For personal use only

Transcription

1 ABN ACN Appendix 4D Half-Year Report For the period ended This information is provided to ASX under ASX Listing Rule 4.2A.3 1. Details of the reporting period Current Period: Previous corresponding period: 1 July 2012 to ( 1H13 ) 1 July 2011 to 31 December 2011 ( 1H12 ) 2. Results for announcement to the market Revenue and Net Profit $ Revenue from ordinary activities Up 65% To $305, Profit from ordinary activities after tax attributable to members Up 47% To $24, Net profit for the period attributable to members Up 47% To $24,650 Dividend Information 2.4 Dividends paid and to be paid: Amount per security Franked amount per security 2012 final dividend per share 9.0c 9.0c 2013 interim dividend per share 10.0c 10.0c 2.5 Record date for determination of entitlement to the dividends: 2012 final dividend 5 October interim dividend 22 March 2013 The Dividend Reinvestment Plan ( DRP ) will operate for the interim dividend. Shares will be offered at a 5% discount to the volume weighted average price of shares sold on the ASX in the 5 days following the record date. Election notices for the DRP must be received by M2 no later than the record date.

2 2.6 Review of Operations The results for 1H13 remain in line with expectations and have delivered a net profit before tax of $34.9 million, representing a 56% increase from 1H12. The business acquisitions over the last 12 months have contributed positively to this growth in both revenue and earnings. Most notable is the Primus business which was acquired on 1 June 2012, where a full six months of operations have been included for this current half. The Primus business continues to perform in line with expectations and its integration into the broader M2 Group continues to provide greater scale and synergies. The increase in M2 s key financial performance areas can be illustrated below. $ 000s Half year end 31 Dec 2012 Half year end 31 Dec 2011 Change in % Revenue 305, ,412 Increase 65% Net profit before tax 34,945 22,335 Increase 56% On 21 December 2012, M2 disposed of 0014 Pty Ltd, a company that owned the Access International business (part of the Primus operations). Access International is a prepaid call card business and its disposal presents an opportunity for M2 to refocus its resources in the direct supply of fixed line, mobile and data services. The sales consideration received is in the form of an equity interest in the purchaser s holding company, Aggregato Global Pty Ltd, which is a specialist prepaid call card operator in the telecommunications industry. This equity interest is represented on the Statement of Financial Position in the Investments in Associates line. 3. Additional Information Additional Appendix 4D requirements can be found in the attached half-year report.

3 ABN ACN CONDENSED CONSOLIDATED HALF YEAR FINANCIAL REPORT For the period ended

4 Table of Contents Corporate Directory 3 Directors Report 4 Auditor s Independence Declaration 8 Statement of Financial Position as at 9 Statement of Comprehensive Income for the half year ended 10 Statement of Cash Flows for the half year ended 11 Statement of Changes in Equity for the half year ended 12 Notes to the Financial Statements 13 Directors Declaration 22 Independent Review Report 23 2

5 Corporate Directory Directors Craig Farrow - Chairman Vaughan Bowen John Hynd Michael Simmons David Rampa Chief Executive Officer Geoff Horth Auditor Ernst & Young Level 23, 8 Exhibition Street Melbourne VIC 3000 Share Registry Link Market Services Limited Level 9, 333 Collins Street Melbourne VIC 3000 Company Secretary Kellie Dean Registered Office Level 10, 452 Flinders Street Melbourne VIC 3000 Telephone: (03) Facsimile: (03) Web Site: s shares are listed on the Australian Securities Exchange (ASX) under the issue code MTU. 3

6 Directors Report The directors of ( the Company ) and its subsidiaries ( the Group ) submit the following report for the half year ended ( 1H13 ). In accordance with the provisions of the Corporations Act 2001, the directors report is as follows: Directors The names of the Company s directors in office during the half-year (unless otherwise noted) and until the date of this report are as below. Mr. Craig Farrow Chairman Mr. Vaughan Bowen Executive Director Mr. John Hynd Non-Executive Director Mr. Michael Simmons Non-Executive Director Mr. David Rampa Non-Executive Director (appointed 21 December 2012) Principal Activities The principal activity of the Group during the half year was the supply of fixed line voice, mobile telecommunications and broadband data services within the Australian and New Zealand markets through its Retail and Wholesale operating divisions. Rounding The Company is a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the directors report and the half year financial report are rounded off to the nearest thousand dollars, unless otherwise stated. 4

7 Review of Operations The results for 1H13 remain in line with expectations and have delivered a net profit before tax of $34.9 million, representing a 56% increase from the half year ended 31 December 2011 ( 1H12 ). The business acquisitions over the last 12 months have contributed positively to this growth in both revenue and earnings. Most notable is the Primus business which was acquired on 1 June 2012, where a full six months of operations have been included for this current half. The Primus business continues to perform in line with expectations and its integration into the broader M2 Group continues to provide greater scale and synergies. The increase in M2 s key financial performance areas can be illustrated below. $ 000s Half year end 31 Dec 2012 Half year end 31 Dec 2011 Change in % Revenue 305, ,412 Increase 65% Net profit before tax 34,945 22,335 Increase 56% On 21 December 2012, M2 disposed of 0014 Pty Ltd, a company that owned the Access International business (which were part of the Primus operations). Access International is a prepaid call card business and its disposal presents an opportunity for M2 to refocus its resources in the direct supply of fixed line, mobile and data services. The sales consideration received is in the form of an equity interest in the purchaser s holding company, Aggregato Global Pty Ltd, which is a specialist prepaid call card business in the telecommunications industry. This equity interest is represented on the Statement of Financial Position in the Investments in Associates line. More details are provided in note 11. 5

8 Interim Dividend On 22 February 2013, the directors declared an interim dividend on ordinary shares in respect of 1H13. The total amount of dividend is $15,797,613, which represents a fully franked dividend of 10.0 cents per share (on shares issued as at ). The interim dividend proposed, compared to the corresponding period, is an increase of 11% (9.0 cent dividend paid relating to 1H12). This dividend will be paid on 16 April The interim dividend has not been provided for in the 1H13 financial statements. Dividend Reinvestment Plan M2 s dividend reinvestment plan ( DRP ) will be made available to shareholders for the interim dividend. Election notices for participation in the DRP must be received by the Company no later than the record date 22 March Shares issued under the DRP will rank equally with existing M2 shares. Shares will be issued under the DRP at a 5% discount to the volume weighted average price ( VWAP ) of shares sold on ASX in the 5 trading days following the record date. Outlook for Remainder of 2012/13 Financial Year As at the date of this report, the directors are of the opinion that the business remains on track to deliver upon the forecast guidance previously issued for the financial year ending 30 June 2013, in light of the expected half year performance and the encouraging progress being made in terms of revenue growth, margin control and expense management. 6

9 Auditor s Independence Declaration The directors have received an auditor s independence declaration, which is attached on page 8 and forms part of this Directors Report. Signed in accordance with a resolution of the directors Craig Farrow Chairman Melbourne, 22 February

10 For personal use only Auditor s Independence Declaration to the Directors of M2 Telecommunications Group Limited In relation to our review of the financial report of M2 Telecommunications Group Limited for the half year ended, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Don Brumley Partner 22 February Liability limited by a scheme approved under Professional Standards Legislation

11 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2012 Note 31 DEC JUN 2012 ASSETS $000 $000 Current Assets Cash and cash equivalents 5 29,629 24,957 Trade receivables 63,840 66,325 Inventories Other current assets 15,567 14,906 Total Current Assets 109, ,074 Non-Current Assets Other receivables - 4 Plant and equipment 55,145 51,108 Intangible assets and goodwill 293, ,430 Deferred income tax asset 8,488 9,151 Other non-current assets 5,759 4,545 Investments in associates 11 3,529 - Total Non-Current Assets 366, ,238 TOTAL ASSETS 476, ,312 LIABILITIES Current Liabilities Trade and other payables 77,369 86,120 Interest-bearing loans and borrowings 22,518 22,330 Deferred consideration 6-5,400 Income tax payable 20,844 13,112 Provisions 11,210 7,975 Total Current Liabilities 131, ,937 Non-Current Liabilities Interest-bearing loans and borrowings 123, ,923 Deferred tax liability 14,774 15,511 Provisions 1, Other non-current liabilities 1,205 3,352 Total Non-Current Liabilities 141, ,637 TOTAL LIABILITIES 273, ,574 NET ASSETS 203, ,738 EQUITY Contributed equity 155, ,911 Reserves Retained earnings 47,929 37,403 Parent interests 203, ,849 Non-controlling interests (327) (111) TOTAL EQUITY 203, ,738 9

12 STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2012 Note 6 Months to 31 DEC Months to 31 DEC 2011 $000 $000 Revenue 4 305, ,412 Cost of Sales (189,405) (130,622) Gross profit 115,745 54,790 Other income 11 3,001 3,600 Employee benefits expenses (38,093) (22,286) Depreciation and amortisation (14,560) (4,107) Share based payments (279) (47) Other expenses (25,315) (8,506) Financing costs (5,554) (1,109) Profit before income tax 34,945 22,335 Income tax expense (10,511) (5,634) Profit after tax 24,434 16,701 Net profit and total comprehensive income for the period 24,434 16,701 Net profit/(loss) and total comprehensive income for the period is attributable to: - Non-controlling interest (216) (30) - Owners of the parent 24,650 16,731 24,434 16,701 Earnings per share for profit attributable to the ordinary equity of the holders of the parent: - Basic earnings per share (cents) Diluted earnings per share (cents)

13 STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2012 Note 6 Months to 31 DEC Months to 31 DEC 2011 $000 $000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 298, ,399 Payments to suppliers and employees (252,298) (163,881) Interest received Interest paid (4,983) (1,109) Income tax paid (5,378) (6,701) Net cash flows from operating activities 36,030 22,062 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment (7,166) (410) Purchase of intangibles (3,715) (2,573) Payment for business acquisition (5,400) - Proceeds from disposal of plant and equipment 1 16 Net cash flows used in investing activities (16,280) (2,967) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from borrowings, net of borrowing cost 5,400 - Repayment of borrowings (10,398) (5,767) Dividends paid (10,868) (9,459) Net cash flows from financing activities (15,078) (14,941) Net increase in cash and cash equivalents 4,672 4,154 Cash and cash equivalents at beginning of period 24,957 12,542 Cash and cash equivalents at end of period 29,629 16,696 11

14 STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 31 DECEMBER 2012 Employee equity Foreign currency Owners Noncontrolling Ordinary Retained benefits translation of the Note shares earnings reserve reserve parent interest Total $000 $000 $000 $000 $000 $000 $000 At 1 July ,911 37, (102) 188,849 (111) 188,738 Profit for the period - 24, ,650 (216) 24, ,911 62, (102) 213,499 (327) 213,172 Shares issued (211) Share option reserves Net translation during the year (2) (2) - (2) Dividends paid - (10,868) - - (10,868) - (10,868) Dividend reinvestment plan 3,256 (3,256) At 155,166 47, (104) 203,696 (327) 203,369 At 1 July ,761 26, (78) 93,818 (45) 93,773 Profit for the period - 16, ,731 (30) 16,701 66,761 43, (78) 110,549 (75) 110,474 Shares issued (56) Share option reserves Net translation during the year Dividends paid - (9,459) - - (9,459) - (9,459) Dividend reinvestment plan 1,684 (1,684) At 31 December ,786 32, (74) 101,426 (75) 101,351 12

15 NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER CORPORATE INFORMATION The condensed financial report of ( M2 or the Company or the Group ) for the half year ended was authorised for issue in accordance with a resolution of the directors on 22 February M2 is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in note 3. 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES Basis of preparation This general purpose condensed financial report for the half-year ended has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. It is recommended that the half-year financial report should be read in conjunction with the annual report for the year ended 30 June 2012 and considered together with any public announcements made by M2 and its controlled entities during the half-year ended in accordance with the continuous disclosure obligations of the ASX Listing Rules. Apart from the changes in accounting policy noted below, the accounting policies and methods of computation are the same as those adopted in the 2012 annual financial report. 13

16 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) Significant accounting policies The accounting policies applied by the Group in its condensed consolidated half year financial report are the same as those applied by the Group in its consolidated annual financial report as at and for the year ended 30 June In the current period, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are effective for the current interim reporting period and relevant to the Group. The adoption of these amendments has not resulted in any changes to the Group s accounting policies and has had no effect on the amounts reported for the current or prior periods. 3 OPERATING SEGMENTS The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (chief operating decisions makers) in assessing performance and in determining the allocation of resources. The Group has two operating segments, Retail and Wholesale. The Group s risks and rates of return are affected predominantly by differences in the markets served by these business units. The operating segments are identified by management based on the manner in which the product is sold, whether Retail or Wholesale. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the products produced and sold and/or the services provided, as these are the resources of the Group s major risks and have the most effect on the rates of return. The Retail business segment offers unique packaged telecommunications services, targeted particularly to small and medium sized enterprises, offering fixed line voice services, including line rental services, mobile voice and data services, terrestrial dial-up and high speed broadband internet services as well as mobile telephone hardware. The Wholesale business segment offers the full suite of fixed line voice services, including line rental services, mobile voice and data services, terrestrial dial-up and high speed broadband internet services and mobile telephone hardware to the telecommunications reseller market at wholesale rates. 14

17 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER OPERATING SEGMENTS (continued) Accounting policies and inter-segment transactions The accounting policies used by the Group in reporting segments internally are the same as those contained in note 2 to the financial report and in the prior periods except as detailed below: Corporate charges Corporate charges comprise non-segmental expenses incurred by the various business functions that support both Retail and Wholesale operations. These business functions include IT, finance, facilities and equipment, commercial and head office. With the exception of head office, all other corporate charges are allocated to each business segment on a proportionate basis linked to segment revenue so as to determine a segment result. Head office charges remain unallocated due to the difficulty in obtaining reliable measurement of amounts that can be reasonable allocated between Retail and Wholesale. Income tax expense Income tax expense is calculated based on the segment operating net profit. Income tax expense includes the effect of deductible temporary differences. It is the Group s policy that if items of revenue and expense are not allocated to operating segments then any associated assets and liabilities are also not allocated to segments. This is to avoid asymmetrical allocations within segments which management believe would be inconsistent. 15

18 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER OPERATING SEGMENTS (continued) The following table present revenue and profit information for reportable segments for the halfyears ended and 31 December Retail Wholesale Total $000 $000 $000 $000 $000 $000 Revenue Sales to external customers 265, ,146 40,035 40, , ,058 Total revenue per the statement of comprehensive income 305, ,058 Result Segment net operating profit after tax 22,729 11,822 3,109 4,090 25,838 15,912 Reconciliation of segment net profit after tax to net profit before tax Income tax expense - current and deferred 10,511 5,634 Unallocated result after tax (1,404) 789 Net profit before tax per the statement of comprehensive income 34,945 22,335 Retail Wholesale Unallocated Total $000 $000 $000 $000 $000 $000 $000 $000 Depreciation 3, , Amortisation 9,830 3, ,347 3,616 Income tax expense - current 9,982 5,822 1,170 1,732 (826) (3,245) 10,326 4,309 16

19 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER OPERATING SEGMENTS (continued) Segment assets and liabilities as of and 30 June 2012 are as follows: Retail Wholesale Total Dec JUN DEC JUN DEC JUN $000 $000 $000 $000 $000 $000 Segment assets Segment operating assets 415, ,559 39,598 47, , ,697 Working capital - Head office 15,125 15,571 Other 5,841 9,044 Total assets per the statement of financial position 476, ,312 Segment liabilities Segment operating liabilities 253, ,910 7,036 8, , ,195 Bank loan - Head office 9,686 10,226 Other - Head office 2,924 8,153 Total liabilities per the statement of financial position 273, ,574 17

20 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER REVENUE 6 Months to 6 Months to 31 DEC DEC 2011 $000 $000 (a) Revenue Rendering of services 304, ,058 Interest income , ,412 5 CASH AND CASH EQUIVALENTS 31 DEC JUN 2012 $000 $000 Cash at bank and in hand 28,806 23,922 Short-term deposits 823 1,035 29,629 24,957 Included within short-term deposits is an amount of $0.8 million at (30 June 2012 $1.0 million), which is held in trust for the Phone & Fly travel dollars loyalty program. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. 6 DEFERRED CONSIDERATION 31 DEC JUN 2012 $000 $000 Current - 5,400 As of 30 June 2012, the deferred consideration for the acquisition of the Time Telecom assets was $5.4 million subject to specific performance milestones being achieved. On 12 September 2012, the balance of $5.4 million was paid in full settlement of the asset acquisition. 18

21 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER DIVIDENDS PAID 6 Months to 31 DEC Months to 31 DEC 2011 $000 $000 (a) Dividends declared and paid during the half-year on ordinary shares: Final franked dividend for the full-year ended 30 June 2012: 9.0 cents, paid 26 October 2012 (2011: 9.0 cents) 14,124 11,143 (b) Dividends proposed and not yet recognised as a liability: Interim franked dividend for the half-year ended : 10.0 cents, will be paid on 16 April 2013 (2011: 9.0 cents) 15,798 11,204 8 SHARE-BASED PAYMENTS During the current half year, nil options (half year 31 Dec 2011: 1,500,000 options) have been granted to the key management personnel under the M2 Executive Management Team Option Plan. 19

22 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER BUSINESS COMBINATIONS Prior period acquisitions On 1 June 2012, acquired 100% of Primus Telecom Holdings Pty Ltd ( Primus ) and its subsidiaries, for a total consideration of $192.4 million (including $10.6 million of restricted cash). The acquisition was funded through a combination of proceeds of a Renounceable Entitlement Offer ( Entitlement Offer ), which raised $83.1 million and a senior lending facility. Due to the timing of the acquisition, the provisional fair value of the identified assets and liabilities of Primus as of the date of acquisition have been reported for the year ended 30 June After further assessment, the fair value of the identified assets and liabilities of Primus as of the date of acquisition have been adjusted during the current half year. Effects of these adjustments on balance sheet are illustrated in the following table: PRIMUS TELECOM Consolidated Provisional Consolidated Final $000 $000 Cash and cash equivalents 15,212 15,212 Trade and other receivables 25,535 29,493 Inventories Other assets 5,792 5,792 Plant and equipment 48,338 49,318 Intangible assets 84,936 84,936 Deferred tax asset 3,574 3,833 Trade and other payables (38,825) (37,910) Interest-bearing loans and borrowings (10,458) (10,458) Income tax payable (3,424) (6,384) Deferred tax liability (9,658) (9,658) Provisions (5,037) (9,248) Fair value of identifiable net assets 116, ,430 Goodwill arising from acquisition 75,911 76, , ,400 Cost of the combination: Cash paid 192, ,400 Total cost of the combination 192, ,400 Key factors contributing to the $77 million goodwill are synergies existing within the acquired business and synergies expected to be achieved as a result of combining Primus with the rest of the M2 Group. 20

23 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE HALF-YEAR ENDED 31 DECEMBER EVENTS AFTER BALANCE SHEET DATE Interim Dividend On 22 February 2013, the directors declared an interim dividend on ordinary shares in respect of the half year period ended. The total amount of dividend is $15,797,613, which represents a fully franked dividend of 10.0 cents per share (on shares issued as at 31 December 2012). The interim dividend proposed, compared to the corresponding period, is an increase of 11.0% (9.0 cent dividend paid relating to 31 December 2011). This dividend will be paid on 16 April 2013.The interim dividend has not been provided for in the financial statements. 11 DISPOSAL OF BUSINESS On 21 December 2012, the Group disposed of 0014 Pty Ltd, a company that owned the Access International business (part of the Primus operations). The proceeds on disposal of $3.5 million was received in the form of an equity interest in the purchaser s holding company, Aggregato Global Pty Ltd, a specialist prepaid call card business. The difference between the disposal proceeds and the cost of disposal has been recognised as a gain in the Statement of Comprehensive Income. 12 CAPITAL COMMITMENTS The Group had contractual obligations to purchase plant and equipment, software and other value added services for $4.0 million at balance sheet date (half year 31 Dec 2011: NIL) principally relating to soft switches and gateways. 21

24 DIRECTORS DECLARATION In accordance with a resolution of the directors of, I state that: In the opinion of the directors: (a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) (ii) give a true and fair view of the financial position as at and of the performance for the half year ended on that date of the consolidated entity; and comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. On behalf of the Board Craig Farrow Chairman Melbourne, 22 February

25 For personal use only To the members of M2 Telecommunications Group Limited Report on the Half Year Financial Report We have reviewed the accompanying half year financial report of M2 Telecommunications Group Limited, which comprises the condensed statement of financial position as at 31 December 2012, the condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half year end or from time to time during the half year. Directors Responsibility for the Half Year Financial Report The directors of the company are responsible for the preparation of the half year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the half year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2012 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of M2 Telecommunications Group Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor s 23 Liability limited by a scheme approved under Professional Standards Legislation

26 For personal use only Independence Declaration, a copy of which is included in the Directors Report. We confirm that the Auditor s Independence Declaration would be in the same terms if given to the directors as at the time of this auditor s report. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half year financial report of M2 Telecommunications Group Limited is not in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2012 and of its performance for the half year ended on that date; and b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Ernst & Young Don Brumley Partner Melbourne 22 February