Cisco Australia restates 2020 as loss, now says back in profit for 2021

Networking giant finds an AU$88.2 million impairment lying under the bed it missed last year.

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The AU$79.7 million in net profit that Cisco Australia claimed last year has been shown in its most recent financials to have had no basis in reality, with the local arm of the networking giant actually posting a AU$16.7 million loss. 

On 31 January 2020, Cisco Australia purchased Zomojo, which traded under the Exablaze label and designed and built field programmable gate array network devices, for AU$118 million. It included four entities -- Zomojo, Zomojo Services, Exablaze, and Zomojo Staff Holdings -- which became subsidiaries of Cisco Australia. On 18 November 2020, Zomojo Staff Holdings was deregistered from Australian Securities and Investment Commission, and Zomojo Services followed on 25 March 2021.

In stating its latest earnings, Cisco said it needed to restate the carrying value of Zomojo as of its 2020 year end.

"During the period it was discovered that impairment charges over the carrying value of the investment in subsidiaries had not been recorded appropriately and accordingly the carrying value of investment in Zomojo of has been restated from AU$116,206,000 to AU$28,037,000 as at 25 July 2020," it said.

"Additional impairment charges of AU$88,168,000 recognised in the comparative period have resulted in the net profit for the period ended 25 July 2020 of the Parent entity being restarted from AU$68,467,000 to a net loss for the period of AU$19,701,000."

That was not the only restating Cisco Australia needed to make for 2020, as a review of its transfer pricing policies found incorrectly values there as well. Consequently, Cisco Australia restated its 2020 revenue was AU$5.7 million lower, had AU$39.6 million increase in cost of sales, and paid AU$13.6 million less in income tax.

For its 2021 fiscal year that ended on July 31, Cisco Australia reported revenue was down by AU$121 million to AU$1.87 billion, consisting of AU$1.08 billion in product revenue, which was down from AU$1.21 billion, and service revenue of AU$466 million which represents a AU$31 million increase on 2020.

With much lower impairment expenses in 2021, pre-tax profit was reported as AU$55 million and after a AU$17 million income tax charge, gave net profit of AU$37.8 million.

Cisco Systems Australia has an immediate parent of Cisco Systems Netherlands Holding B.V. before reaching its ultimate parent Cisco Systems Inc in the United States. In 2021, Cisco Australia paid a AU$70 million dividend to its owners, compared to AU$43.4 million paid out last year.

Over the course of the year, Cisco Australia was charged a total of AU$1 billion in service fees and cost of sales expenses by its parents and related parties, with AU$299 million flowing in the opposite direction to the Australian arm, both numbers are down on last year. The company said it also purchased over AU$45 million in "various goods and services" from its ultimate parent and related entities throughout the fiscal year.

As of July 25, Cisco Systems Australia had 1,392 employees, a mild increase on last year's 1,378, however its wages and salaries line item grew from AU$395 million to AU$410 million.

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