5,070 Intellectual Property Software $’000 $’000 75 269 - - - - - (60)
	4,786	75 209
	4,786 (629) -	75 209 - - - (47)
	4,157	75 162

Intangible assets other than goodwill and intellectual property have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of comprehensive income. Goodwill and intellectual property have indefinite useful lives. These have been assessed as having indefinite useful lives because these intangible assets arose on the acquisition of businesses purchased as going concerns. These businesses continue to be operated within the CPT Global Group and there are no plans to cease any part of these operations.

Goodwill is allocated to cash-generating units, based on the Group’s reporting segment.

Australian Segment Europe Segment	2016 2015 $’000 $’000 4,157 4,157 - 629
	4,157 4,786

The recoverable amount of the cash-generating units is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of the projected cash flows from that cash-generating unit over 5 years; periods beyond 5 years have been extrapolated using the terminal value growth rate of 7.5% (2015: 7.5%).

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Key Assumptions

The following key assumptions were used in determining the recoverable amount of goodwill:

Discount rate Gross Margin Sales Growth 2016 2015 2016 2015 2016 2015 Australian Segment 16.0% 18.6% 25.2% 25.0% 9.7% 7.7%

Management has based the value-in-use calculations on budgets and estimates for the CGU. The value-in-use is most sensitive to the following assumptions:

• Discount rate;

• Gross profit margins;

• Sales growth rates;

• Terminal growth rates; and

• Corporate costs.

Discount rate – the discount rate is a pre-tax rate and reflects the risks associated with a particular segment. Gross profit margins – values assigned reflect past experience, margins on existing contracts and analysis of the market conditions.

Sales growth rates – reflects management’s expectations of revenue growth in the context of the Group’s Australian market strategy.

Terminal growth rates – reflect the managements expectation of revenue and profit growth in the periods beyond the 5 year forecast and are based on expected growth during the forecast period, long term historical growth, operating leverage and level of fixed and variable costs.

Corporate costs – corporate costs are allocated to the CGU based upon the CGU’s proportional contribution to the revenue of the Group.

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C PT Global Li m ited and Controlled Enti t ies – Preliminary Final R e port

C ompli a nce S t ateme n t

T his prelimi n ary final report has be e n prepared in accorda n ce with the requireme n ts of the C o rporations A ct 2 001, Austr a lian Acco u nting Stan d ards, Aust r alian Accounting Interpretations and other authoritative p ronouncem e nts of the A ustralian A c counting St a ndards Board. T he prelimi n ary final report covers the econo m ic entity of CPT Global Limited an d Controlle d Entities, and C PT Global Limited as an individ u al parent entity. C P T Global L imited is a listed pu b lic compa n y, incorporate d and domiciled in Austr a lia. T he prelimi n ary final r e port of CP T Global Li m ited and C o ntrolled Entities, and C PT Global Limited as an individual p a rent entity have been prepared i n accordanc e with all Australian e q uivalents t o Internatio n al F inancial Re p orting Sta n dards (AIFR S ) in their e ntirety. This report, a n d the acco u nts on whi c h it is bas e d, u se the sam e accountin g policies. T his report g ives a true a nd fair vie w of the mat t ers disclos e d. T his report i s based on accounts whi c h are in th e process of being audit e d. C PT Global L imited has a formally c o nstituted a u dit commit t ee.

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G rant Sinco c k C ompany Se c retary A ugust 30, 2 0 16

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