CPT GLOBAL LIMITED — Annual Report 2017

Aug 28, 2017

CPT Global Limited ABN 16 083 090 895 and Controlled Entities

Appendix 4E - Preliminary Final Report for the Year Ended 30 June 2017

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RESULTS FOR ANNOUNCEMENT TO THE MARKET

Key Information

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|||||||||
|---|---|---|---|---|---|---|---|
|2017|2016|
|A $000's|A $000's|
|Revenues from ordinary activities|down|-5.5%|to|$27,159|$28,750|
|Net Profit (Loss)|before tax|attributable to members|up|54.6%|to|($1,327)|($2,922)|
|Net Profit (Loss)|after tax|attributable to members|up|62.4%|to|($1,468)|($3,909)|
|DIVIDENDS PAID AND PROPOSED|Franked Amount per|
|Amount per|Security at 30% of|
|Security|Tax|
|Ordinary Shares:|
|2016 interim and final|0.0 cents|0.0 cents|
|2017 interim|0.0 cents|0.0 cents|
|2017 final|0.0 cents|0.0 cents|
|There were no dividends recommended or declared for the current financial year.|
|DIVIDEND DETAILS|
|2017|2016|
|A $000's|A $000's|
|Ordinary Share Capital:|
|-|-|
|Final dividend paid|
|-|-|
|Interim dividend paid|
|Final dividend declared|-|-|

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DIVIDEND REINVESTMENT PLAN

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

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||||
|---|---|---|
|EARNINGS PER SHARE (EPS)|
|2017|2016|
|Basic EPS|-3.93 cents|-10.51 cents|
|Diluted EPS|-3.93 cents|-10.43 cents|
|NTA BACKING|
|Net tangible asset backing per ordinary security|$0.01|$0.04|

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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.

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CPT Global Limited and Controlled Entities

ABN 16 083 090 895

Preliminary Final Report for the year ended 30 June 2017

cptglobal.com

CPT Global Limited and Controlled Entities – Preliminary Final Report

Contents

Operational Review
-Managing Director’s Review	3
Consolidated Statement of Comprehensive Income	10
Consolidated Statement of Financial Position	11
Consolidated Statement of Changes in Equity	12
Consolidated Statement of Cash Flows	13
Notes to the Preliminary Final Report	14
Compliance Statement	17

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Managing Director’s Review

Fellow Shareholders,

In FY16 we commenced a process to review our strategy, our structure, our culture and our operations. To set a clear direction for the next 3-5 years and to ensure we capitalise on market direction towards cloud, data analytics, mobility and artificial intelligence, it was the right time to revisit our corporate charter.

We have made a lot of progress in embedding our new purpose, mission and vision into our customer and consultant communications and training. Our roadmap and business strategy was refreshed in line with our new charter.

The CPT vision statement encompasses the changes in direction we are making to align our strategy with how digital transformation is dominating technology services demand in the market.

Our vision at CPT is to be an innovative digital and IT performance solution leader, delivering consistent growth in revenues, dividends, and share price, derived from 50 global enterprise clients, scalable new revenue streams and partner alliances that capitalise on opportunities from the shift to cloud, mobile and data driven investments.

During the year we continued to implement changes to stabilise and reinvigorate the business and drive performance. This included taking decisive action to reduce unnecessary expenses, leveraging cloud based software to run our business faster and recruiting talent to drive our new business lines.

However, despite the many positive changes and progress made, CPT made a loss after income tax of $1.5million in FY17 compared to a net loss after tax of $3.9m in FY16.

After returning to profitability for the 6 month period to 30 June 2016 with an EBITDA before one-off items* of $0.34m, we were unable to sustain the improvement in performance throughout FY17 despite early expectations. The EBITDA loss for the 2017 financial year is $1.2m which is marginally better than the EBITDA at 30 June 2016 of a loss of $1.3m 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.

Our Australian business continued to perform well with steady growth in revenue and margins but it was not sufficient to make up for the disappointing results in North America and Europe. The second half of the year was particularly disappointing with an EBITDA loss of $1.1m. The loss in the second half was a result of a significant decline in revenue in North America and Europe in the last quarter.

We are under no illusion that three years of losses in a row is in any way acceptable to Shareholders and further action has been taken to reduce costs and drive revenue growth across all regions:

• the European region has been merged with the North American region. The New York office has taken over responsibility for the European operations and is leading and managing the European sales team and providing administration support;

• merging Europe and North America has resulted in a further reduction in fixed costs. Leases in the UK have either not been renewed or terminated and head count has been reduced. There were no material costs to the business in implementing these changes. The fixed costs of the European region are now just the costs of maintaining the corporate structure and compliance requirements in each country CPT has a subsidiary;

• variable costs in Europe are contractor time and travel costs. Variable costs cannot be incurred without pre-approval;

• these changes in Europe, as well as other actions taken in Europe during the last two years, are expected to save $480k in operating costs in FY18 when compared to FY17, a 51% reduction; and

• we have invested in business development in the regions in which we see the best opportunities for

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CPT Global Limited and Controlled Entities – Preliminary Final Report

growth in the short to medium term, Australia and North America. We have appointed a new sales manager in Australia to focus on driving key partnerships and the Sydney market and the COO has transitioned to a sales focussed role in the Southern region. The COO role and responsibilities have been allocated across existing employees. We have also appointed a sales manager in New York to drive growth in new accounts in North America.

Highlights of the year

Despite the result, there were positive outcomes, events and developments during the year that are worth highlighting:

• revenue in the Australian region grew 4.3% with major contracts in the government, semi-government and banking sectors renewing and 15 new clients across government, insurance, education and health being won;

• CPT entered into a partnership with Wipro Limited (Wipro), a leading global information technology consulting and business process services company, to deliver IT testing services to one of Australia’s largest financial institutions. The partnership has seen CPT increase the number of consultants at the client;

• The relationship with Wipro has extended to the Northern Hemisphere where CPT completed a mainframe tuning and cost reduction project for Wipro;

• the pipeline in North America is strong but the region suffered from delays in closing new contracts in the second half of the financial year. However, the hard work and dedication of the North American team has resulted in CPT closing a US$2m risk/reward contract in August 2017 with one of the world’s largest financial institutions. The project will be delivered in FY18;

• a large risk/reward contract was successfully completed in North America and the client is now providing references to potential CPT clients. This is a testament to the expertise of our mainframe consultants and the quality service they consistently deliver;

• the signing of 3 further alliance agreements with vendors of world class software tools and services squarely aimed at enhancing our digital solution capabilities; and

• the digital consulting practice was established.

Operating and Financial Review

CPT made a loss after tax of $1.5m for the full financial year. The loss was driven by the decline in revenue in Europe of 33.3% and North America of 18.5% from FY16 (see Table 1). While costs were reduced across the regions this was not sufficient to counter the reduction in revenue, particularly in the last quarter of the financial year when the reduction in revenue was most pronounced.

Revenue in North America was impacted by changes to key management personnel at our largest client in North America. Revenue didn’t start to rebound at the client until June 2017.

Write downs in unrecoverable WIP of $0.3m in the second half of the financial year added to the impact of lower revenue.

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

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Table 1

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Revenue by Region - Year on Year
$mil AUD
25
FY15
FY16
20
FY17
15
10
5
0
Australia Europe North America
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Europe

The signs of improvement in the performance of the European region in late FY16 were not sustained beyond the first quarter in FY17. There was no single factor that caused the halt in the improvement in performance but the uncertainty in Europe that arose after Brexit and the concerns about the strength and stability of the Italian banking sector made rebuilding the region more difficult, particularly in Italy where we had been successful in winning work in the banking sector.

Table 2 shows the reliance Europe has on banking and the challenges experienced in FY15, FY16 and FY17.

Table 2

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Revenue by Sector - Europe
$mil AUD
4
FY15
3.5
FY16
3 FY17
2.5
2
1.5
1
0.5
0
Banking & Finance IT&C Other Insurance
Europe
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CPT Global Limited and Controlled Entities – Preliminary Final Report

North America

The performance of the North American region in the first three quarters of the year was solid with some exceptional results on individual projects. However, on completion of a risk reward project in March, monthly revenue declined through the fourth quarter as new projects were not ready to come online.

Overall, revenue decreased by 18.5% in North America. Revenue in Canada declined 45.8% after a change in senior management at our biggest client in North America. The revenue didn’t start to return to historic levels until June 2017.

Revenue in the USA grew 10.8% on the back of a successful risk reward contract in the healthcare sector. However, the growth in revenue and strong margins in USA were not sufficient to cover the reduction in revenue in Canada.

Three of our top ten clients by revenue are based in North America.

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

Table 3

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Revenue by Sector - North America
$mil AUD
7
FY15
6 FY16
FY17
5
4
3
2
1
0
Banking & IT&C Government & Insurance Healthcare Other
Finance Defence
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Australia

Revenue in Australia grew by 4.3% in the financial year. We grew revenue across our three major industry sectors of banking & finance, government & defence and IT&C. The growth in the Australian business is profitable and margins have been maintained despite the general pressure on margins in the industry. Revenue has grown by 24% in two years. Seven of our top 10 clients by revenue are based in Australia.

The Wipro partnership commenced during the financial year and has seen CPT increase the number of consultants at the client. The five year term of this agreement provides us with some certainty and stability and allows us to focus on growing the account.

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CPT Global Limited and Controlled Entities – Preliminary Final Report

During the year we established digital consulting as a distinct practice, recruited a consultant to lead the practice and increased the number of partnerships and alliances with world-class digital solutions providers to six. The delivery of a robotic process automation project at a financial institution was a milestone for the company and demonstrated the strength in combining CPT’s consulting services and skills with industry leading partners.

The addition of a new sales manager and the changes to the structure of the sales team are showing early positive signs and the pipeline in Australia remains strong into FY18.

Table 4

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Revenue by Sector - Australia
$mil AUD
12
FY15
FY16
10
FY17
8
6
4
2
0
Banking & Government & IT&C Other Insurance Healthcare
Finance Defence
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Financial Results

Financial Performance

CPT Global’s revenue for the year ended 30 June 2017 was $27.2m, a 5.6% decrease on the previous year’s revenue of $28.8m. CPT Global’s net loss after tax for the year ended 30 June 2017 was $1.5m, an improvement of $2.4m on the 30 June 2016 result.

The improvement in performance is a result of:

• profitable growth in the Australian region;

• a significant reduction in the operating losses in Europe as costs were cut and margins improved on FY16 despite the reduction in revenue. Margins in FY16 were unusually low due to the early close out of a risk/reward contract with an Italian bank which resulted in a breakeven result for CPT; and

• $0.6m of goodwill was impaired in FY16.

Basic earnings per share amounted to -3.93 cents per share (diluted earnings -3.93 cents per share).

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Financial Position

CPT Global’s balance sheet reflected net tangible assets of $0.3m as at 30 June 2017 ($1.5m at 30 June 2016).

• Unbilled revenue (WIP) has decreased by $1.1m. At 30 June 2016 $0.8m of WIP related to risk/reward contracts. At 30 June 2017, the WIP relating to risk/reward contracts was $0.1m. The balance of the decline is due to a decrease in the number of fixed price and milestone contracts in Australia as billing at a major client moved to monthly time and materials.

• The $0.8m increase in trade and other receivables is due to the delay in payments from two clients as agreements went through change processes ($1.6m paid in July). Without the delay in payment trade and other receivables decreased in line with the reduction in revenue in the last quarter in North America and Europe;

• Trade and other payables decreased by $1.6m as amounts owed to contractors for May and June 2017 were lower in comparison to FY16 with the reduction in revenue in the last quarter in North America and Canada and the cost base of the Company was lower at the end of FY17 than in FY16; and

• Borrowings at year end relate to the debtor funding provided by Scottish Pacific against the debtors of the Australian business. The balance owing was high at 30 June 2017 due to the $1.6m of debtors outstanding due to a delay in payment, as mentioned above. Approximately $1.2m of the debtor funding related to these debtors.

Cash Flow

CPT had $1.7m in cash at 30 June 2017 ($3.0m 30 June 2016), a cash outflow of $1.7m in the financial year. We also had access to $0.9m in additional funding in our debtor funding facility.

Our strong cash management processes, Australian debtor funding facility, early payment programs with clients in North America, delays in finalising Canadian tax obligations with the Canadian tax authorities and the increase in revenue in Australia all contributed to CPT being able to manage the cash flow challenges in FY17.

The decrease in cash at 30 June 2017 is due to the $1.5m after tax loss.

Capital Management

No dividends will be declared for FY17.

Our debtor funding facility has a limit of $5m of which $1.6m was outstanding at 30 June 2017 and $0.9m was available to draw on.

During FY18 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

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 CPT’s 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 couple of years for CPT and a period of transition and transformation to becoming a digital services leader.

Strategy

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. Our digital practice will become a core component of our services and drive 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.

The CEO Australia and Asia will continue running the Australian and Asian regions and drive the growth and expansion of the digital practice. I will be focussed on the international business, as I was during FY17. My focus is on closing business in North America and Europe 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

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CPT Global Limited and Controlled Entities – Preliminary Final Report

expand our presence in existing clients. While mainframe has been the backbone of the international business, we will continue expanding our services into midrange, testing, digital and cloud.

The Outlook

We are optimistic that the momentum we have built in Australia will continue into FY18 and projects in the North American business that have been in negotiation for many months will start to close in the first quarter, however, we are also cognisant of the challenges that still lie ahead.

The Australian business is expected to continue to grow steadily, particularly within the banking and insurance sectors and federal government departments and semi-government organisations. Our revenue and consultant pipelines remain strong. We expect margin pressure to continue in some industry sectors with increases in volume compensating for the lower margins. Contract renewals are due at two major clients and while we are confidant of extending the contracts, there is always a risk that the scope of the contract could change or the contract could not be extended.

We expect revenue in the North American business to grow in the first half of FY18 as revenue contracted for the first quarter at our largest client in Canada has increased and a risk/reward contract worth up to US$2m was signed in August and is due to commence in mid-September. Our priority is to continue to close risk/reward contracts in the short term with two opportunities in the final stages of negotiation, convert risk/reward clients to long term recurrent revenue and grow our other services at existing and new clients.

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 an opportunistic basis in the short term.

The outlook in the European region is uncertain. To minimise our exposure the European region has been merged into the North American region to form a Northern Hemisphere region, our presence scaled back and fixed costs have been cut to the minimum required to maintain the corporate structure and comply with relevant laws and regulation. The cost cutting and structural changes will allow us to adjust our strategy quickly as the need arises.

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Gerry Tuddenham Managing Director August 29, 2017

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Comprehensive Income

YEAR ENDED 30 JUNE 2017 Notes	Restated 2017 2016 $’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 BEFORE INCOME TAX INCOME TAX EXPENSE LOSS 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 Income for the year, net of tax TOTAL COMPREHENSIVE LOSS FOR THE YEAR LOSS ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO MEMBERS OF CPT GLOBAL LIMITED Basic earnings per share (cents per share) 3 Diluted earnings per share (cents per share) 3	27,159 28,750 70 326 (3,308) (3,178) (21,066) (22,419) (66) (63) (274) (268) (244) (348) (971) (998) (2,433) (3,921) (194) (173) - (630)
	(1,327) (2,922) (141) (982) (1,468) (3,909) 184 317
	184 317
	(1,284) (3,587)
	(1,468) (3,909)
	(1,284) (3,587)
	(3.93) (10.51) (3.93) (10.43)

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 2017

AT 30 JUNE 2017	Restated 2017 2016 $’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 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	1,656 3,034 5,571 4,815 792 1,925 - 18 103 214
	8,122 10,006 1,067 968 43 63 4,348 4,394
	5,458 5,425 13,580 15,431
	6,989 8,579 1,640 905 2 -
	8,631 9,484 233 - 91 71
	324 71 8,955 9,555
	4,625 5,876
	12,228 12,195 1,439 1,254 (9,042) (7,573) 4,625 5,876

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Changes in Equity YEAR ENDED 30 JUNE 2017

YEAR ENDED 30 JUNE 2017
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 Restated Balance at 30 June 2016 Balance at 1 July 2016 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 2017	$’000 $’000 $’000 $’000 $’000 Issued capital Retained Equity Foreign Currency Translation Ordinary Earnings Reserve Reserve Total
	12,105 (3,665) 1,705 (753) 9,392 - (3,909) - - (3,909) - - - 317 317
	- (3,909) - 317 (3,592)
	- (14) - (14) - - - - - 90 - - - 90
	90 - (14) - 76
	12,195 (7,574) 1,691 (436) 5,876
	12,195 (7,574) 1,691 (436) 5,876 - (1,468) - - (1,468) - - - 184 184
	- (1,468) - 184 (1,284)
	- - - - - - - - - 33 - - - 33
	33 - - - 33
	12,228 (9,042) 1,691 (252) 4,625

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Consolidated Statement of Cash Flows

YEAR ENDED 30 JUNE 2017

Consolidated Statement of Cash Flows YEAR ENDED 30 JUNE 2017
	2017 2016 $’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 (USED IN)/FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, software NET CASH FLOWS (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 FINANCING ACTIVITIES NET (DECREASE)/INCREASE 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	28,851 32,270 (31,039) (29,834) 5 6 (166) (345) 9 (125)
	(2,340) 1,972
	(2) (61)
	(2) (61)
	- - - (1,025) 735 1,059 - -
	735 34
	(1,607) 1,945 3,034 458 229 631 1,656 3,034

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CPT Global Limited and Controlled Entities – Preliminary Final Report

Notes to the Preliminary Final Report

YEAR ENDED 30 JUNE 2017 1. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES (a) Dividends paid during the year Current year interim Franked dividends (0.0c per share) (2016: 0.0c per share) Previous year final Franked dividends (0.0c per share) (2016: 1.5c per share) (b) Dividends proposed and not recognised as a liability Franked dividends (0.0c per share) (2016 0.0c per share)	2017 2016 $’000 $’000 - - - -
	- -
	- -

2. EVENTS AFTER THE BALANCE SHEET DATE

(a) On 28[th] August 2017 CPT Global Limited announced its intention to extend the on-market share buy back for a further twelve months until 28[th] August 2018. A maximum of 3,000,000 shares may be bought back during the buy back period, which will run from 28[th] August 2017 until 28[th] August 2018.

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	2017 Restated 2016 $’000 $’000 (1,468) (3,909)
	(1,468) (3,909)
	Number of shares Number of shares 37,318,525 37,177,131 300,000 300,000 37,618,525 37,477,131

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CPT Global Limited and Controlled Entities – Preliminary Final Report

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 2016 Balance at the beginning of the year Additions Impairment charge Amortisation charge Year ended 30 June 2017 Balance at the beginning of the year Impairment charge Amortisation charge	Goodwill $’000 4,786 - (629) -	2017 2016 $’000 $’000 9,659 9,659 (5,502) (5,502) 4,157 4,157 75 75 818 818 (702) (656) 116 162 4,348 4,394 Intellectual Property Software $’000 $’000 75 209 - - - - - (47)
	4,157	75 162
	4,157 - -	75 162 - - - (46)
	4,157	75 116

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	2017 2016 $’000 $’000 4,157 4,157
	4,157 4,157

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 4.0% (2016: 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
	2017	2016	2017	2016	2017	2016
Australian Segment	20.0%	16.0%	25.7%	25.2%	9.1%	9.7%

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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CPT Global Limited and Controlled Entities – Preliminary Final Report

Compliance Statement

This preliminary final report has been prepared in accordance with Listing Rule 4.3A and is based on accounts which are in the process of being audited.

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 as appropriate for profit oriented entities. The preliminary financial report does not include all the notes of the type normally included in an annual financial report.

This report, and the accounts on which it is based, use the same accounting policies which have been consistently applied by the entities in the group and are consistent with those applied in the 30 June 2016 annual report.

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

CPT Global Limited has a formally constituted audit committee.

On behalf of the Board of CPT Global Limited

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Grant Sincock CFO & Company Secretary 29 August 2017

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