DATA#3 LIMITED - Annual Report 2018

Appendix 4E

ASX Preliminary Final Report

Name of entity Data[#] 3 Limited ABN 31 010 545 267

Reporting period

Previous corresponding period

Year ended 30 June 2018 (FY18) Year ended 30 June 2017 (FY17)

Results for announcement to the market

Results			$
Revenues from ordinary activities	up 7.6%	to	$1,181,411,000
Profit from ordinary activities after tax attributable to members	down 8.4%	to	$14,078,000
Net profit for the period attributable to members	down 8.4%	to	$14,078,000
Dividends	Amount per		Franked amount
	security		per security
Current period
Interim dividend	1.60 cents		1.60 cents
Final dividend	6.60 cents		6.60 cents
Previous corresponding period
Interim dividend	3.35 cents		3.35 cents
Final dividend	5.55 cents		5.55 cents

The Record Date for determining entitlements to the dividend is 14 September 2018.

Brief explanation of the figures reported above

In a competitive and transforming technology market Data[#] 3 has delivered solid revenue growth; however, one-off events have reduced the services profit contribution, causing the consolidated profit to decrease. This is considered an anomaly, and the company has continued to enhance its financial position through strong cash flow and diligent management of its balance sheet.

Please refer to the attached audited Annual Financial Report for the year ended 30 June 2018 for the following information:

consolidated statement of profit or loss and other comprehensive income
consolidated balance sheet
consolidated statement of changes in equity
consolidated statement of cash flows
notes to the consolidated financial statements

Data[#] 3 Limited Financial Report 2018 1

Appendix 4E (continued)

for the year ended 30 June 2018

Retained profits

Retained profits
	Current year	Previous year
	$’000	$’000
Retained profits at the beginning of financial period	33,312	31,564
Net profit attributable to members	14,078	15,375
Net transfers to and from reserves	-	-
Dividends provided for or paid	(11,009)	(13,627)
Other	(167)	-
Retained profits at end of financial period	36,214	33,312

Additional dividend information

Details of dividends declared or paid during or subsequent to the year ended 30 June 2018 are as follows:

Record date	Payment date	Type	Amount per	Franked amount	Total dividend
			security	per security	$’000
15/9/2017	29/9/2017	Final	5.55 cents	5.55 cents	8,546
15/3/2018	29/3/2018	Interim	1.60 cents	1.60 cents	2,464
14/9/2018	28/9/2018	Final	6.60 cents	6.60 cents	10,162

Total dividend per security (interim plus final)

Total dividend per security (interim plus final)
	Current year	Previous year
Ordinary securities	8.20 cents	8.90 cents

Data[#] 3 Limited Dividend Reinvestment Plan

The Data[#] 3 Dividend Reinvestment Plan has been suspended from 1 September 2006.

Net tangible assets per security

Net tangible assets per security
	Current year	Previous year
Net tangible asset backing per ordinary security	$0.18	$0.17

Control gained over entities having a material effect

Not applicable.

Loss of control of entities having a material effect

Not applicable.

Data[#] 3 Limited Financial Report 2018 2

Appendix 4E (continued)

for the year ended 30 June 2018

Details of aggregate share of profits (losses) of associates and joint venture entities

Not applicable.

Compliance with IFRS

The attached Annual Financial Report complies with Australian Accounting Standards, which include AIFRS. Compliance with AIFRS ensures that the financial report complies with International Financial Reporting Standards (IFRS).

Commentary on the results for the period

The results for the 2018 financial year (FY18) reflect a disappointing first half followed by a strong second half performance. The full year result saw earnings per share decrease by 8.4% to 9.14 cents, and total fully franked dividends decrease by 7.9% to 8.20 cents per share.

Please refer to the attached Operating and Financial Review for further information in relation to the results for the period.

Compliance statement

This report is based on financial statements that have been audited.

Signed:

==> picture [109 x 27] intentionally omitted <==

Richard Anderson Director

Date: 22 August 2018

Data[#] 3 Limited Financial Report 2018 3

Operating and Financial Review

Our plan for FY18 was to refine our existing three-year strategy rather than make major changes. The ICT industry is fast moving and can be complex, so our objective was to continue to improve the connection with our people, customers and business partners and to simplify our business processes where possible.

The strategic planning process for FY18 – FY20 identified the following market assumptions and trends in the adoption and use of business technology:

Digital transformation is more prevalent in business strategy.
The overall IT market growth is being fueled by digital transformation.
Consumption will continue to shift from capital expenditure to operating expenditure.
Vendor models are changing to reward cloud adoption.
Private cloud is increasing demand for infrastructure and software.
Cloud adoption increases the focus on security.
Education and health sectors will continue to grow.
Resource flexibility and availability is an increasing challenge.

Priority actions in our FY18 business plan included:

accelerate services
accelerate cloud adoption
engage our people
engage our customers to enable their success
adapt and enhance solutions
improve internal systems for productivity
sustain financial performance.

Our overall financial goal for FY18 was to improve on the previous year’s ‘best ever’ profit result.

Whole of group performance

Market conditions in both the public and private sectors generally improved in FY18, but remained relatively patchy, and our strategy to grow our core business while building service-centric revenues achieved mixed success.

As announced in the interim report, we had a very challenging start to the year and delivered a first half profit that was approximately 50% lower than the previous corresponding period (PCP). This disappointing result was due to a number of one-off events, both planned and unplanned, which affected the product and services businesses. Consequently there was a material shift in profit dependency to the second half.

Pleasingly, the core Data[#] 3 business delivered a strong second half profit, ending the year ahead of the PCP. However, this result did not fully offset disappointing results achieved by recent acquisitions. Although Business Aspect essentially recovered its first half loss, producing a full year result close to break even, performance was behind PCP. Discovery Technology, which is 77.4% owned by Data[#] 3, recorded a material reduction in contribution, with a second half pre-tax result $1.3 million below PCP, and a full year pre-tax result $1.7 million below PCP. Further details are provided in the segment commentary below.

The full year result saw total revenue increase by 7.6% from $1,098.2 million to $1,181.4 million, with a solid increase in product revenue and a steady increase in services revenues. We are particularly pleased with the continued growth of core product business and significant growth in cloud-based business, which saw public cloud-based revenues increase by 58.0% from $169.5 million to $267.8 million.

Total gross profit (excluding other revenue) increased by 0.8% from $158.9 million to $160.1 million, and total gross margin decreased from 14.5% to 13.6% reflecting changes in sales mix.

Data[#] 3 Limited Financial Report 2018 4

Operating and Financial Review (continued)

Total revenue ($M):

==> picture [217 x 117] intentionally omitted <==

Total gross profit ($M):

==> picture [211 x 120] intentionally omitted <==

The group’s total net profit before tax decreased by 8.9% from $22.4 million to $20.4 million, in part due to the significant decrease in contribution from Discovery Technology.

Net profit after tax (excluding minority interests in Discovery Technology) decreased by 8.4% from $15.4 million to $14.1 million. This represented basic earnings per share of 9.14 cents, a decrease of 8.4% from 9.99 cents in the previous year.

The board declared fully franked dividends of 8.20 cents per share for the full year, representing a payout ratio of 89.7%.

NPAT ($M):

==> picture [214 x 117] intentionally omitted <==

EPS and DPS (cents):

==> picture [245 x 113] intentionally omitted <==

Return on equity decreased from 37.0% to 31.6%.

Product segment performance

Total product revenue for the full year increased by 8.1% from $889.2 million to $961.2 million, reflecting strong growth in Infrastructure sales (up 12.4% to $303.6 million) and steady growth in Software Licensing (up 6.0% to $655.1 million), with the $2.5 million balance comprising Discovery Technology’s product revenue. Infrastructure and Licensing revenues include the sale of public and private cloud solutions.

Total product gross profit increased by 6.7% from $72.5 million to $77.4 million, and product gross margin decreased slightly from 8.2% to 8.1%.

Product segment profit increased by 10.0% from $23.9 million to $26.3 million.

This is a very pleasing result, demonstrating the fundamental strength and resilience of our product businesses.

Data[#] 3 Limited Financial Report 2018 5

Operating and Financial Review (continued)

Product revenue ($M): Product gross profit ($M):

==> picture [213 x 119] intentionally omitted <==

==> picture [214 x 117] intentionally omitted <==

Services segment performance

Total services revenue increased by 5.3% from $208.1 million to $219.1 million. This included solid growth in Professional Services revenues (up 9.1% to $49.1 million) and Recruitment revenues (up 9.3% to $50.4 million); and modest growth in Support Services (Managed and Maintenance Services) revenues (up 4.8% to $87.0 million) and Business Aspect Consulting revenues (up 3.7% to $25.2 million). Discovery Technology’s services revenue decreased by $2.5 million to $5.1 million, and other services revenues were $2.3 million.

Total services gross margin decreased from 41.5% to 37.8%, reflecting a change in sales mix, and the overall services gross profit decreased by $3.6 million (or 4.2%), from $86.3 million to $82.7 million.

The total services segment profit decreased by $4.2 million (or 36.9%), from $11.4 million to $7.2 million.

The planned decommissioning of the Data[#] 3 Cloud platform contributed to the profit decline in Managed Services. We expect to complete this project in the first quarter of FY19, positioning Managed Services for improved profitability in FY19. We will continue with our strategy of offering customers public or private cloud solutions from our market-leading, global vendor partners, which include the full range of Data[#] 3 services.

As mentioned previously, Business Aspect Consulting’s negative profit performance in the first half was well below plan due to lower productivity across the expanded national operation. Utilisation levels (and profitability) improved significantly throughout the second half, ending the year close to break even and well positioned for a more substantial profit contribution in FY19.

Discovery Technology’s contribution was disappointing and unexpected, largely due to a customer’s early termination of a five-year supply contract. This action is currently subject to legal proceedings for debt and economic loss recovery by Discovery Technology.

Services revenue ($M): Services gross profit ($M):

==> picture [219 x 124] intentionally omitted <==

==> picture [210 x 122] intentionally omitted <==

Other revenue

Other revenue increased from $0.9 million to $1.1 million and largely comprised interest income.

Data[#] 3 Limited Financial Report 2018 6

Operating and Financial Review (continued)

Operating expenses

Internal staff costs increased by 3.1% from $114.1 million to $117.6 million and other operating expenses remained steady at $23.3 million. The cost ratio (staff and operating expenses as percentage of gross profit) increased from 86.5% to 88.0%, demonstrating a small decline in operating leverage.

Total staff numbers increased slightly from 1,177 at the commencement of the financial year to 1,210 at the close, with continual rebalancing of resources to meet business demands throughout the year. Average salaries increased in line with the broader industry trend.

Cash flow

The net cash flow from operating activities was an inflow of $8.2 million. As usual the operating cash flow and year-end cash balance were temporarily inflated due to the timing of receipts and payments around 30 June. The traditional May/June sales peak produces higher than normal collections pre-30 June, generating temporary cash surpluses which subsequently reverse after 30 June when the associated supplier payments occur.

As a result, the year-end cash balance of $128.3 million was inflated by this temporary surplus, albeit lower than the unusually high surplus at 30 June 2017.

The key trade receivables indicator of average days’ sales outstanding remained ahead of target, and at 25.3 days is industry best practice, an even better result than the previous year.

Performance against strategic priorities

Our three-year strategic plan for FY18 – FY20 included three long-term objectives:

deliver sustained profit growth
grow services revenue with an increase in annuity and an increase in margin
grow cloud services revenues.

Our progress against these strategic priorities is summarised below.

1. Deliver sustained profit growth

The first half of FY18 saw a significant decrease in profit after six consecutive half years of growth. The first half shortfall was not fully recovered, however, by the strong second half profit, delivering a full year consolidated result that was 8.4% below the previous year.

The underlying contributions to full year result included the following:

a record second half profit from the ‘core’ Data[#] 3 business, delivering a full year result ahead of FY17
a second half profit turnaround by Business Aspect, finishing the year close to break even but lower than FY17
a material decrease in contribution from Discovery Technology compared to FY17.

2. Grow services profit with an increase in annuity and an increase in margin

Prior to the first half of FY18 we had delivered a steady increase in services profit. The impact of a poor first half and an improved second half performance was not sufficient, however, to support a continued upward annual trend. The Data[#] 3 Cloud divestment in Managed Services and Discovery Technology’s profit decline significantly affected the combined profit result for services. Business Aspect achieved a significant turnaround in profit in the second half to end the year close to break-even but behind FY17. In summary, while we performed some excellent services engagements for our customers, we did not achieve this strategic goal in FY18.

3. Grow cloud services revenue

The major component of cloud services is the growing market segment of public cloud. In FY17 we recorded $169.5 million of public cloud-based revenues, which was a significant increase from FY16’s $99.0 million. In FY18 we grew these cloud-based revenues by 58% to $267.8 million.

Data[#] 3 Limited Financial Report 2018 7

Operating and Financial Review (continued)

Data[#] 3 is Microsoft’s largest reseller in the region, and our cloud services strategy contains major elements of Microsoft’s product offerings such as Azure, Office 365 and Dynamics 365. Microsoft is taking the lead in public cloud globally, and locally and we are in a prime position to capitalise on market growth. At the base level, cloud services annuity revenue with Microsoft subscription licenses is a substitute for our traditional license business. Our intent and focus is to help our customers migrate applications to the most appropriate cloud solution. This may include private or hybrid cloud where customers can use a mixture of cloud services and software they run in their own data centers and manage both with a common set of tools. Vendors such as Cisco, Microsoft, HP and Dell EMC are major players in this market segment. Data[#] 3 is a dominant reseller for each of these global vendors. An ideal engagement would see us provide services at every stage of our solution life cycle: consulting, design and implementation, and managed or support services for both public and private clouds.

Aside from the above strategic priorities, there are other indicators we utilise to determine the health of the business. Our people satisfaction survey, customer surveys and independent external awards are three such indicators. During the year sustained high performance was achieved across each of these areas.

People Satisfaction

We ended FY18 with 1,210 people in the group, which includes a combination of permanent, contracted and casual staff. Each year we survey our people’s satisfaction and the summary for FY18 was as follows:

strong participation in the survey
overall satisfaction score of 4.38 out of 5, up from 4.27 in FY17, and a record result
95% of our people recommend Data[#] 3 as an employer.

Customer Satisfaction

Our annual customer satisfaction survey produced a solid overall satisfaction rating of 4.14 out of 5, up from 4.09 in FY17. Last year we introduced “customer pulse” surveys to provide instant customer feedback on projects, service desk calls and services in general. These surveys have proved to be very useful sources of information for insight into areas of improvements and investment to ensure we are delivering enhanced customer experiences.

External Awards

Each year we receive national and international recognition from our global partners. FY18 was no exception and we were pleased to have been acknolwedged with the following awards:

Adobe Partner of the Year for Asia Pacific Region
APC by Schneider Electric Elite Partner of the Year
Australian Reseller News (ARN) Enterprise Partner of the Year
Australian Reseller News (ARN) Channel Choice Partner Award
Cisco Software Partner of the Year
Cisco HyperFlex Partner of the Year
Cisco Services Partner of the Year
Dell EMC Solution Provider Partner of the Year
Dell EMC Special Achievement Award
HP Partner of the Year for South Pacific Region
McAfee Growth Partner of the Year for ANZ Region
Symantec Pacific Regional Channel Partner of the Year for Endpoint and Information Security

This is the eleventh year in a row we were voted ARN’s Enterprise Partner of the Year by our peers, and the sixth consecutive year we have been recognised with the ARN Channel Choice Award.

Data[#] 3 Limited Financial Report 2018 8

Operating and Financial Review (continued)

In addition to awards for our solutions or technical expertise, we are delighted to have received the following employer of choice and staff development awards:

HRD Employer of Choice Award. This is the third year in a row we have received an HRD award for organisations with more than 500 employees.
LearningElite Award
The Australian Business Awards – Employer of Choice
Women in Technology – Employer of Choice

The first three of these awards are not limited to the Information Technology sector; they cover all industries and include many multinational entries.

Review of financial position

Our balance sheet remains conservative with no material debt.

Trade receivables and payables are generally highest at year end due to the traditional sales peak in May/June. Trade and other current receivables at 30 June 2018 were $211.0 million and trade and other current payables $295.4 million, reflecting the timing differences in the collections from customers and payments to suppliers around 30 June (referred to in the ‘Cash flow’ section).

The year-end cash balance decreased from $135.7 million to $128.3 million. The 30 June 2017 balance reflected a higher than usual temporary cash surplus, inflated by early customer receipts. The 30 June 2018 balance includes a more typical temporary surplus.

The key trade receivables indicator of average days’ sales outstanding decreased and remained well ahead of target at 25.3 days. This excellent result demonstrates the effectiveness of our ongoing focus on collections and credit management.

Total inventory holdings decreased from $4.5 million to $3.3 million and comprise product held in our warehousing and configuration centres pending delivery to customers for projects that were in progress at year end.

Operating results by state

Performance across the states varied, reflecting local market conditions and the relative scale of our business in each location.

Queensland

The Queensland business achieved modest growth from both public and commercial sectors, supported by ongoing success in health and education, with total revenue increasing by 5%.

New South Wales

The NSW business had a challenging year with revenue decreasing by 8%. External market conditions remain favourable.

ACT

Our Canberra-based business achieved solid growth in services and infrastructure which, combined with our strong foundation in software, delivered revenue growth of 9%.

Victoria

Our Victorian infrastructure and software businesses delivered a strong performance that more than offset a disappointing services performance. Overall revenue increased by 16%.

Tasmania

Our third year of operations in Tasmania saw exceptionally strong performance across the business, particularly in infrastructure, delivering a 75% increase in revenue.

Data[#] 3 Limited Financial Report 2018 9

Operating and Financial Review (continued)

South Australia

Despite challenging economic conditions, our SA business achieved a solid result in software and services, with total revenue increasing by 11%.

Western Australia

The WA business had a strong year, particularly in infrastructure and services, with overall revenue increasing by 12%.

Fiji and the Pacific Islands Our first year with a local branch in Fiji exceeded expectations with results ahead of plan, delivering a positive return on investment.

Operating results by area of specialisation

The core Data[#] 3 business is structured around three functional areas – Software Solutions, Infrastructure Solutions and Services – operating across eight regions. Business Aspect operates independently but within the Data[#] 3 group structure. Discovery Technology operates independently and externally to the Data[#] 3 group.

Software Solutions

Software Solutions helps customers maximise business value from their software investments through effective procurement, deployment, management and use. Working with customers that span federal, state and local governments, education, health and the general commercial sector, the business offers a complete software solution. This includes the supply and management of licensing programs, the deployment and management of the software, and the user adoption and productivity benefits of the software.

Software Solutions delivered growth in revenue and profit for Software Licensing and Services. The shift to cloud offerings with subscription services for Microsoft Azure and Office 365 continued with solid annuity-based growth. We continued to gain market share with new business, which enabled us to grow the overall business. After many years of providing solutions into Fiji from Australia, this year saw the first full year of our local office operation in Fiji, which helped to sustain and grow our business in Fiji and the Pacific Islands.

Data[#] 3 became a member of Microsoft’s new Global Azure and Infrastructure Partner Advisory Council and continued to provide input into Microsoft’s global licensing and operations programs. Our Software Licensing team continued to be the most successful team in Australia, growing market share and winning major awards with our key software licensing partners.

In March 2018, following a competitive tender process, Data[#] 3 was selected by the Digital Transformation Agency, representing the Commonwealth of Australia, as the sole provider of Microsoft licensing solutions to the Australian Government. This contract extends the existing nine-year relationship for another three-year term.

Infrastructure Solutions

Infrastructure Solutions helps customers maximise returns from their infrastructure investments across server, storage, networks and devices.

The Infrastructure Solutions business delivered growth in both revenue and profit in FY18. This growth came from each of Data[#] 3’s focus areas of server, storage, networks and devices. Server and storage recovered from the “softness” of the previous year as customers made decisions to invest in their own private cloud solutions. This trend included growth in hyper-converged infrastructure, which combines processing power, storage and networking in larger capacity systems. Networking demand remained strong in FY18 as customers upgraded networks to connect to the public cloud, and adopted software-defined networking that provides addition functionality and value over core networking hardware. End user computing demand also remained strong as customers upgraded devices to connect to their own networks and public cloud.

Data[#] 3 retained its position on the HP Global Partner Advisory Board and remained a member of the Cisco Advisory Board for Asia Pacific.

Data[#] 3 Limited Financial Report 2018 10

Operating and Financial Review (continued)

Services

The Services business unit has a wide portfolio of services and capabilities including Professional Services for project-based solutions; Support Services (comprising Managed Services and Maintenance Services) for annuity-based contracts; and People Solutions for the provision of contractors and permanent staff.

Professional Services benefited from significant project wins, particularly for software projects.

Support Services delivered a weaker financial performance with solid growth in Maintenance Services largely offset by a decline in Managed Services; however, it improved on its customer satisfaction, systems and processes. Our approach over the year has been to move away from opportunities that do not present acceptable levels of risk (or return) and to add a catalogue of services that better supports and manages the solutions we deliver in line with our vendor technologies. With the combination of divesting from the Data[#] 3 Cloud and reshaping our market offerings, revenue and profit declined.

People Solutions enjoyed a record year. This was a great outcome in a highly competitive recruitment and contracting market. Once again, this success was helped by cross selling and cooperation from the Professional Services and Managed Services business units.

Business Aspect Consulting

The majority of our consulting capability is vested in Business Aspect, a management consulting business that was acquired in FY15. Business Aspect has extensive skills, experience and expertise in digital transformation, cloud strategy, architecture, security, risk, control, planning, design and governance. In delivering services, Business Aspect addresses all layers of the business, including people, organisational change, process change, information management, information and communications technology (ICT) applications and technology infrastructure. One of the business’s key strengths is the experience and skills of its senior consultants.

Business Aspect had a year of two contrasting halves. The first half had poor financial performance with low productivity combined with an overhead cost structure that the business could not sustain. A recovery plan was developed and instigated in November 2017 resulting in significant remedial actions. The second half progressively improved each month and largely recovered the losses from the first half. Business Aspect now has a refined management structure, a narrower focus on service areas, and more efficient operations having completed ‘back-end’ systems and processes integration with Data[#] 3.

Discovery Technology

Discovery Technology is predominantly a Wi-Fi analytics business, which has developed an application called Connected Customer eXperience (CCX) that provides a unique range of location and analytical services utilising Wi-Fi infrastructure. In July 2017, Data[#] 3 increased its shareholding in Discovery Technology from 61.6% to 77.4%.

Discovery Technology continued to operate independently of Data[#] 3 throughout FY18. During the year the business had several challenges with staff changes and the early termination of a five-year customer contract, which is currently subject to legal recovery action by Discovery Technology. As a result financial performance was well below plan, with pre-tax profit $1.7 million below PCP.

Data[#] 3 sees significant strategic advantage in Discovery Technology and will seek to capitalise on growth in the fast-moving data and analytics market. Going forward, Data[#] 3 has defined a closer working relationship with Discovery Technology.

Our strategy and plan for FY19

The strategic planning process for FY19 – FY21 identified the following market assumptions and trends in the adoption and use of business technology:

Digital transformation is a high priority in business strategy.
The overall IT market growth is fuelled by digital transformation.
Industry consolidation is creating opportunity.
Cyber security is our customers’ number one priority.
Data and analytics are leading drivers of competitive differentiation.
Cloud provides the platform for automation, artificial intelligence, blockchain and many more innovative technologies.
Skilled resources are becoming more scarce.

Data[#] 3 Limited Financial Report 2018 11

Operating and Financial Review (continued)

Our plan

The foundations for our plan are our core purpose, our vision, our core values and our high-level strategy.

Our core purpose is to enable our customers’ success.

Acknowledging the transition that is continuing within our customers and in technology, our vision is to harness the power of people and technology for a better future.

Our core values guide how we behave and we continually reinforce these values:

==> picture [235 x 147] intentionally omitted <==

Our strategy is to enable our customers' digital transformation by creatively evolving our solutions capability.

Executing our plan in FY19

At the highest level, our plan is to deliver technology to support our customers’ business objectives , which we have grouped as follows:

==> picture [316 x 68] intentionally omitted <==

We work with our customers to enable their business objectives, utilising our technology solution categories:

==> picture [366 x 112] intentionally omitted <==

These solutions are delivered using our Customer Solutions Lifecycle (PDO[2] ) methodology, comprising Position, Plan, Design, Deploy, Operate and Optimise phases.

Each customers’ business objectives may have multiple solutions, and each solution may apply to multiple business objectives. Our solution categories contain over two hundred specific solution offerings.

In the interest of gaining clarity and focus in a fast changing IT market, we have identified three strategic priorities for FY19:

Services – improving margins
Digital Enablement – helping our customers succeed in their digital transformation

 Customer Experience – unifying every customer touchpoint across our company to improve the overall customer experience.

Data[#] 3 Limited Financial Report 2018 12

Operating and Financial Review (continued)

Outlook

We remain confident about delivery of the company’s longer-term strategy. We have a robust business, no material debt, solid long-term customer relationships, committed supplier partnerships, and a highly experienced and productive team.

We continue to see growth in the Australian IT market, and believe we are well positioned to capitalise on that opportunity and to continue to deliver growth in shareholder value. Our overall financial goal remains to deliver earnings growth and improve returns to shareholders. It is not feasible to provide more specific full year guidance, particularly given the large proportion of business that is usually transacted in the fourth quarter.

Data[#] 3 Limited Financial Report 2018 13

Directors’ report

Your directors present their report on the consolidated entity consisting of Data[#] 3 Limited (the company) and the entities it controlled at the end of, or during, the year ended 30 June 2018. Throughout the report, the consolidated entity is referred to as the group. “We”, “our”, or “us” refer in this report to the directors speaking on behalf of the group.

1. Principal activities

We provide information technology solutions which draw on our broad range of products and services and, where relevant, with our alliances with other leading industry providers. Our technology solutions are broadly categorised into the following areas:

Mobility – solutions to enable customers to seamlessly connect to business networks and information – anywhere, any time and on any device
Cloud – highly secure data centre solutions to improve business efficiency, reduce costs and scale customers’ technology requirements in hybrid IT environments
Security – solutions designed to help our customers navigate the complexities of cyber security and a changing threat landscape
Data and analytics – solutions designed to enhance visibility and control over customers’ data to enable them to make faster, more accurate business decisions
IT lifecycle management – solutions to optimise our customers’ IT landscape and assist them to realise the full value of their technology assets.

Our service capabilities include

consulting,
procurement,
project services,
managed services and
resourcing.

There were no significant changes in the nature of our group’s activities during the year.

2. Dividends

2. Dividends
	Cents	$’000
Final dividend recommended for the year ended 30 June 2018	6.60	10,162
Dividends paid in the year:
Interim for the year ended 30 June 2018	1.60	2,463
Final for theyear ended 30 June 2017	5.55	8,546
	7.15	11,009

3. Operating and financial review

Information on the operations and financial position of the group and its business strategies and prospects is set out in the attached Operating and Financial Review, as follows:

Operating and financial review ormation on the operations and financial position of erating and Financial Review, as follows:	the group and
	Page
Whole of group performance	4
Review of financial position	9
Operating results by state	9
Operating results by area of specialisation	10
Our strategy and plan for FY19	11

Data[#] 3 Limited Financial Report 2018 14

Directors’ report (continued)

4. Business strategy

Our vision is to harness the power of people and technology for a better future.

For more information on our business strategy please refer to page 11 of the attached Operating and Financial Review.

5. Earnings per share

5. Earnings per share
	2018	2017
	Cents	Cents
Basic and diluted earnings per share	9.14	9.99

6. Significant changes in the state of affairs

There was no significant change in the state of the group’s affairs during the year.

7. Significant events after the balance date

No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect:

(a) the group’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the group’s state of affairs in future financial years.

8. Likely developments and expected results

Information on likely developments and expected results is included in the attached Operating and Financial Review on pages 11 to 13.

9. Directors

The names and details of Data[#] 3 Limited’s directors are set out below. Mr A M Gray was a director from the date of his appointment on 29 August 2017 and remains in office at the date of this report. All other directors were in office for the entire financial year and remain in office at the date of this report.

Names, qualifications, experience and special responsibilities

R A Anderson, OAM, BCom, FCA, FCPA (Chairman, non-executive director) Independent non-executive director since 1997 and Chairman since 2000. Mr Anderson was formerly a partner with

PricewaterhouseCoopers, the firm’s Managing Partner in Queensland, and a member of the firm’s National Committee. He was previously a member of the Capital Markets Board of Queensland Treasury Corporation and President of CPA Australia in Queensland.

During the past three years Mr Anderson has also served as a non-executive director of two other public companies: Namoi Cotton Limited (director since 2001) and Lindsay Australia Limited (director since 2002). Mr Anderson is also president of Guide Dogs Queensland.

Special responsibilities: Chairman of the board Member of audit and risk committee Chairman of remuneration and nomination committee

Data[#] 3 Limited Financial Report 2018 15

Directors’ report (continued)

9. Directors (continued)

L C Baynham, BBus (Honours), FAICD (Managing Director)

Appointed Managing Director in November 2016. Serving as Chief Executive Officer since 2014, Mr Baynham has served Data[#] 3 in various roles since 1994, including as Group General Manager for ten years. Prior to joining Data[#] 3, Mr Baynham gained a broad range of international IT industry experience. Mr Baynham is a graduate of the INSEAD Business School (Singapore) Strategic Management Academy, and sits on a number of global advisory boards for key strategic partners representing Data[#] 3 and the wider Australian IT channel community.

A M Gray, BEcon (Hons), FAICD, FFSIA (non-executive director from 29 August 2017)

Independent non-executive director since August 2017. Mr Gray’s career encompasses an array of senior executive and board appointments in government and private sector organisations, including as Under Treasurer of the Queensland Treasury Department, Chief Executive Officer of the Queensland Competition Authority and the Queensland Independent Commission of Audit, Office Head at Macquarie Group and Executive Director with BDO. He is currently the Chairman of the Queensland Section and a Director of the Federation Board of the Royal Flying Doctor Service of Australia, non-executive director and Chairman of Sugar Terminals Limited, and non-executive director of Q-Pharm.

During the past three years, Mr Gray has served as a non-executive director of one other public company: Sugar Terminals Limited (director since 2017).

L M Muller, BCom, CA, GradDip App Fin and Inv, GAICD (non-executive director)

Independent non-executive director since February 2016. Ms Muller has extensive experience in finance with a 30-year career in senior corporate financial management roles and professional advisory services roles. Ms Muller has previously held Chief Financial Officer (or equivalent roles) with RACQ, Uniting Care Queensland and Energex. Prior to those appointments Ms Muller worked for

PricewaterhouseCoopers and with the Australian Securities Commission. Ms Muller is currently on the boards of Sugar Terminals Limited, QInsure Limited, Guide Dogs Queensland, LGE Holdings Pty Ltd, LGE Operations Pty Ltd and Local Buy Pty Ltd, trading as Peak Services.

During the past three years, Ms Muller has served as a non-executive director of one other public company: Sugar Terminals Limited (director since 2017).

Special responsibilities: Chair of audit and risk committee

W T Powell, BEcon (non-executive director)

Independent non-executive director since 2002. Mr Powell was Executive Chairman of the company from its foundation in 1984 and then Managing Director from 1989 to 1996. Prior to 1984 he had extensive experience in the IT industry and was Managing Director of Powell Clark and Associates, formed in 1977. Mr Powell re-joined the board of Data[#] 3 Limited in 2002.

Special responsibilities: Member of audit and risk committee Member of remuneration and nomination committee

Data[#] 3 Limited Financial Report 2018 16

Directors’ report (continued)

9. Directors (continued)

Meetings of directors

The number of meetings of our board of directors (including meetings of the board committees) held during the year, and the numbers of meetings attended by each director are shown below:

Name	Full meetings of directors	Full meetings of directors	Meetings of audit	Meetings of audit	Meetings of remuneration and	Meetings of remuneration and
			and risk committee		nomination committee
	Meetings	Meetings	Meetings	Meetings	Meetings	Meetings
	attended	held*	attended	held*	attended	held*
R A Anderson	16	16	4	4	3	3
L C Baynham	16	16	**	**	**	**
A M Gray	12	12	**	**	**	**
L M Muller	16	16	4	4	**	**
W T Powell	15	16	3	4	3	3

Number of meetings held during the time the director held office or was a member of the committee during the year.
** Not a member of the committee during the year.

10. Company secretary

Mr B I Hill, BBus, FCPA, FGIA, was appointed to the position of Company Secretary in 1997. He has served as our Financial Controller or Chief Financial Officer since 1992 and is a fellow of both CPA Australia and the Governance Institute of Australia.

Mr T W Bonner, LLB, BComm, AGIA, was appointed to the position of Joint Company Secretary in 2007. He has served as our General Counsel since 2005 and is a member of the Queensland Law Society and the Governance Institute of Australia.

11. Remuneration report

The remuneration report is set out under the following main headings:

A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Additional information

A Principles used to determine the nature and amount of remuneration

Role of the remuneration committee

The remuneration and nomination committee is a separate committee of the board and is responsible for

Data[#] 3’s remuneration, recruitment, retention and termination policies and procedures for senior executives;
senior executives’ remuneration and incentives;
superannuation arrangements; and
the remuneration for directors.

The committee’s objective in relation to remuneration policy is to motivate senior executives to pursue the long-term growth and success of Data[#] 3 and to demonstrate a clear relationship between senior executives’ performance and remuneration. The Corporate Governance Statement provides further information on the role of this committee.

Data[#] 3 Limited Financial Report 2018 17

Directors’ report (continued)

11. Remuneration report (continued)

Executives

The board and the remuneration committee address remuneration policies and practices generally, and determine remuneration packages and other terms of employment for our senior executives. Each year the board reviews executive remuneration and other terms of employment having regard to performance against goals set at the start of the year, relevant comparative information and independent expert advice. During the year the board engaged a remuneration consultant to re-design the long-term incentive structure to ensure a larger component of remuneration is based on equity in the company and still at risk. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing our operations, achieving our strategic objectives, and increasing shareholder wealth. The executive pay and reward framework has three components:

base pay and benefits, including superannuation,
short-term performance-related bonuses, and
long-term incentives.

The combination of these three components comprises the executive’s remuneration.

Base pay

Base pay is structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non-cash benefits at the executive’s discretion, plus statutory superannuation. There are no guaranteed base pay increases included in any senior executives’ contracts.

Short-term performance-related bonuses

Performance-related cash bonuses are linked to the achievement of financial and non-financial objectives that are relevant to meeting the company’s business objectives. In 2018 the proportion of the planned total executive remuneration for key management personnel that was performance related (excluding the long-term incentives discussed in Section C below) was 34% (2017: 37%). In 2018 actual short-term bonuses as a proportion of planned total executive remuneration was 30% (2017: 35%).

A major part of the short-term bonus is determined by the actual performance against planned company and divisional profit targets relevant to each individual. Using a profit target ensures variable reward is only available when value has been created for shareholders and when profit is consistent with the business plan. In 2018 the planned profit-related component represented 71% of the total executive bonuses (2017: 71%). Profit targets for some areas of the business were not met in FY17 and FY18, resulting in reduced bonus payments calculated on a pro rata basis. The balance of the short-term bonus is determined by performance against agreed nonfinancial objectives relevant to each individual.

The executives’ cash bonuses are assessed and paid either quarterly or six-monthly, based on the actual performance against the relevant full-year profit and individual performance targets. The board, together with certain senior managers, is responsible for assessing whether an individual’s targets have been met, and profit targets and individual performance indicator targets are reviewed and reset annually.

Long-term incentives

The chief executive officer (CEO) and three other senior executives are eligible to earn long-term incentives (LTI) in the form of cash payments that must be used to purchase shares in Data[#] 3 Limited. The aim of the LTI remuneration element is to provide compensation based solely on earnings per share (EPS) performance by Data[#] 3 Limited. Total LTI grants were $1,430,000 in FY2018, vesting over the three-year period ending 30 June 2020. Vesting of the grants is based on a sliding scale of cumulative EPS performance. The full amount of these grants will only be earned upon achievement of stretch target performance outcomes. The LTI is payable within 60 days following release of the 2020 financial report as a gross bonus, and the net after-tax proceeds are applied to the on-market purchase of Data[#] 3 shares.

The board has also put in place a transitional LTI arrangement for financial years 2018 and 2019 for up to $50,000 per executive in each year, payable upon the company exceeding its EPS target each year by a designated amount. The target for this bonus was not met in 2018.

Data[#] 3 Limited Financial Report 2018 18

Directors’ report (continued)

11. Remuneration report (continued)

Non-executive directors

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. The board determines remuneration of non-executive directors, using independent expert advice if required, within the maximum amount approved by the shareholders from time to time. This maximum currently stands at $500,000 per annum in total for salary and fees, to be divided among the non-executive directors in such a proportion and manner as they agree. Members of the board (non-executive directors) are paid a fixed remuneration comprising base fees, superannuation, and additional fees for those in the role of chair for the full board and chair of the audit and risk committee. Non-executive directors do not receive bonus payments or share options and are not provided with retirement benefits other than statutory superannuation. The board is composed of four non-executive directors in addition to the managing director/CEO. The board undertakes a periodic review of its performance and the performance of the board committees.

B Details of remuneration

Compensation paid, payable, or provided by the company or on behalf of the company to key management personnel is set out below. Key management personnel include all directors of the company and certain executives who, in the opinion of the board and managing director/CEO, have authority and responsibility for planning, directing and controlling the company’s activities directly or indirectly. Comparative information is not shown for individuals who were not considered to be key management personnel in the previous year.

		Short-term	Short-term	Long-term	Long-term	Post-
						employment
		Cash salary	Cash	Long	LTI	Super-	Total	%
		and fees	bonus	service		annuation		perfor-
				leave				mance
		$	$	$	$	$	$	related
Non-executive directors
Anderson, R.A.	2018	130,000	-	-	-	12,350	142,350	-
Chairman	2017	130,000	-	-	-	12,350	142,350	-
Gray, A.M. (From 29/08/2017)	2018	64,615	-	-	-	6,138	70,753	-
Johnston, I. (Until 30/9/2016)	2017	18,846	-	-	-	1,790	20,636	-
Muller, L.M. (From 26/2/2016)	2018	85,000	-	-	-	8,075	93,075	-
	2017	83,653	-	-	-	7,947	91,600	-
Powell, W.T.	2018	75,000	-	-	-	7,125	82,125	-
	2017	75,000	-	-	-	7,125	82,125	-
Subtotals – non-executive	2018	354,615	-	-	-	33,688	388,303	-
directors	2017	307,499	-	-	-	29,212	336,711	-
Executive director
Baynham, L.C.	2018	515,431	230,094	52,523	62,003	20,049	880,100	33.2
Chief Executive Officer/MD(1)	2017	400,278	249,026	15,787	230,000	19,616	914,707	52.4
Other key management personnel
Bowser, M.J.	2018	289,963	166,797	12,409	57,108	20,049	546,326	41.0
Executive General Manager	2017	275,783	180,459	8,531	140,000	19,616	624,389	51.3
Colledge, B.D.	2018	352,040	198,374	12,018	57,108	20,049	639,589	39.9
Executive General Manager	2017	334,995	214,622	8,939	140,000	19,616	718,172	49.4
Hill, B.I.	2018	306,755	108,436	7,253	57,108	20,049	499,601	33.1
Chief Financial Officer	2017	294,000	118,054	7,456	140,000	19,616	579,126	44.6
Totals – key management	2018	1,818,804	703,701	84,203	233,327	113,884	2,953,919
personnel	2017	1,612,555	762,161	40,713	650,000	107,676	3,173,105

(1) Mr L C Baynham was appointed Managing Director on 16 November 2016.

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2018 (2017: nil).

Data[#] 3 Limited Financial Report 2018 19

Directors’ report (continued)

Remuneration report (continued)

C Service agreements

Terms of employment for the managing director and other key management personnel are formalised under rolling contracts. The contracts state that base salary and performance-related bonuses will be agreed annually, which occurs at the commencement of each financial year. The company may terminate the contracts without notice for gross misconduct; otherwise, either party may terminate the contract early with the agreed notice period, subject to termination payments as detailed below. Other major provisions of the contracts relating to remuneration of the chief executive officer and the other key management personnel are as follows:

L C Baynham (Chief Executive Officer/Managing Director)

The LTI granted in FY2018 was $380,000, subject to three-year vesting.
Termination notice of up to 12 months is required.
Payment of a termination benefit on termination due to redundancy by the company of six months of the packaged salary including performance-related bonuses is required.

All other executive KMPs

The LTI granted in FY2018 was $350,000, subject to three-year vesting.
Termination notice of three months is required.

Mr B I Hill is also entitled to payment of a termination benefit on termination due to redundancy by the company of six months of the packaged salary including performance-related bonuses. This termination benefit is provided for the CEO and CFO roles as these positions are considered more likely to be subject to early termination in the event of a significant business combination.

D Share-based compensation

Share-based compensation may be granted to directors and key management personnel under the Data[#] 3 Limited Employee Share Ownership Plan, the Data[#] 3 Limited Deferred Share and Incentive Plan, and the Data[#] 3 Limited Employee Option Plan.

No shares, rights, or options were granted to directors or key management personnel during the year ended 30 June 2018 (2017: nil), no rights or options vested or lapsed during the year (2017: nil), and no rights or options were exercised during the year (2017: nil).

Interests in shares

Ordinary shares held directly, indirectly or beneficially by each key management person, including their personally related entities, are shown below.

	Balance	Other	Balance	Other	Balance
	1 July 2016	changes*	30 June 2017	changes*	30 June 2018
Directors:
Anderson, R.A.	600,000	-	600,000	20,000	620,000
Baynham, L.C.	475,360	8,480	483,840	7,255	491,095
Muller, L.M.	-	-	-	20,000	20,000
Powell, W.T.	3,350,000	(60,000)	3,290,000	(100,000)	3,190,000
Johnston, I. (until 30/09/2016)(1)	600,000	(600,000)	-	-	-
Other executives:
Bowser, M.J.	116,650	8,480	125,130	7,255	132,385
Colledge, B.D.	202,936	8,480	211,416	7,255	218,671
Hill, B.I.	516,650	8,480	525,130	(92,745)	432,385
	5,861,596	(626,080)	5,235,516	(130,980)	5,104,536

Except as noted, other changes refer to the individual’s on-market trading.

(1) The amount in other changes is the individual’s shareholding at the date he ceased to be a key management person, in addition to the individual’s on-market trading during the year.

Data[#] 3 Limited Financial Report 2018 20

Directors’ report (continued)

11. Remuneration report (continued)

None of the shares in the preceding table are held nominally by the directors or any of the other key management personnel.

E Additional information

Relationship between remuneration and company performance

The overall level of executive reward takes into account the group’s performance over a number of years, with greater emphasis given to improving performance over the prior year. Since 2013 the group’s net profit has grown at an average compounded rate of 3.0% per year, the average executive remuneration has increased by an average compounded rate of 3.2% per year and total shareholder return averaged 15.9% per year.

Cash bonuses

For each cash bonus included in the table in Section B, the percentage of the planned bonus that was actually earned in the financial year, and the percentage that was forfeited because the person did not meet the relevant profit or other performance-related criteria, are set out below.

Name	Earned	Forfeited
	%	%
Baynham, L.C.	87%	13%
Bowser, M.J.	87%	13%
Colledge, B.D.	87%	13%
Hill,B.I.	87%	13%

Long-term incentives

For the FY2018-2020 LTI plan amounts discussed in Section A, the percentage of the planned incentive (being one-third of the incentive granted, as it is subject to three-year vesting) that was actually earned in the financial year, and the percentage that was forfeited because the group did not meet the relevant EPS target, are set out below.

Name	Earned	Forfeited
	%	%
Baynham, L.C.	49%	51%
Bowser, M.J.	49%	51%
Colledge, B.D.	49%	51%
Hill,B.I.	49%	51%

For the transitional LTI amounts discussed in Section A, the percentage of the planned incentive that was actually earned in the financial year, and the percentage that was forfeited because the group did not meet the relevant EPS target, are set out below.

Name	Earned	Forfeited
	%	%
Baynham, L.C.	-	100%
Bowser, M.J.	-	100%
Colledge, B.D.	-	100%
Hill,B.I.	-	100%

2017 Annual General Meeting

We received a 96.8% vote for the adoption of our Remuneration Report for the 2017 financial year.

Other transactions with key management personnel

There were no transactions during the 2018 financial year with key management personnel or their personally related entities.

Data[#] 3 Limited Financial Report 2018 21

Directors’ report (continued)

12. Shares under option

We have no unissued ordinary shares under option at the date of this report. No share options were granted or exercised during the financial year and up to the date of this report.

13. Indemnification and insurance of directors and officers

During the financial year, we paid a premium of $45,000 to insure the directors and members of the executive management team against any liability incurred by them in their capacity as officers, unless the liability arises out of conduct involving a lack of good faith. Our executive officers are also indemnified against any liability for costs and expenses incurred in defending civil or criminal proceedings involving them as such officers if judgement is given in their favour or if they are acquitted or granted relief.

14. Environmental regulation and performance

Our group is not subject to any particular and significant environmental regulations.

15. Rounding

The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, relating to the “rounding off” of amounts in the directors’ report and financial report. We have rounded off amounts in the directors’ report and financial report to the nearest thousand dollars, or in certain cases to the nearest dollar, in accordance with that instrument.

16. Auditor independence and non-audit services

Pitcher Partners continued as our auditor in 2018. We employ Pitcher Partners on assignments additional to its statutory duties where the firm’s expertise and experience with our company are important. Fees we paid or owed to the auditor for these non-audit services during the year are included in the following table of total fees paid or payable to the auditor:

	2018 2017 $ $
Audit and other assurance services Audit and review of financial statements	160,000 160,000
Non-audit services Tax compliance services Other business advice	16,360 14,453 6,270 -
	22,630 14,453
Total remuneration	182,630 174,453

The board of directors has considered the position, and in accordance with the advice received from the audit and risk committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services have been reviewed by the audit and risk committee to ensure they do not impact the impartiality and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on the page following this Directors’ report.

Data[#] 3 Limited Financial Report 2018 22

Directors’ report (continued)

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

==> picture [109 x 27] intentionally omitted <==

R A Anderson Director

Brisbane 22 August 2018

Data[#] 3 Limited Financial Report 2018 23

==> picture [596 x 172] intentionally omitted <==

The Directors Data[#] 3 Limited 67 High Street TOOWONG QLD 4066

Auditor’s Independence Declaration

As lead auditor for the audit of the financial report of Data[#] 3 Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:

(i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants in relation to the audit.

This declaration is in respect of Data[#] 3 Limited and the entities it controlled during the year.

PITCHER PARTNERS

J J Evans Partner Pitcher Partners

Brisbane 22 August 2018

==> picture [503 x 79] intentionally omitted <==

Financial report 2018

		Page
Consolidated financial statements
Consolidated statement of profit or loss and other comprehensive income		26
Consolidated balance sheet		27
Consolidated statement of changes in equity		28
Consolidated statement of cash flows		29
Notes to the consolidated financial statements
About	this report	30
Group	performance
1	Segment information	30
2	Revenue	32
3	Expenses	33
4	Income tax	34
Assets	and liabilities
5	Cash and cash equivalents	36
6	Trade and other receivables	37
7	Inventories	39
8	Other assets	39
9	Property and equipment	40
10	Intangible assets	41
11	Trade and other payables	43
12	Provisions	43
13	Other liabilities	44
Capital structure, financing and risk management
14	Earnings per share	45
15	Dividends	45
16	Contributed equity	46
17	Borrowings	46
18	Net debt reconciliation	47
19	Commitments	47
20	Financial risk management	48
Other
21	Business combinations	50
22	Related parties	51
23	Contingent liabilities	52
24	Key management personnel	52
25	Remuneration of auditor	53
26	Accountingstandards notyet effective	53
Directors’ declaration		56
Independent audit report to the members of Data#3 Limited		57
Shareholder information		61

Data[#] 3 Limited Financial Report 2018 25

Consolidated statement of profit or loss and other comprehensive income

for the year ended 30 June 2018

		2018	2017
	Notes	$’000	$’000
Revenue
Sale of goods	2	961,224	889,204
Services	2	219,077	208,088
Other	2	1,110	929
		1,181,411	1,098,221
Expenses
Changes in inventories of finished goods		(1,152)	(8,006)
Purchase of goods		(882,677)	(808,659)
Employee and contractor costs directly on-charged (cost of sales on services)		(70,584)	(59,793)
Other cost of sales on services		(65,776)	(61,955)
Internal employee and contractor costs		(117,564)	(114,063)
Telecommunications		(1,876)	(1,688)
Rent	3	(7,631)	(8,145)
Travel		(1,812)	(2,182)
Professional fees		(1,588)	(1,098)
Depreciation and amortisation	3	(2,939)	(3,065)
Finance costs	3	(101)	(105)
Other		(7,312)	(7,060)
		(1,161,012)	(1,075,819)
Profit before income tax expense		20,399	22,402
Income tax expense	4	(6,365)	(6,593)
Profit for the year		14,034	15,809
Other comprehensive income, net of tax		-	-
Total comprehensive income		14,034	15,809
Profit and comprehensive income is attributable to:
Owners of Data#3 Limited		14,078	15,375
Non-controllinginterests		(44)	434
		14,034	15,809
Earnings per share for profit attributable to the ordinary equity holders of the company:		Cents	Cents
Basic earnings per share	14	9.14	9.99
Diluted earnings per share	14	9.14	9.99

The accompanying notes form part of these financial statements.

Data[#] 3 Limited Financial Report 2018 26

Consolidated balance sheet

as at 30 June 2018

		2018	2017
	Notes	$’000	$’000
Current assets
Cash and cash equivalents	5	128,348	135,695
Trade and other receivables	6	210,962	168,495
Inventories	7	3,303	4,480
Other	8	4,835	5,104
Total current assets		347,448	313,774
Non-current assets
Trade and other receivables	6	2,323	454
Property and equipment	9	3,993	6,187
Deferred tax assets	4	2,810	2,938
Intangible assets	10	17,189	16,718
Total non-current assets		26,315	26,297
Total assets		373,763	340,071
Current liabilities
Trade and other payables	11	295,343	263,226
Borrowings	17	178	303
Current tax liabilities		913	2,109
Provisions	12	4,475	3,207
Other	13	24,295	23,608
Total current liabilities		325,204	292,453
Non-current liabilities
Trade and other payables	11	543	636
Borrowings	17	32	358
Provisions	12	2,805	3,620
Other	13	139	249
Total non-current liabilities		3,519	4,863
Total liabilities		328,723	297,316
Net assets		45,040	42,755
Equity
Contributed equity	16	8,278	8,278
Retained earnings		36,214	33,312
Equity attributable to owners of Data#3 Limited		44,492	41,590
Non-controlling interests		548	1,165
Total equity		45,040	42,755

The accompanying notes form part of these financial statements.

Data[#] 3 Limited Financial Report 2018 27

Consolidated statement of changes in equity

for the year ended 30 June 2018

Notes	Attributable to owners of Data#3 Limited Contributed Equity Retained Earnings Total Non- controlling interests Total Shareholders’ Equity $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2016 Profit for the year Other comprehensive income,net of tax	8,278 31,564 39,842 784 40,626 - 15,375 15,375 434 15,809 - - - - -
Total comprehensive income	- 15,375 15,375 434 15,809
Transactions with owners in their capacity as owners: Payment of dividends 15	- (13,627) (13,627) - (13,627)
Non-controlling interest – accretion of share options Non-controlling interest – cancellation of share options	- - - 39 39 - - - (92) (92)
Balance at 30 June 2017	8,278 33,312 41,590 1,165 42,755
Profit (loss) for the year	- 14,078 14,078 (44) 14,034
Other comprehensive income,net of tax	- - - - -
Total comprehensive income	- 14,078 14,078 434 14,034
Transactions with owners in their capacity as owners:
Payment of dividends 15	- (11,009) (11,009) - (11,009)
Additional acquisition of controlling interests	- (167) (167) (479) (646)
Non-controlling interest – cancellation of share options	- - - (97) (97)
Non-controlling interest – accretion of share options	- - - 3 3
Balance at 30 June 2018	8,278 36,214 44,492 548 45,040

The accompanying notes form part of these financial statements.

Data[#] 3 Limited Financial Report 2018 28

Consolidated statement of cash flows

for the year ended 30 June 2018

		2018	2017
	Notes	$’000	$’000
Cash flows from operating activities
Profit for the year		14,034	15,809
Depreciation and amortisation	3	3,858	3,595
Fixed assets transferred to inventory		1,126	-
Unwinding of discount on provisions		34	33
Bad and doubtful debts	3	13	283
Excess and obsolete inventory		80	85
Accretion of options to minority interest in subsidiary, net of options cancellations		(94)	(53)
Other		59	(23)
Change in operating assets and liabilities
Decrease/(increase) in trade receivables		(39,162)	83
Decrease/(increase) in other receivables		(1,307)	2,424
Decrease in inventories		1,097	8,006
Decrease/(increase) in other operating assets		(3,537)	1,496
Decrease/(increase) in net deferred tax assets		128	(385)
Increase in trade payables		31,005	21,828
Increase/(decrease) in unearned income		692	(2,808)
Increase in other operating liabilities		842	934
(Decrease) in current tax liabilities		(1,196)	(678)
Increase inprovision for employee benefits		481	622
Net cash inflow from operatingactivities		8,153	51,251
Cash flows from investing activities
Payments for property and equipment	9	(1,521)	(1,729)
Payments for software assets	10	(1,873)	(2,224)
Payments for acquisition of minorityinterests in subsidiary	21	(646)	-
Net cash (outflow) from investing activities		(4,040)	(3,953)
Cash flows from financing activities
Payment of dividends	15	(11,009)	(13,627)
Finance leasepayments	18	(451)	(255)
Net cash (outflow) from financing activities		(11,460)	(13,882)
Net increase/(decrease) in cash and cash equivalents held		(7,347)	33,416
Cash and cash equivalents, beginning of financial year		135,695	102,279
Cash and cash equivalents, end of financial year	5	128,348	135,695

The accompanying notes form part of these financial statements.

Data[#] 3 Limited Financial Report 2018 29

Notes to consolidated financial statements

About this report

The principal accounting policies we have adopted in the preparation of our financial report are set out in the following notes to the financial statements. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the group consisting of Data[#] 3 Limited (“the company”) and its subsidiaries. References in this financial report to “we”, “us” or “our” refer to management speaking on behalf of the consolidated group (“the group”).

We have prepared these general purpose financial statements in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. These financial statements have also been prepared under the historical cost convention. Data[#] 3 Limited is a for-profit entity for the purpose of preparing the financial statements.

Our financial statements are presented in Australian dollars and we have rounded all values to the nearest thousand dollars ($’000), unless otherwise stated. We have reclassified comparative figures where necessary to ensure consistency with current year presentation.

Compliance with IFRS

Our financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Changes in accounting standards and regulatory requirements

The group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 July 2017:

AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016 Cycle

The adoption of these amendments did not have any impact on the amounts recognised in prior periods, nor will they affect the current or future periods. The amendments to AASB 107 set out in AASB 2016-2 require disclosure of changes in liabilities arising from financing activities; please refer to note 18.

Rounding of amounts

Corporate information

The financial report was authorised for issue in accordance with a resolution of the directors on 22 August 2018. Data[#] 3 Limited is a public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business follows:

Data[#] 3 67 High Street TOOWONG QLD 4066

Note 1. Segment information

Our business is conducted primarily in Australia. Our management team makes financial decisions and allocates resources based on the information it receives from our internal management system. We attribute sales to an operating segment based on the type of product or service provided to the customer. Revenue from customers domiciled in Australia comprised 99% of external sales for the year ended 30 June 2018 (2017: 99%).

We report operating segments in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the managing director. We do not allocate income tax, assets or liabilities to each segment because management does not include this information in its measurement of the performance of the operating segments. Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm’s-length basis and are eliminated on consolidation.

Data[#] 3 Limited Financial Report 2018 30

Notes to consolidated financial statements (continued)

Note 1. Segment information (continued)

We have identified two reportable segments, as follows:

Product – providing hardware and software licenses for our customers' desktop, network and data centre infrastructure; and
Services – providing consulting, project, managed and maintenance contracts, as well as workforce recruitment and contracting services, in relation to the design, implementation, operation and support of ICT solutions.

The following table shows summarised financial information by segment for the financial years ended 30 June 2018 and 2017.

	Product	Product	Services	Services	Total
	2018	2017	2018	2017	2018	2017
	$’000	$’000	$’000	$’000	$’000	$’000
Revenue
Total revenue	961,245	889,217	233,699	221,112	1,194,944	1,110,329
Inter-segment revenue	(21)	(13)	(14,622)	(13,024)	(14,643)	(13,037)
External revenue	961,224	889,204	219,077	208,088	1,180,301	1,097,292
Costs of sale
Cost of goods sold	(883,829)	(816,665)	-	-	(883,829)	(816,665)
Employee and contractor costs directly on-
charged			(70,584)	(59,793)	(70,584)	(59,793)
Other costs of sales on services			(65,776)	(61,955)	(65,776)	(61,955)
Gross profit	77,395	72,539	82,717	86,340	160,112	158,879
Other expenses	(51,120)	(48,662)	(75,517)	(74,935)	(126,637)	(123,597)
Segmentprofit	26,275	23,877	7,200	11,405	33,475	35,282
Unallocated corporate items
Interest and other revenue					1,110	929
Other employee and contractor costs					(7,491)	(7,156)
Rent					(2,013)	(2,055)
Depreciation and amortisation					(1,982)	(2,128)
Other					(2,700)	(2,470)
					(13,076)	(12,880)
Profit before income tax					20,399	22,402
Reconciliation of revenue:
External revenue					1,180,301	1,097,292
Unallocated corporate revenue:
Interest and other revenue					1,110	929
Revenue					1,181,411	1,098,221

Data[#] 3 Limited Financial Report 2018 31

Notes to consolidated financial statements (continued)

Note 2. Revenue

Note 2. Revenue
	2018	2017
	$’000	$’000
Sale of goods	961,224	889,204
Services	219,077	208,088
	1,180,301	1,097,292
Other revenue
Interest	1,002	842
Other recoveries	108	87
	1,110	929

We recognise and measure revenue at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. We recognise revenue for major business activities as follows:

Sale of goods

We recognise revenue from the sale of goods when the goods are received at a customer’s specified location pursuant to a sales order, the risks of obsolescence and loss have passed to the customer, and the customer has either accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or we have objective evidence that all criteria for acceptance have been satisfied.

Rendering of services

We recognise revenue from services in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where it is probable that a loss will arise from a fixed price service contract, we immediately recognise the excess of total costs over revenue as an expense.

Bundled sales

We offer certain arrangements whereby customers can purchase computer systems together with a multi-year servicing arrangement. For these sales, the amount recognised as revenue upon sale of the computer systems is the fair value of the system in relation to the fair value of the sale taken as a whole. The remaining revenue, which relates to the service arrangement, is recognised over the service period. We determine the fair values of each element based on the current market price of each of the elements when sold separately. Any discount on the arrangement is allocated between the elements of the contract based on the fair value of the elements.

Other revenue

Interest revenue is recognised as it accrues using the effective interest method.

Data[#] 3 Limited Financial Report 2018 32

Notes to consolidated financial statements (continued)

Note 3. Expenses

Note 3. Expenses
	2018	2017
	$’000	$’000
Depreciation and amortisation of property and equipment (Note 9)
Depreciation and amortisation of property and equipment included in depreciation and amortisation
expense	2,337	2,171
Depreciation of equipment recorded in cost of sales	252	120
	2,589	2,291
Amortisation of intangibles (Note 10)
Amortisation of intangibles included in depreciation and amortisation expense	302	594
Amortisation of intangibles recorded in cost of sales	667	410
Amortisation of customer relationships included in depreciation and amortisation expense	300	300
	1,269	1,304
	3,858	3,595
Employee benefits expense	107,892	106,302
Termination benefits expense	935	1,389
Defined contribution superannuation expense (a)	12,166	11,541
Other charges against assets
Impairment of trade receivables (Note 6(b))	13	283
Rental expenses on operating leases
Minimum lease payments	6,085	5,940
Straight lining lease rentals	(341)	(61)
Rental expenses – other	1,887	2,266
	7,631	8,145
Finance costs
Interest and finance charges paid/payable	67	72
Unwindingof discount onprovisions and otherpayables	34	33
	101	105

(a) Post-employment benefits

We make contributions to defined contribution superannuation funds. We charge these contributions to expense as they are incurred.

Data[#] 3 Limited Financial Report 2018 33

Notes to consolidated financial statements (continued)

Note 4. Income tax

Note 4. Income tax
	2018 2017 $’000 $’000
The major components of income tax expense are: Current income tax expense Deferred income tax relating to the origination and reversal of temporary differences Adjustments for current tax of prior years	6,762 7,660 (505) (868) 108 (199)
Income tax expense	6,365 6,593
A reconciliation between income tax expense and the product of accounting profit before income tax multiplied by the company’s applicable income tax rate is as follows: Accounting profit before income tax	20,399 22,402
Income tax calculated at the Australian tax rate: 30% (2017: 30%) Tax effect of amounts which are not deductible in calculating taxable income: R&D tax offset Non-assessable income Non-deductible items	6,120 6,721 (211) (470) - (9) 348 550
Under/(over) provision inprioryear	6,257 6,792 108 (199)
Income tax expense	6,365 6,593
Effective tax rate (income tax expense as a percentage of profit before tax)	% % 31.2 29.4
We paid income taxes of $7,139,000 during financial year 2018 (2017: $7,188,000). Deferred income tax assets and liabilities are attributable to the following temporary differences: Accrued liabilities Provisions Lease incentive liabilities Depreciation Other	$’000 $’000 2,617 2,385 2,209 2,170 76 110 1,203 996 474 685
Total deferred tax assets	6,579 6,346
Intangible assets Lease incentive assets Accrued income Other	(751) (989) (30) (14) (2,470) (2,402) (518) (3)
Total deferred tax liabilities	(3,769) (3,408)
Net deferred tax assets	2,810 2,938

Data[#] 3 Limited Financial Report 2018 34

Notes to consolidated financial statements (continued)

Note 4. Income tax (continued)

Movements in deferred tax assets are as follows:

	Accrued	Provisions	Lease incentive	Depreciation	Other	Total
	liabilities		liabilities
	$’000	$’000	$’000	$’000	$’000	$’000
Balance at 1 July 2016	2,305	2,012	144	895	740	6,096
(Charged)/credited
- to profit or loss	80	158	(34)	101	(55)	250
- to current tax liability	-	-	-	-	-	-
Balance at 30 June 2017	2,385	2,170	110	996	685	6,346
Charged/(credited)
- to profit or loss	232	39	(34)	204	(211)	230
- to current tax liability	-	-	-	3	-	3
Balance at 30 June 2018	2,617	2,209	76	1,203	474	6,579
Movements in deferred tax liabilities are as follows:
		Intangible	Lease incentive	Accrued income	Other	Total
		assets	assets
		$’000	$’000	$’000	$’000	$’000
Balance at 1 July 2016		(877)	(28)	(2,638)	-	(3,543)
Charged/(credited)
- to profit or loss		(112)	14	236	(1)	137
- to current tax liability		-	-	-	(2)	(2)
Balance at 30 June 2017		(989)	(14)	(2,402)	(3)	(3,408)
Charged/(credited)
- to profit or loss		238	(16)	(68)	3	157
- to current tax liability		-	-	-	(518)	(518)
Balance at 30 June 2018		(751)	(30)	(2,470)	(518)	(3,769)

Income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses or R&D tax offsets.

We recognise deferred tax assets and liabilities for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences arising from the initial recognition of an asset or a liability, except that no deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction (other than a business combination) that did not affect either accounting or taxable profit or loss at the time of the transaction.

We only recognise deferred tax assets for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to use those temporary differences and losses. We do not recognise deferred tax assets and liabilities for temporary differences between the carrying amount and tax base of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Data[#] 3 Limited Financial Report 2018 35

Notes to consolidated financial statements (continued)

Note 4. Income tax (continued)

We recognise current and deferred tax in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. We only offset deferred tax assets and deferred tax liabilities if they relate to the same taxable entity and the same taxation authority, and a legally enforceable right exists to set off current tax assets against current tax liabilities.

Tax consolidation legislation

Data[#] 3 Limited and its wholly-owned Australian subsidiaries are part of a tax-consolidated group under Australian taxation law. Data[#] 3 Limited and the controlled entities in the tax-consolidated group continue to account for their own current and deferred tax amounts. These amounts are measured as if each entity in the tax-consolidated group continues to be a stand-alone taxpayer in its own right. Data[#] 3 Limited, as the head entity, immediately assumes current tax liabilities or assets and the deferred tax assets arising from unused tax losses and unused tax credits from controlled entities in the tax consolidated group, in addition to its own current and deferred tax amounts.

The entities in the tax-consolidated group have also entered into tax sharing and funding agreements. Under the terms of these agreements, the wholly-owned subsidiaries reimburse Data[#] 3 Limited for any current tax payable assumed and are compensated by Data[#] 3 Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Data[#] 3 Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned subsidiaries’ financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments. The funding amounts are recognised as current intercompany receivables or payables.

In the opinion of the directors, the tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the wholly-owned subsidiaries in the case of a default by Data[#] 3 Limited.

No tax losses are available for offset against future taxable profits (2017: nil).

Note 5. Cash and cash equivalents

Note 5. Cash and cash equivalents
	2018	2017
	$’000	$’000
Cash at bank and on hand	49,334	5,686
Deposits at call	79,014	130,009
	128,348	135,695

For purposes of the consolidated statement of cash flow, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. We show any bank overdrafts within borrowings in current liabilities on the balance sheet.

Data[#] 3 Limited Financial Report 2018 36

Notes to consolidated financial statements (continued)

Note 6. Trade and other receivables

Note 6. Trade and other receivables
	2018	2017
	$’000	$’000
Current
Trade receivables (a)	191,142	151,993
Allowance for impairment(b)	(11)	(85)
	191,131	151,908
Finance lease receivable (c)	-	562
Other receivables(d)	19,831	16,025
	210,962	168,495
Non-current
Trade receivables on deferred payment terms (e)	2,323	-
Finance lease receivable(c)	-	454
	2,323	454

We carry loans and receivables at amortised cost using the effective interest method. We calculate amortised cost by taking into account any discount or premium on acquisition over the period of maturity. Impairment losses are measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), we reverse the previously recognised impairment loss and recognise it in profit or loss.

(a) Trade receivables

Trade receivables, which are non-interest bearing and generally due for settlement within 30 days, are recognised initially at fair value and subsequently measured at amortised cost, less an allowance for impairment. We review collectability of trade receivables on an ongoing basis. Debts we know to be uncollectible are written off by reducing the carrying amount directly. We establish an allowance for impairment of trade receivables when there is objective evidence that we will not be able to collect all amounts due according to the original terms of the receivables. We consider significant financial difficulties of the debtor, default payments or debts more than 120 days overdue where there are not extenuating circumstances to be objective evidence of impairment. The amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

We recognise impairment losses in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, we write it off against the allowance account. Subsequent recoveries of amounts previously written off are credited to other revenue in profit or loss.

Data[#] 3 Limited Financial Report 2018 37

Notes to consolidated financial statements (continued)

Note 6. Trade and other receivables (continued)

(b) Allowance for impairment

We recognised an impairment loss of $13,000 in the current year (2017: $283,000). Impairment amounts are included in profit or loss within other expenses. Movements in the provision for impairment loss were as follows:

	$’000
Carrying amount at 1 July 2016	213
Impairment loss recognised during the year	283
Receivables written off during the year	(391)
Unusedprovision reversed duringtheyear	(20)
Carrying amount at 30 June 2017	85
Impairment loss recognised during the year	13
Receivables written off during the year	(13)
Unusedprovision reversed duringtheyear	(74)
Carrying amount at 30 June 2018	11

Our ageing of overdue trade receivables as at 30 June 2018 is as follows:

	2018	2018		2017
	Considered	Past due but	Considered	Past due but
	impaired	not impaired	impaired	not impaired
	$’000	$’000	$’000	$’000
31-60 days	-	9,784	-	8,997
61-90 days	-	1,683	-	1,559
91-120 days	6	732	-	1,242
+120 days	5	3,146	85	2,047
	11	15,345	85	13,845

For trade receivables that are past due but not impaired, each customer’s account has been placed on hold where deemed necessary until full payment is made. Each of these debtors has been contacted, and we are satisfied that payment will be received in full.

(c) Finance lease receivable

Leases in which the group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

We were a lessor for one finance lease that was settled before its due date during 2018 (2017: one). The interest rate implicit in the lease was 6.75%. The lease was collateralised by the assets financed. Future minimum lease payments under the lease as at 30 June 2017 were as follows:

	2017
	$’000
Within one year	613
Later than oneyear but not later than fiveyears	466
	1,079
Less: future finance charges	(64)
	1,015

Data[#] 3 Limited Financial Report 2018 38

Notes to consolidated financial statements (continued)

Note 6. Trade and other receivables (continued)

Note 6. Trade and other receivables (continued)
	2017
	$’000
The present value of finance lease receivables was as follows:
Within one year	561
Later than oneyear but not later than fiveyears	454
	1,015

(d) Other receivables

These amounts generally arise from accrued rebates or transactions outside our usual operating activities. Interest is normally not charged, collateral is not normally obtained, and the receivables are normally due within 30 days of recognition. None of these receivables are past due.

(e) Trade receivables on deferred payment terms

Non-current trade receivables are unsecured, non-interest bearing and payable within two years. None of these receivables are past due.

Note 7. Inventories

Note 7. Inventories
	2018	2017
	$’000	$’000
Goods held for sale – at cost	3,303	4,480

Inventories are stated at the lower of cost and net realisable value. We assign costs to individual items of inventory on a specific identification basis after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Inventories recognised as expense in cost of goods sold during the year ended 30 June 2018 amounted to $275,318,000 (2017: $235,267,000).

Note 8. Other assets

Note 8. Other assets
	2018	2017
	$’000	$’000
Prepayments	4,710	4,978
Securitydeposits	125	126
	4,835	5,104

Data[#] 3 Limited Financial Report 2018 39

Notes to consolidated financial statements (continued)

Note 9. Property and equipment

Note 9. Property and equipment
	2018	2017
	$’000	$’000
Leasehold improvements – at cost	10,801	10,350
Accumulated amortisation	(8,676)	(7,522)
	2,125	2,828
Equipment – at cost	4,862	5,840
Accumulated depreciation	(2,994)	(2,481)
	1,868	3,359
	3,993	6,187

Property and equipment is stated at cost, less accumulated depreciation and amortisation. We depreciate our equipment using the straight-line method or diminishing value method to allocate cost, net of residual values, over the estimated useful lives of the assets, being three to 20 years. We calculate amortisation on leasehold improvements using the straight-line method over two to ten years. If an asset is impaired, we immediately write down its carrying amount to its recoverable amount.

	2018	2017
	$’000	$’000
Leased assets
Property and equipment include the following amounts where we are a lessee under a finance lease:
Cost	533	931
Accumulated depreciation	(330)	(279)
Carrying amount	203	652

We classify leases of property and equipment where the group, as lessee, has substantially all the risks and rewards of ownership as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property or the present value of the minimum lease payments. We include the corresponding rental obligations, net of finance charges, in other short-term and long-term payables. Lease payments are allocated between the liability and interest expense. We depreciate each leased asset on a straight-line basis over the shorter of the asset’s useful life or the lease term.

Assets subject to finance lease effectively secure the related lease liabilities (Note 17).

	Leasehold	Equipment	Total
	improvements
	$’000	$’000	$’000
Carrying amount at 1 July 2016	3,816	2,504	6,320
Additions	172	1,986	2,158
Depreciation and amortisation expense	(1,160)	(1,131)	(2,291)
Carrying amount at 30 June 2017	2,828	3,359	6,187
Additions	451	1,070	1,521
Transfers to inventory	-	(1,126)	(1,126)
Depreciation and amortisation(Note 3)	(1,153)	(1,436)	(2,589)
Carrying amount at 30 June 2018	2,126	1,867	3,993

Data[#] 3 Limited Financial Report 2018 40

Notes to consolidated financial statements (continued)

Note 10. Intangible assets

Note 10. Intangible assets
				2018	2017
				$’000	$’000
Goodwill – at cost				11,843	11,843
Accumulated impairment				(587)	(587)
				11,256	11,256
Software assets – at cost				4,897	4,548
Accumulated amortisation and impairment				(2,814)	(2,646)
				2,083	1,902
Internally generated software assets – at cost				8,030	6,768
Accumulated amortisation and impairment				(4,530)	(3,858)
				3,500	2,910
Customer relationships				1,500	1,500
Accumulated amortisation and impairment				(1,150)	(850)
				350	650
				17,189	16,718
	Goodwill	Software	Internally	Customer	Total
		assets	generated	relationships
			software
	$’000	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2016	11,256	1,095	2,497	950	15,798
Additions	-	1,061	1,163	-	2,224
Amortisation(Note 3)	-	(254)	(750)	(300)	(1,304)
Carrying amount at 30 June 2017	11,256	1,902	2,910	650	16,718
Additions	-	612	1,261	-	1,873
Disposals	-	(133)	-	-	(133)
Amortisation(Note 3)	-	(298)	(671)	(300)	(1,269)
Carrying amount at 30 June 2018	11,256	2,083	3,500	350	17,189

Goodwill

We initially measure goodwill on acquisition at cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Subsequently goodwill is carried at cost less any accumulated impairment losses. We test goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired, and we write its value down when impaired (refer below).

Data[#] 3 Limited Financial Report 2018 41

Notes to consolidated financial statements (continued)

Note 10. Intangible assets (continued)

Software

Software assets include those we have developed ourselves and those we have purchased. We capitalise costs incurred in purchasing or developing software where the software will provide a future financial benefit to the group. Costs of internally generated software that we capitalise from the date we have determined the software’s technical feasibility include external direct costs of materials and service and direct payroll and payroll-related costs of employees’ time spent on the project. Software assets are carried at cost less accumulated amortisation and impairment losses. We calculate amortisation using the straight-line method over the estimated useful lives of the respective assets, generally two to five years.

Customer relationships

Customer relationships have been externally acquired. We capitalise acquired customer relationship assets at fair value based on an assessment of future cash flows. Customer relationship assets are carried at cost less accumulated amortisation and impairment losses. We calculate amortisation using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. We test customer relationship assets for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired, and we write its value down when impaired (refer below).

Impairment testing

Goodwill is not subject to amortisation; we test it annually for impairment, or more frequently if events or changes in circumstances indicate it might be impaired. We test other assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We recognise an impairment loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. For the purposes of assessing impairment, we group together assets that cannot be tested individually into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit or CGU). For the purpose of goodwill impairment testing, we aggregate CGUs to which goodwill has been allocated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. We allocate goodwill acquired in a business combination to groups of CGUs that are expected to benefit from the synergies of the combination.

We have allocated goodwill to our cash-generating units (CGUs) according to operating segment, unless the segment did not exist at the time of the business acquisition which generated the goodwill. Goodwill summarised by reporting segment is shown below.

	Goodwill
	$’000
Product	3,421
Services	7,835
	11,256

We determine whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill is allocated. We determined the recoverable amount of each operating segment based on a valuein-use calculation using cash flow projections on the basis of financial projections approved by senior management for financial year 2019. We applied a 12% before-tax discount rate to cash flow projections (2017: 12%). We have extrapolated cash flows beyond the 2019 financial year using an average growth rate of 3.5% (2017: 3.5%).

Key assumptions used in value-in-use calculations

We determined budgeted gross profits based on past performance and our expectations for the future. The discount rate was estimated based on our weighted average cost of capital at the date of impairment test. We believe that no reasonably possible change in any of the key assumptions would cause the carrying value of the goodwill to be materially different from its recoverable amount.

Data[#] 3 Limited Financial Report 2018 42

Notes to consolidated financial statements (continued)

Note 11. Trade and other payables

Note 11. Trade and other payables
	2018	2017
	$’000	$’000
Current
Trade payables – unsecured	263,271	232,266
Otherpayables – unsecured(a)	32,072	30,960
	295,343	263,226
Non-current
Trade payables on deferred payment terms	543	636

Current trade and other payables are unsecured and are usually paid within 30 to 60 days of recognition. Non-current trade payables are unsecured, non-interest bearing, subject to a default rate of 18%, and payable within two years.

(a) Other payables

Wages, salaries, annual leave and sick leave

Liabilities for wages, salaries, including non-monetary benefits, and annual leave expected to be settled wholly within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for annual leave expected to be settled at least 12 months after reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date, and discounted using market yields at the reporting date on corporate bonds with terms to maturity that match the estimated future cash flows as closely as possible. Liabilities for sick leave, which are non-vesting, are recognised when the leave is taken and measured at the rates paid or payable.

Bonus plans

We recognise a liability for employee benefits in the form of bonus plans in other payables when we have a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. We measure liabilities for bonus plans at the amounts expected to be paid when they are settled; settlement occurs within 12 months.

Note 12. Provisions

Note 12. Provisions
		2018			2017
	Current	Non-	Total	Current	Non-	Total
		current			current
	$’000	$’000	$’000	$’000	$’000	$’000
Employee benefits	4,470	2,297	6,767	3,140	3,146	6,286
Lease remediation(Note 19)	5	508	513	67	474	541
	4,475	2,805	7,280	3,207	3,620	6,827

Data[#] 3 Limited Financial Report 2018 43

Notes to consolidated financial statements (continued)

Note 12. Provisions (continued)

Movements in provisions other than employee benefits are as follows:

	Lease
	remediation
	$’000
Balance at 1 July 2016	502
Increase to present value	33
Arising during the year	11
Used during the year	(2)
Unusedprovision reversed duringtheyear	(3)
Balance at 30 June 2017	541
Increase to present value	34
Used duringtheyear	(62)
Balance at 30 June 2018	513

We recognise provisions when we have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. We measure provisions at the present value of management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, where the discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

If we are virtually certain that some or all of a provision will be reimbursed, such as under an insurance contract, we recognise the reimbursement as a separate asset. We present the expense relating to any provision in the profit or loss net of any reimbursement.

Long service leave

The liability for long service leave which is not expected to be settled within 12 months after the end of the period in which the employee renders the related service is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. We consider expected future wage and salary levels, experience of employee departures and periods of service when estimating the liability. We discount expected future payments using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

We present the obligations as current liabilities in the balance sheet if we do not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur.

Note 13. Other liabilities

Note 13. Other liabilities
	2018	2017
	$’000	$’000
Current
Unearned income	24,185	23,493
Lease incentives	110	115
	24,295	23,608
Non–current
Lease incentives	139	249

Unearned income comprises amounts received in advance of the provision of goods or services.

Data[#] 3 Limited Financial Report 2018 44

Notes to consolidated financial statements (continued)

Note 14. Earnings per share

Note 14. Earnings per share
	2018	2017
	Cents	Cents
Basic earnings per share	9.14	9.99
Diluted earnings per share	9.14	9.99
	Number	Number
Weighted average number of shares
Weighted average number of ordinaryshares for basic and diluted earningsper share	153,974,950	153,974,950

Basic earnings per share is computed as profit attributable to owners of the company, adjusted to exclude costs of servicing equity (other than ordinary shares), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. There were no dilutive elements in 2018 or 2017.

Note 15. Dividends

Note 15. Dividends
	2018	2017
	$’000	$’000
Dividends paid on ordinary shares during the year
Final fully franked dividend for 2017: 5.55c per share (2016: 5.50c)	8,546	8,469
Interim fullyfranked dividend for 2018: 1.60cper share(2017: 3.35c)	2,463	5,158
	11,009	13,627
Dividends declared (not recognised as a liability at year end)
Final fullyfranked dividend for 2018: 6.60c(2017: 5.55c)	10,162	8,546
The tax rate at which dividends paid have been franked is 30% (2017: 30%). Dividends declared will
be franked at the rate of 30% (2017: 30%).
Franking credit balance
Frankingcredits available for subsequent financialyears based on a tax rate of 30%(2017: 30%)	21,367	19,421

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

(a) franking credits that will arise from the payment of the current tax liability;

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

The dividend recommended by the directors since year end, but not recognised as a liability at year end, will result in a reduction in the franking account of $4,355,000 (2017: $3,662,000).

Data[#] 3 Limited Financial Report 2018 45

Notes to consolidated financial statements (continued)

Note 16. Contributed equity

(a) Movements in ordinary share capital

There were no movements in ordinary share capital during the years ended 30 June 2018 and 2017.

(b) Ordinary shares

All ordinary shares issued as at 30 June 2018 and 2017 are fully paid. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company has an unlimited amount of authorised capital. Subject to legislative requirements, the directors control the issue of shares in the company.

(c) Share options

No share options are outstanding as at 30 June 2018.

(d) Capital management

When managing capital (equity), the board's objective is to ensure the group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The board adjusts the capital structure as necessary to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, the board may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or reduce debt that may be incurred to acquire assets.

During 2018 the board paid dividends of $11,009,000 (2017: $13,627,000). The board's intent for dividend payments is to maintain the historical dividend payout ratio; however, market conditions are taken into consideration prior to the declaration of each dividend.

We are not subject to any externally imposed capital requirements.

Note 17. Borrowings

Note 17. Borrowings
	2018	2017
	$’000	$’000
Current
Finance lease liabilities – secured	178	303
Non–current
Finance lease liabilities – secured	32	358
Total secured liabilities	210	661

Borrowings are initially recognised at fair value, net of transaction costs, and subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowing using the effective interest method. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

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

Assets pledged as security

All our assets are pledged as security for bank facilities (above and refer to Note 20).

Data[#] 3 Limited Financial Report 2018 46

Notes to consolidated financial statements (continued)

Note 18. Net debt reconciliation

An analysis of net debt and the movements in net debt for 2018 are set out below.

Net debt			2018
			$’000
Cash and cash equivalents			128,348
Finance leases			(210)
Net debt			128,138
Movement in net debt		Finance
	Cash	leases	Total
	$’000	$’000	$’000
Net debt as at 1 July 2017	135,695	(661)	135,034
Cash flows	(7,347)	451	(6,896)
Net debt as at 30 June 2018	128,348	(210)	128,138

Note 19. Commitments

Note 19. Commitments
	2018	2017
	$’000	$’000
(a) Non-cancellable operating leases
Future minimum lease payments under non-cancelable operating leases are as follows:
Within one year	4,514	5,399
Later than one year but not later than five years	4,646	7,503
Later than fiveyears	643
	9,803	12,902

We classify leases in which a significant portion of the risks and rewards of ownership are retained by the lessor as operating leases. Operating lease payments, net of any incentives received from the lessor, are charged to expense on a straight-line basis over the period of the lease. Where we are required to return the premises to their original condition at the end of the lease, we record a provision for lease remediation equal to the present value of the estimated liability (refer to Note 12).

Operating leases include leases of premises and office equipment. Under the relevant lease agreements (mainly premises) the rentals are subject to periodic review to market and/or for CPI increases. Operating leases are under normal commercial operating lease terms and conditions.

Data[#] 3 Limited Financial Report 2018 47

Notes to consolidated financial statements (continued)

Note 19. Commitments (continued)

	2018	2017
	$’000	$’000
(b) Finance leases
Commitments related to finance leases as at 30 June are payable as follows:
Within one year	186	344
Later than oneyear but not later than fiveyears	33	377
	219	721
Less: future finance charges	(9)	(60)
Recognised as a liability	210	661
The present value of finance lease liabilities is as follows:
Within one year	178	303
Later than oneyear but not later than fiveyears	32	358
	210	661
A controlled entity leases equipment under finance leases which are due to expire in August 2020.
	2018	2017
	$’000	$’000
(c) Trade payables
Trade payables on deferred payment terms are payable as follows:
Within one year	610	672
Later than oneyear but not later than fiveyears	610	672
	1,220	1,344
Less: future finance charges	(102)	(108)
Recognised as a liability	1,118	1,236

Note 20. Financial risk management

Our business activities can expose us to a variety of financial risks: market risk (including foreign exchange risk, price risk, and cash flow and fair value interest rate risk), credit risk, and liquidity risk. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on our financial performance. To date we have not used derivative financial instruments. We use sensitivity analysis to measure interest rate and foreign exchange risks, and aging analysis for credit risk. Risk management is carried out by our Chief Financial Officer (CFO) under policies approved by the board of directors. The CFO identifies, evaluates and mitigates financial risks in close cooperation with senior management.

All our financial assets are within the loans and receivables category, and our financial liabilities are all within the financial liabilities recorded at amortised cost category.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises for us when future commercial transactions and recognised assets and liabilities are denominated in a currency other than the Australian dollar. From time to time we make sales to customers who require the currency of settlement to be a foreign currency. At 30 June 2018 and 2017 our exposure to foreign currency risk was immaterial.

Data[#] 3 Limited Financial Report 2018 48

Notes to consolidated financial statements (continued)

Note 20. Financial risk management (continued)

(ii) Price risk

We are not exposed to equity securities or commodity price risk.

(iii) Cash flow and fair value interest rate risk

Our exposure to cash flow interest rate risk arises predominantly from cash and cash equivalents bearing variable interest rates. Our borrowings bear a fixed interest rate and are carried at amortised cost, so we are not exposed to fair value interest rate risk. At balance date we maintained the following variable rate accounts:

	30 June 2018	30 June 2018	30 June	2017
	Weighted	Balance	Weighted	Balance
	average		average
	interest rate		interest rate
	%	$’000	%	$’000
Cash at bank and on hand	1.3%	49,334	1.2%	5,686
Deposits at call	1.5%	79,014	1.5%	130,009
Cash and cash equivalents	1.5%	128,348	1.5%	135,695

At balance date, if the interest rates had changed, as illustrated in the table below, with all other variables remaining constant, after-tax profit and equity would have been affected as follows:

		After-tax profit	After-tax profit		Equity
		Higher/(lower)		Higher/(lower)
		2018	2017	2018	2017
		$000	$000	$000	$000
+0.25% (25	basis points) (2017: -0.25%)	225	(237)	225	(237)
+0.50%(50	basispoints) (2017: +0.25%)	449	237	449	237

(b) Credit risk

Credit risk arises from the financial assets of our group, which comprise cash and cash equivalents and trade, finance lease and other receivables. Our exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. We do not hold any credit derivatives to offset the credit exposure. We have policies in place to ensure that sales of products and services are made to customers with an appropriate credit history; collateral is not normally obtained. We set risk limits for each individual customer in accordance with parameters set by the board. These limits are regularly monitored.

Specific information as to our credit risk exposures is as follows:

Cash and cash equivalents are maintained at one large financial institution.
During the 2018 year, sales to one government customer comprised 5% of revenue (2017: 6%).
At 30 June 2018, one debtor comprised 18% of total debtors (2017: nil), and the ten largest debtors comprised approximately 39% of total debtors (2017: 30%), of which 96% were accounts receivable from government customers (2017: 100%).
Our customers generally do not have independent credit ratings. Our risk control procedures assess the credit quality of the customer taking into account its financial position, past experience and other factors. We set individual risk limits based on internal or external ratings in accordance with limits set by the board. Our credit management department regularly monitors compliance with credit limits. Management believes the credit quality of our customers is high based on the very low level of bad debt writeoffs experienced historically. In 2018 bad debt write-offs as a percent of the trade receivables carrying amount was 0.0%, (2017: 0.3%).

Data[#] 3 Limited Financial Report 2018 49

Notes to consolidated financial statements (continued)

Note 20. Financial risk management (continued)

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. We aim to maintain flexibility in funding by keeping committed credit lines available. We manage liquidity risk by monitoring cash flows and ensuring that adequate cash and unused borrowing facilities are maintained.

At reporting date we had used $2,654,000 (2017: $2.353,000) of the multi-option financing facility for bank guarantees and our corporate credit card facility and had access to the following undrawn borrowing facilities at the reporting date:

	2018	2017
	$’000	$’000
Multi-option bank facility	9,346	9,147

The multi-option facility is a comprehensive borrowing facility which includes a bank overdraft facility and is subject to certain financial undertakings. The facility is subject to annual review. Interest is variable and is charged at prevailing market rates. The weighted average interest rate for the year ended 30 June 2018 was 5.6% (2017: 5.6%).

Maturity of financial liabilities

The table below categorises our financial liabilities into relevant maturity groups based on their contractual maturities, calculated as their undiscounted cash flows. All the financial liabilities are non-derivative.

	Less than	6 – 12	Between 1	Between	2	Total	Carrying
	6 months	months	and 2 years	And 3 years		contractual	amount
						cash flows
	$’000	$’000	$’000	$’000		$’000	$’000
At 30 June 2018
Trade and other payables	289,298	-	610		-	289,908	289,841
Finance lease liabilities	97	89	32		1	219	210
	289,395	89	642		1	290,127	290,051
At 30 June 2017
Trade and other payables	257,353	-	672		-	258,025	257,989
Finance lease liabilities	172	172	342	35		721	661
	257,525	172	1,014	35		258,746	258,650

(d) Fair values

The carrying amounts of financial assets (net of any provision for impairment) and current financial liabilities approximate fair value primarily because of their short maturities. The carrying amount of the non-current borrowing approximates fair value because the interest rate applicable to the borrowing approximates current market rates.

Note 21. Business combinations

Accounting policy

We use the acquisition method of accounting to account for all business combinations, regardless of whether we acquire equity instruments or other assets. Consideration for an acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the company. Consideration also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. We charge costs associated with the acquisition to expense as incurred. With limited exceptions, we initially measure identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination at their fair values at the acquisition date. On an acquisition-by-acquisition basis, we recognise any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

Note 21. Business combinations (continued)

Data[#] 3 Limited Financial Report 2018 50

Notes to consolidated financial statements (continued)

We record as goodwill the excess of the consideration of the acquisition and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired (refer to Note 10). If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, we recognise the difference directly in profit or loss as a bargain purchase.

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

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

Discovery Technology

On 20 August 2014 Data[#] 3 Limited (Data[#] 3) acquired 46.2% of the issued capital of Discovery Technology Pty Ltd (“Discovery Technology”), a company specialising in Wi-Fi analytics. On 3 July 2015 Data[#] 3 exercised its option to acquire a further 15.4% shareholding in Discovery Technology, bringing Data[#] 3’s total shareholding to 61.6%. As a result of obtaining control, Discovery Technology has been consolidated in Data[#] 3’s consolidated financial statements from 3 July 2015. In July 2017 Data[#] 3 exercised a further option to acquire an additional 15.8% shareholding in Discovery Technology for $646,000, increasing its total shareholding to 77.4%.

Note 22. Related parties

Wholly-owned group

The consolidated financial statements include the financial statements of Data[#] 3 Limited (being the ultimate parent entity) and the subsidiaries listed in the following table.

Name of entity	Country of formation	Equity	holding
	or incorporation	(ordinary shares)
		2018	2017
		%	%
Business Aspect Group Pty Ltd	Australia	100.0	100.0
Business Aspect (Australia) Pty Ltd	Australia	100.0	100.0
Business Aspect Pty Ltd	Australia	100.0	100.0
Business Aspect (ACT) Pty Ltd	Australia	100.0	100.0
CTG Consulting Pty Ltd	Australia	100.0	100.0
Discovery Technology Pty Ltd	Australia	77.4	61.6
People Aspect PtyLtd	Australia	100.0	100.0

Principles of consolidation

Subsidiaries are all entities over which we have control; we control an entity when we are exposed to, or have the rights to, variable returns from our involvement with the entity and we have the ability to affect those returns through our power over the entity. Subsidiaries are consolidated from the date on which control is transferred to us and are deconsolidated from the date on which control is transferred from us. Investments in subsidiaries are accounted for at cost in the financial statements of Data[#] 3 Limited. Intercompany transactions, balances and unrealised gains on transactions between companies we control are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the company.

Data[#] 3 Limited Financial Report 2018 51

Notes to consolidated financial statements (continued)

Note 22. Related parties (continued)

Parent entity

Summarised financial information for the parent entity is as follows:

	2018	2017
	$’000	$’000
As at 30 June
Current assets	339,779	305,029
Total assets	366,480	329,314
Current liabilities	318,658	284,543
Total liabilities	321,827	288,661
Shareholders’ equity
Contributed equity	8,278	8,278
Retained earnings	36,375	32,375
Total equity	44,653	40,653
For the year ended 30 June
Net profit and total comprehensive income	15,009	14,547

Note 23. Contingent liabilities

At 30 June 2018 we had provided bank guarantees totalling $2,405,000 (2017: $1,978,000) to lessors as security for premises we lease and $153,000 (2017: $375,000) to customers for contract performance. The guarantees will remain in place for the duration of the relevant contracts. Bank guarantees are secured by charges over all our assets.

During the year Data[#] 3 was involved in legal proceedings initiated by a competitor, which related to Data[#] 3 and a small group of the competitor’s former employees that joined Data[#] 3. The matter was settled prior to year end. The impact on net profit was not material.

Note 24. Key management personnel

Note 24. Key management personnel
	2018	2017
	$	$
Key management personnel compensation is set out below.
Short-term employee benefits	2,522,505	2,374,716
Long-term employee benefits	317,530	690,713
Post-employment benefits	113,884	107,676
	2,953,919	3,173,105

Remuneration in 2018 and 2017 reflected under-achievement of short-term profit targets; the long-term targets were partially met in 2018 and fully met in 2017.

Transactions with key management personnel

There were no transactions during the 2018 or 2017 financial years with key management personnel or their personally related entities.

Data[#] 3 Limited Financial Report 2018 52

Notes to consolidated financial statements (continued)

Note 25. Remuneration of auditor

Note 25. Remuneration of auditor
	2018 2017 $ $
During the year the following fees were paid or payable to the auditor for audit and non-audit services: Audit and other assurance services Audit and review of financial statements	160,000 160,000
Non-audit services Tax compliance services Other business advice	16,360 14,453 6,270 -
	22,630 14,453
Total remuneration	182,630 174,453

We employ Pitcher Partners on assignments additional to its statutory duties where the firm’s expertise and experience with our group are important.

Note 26. Accounting standards not yet effective

Relevant Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not been adopted for the annual reporting period ended 30 June 2018, are as follows:

Standard/Interpretation	Application date	Application date
	of Standard(1)	for the group(1)
AASB 9 Financial Instruments - revised and consequential amendments to other accounting	1 January 2018	1 July 2018
standards arising from its issue
AASB 15 Revenue from Contracts with Customers	1 January 2018	1 July 2018
AASB 16 Leases	1 January 2019	1 July 2019
AASB 2014-10 Sale or contribution of assets between an investor and its associate or joint venture	1 January 2018	1 July 2018
(with the application date as amended by AASB 2015-10)
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement	1 January 2018	1 July 2018
of Share-based Payment Transactions
AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investments	1 January 2018	1 July 2018
Property, Annual Improvements 2014-2016 Cycle and Other Amendments
AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over Income Tax	1 January 2019	1 July 2019
Treatments
AASB 2018-1 Annual Improvements to IFRS Standards 2015–2017 Cycle	1 January 2019	1 July 2019

Data[#] 3 Limited Financial Report 2018 53

Notes to consolidated financial statements (continued)

Note 26. Accounting standards not yet effective (continued)

Note 26. Accounting standards not yet effective (continued)
Standard/Interpretation	Application date	Application date
	of Standard(1)	for the group(1)
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration	1 January 2018	1 July 2018
Interpretation 23 Uncertainty over Income Tax Treatments	1 January 2019	1 July 2019

(1) Application date is for annual reporting periods beginning on or after the date shown in the above table.

The directors anticipate that the adoption of these standards and interpretations in future years may have the following impacts:

AASB 9 – AASB 9 will replace AASB 139 Financial Instruments: Recognition and Measurement. The key change that will affect the group on initial application of AASB 9 and associated amending Standards relates to the new requirement to recognise impairment of financial assets carried at amortised cost based on an expected loss approach. The new impairment model uses a forward looking (expected loss) model whereby credit losses will be recognised when expected rather than when losses are incurred. The group has historically experienced very low levels of bad debts; therefore, we expect the adoption of AASB 9 will not have a material impact on the group’s financial statements.

AASB 15 – This new standard contains a single model that applies to contracts with customers and two approaches to recognising revenue. The model features a contract-based five step analysis of transactions to determine whether, how much and when revenue is recognised. Management has carried out an analysis of the impact this standard will have on the group, and we anticipate this standard will not have a material impact on our financial statements as it is not significantly different from our current method of recognising revenue for the largest components of our revenue. For service contracts where we measure revenue on a percentage-of-completion basis under our existing accounting policy, we will not recognise revenue using this method when AASB 15 is effective unless we have an enforceable right to payment for performance completed to date; management estimates that this change will not have a material impact due to the small number and value of contracts accounted for using the percentage-of-completion method.

AASB 16 – This new standard replaces AASB 117 and some lease-related Interpretations. It requires all leases to be accounted for “on balance sheet” by lessees, other than for short-term and low value asset leases. The standard also provides new guidance on the definition of a lease and on sale and leaseback accounting and requires new and different disclosures about leases. The accounting requirements for lessors remains largely unchanged from AASB 117. Upon implementation on 1 July 2019, based on the leases in effect at 1 July 2018, this standard will have a material impact on the lease assets and financial liabilities recorded on the balance sheet, which we expect to increase by approximately $8.6 million and $9.9 million, respectively. Retained earnings will reduce by approximately $1.3 million because the carrying value of the assets reduce more quickly than the carrying amount of the lease liabilities. We expect the impact on net profit in FY2020 will not be material.

AASB 2014-10 – The amendments clarify the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. We anticipate there will be no impact on our financial statements, as we do not intend to sell or contribute assets to an associate or joint venture in the foreseeable future.

AASB 2016-5 – This Standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. We expect this amendment will not have a material impact on our financial statements, as any sharebased payments have historically been immaterial, and we do not intend to make any material share-based payments in the foreseeable future.

Data[#] 3 Limited Financial Report 2018 54

Notes to consolidated financial statements (continued)

Note 26. Accounting standards not yet effective (continued)

AASB 2017-1 – The amendments clarify certain requirements in:
AASB 1 First-time Adoption of Australian Accounting Standards – deletion of exemptions for first-time adopters and addition of an exemption arising from AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
AASB 12 Disclosure of Interests in Other Entities – clarification of scope
AASB 128 Investments in Associates and Joint Ventures – measuring an associate or joint venture at fair value
AASB 140 Investment Property – change in use

We anticipate there will be no impact on our financial statements, as the amendments address issues that are not currently applicable to the group nor do we anticipate they will apply in the foreseeable future.

AASB 2017-4 – This amendment to AASB 1 First-time Adoption of Australian Accounting Standards adds paragraphs arising from AASB Interpretation 23 Uncertainty over Income Tax Treatments. We expect this amendment will not have a material impact on our financial statements, as we currently have no material uncertain tax position and do not foresee any arising in the near future.

AASB 2018-1 – This amendment makes a number of relatively minor amendments to AASB 3 Business Combinations, AASB 111 Joint Arrangements, AASB 112 Income Taxes and AASB 123 Borrowing Costs.

AASB Interpretation 22 – The Interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or nonmonetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the nonmonetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. We anticipate there will be no impact on our financial statements, as we do not currently hold non-monetary assets or non-monetary liabilities denominated in foreign currencies, nor do we intend to in the foreseeable future.

Interpretation 23 – The Interpretation clarifies the application of the recognition and measurement criteria in IAS 12 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following:

whether an entity considers uncertain tax treatments separately
the assumptions an entity makes about the examination of tax treatments by taxation authorities
how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
how an entity considers changes in facts and circumstances.

We expect there will be no impact on our financial statements, as we historically have not had circumstances where there are uncertainties surrounding material income tax treatments and do not foresee such issues in the near future.

Data[#] 3 Limited Financial Report 2018 55

Directors’ declaration

In the opinion of the directors:

(a) the financial statements and notes set out on pages 26 to 55 are in accordance with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the group’s financial position as at 30 June 2018 and of its performance for the financial year ended on that date; and

(b) there are reasonable grounds to believe that the group will be able to pay its debts as and when they become due and payable; and The notes to the consolidated financial statements confirm that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the managing director and chief financial officer required by section 295A of the Corporations Act 2001.

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

==> picture [109 x 27] intentionally omitted <==

R A Anderson Director

Brisbane 22 August 2018

Data[#] 3 Limited Financial Report 2018 56

==> picture [596 x 173] intentionally omitted <==

Independent Auditor’s Report to the Members of Data[#] 3 Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Data[#] 3 Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated balance sheet as at 30 June 2018, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

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

(a) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

==> picture [562 x 114] intentionally omitted <==

Data[#] 3 Limited Financial Report 2018 57

==> picture [160 x 30] intentionally omitted <==

Key Audit Matters

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

Key Audit Matter	How	our audit addressed the key audit matter
Impairment of goodwill and internally generated
software assets
Refer to note 10
On consolidation of subsidiaries acquired in previous	Our procedures included, amongst others:
years, Goodwill on acquisition is recognised in the balance sheet.	•	Assessing management’s determination of the Group’s CGUs based on our understanding of
The carrying amount of Goodwill is supported by		the nature of the Group’s business and
value-in-use calculations prepared by management		internal reporting in order to assess how
which are based on budgeted future cash flows and		results were monitored and reported;
key estimates such as growth and discount rates.	•	Assessing the reasonableness of key
Additionally, the group recognises directly attributable		estimates, considering supporting
costs of internally generated software as an asset in		management prepared documentation or
the balance sheet.		historical performance, where available;

The carrying amount of this asset is supported by value-in-use calculations prepared by management which are based on budgeted future cash flows and key estimates such as growth and discount rates.

It is due to the use of key estimates and judgement that this is a key area of audit focus.

Comparing the prior year forecasts to assess the accuracy of the forecasting process, finding that historical actual results have been materially consistent with the forecast performance;
• Testing management’s calculations for accuracy; and
• Performing a sensitivity analysis of management’s calculations to assess the level of headroom available.
Revenue recognition Refer to note 2 Due to the nature of Data[#] 3’s operations, the Our procedures included, amongst others: performance of the Group at the end of the financial • Selecting a sample of transactions prior and
year has a significant impact on the Group’s overall subsequent to year end and agreeing to
year end result. supporting documentation to gain assurance
It is due to the quantum of transactions occurring that the risks and rewards of ownership had near year end that this is a key area of audit focus. been transferred to the customer (product sales), or the service had been rendered to the designated stage of completion (services) in the same cut-off period the revenue had been recognised; and
• Completing substantive audit procedures on receivables and deferred income recognised at year end to gain assurance on the existence / completeness of the receivable / liability at year end and the corresponding revenue being recognised in the correct period.

Data[#] 3 Limited Financial Report 2018 58

==> picture [160 x 30] intentionally omitted <==

Other Information

The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon.

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

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

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

Responsibilities of the Directors for the Financial Report

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

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

Data[#] 3 Limited Financial Report 2018 59

==> picture [160 x 30] intentionally omitted <==

Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in section 11 of the directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Data[#] 3, for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001 .

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

PITCHER PARTNERS

==> picture [63 x 43] intentionally omitted <==

J J Evans Partner

Brisbane, Queensland 22 August 2018

Data[#] 3 Limited Financial Report 2018 60

Shareholder information

The shareholder information set out below was applicable as at 20 August 2018.

1. Distribution of equity securities

(a) Analysis of numbers of equity security holders by size of holding:

	Numberofshares	% of issued capital	Numberof holders
1 to 1,000	518,076	0.34	854
1,001 to 5,000	5,528,685	3.59	1,905
5,001 to 10,000	8,649,981	5.62	1,093
10,001 to 50,000	35,380,634	22.98	1,528
50,001 to 100,000	17,376,199	11.29	235
100,001 and over	86,521,375	56.19	145
	153,974,950	100.00	5,760

(b) There were 160 holders of less than a marketable parcel of ordinary shares.

2. Twenty largest quoted equity security holders

2. Twenty largest quoted equity security holders
Name		Ordinary shares
	Number held		% of issued shares
HSBC Custody Nominees (Australia) Limited - A/C 2	12,506,783		8.12
Citicorp Nominees Pty Limited	12,231,304		7.94
HSBC Custody Nominees (Australia) Limited	11,859,680		7.70
J P Morgan Nominees Australia Limited	5,738,843		3.73
Powell Clark Trading Pty Ltd	2,985,370		1.94
Oakport Pty Ltd	2,278,582		1.48
National Nominees Pty Limited	2,195,332		1.43
Thomson Associates Pty Ltd	2,000,000		1.30
J T Populin	1,690,140		1.10
Elterry Pty Ltd	1,540,000		1.00
Densley Pty Ltd	1,288,000		0.84
Neweconomy.Com.Au Nominees Pty Ltd	1,041,604		0.68
Elterry Super Pty Ltd	1,000,000		0.65
L J Fahey	975,500		0.63
BNP Paribas Nominees Pty Ltd	915,709		0.59
U Pty Ltd	782,280		0.51
W T Powell	650,000		0.42
Banksia Administration Services Pty Ltd	637,000		0.41
R A & M I Anderson	600,000		0.39
HGT Investments Pty Ltd	600,000		0.39
AlbanyBraithwaite Holdings Limited	549,278		0.36
	64,065,405		41.61

Data[#] 3 Limited Financial Report 2018 61

Shareholder information (continued)

3. Substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	% of issued shares
Cat Rock Capital Management	12,498,533	8.12
Commonwealth Bank of Australia	8,405,638	5.46

4. Unquoted equity securities

Not applicable.

5. Voting rights

The voting rights attaching to the ordinary shares, set out in the company’s constitution, are:

(a) every shareholder present at a general meeting has one vote on a show of hands; and

(b) on a poll, each shareholder has one vote for each fully paid share held.

Options have no voting rights.

Data[#] 3 Limited Financial Report 2018 62

AI assistant

DATA#3 LIMITED — Annual Report 2018

64791_rns_2018-08-21_64791ef6-bc41-42b1-82e1-c0db8d69d706.pdf

Appendix 4E

Name of entity Data[#] 3 Limited ABN 31 010 545 267

Reporting period

Previous corresponding period

Results for announcement to the market

Brief explanation of the figures reported above

Appendix 4E (continued)

Retained profits

Additional dividend information

Data[#] 3 Limited Dividend Reinvestment Plan

Net tangible assets per security

Appendix 4E (continued)

for the year ended 30 June 2018

Compliance with IFRS

Commentary on the results for the period

Compliance statement

Operating and Financial Review

Whole of group performance

Operating and Financial Review (continued)

Product segment performance

Operating and Financial Review (continued)

Services segment performance

Other revenue

Operating and Financial Review (continued)

Operating expenses

Cash flow

Performance against strategic priorities

1. Deliver sustained profit growth

2. Grow services profit with an increase in annuity and an increase in margin

3. Grow cloud services revenue

Operating and Financial Review (continued)

People Satisfaction

Customer Satisfaction

External Awards

Operating and Financial Review (continued)

Review of financial position

Operating results by state

Queensland

New South Wales

ACT

Victoria

Tasmania

Operating and Financial Review (continued)

South Australia

Western Australia

Operating results by area of specialisation

Software Solutions

Infrastructure Solutions

Operating and Financial Review (continued)

Services

Business Aspect Consulting

Discovery Technology

Our strategy and plan for FY19

Operating and Financial Review (continued)

Operating and Financial Review (continued)

Outlook

Directors’ report

1. Principal activities

2. Dividends

3. Operating and financial review

Directors’ report (continued)

4. Business strategy

5. Earnings per share

6. Significant changes in the state of affairs

7. Significant events after the balance date

8. Likely developments and expected results

9. Directors

Directors’ report (continued)

9. Directors (continued)

L C Baynham, BBus (Honours), FAICD (Managing Director)

A M Gray, BEcon (Hons), FAICD, FFSIA (non-executive director from 29 August 2017)

L M Muller, BCom, CA, GradDip App Fin and Inv, GAICD (non-executive director)

W T Powell, BEcon (non-executive director)

Directors’ report (continued)

9. Directors (continued)

Meetings of directors

10. Company secretary

DATA#3 LIMITED Annual Report 2018