Exhibit 99.1

 

Sensis Holding Limited   Annual report and financial statements   for the year ended 30 June 2020 Registered number: 09872424

 

Directors

Eva Monica Kalawski (resigned on 1 March 2021)

Ian M.S. Downie (resigned on 1 March 2021)

Mary Ann Sigler (resigned on 1 March 2021)

 

KJ Christopher (appointed on 1 March 2021 and resigned on 11 March 2021)

 

John Allan (Appointed on 11 March 2021)

Kerrie-Anne Hutchins (Appointed on 11 March 2021)

 

Auditors

Ernst & Young LLP

1 More London Place

London

SE1 2AF

 

Registered office

Windsor House, Bayshill Road

Cheltenham

GL50 3AT

 

The directors are responsible for preparing the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).  Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that year.  In preparing these financial statements, the directors are required to:

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006.  They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

The consolidated financial statements of Sensis Holding Limited were approved by the board of directors and authorised for issue on 13 May 2021.

1.        Significant accounting policies

 

The principal accounting policies are summarised below.

 

Statement of compliance

 

The Company is a private company limited by shares incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given on page 2.

 

The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council. They have all been applied consistently throughout the year ended 30 June 2020.

 

General information and basis of preparation

 

The figures shown for the year to 30 June 2020 are based on the Group’s statutory accounts for that period and do not constitute the Group’s statutory accounts for that period as defined in Section 434 of the Companies Act 2006. These statutory accounts, which were prepared under FRS 102, have been filed with the Registrar of Companies. The audit report on those accounts was not qualified, included a reference to matters to which the Auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006.

 

The financial statements of the Group were approved for issued by the Board of Directors on 13 May 2021.

 

The consolidated financial statements are presented in Australian Dollars and rounded to the nearest $’000. Foreign operations are included in accordance with the policies set out below.

 

In accordance with the merger accounting method the results of all combining entities have been included from the start and for comparatives restated.

 

Principal risks and uncertainties

 

The principal risks and uncertainties facing the Group are broadly grouped as competitive/technological risks and financial instrument risks.

 

 

The Group’s print advertising activities are exposed to the risk of technical obsolescence, as customers advance to digital methods of advertising and communication. To limit its exposure to the decline in the print market, the Group continues to diversify its product offering and invest in its services offerings.

 

 

The Group’s activities expose it to a number of financial risks including credit risk, cash flow risk and liquidity risk. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which provide written principles on the use of financial derivatives to manage these risks. The Group does not use derivative financial instruments for speculative purposes.

 

 

Cash flow risk is the risk of exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability. The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (through USD denominated debt) and interest rates.

 

 

Credit risk is the risk that one party to a financial instrument will cause a financial loss for that other party by failing to discharge an obligation. The Group’s principal financial assets are bank balances and cash, trade and other receivables, and derivative financial assets.

 

The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

 

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

 

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

 

 

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses long-term debt finance.

 

 

Both Print and Digital businesses experienced minimal disruption to operations as a result of the COVID-19 pandemic during the year. Print distribution schedules were accelerated to ensure that print books were distributed to all targeted regions despite transit restrictions, while digital fulfilment was able to be continue due to the online nature of the business.

 

While not significant during the year, customer credit risk remains to be an area of focus considering the uncertainty of the full economic impact of the pandemic. Management have taken the approach of factoring in the uncertainty of future COVID-related impacts into accounting estimates such as assessing the ability of the business to continue as a going concern assessment, assessing long-term assets for impairment and provisioning for expected credit losses relating to financial assets on the Statement of Financial Position at 30 June 2020.

 

Going concern

 

The Group’s financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the normal course of business.  As at 30 June 2020, the Group had a net asset position of $129.8m and net current assets of $94.5m.

 

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current facility. The Directors note the global COVID-19 pandemic and the resulting adverse economic impacts has caused uncertainty in the economic environment.  The Group has reforecast its Annual Operating Plan for the next 12 months. The reforecast, which is the basis of the preparation of the 12 month cashflow through until 30 June 2022 includes management’s expected downturn in revenue, as well as the offsetting benefits in cash flow as a result of management’s continued effort to implement cost saving initiatives and maintain a strong EBITDA and cash flow margin. This includes an average reduction of 18% in cash inflows for the year to June 2022 reflecting a 15% fall in revenues compared to the year to June 2021 and offset with a significant reduction in income tax outflows. Under this scenario, the Group and its related entities will have access to adequate funds to meet its debts as and when they fall due.  

 
The Group has sufficient financial resources and long-term funding in place. As a consequence, the directors believe that the group is well placed to manage its business risks successfully despite the expected continued decline in print revenue.

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 

 

Basis of consolidation

 

The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings drawn up to the end of each reporting period presented.

 

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities.

 

Foreign currency

 

Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account.

 

Revenue recognition

 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised.

 

 

Classified advertisements and display advertisements are published online on a daily, weekly or monthly basis, for which revenues are recognised when the advertisement is published.

 

Yellow Pages^® and White Pages^® directory print advertising revenues are recognised on delivery of 60% of the published directories to consumers’ premises. Revenue from online directories is recognised over the life of service agreements, which, on average, span one year.

 

Various digital marketing services are performed for customers on a once-off basis, for which revenues are recognised when performance obligation is met at a point in time.

 

 

For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

 

 

Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. When the deliverables in a multiple deliverable arrangement are not considered to be separate units of accounting, the arrangement is accounted for as a single unit.

 

A separate unit of accounting exists where the deliverable has a value to the customer on a stand-alone basis and any undelivered items cannot be terminated by the customer without incurring penalties if the delivered item was returned.

 

The consideration from the revenue arrangement is allocated to its separate units based on the relative selling prices of each unit. If neither vendor specific objective evidence nor third party evidence exists for the selling price, then the item is measured based on the best estimate of the selling price of that unit. When allocating revenue to the separate units within an arrangement, the amount allocated to a delivered item is limited to the amount that is not contingent upon the delivery of additional items or meeting other specified performance conditions (non-contingent amount). The non-contingent revenue allocated to each unit is then recognised in accordance with our revenue recognition policies described above.

 

Business combinations and goodwill

 

Business combinations are accounted for using the purchase method, which involves the following steps:

 

 

 

 

Positive goodwill acquired on each business combination is capitalised, classified as an asset on the balance sheet and amortised on a straight line basis over its useful life.

 

Goodwill acquired in a business combination is, from the acquisition date, allocated to each cash generating unit that is expected to benefit from the synergies of the combination.

 

If a subsidiary, associate or business is subsequently sold or discontinued, any goodwill arising on acquisition that has not been amortised through the profit and loss account is taken into account in determining the profit or loss on sale or discontinuance.

 

Intangible assets

 

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if the fair value can be measured reliably on initial recognition. Intangible assets acquired as part of an acquisition are not recognised where they arise from legal or other contractual rights, and where there is no history of exchange transactions. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the year in which it is incurred.

 

Subsequent to initial recognition, intangible assets are stated at cost less accumulated amortisation and accumulated impairment. Intangible assets are amortised on a straight line basis over their estimated useful life. The carrying value of intangible assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

 

Internally developed software assets

 

Development expenditures on business software developed for internal use are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during development.

 

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Assets are classified as “Assets under construction” until development is complete and the asset is available for use, at which point amortisation commences, with assets amortised evenly over the period of expected future benefit.

 

All other research and development expenditure is written off as incurred.

 

The weighted average amortisation periods of the Group’s intangible assets are as follows:

 

 

If there are indicators that the residual value or useful life of an intangible asset has changed since the most recent annual reporting period previous estimates shall be reviewed and, if current expectations differ the residual value, amortisation method or useful life shall be amended. Changes in the expected useful life or the expected pattern of consumption of benefit shall be accounted for as a change in accounting estimate.

 

Property, Plant and Equipment

 

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment.  Such cost includes costs directly attributable to making the asset capable of operating as intended.  Assets are classified as “Assets under construction” until the asset is available for use, at which point depreciation commences.

 

Depreciation is provided on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a straight line basis over its expected useful life as follows:

 

 

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

 

Stocks

 

Stocks are stated at the lower of cost and estimated selling price less costs to sell, which is equivalent to the net realisable value.  Cost is calculated using the FIFO (first-in, first-out) method. Provision is made for obsolete, slow-moving or defective items where appropriate.

 

Impairment of non-financial assets

 

The Group assesses at each reporting date whether an asset may be impaired. If any such indication exists the Group estimates recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group estimates, the recoverable amount of the cash generating unit (CGU) to which the asset belongs.

 

The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. If the recoverable amount is less than its carrying amount, the carrying amount of the asset is impaired and it is reduced to its recoverable amount through an impairment in profit and loss unless the asset is carried at a revalued amount where the impairment loss of a revalued asset is a revaluation decrease. An impairment loss recognised for all assets, including goodwill, is reversed in a subsequent period if and only if the reasons for the impairment loss have ceased to apply.

 

The following CGU’s have been identified for the purposes of impairment assessment:

 

 

 

Provisions for liabilities

 

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

 

 

Restructuring provisions are recognised only when the recognition criteria for provisions are fulfilled. The Group has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline. Furthermore, the employees affected have been notified of the plan’s main features.

 

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

Restructuring provisions are generally utilised within the subsequent 12 months.

 

 

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

 

The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using interest rates on high quality corporate bonds at the reporting date with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

 

Employee benefit provisions are utilised over the life of the employment contract.

 

 

The Group is required to restore the leased premises of its office premises to their original condition at the end of the respective lease terms.  The amount of the provision recognised will be the best estimate of the expenditure required to settle the present obligation at reporting date.  The provision is discounted to reflect the present value of the expenditures where the time value of money is material.

 

Make good provision is utilised over the life of the lease (varied across properties, longest maturity being 2023).

 

 

The Group has decided to exit a large number of property leases and is required to recognise an onerous lease provision. The amount of the provision recognised will be the best estimate of the total unavoidable costs offset with the expected rental benefit. The provision is discounted to reflect the present value of the expenditures and benefit where the time value of money is material.

 

Onerous Lease provision is utilised over the life of the lease (varied across properties, longest maturity being 2023).

 

Taxation

 

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. The majority of the Group’s operations are subject to Australian company tax, except for the individual results of the Company, which is incorporated in the UK and therefore subject to UK corporation tax.

 

Deferred tax is recognised in respect of all timing differences which are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements, except that:

 

 

 

 

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

 

Financial instruments

 

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

 

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

 

Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

 

 

All interest-bearing loans and borrowings which are basic financial instruments are initially recorded at the present value of future payments discounted at a market rate of interest for a similar loan, less transaction costs. Subsequently, they are measured at amortised cost using the effective interest rate (EIR) method. The EIR amortisation is include in finance costs in the income statement.

 

Loans and borrowings that are receivable or payable within one year are not discounted.

 

 

Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the income statement in ‘Bad debts / recovery costs / doubtful debts.’

 

 

Equity instruments issued by the Company are recorded at the fair value of cash or other resources received or receivable, net of direct issue costs.

 

 

The Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates.

 

Derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value through profit or loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

 

 

The best evidence of fair value is a quoted price for an identical asset in an active market.  When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place.  If the market is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, the fair value is estimated by using a valuation technique.

 

Operating leases

 

Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term. Lease incentives are recognised over the lease term on a straight line basis.

 

2.         Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Critical judgements in applying the Group’s accounting policies

 

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

 

Timing of print revenue recognition

 

Revenue from print directories is recognised on delivery of the published directory using the delivery method, with any amounts prepaid by customers deferred in the consolidated balance sheet prior to recognition.

 

The Group has determined that substantial completion of its obligations pursuant to the terms of the arrangement with the customer occurs upon the delivery of 60% of the published directory to the consumer’s premises.

 

Key sources of estimation uncertainty

 

Impairment of non-financial assets

 

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

 

Taxation

 

Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.

 

3.         Turnover

 

Turnover represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities, stated net of goods and services tax (GST).

 

The Group operates in two principal areas of activity, being Yellow Pages and White Pages. The Group operates within a single geographical market, being Australia.

 

An analysis of the Group’s turnover is set out below.

 

 

4.         Group operating profit

 

Profit on ordinary activities before taxation is stated after charging/ (crediting):

 

 

 

The Group pays advisory fees to an affiliate of its ultimate parent, refer to Note 24 for further details.

 

The average monthly number of employees (including executive directors) was:

 

 

 

(b) Factors affecting the total tax charge

 

Substantially all of the Group’s operations are subject to Australian company tax, with the exception of the individual results of the parent company, which is incorporated in the UK and therefore subject to UK corporation tax.

 

The differences between the total tax charge shown above and the amount calculated by applying the standard rate of tax for Australian companies to the profit before tax is as follows:

 

(c) Factors that may affect future tax charges

 

Finance Act 2016 provides that the rate of corporation tax is 19%. On 15 September 2016 the UK Government enacted legislation to further reduce the main rate of UK corporation tax from 18% to 17% with effect from 1 April 2020. In 2020, the government announced that the UK corporation tax rate for the years starting 1 April 2020 and 2021 would remain at 19%. As a result the disclosure of deferred tax has been adjusted to reflect the enactment of this Act with no significant impact on these financial statements.

 

 (d) Deferred tax

 

The deferred tax included in the balance sheet is as follows:

 

Deferred tax assets and liabilities are offset only where the Group has a legally enforceable right to do so and where the assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity or another entity within the Group.