2017 Annual Report
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
(ASX:BTI)
Table of Contents
03 Corporate Summary
04 Board of Directors
06 Letter from the Founders
14 Operating and Financial Review
22 Corporate Governance Statement
25 Directors’ Report
30 Auditor’s Independence Declaration
31 Statement of Profit or Loss and Other Comprehensive Income
32 Statement of Financial Position
33 Statement of Changes in Equity
34 Statement of Cash Flows
35 Notes to the Financial Statements
51 Directors’ Declaration
52 Independent Auditor’s Report
57 Shareholder Information
59 Corporate Information
Providing access to
a portfolio of quality,
high growth companies
in the technology sector.
2
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Corporate Summary
The Company
Risk
Bailador Technology Investments Limited (ACN 601 048 275)
is a listed investment company and its shares are listed on the
Australian Securities Exchange (ASX:BTI).
The company invests in expansion stage internet-related
businesses. The value of the shares and the income derived may
fall or rise depending on a range of factors. Refer to Note 17 of the
Financial Report for further information.
Objective
Bailador invests in internet-related businesses in Australia and
New Zealand that require expansion capital. In particular, Bailador
focuses on software, internet, mobile, data, online market-places
and telecommunications-related businesses with proven revenue
generation and management capability, demonstrated business
models and expansion opportunities.
Capital Structure
The Company’s capital structure comprises 120,247,831
Ordinary Shares which trade on the Australian Securities
Exchange (ASX:BTI).
Financial KPIs
Share price
Earnings per share (cents)
Total Assets ($000)
NAV $ per share (pre-tax)
NAV $ per share (post-tax)
30 June 2017
30 June 2016
$0.90
(4.44)
136,496
1.067
1.035
$1.135
12.38
121,607
1.166
1.089
Investment Manager
Management Agreement
The Company has outsourced its investment management
function to Bailador Investment Management Pty Ltd (A.C.N. 143
060 511)(AFSL 400811). The Manager is a Sydney based privately
owned investment manager which commenced trading in 2010.
The Company has an agreement with Bailador Investment
Management Pty Ltd for the provision of management
services, the details of which are contained in Note 5 of
the Financial Report.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
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Board of Directors
David Kirk
Chairman and Executive Director
David has been chief executive of two ASX-listed companies, including diversified media company, Fairfax Media Limited, where he led a number
of successful internet sector investments. David is currently Chairman of ASX-listed companies, Trade Me Group Limited and Kathmandu
Holdings Limited and is Chairman of the Sydney Festival. He is also a director of Forsyth Barr Limited, a privately owned investment firm.
David holds several BTI portfolio directorships as Chairman of Rezdy and SMI and a director each of SiteMinder, DocsCorp and Viostream.
David is a Rhodes Scholar with degrees in Medicine from Otago University and Philosophy, Politics and Economics from Oxford University.
David enjoyed a highly successful rugby career, captaining the All Blacks to win the World Cup in 1987. He was awarded an MBE in 1987.
David holds 8,387,841 ordinary shares in BTI and an indirect interest in a further 773,887 ordinary shares.
David is a Director and shareholder of Bailador Investment Management Pty Ltd which holds a contract with Bailador Technology Investments
Limited to act as Manager. Further details pertaining to this agreement can be found in Note 5 of the Financial Report.
Paul Wilson
Executive Director
Paul has had extensive private equity investment experience as a previous director of CHAMP Private Equity in Sydney and New York and with
MetLife in London. Paul was also previously Executive Director at media focused investment group, Illyria Pty Ltd. Paul is the Chairman of
SiteMinder, and Director of Viostream, Straker Translations and Stackla. Paul is also a director of ASX-listed Vita Group Limited along with Yellow
Pages (New Zealand) and the Rajasthan Royals IPL cricket franchise.
Paul holds a Bachelor of Business, Banking and Finance from QUT and is a Fellow of FINSIA. He is a member of the Institute of Chartered
Accountants and of the Australian Institute of Company Directors.
Paul holds 3,068,136 ordinary shares in BTI and has an indirect interest in a further 410,423 ordinary shares.
Paul is a Director and shareholder of Bailador Investment Management Pty Ltd which holds a contract with Bailador Technology Investments
Limited to act as Manager. Further details pertaining to this agreement can be found in Note 5 of the Financial Report.
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BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
Board of Directors (continued)
Andrew Bullock
Independent Non-Executive Director
Andrew is a Managing Director at Adamantem Capital, a private equity firm based
in Sydney. Prior to joining Adamantem, Andrew was for many years the head of the
corporate advisory and private equity practice of Gilbert + Tobin, one of Australia’s
leading law firms. He was also previously a partner of Minter Ellison and spent three
years in the London office of Freshfields Bruckhaus Deringer.
Andrew has a Bachelor of Arts from Sydney University and a Bachelor of Laws from
the University of New South Wales.
Andrew is the Chair of Bailador’s Nomination and Remuneration Committee
Andrew holds interest in 410,422 ordinary shares in BTI.
Heith Mackay-Cruise
Independent Non-Executive Director
Heith is the independent non-executive Chair of hipages Group, the non-executive
Chair of Literacy Planet and the non-executive Chair of the Vision Australia Foundation.
He is non-executive director of the ASX listed LifeHealthcare Group and non-executive
director of ACG Education in New Zealand. Heith is also a member of the Adara
Partners Advisory Board.
Heith has a Bachelor of Economics from the University of New England and is a Fellow
of the Australian Institute of Company Directors.
Heith holds interest in 502,592 ordinary shares in BTI.
Sankar Narayan
Independent Non-Executive Director
Sankar is currently the Chief Operating and Financial Officer of ASX and NZX listed
company, Xero. He has previously been CFO at Virgin Australia Holdings Limited, Fairfax
Media and Foxtel.
Sankar has an MBA from the University of Chicago Booth School of Business and is an
FCPA (Australia). He also holds a masters degree in electrical engineering from the State
University of New York.
Sankar is the Chair of Bailador’s Audit and Risk Committee.
Sankar holds 200,000 ordinary shares in BTI.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
5
Dear fellow shareholder,
Bailador Technology Investments (Bailador) was listed on the
Australian stock exchange in November 2014 to give retail and
institutional investors the opportunity to invest in information
technology companies at the expansion stage. Expansion
stage companies in information technology have the following
characteristics: several million dollars of revenue, an established
customer base (usually international as well as domestic), proven
technology and a proven management team. They are well past
being ‘start-up’ businesses.
The companies of interest to Bailador have identified very large
target markets, have technology that is at least as good as anything
else in the world, have highly profitable unit economics and a
demonstrated effective approach to acquiring new customers in
their target markets. What these companies don’t have is enough
capital to invest in acquiring new customers rapidly and the
experience of building a company with revenue of something like
$10 million to one with revenue of $100 million or more.
Performance in 2017
The underlying investment performance of the Bailador portfolio,
measured as the increase in the NTA between 1 July 2016 and 30
June 2017 (pre-tax, and after all fees) was a decline of 6.7%.
This is a disappointing result and given our large personal
shareholdings in Bailador you can be assured we feel the pain of this
result as much as you do.
In 2017, we added two new companies to the Bailador portfolio, saw
strong increases in the value of six companies held more than a year
and registered a decline in value for two companies. In one of these
cases we wrote the investment down to zero, when in May of this
year we placed iPRO into voluntary administration.
iPRO
If you have been reading our monthly NAV reports and other updates
you will know that iPRO was in the business of providing certification
compliance verification to companies employing contractors on
large sites. Typical customers included major construction companies,
hospitals and education providers.
Contractors working on large sites must have a wide range of
documentation completed and up-to-date before they can enter the
work site. Previously the verification of the required certification had
to be done manually. iPRO created a system that allowed the original
certification and its continuing verification to be done quickly and
efficiently in real time online.
There is a large market for these services and when we invested
in iPRO it seemed that the company was ready for rapid growth.
The company had, we believed, completed its technology build,
established a solid early customer base and had a solid pipeline of
new customers about to join. Soon after investing we discovered
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the iPRO technology was not as advanced as we had been led
to believe in due diligence. However, strange as it may seem in
technology investing, when things go wrong almost invariably the
state of the technology is not the key issue. The most important
asset when in investing in technology is not the technology but the
people. We made a big mistake investing with the founder and CEO
of iPRO. He was not straight with us and often operated contrary to
board direction and other shareholders’ interests. Our contractual
protections allowed us to move him out after a period but much of
the damage was done. We did our best to work with the remaining
management team and brought in some new managers but,
unsurprisingly in retrospect, a sub-par founder cannot attract and
retain top talent. Persistent delays in product delivery led us finally
to accept that it was not in the best interests of our shareholders to
continue to fund the company.
We are sure the decision to cease funding iPRO was the right one. No
one gets every investment right and as I am sure many of you will
know from your own experience it is difficult to admit errors, take
a loss and move on. It is natural to expect things to get better next
week or next month and to be tempted to put good money after
bad. It is natural for investors to see good results as confirmation of
investment genius and bad results as the result of something outside
your control that will come right soon enough. Owning mistakes
as a team, treating a follow-on investment as if it were the first
investment and above all moving early (although of course it is never
early enough), are very important disciplines we are working hard to
apply in investing yours and our money.
The decline in the value of iPRO was catastrophic for iPRO but not for
the Bailador portfolio. iPRO made up 6% of the Bailador portfolio at
the time we wrote it down to zero (at its highest point it made up just
under 9% of the portfolio).
The ‘portfolio effect’ (correctly applied, which it often isn’t) is
important in investing. Later in this letter we set out how we believe
you can benefit from the ‘portfolio effect’ by adding an investment in
Bailador to your investment portfolio.
New Investments
We made two new investments in the 2017 financial year and we
couldn’t be happier with them both.
DocsCorp
In July 2016 we invested in DocsCorp. As we concluded the
investment prior to the publication of the 2016 Annual Report we
were able to explain what DocsCorp does and our expectations for
the company in last year’s Annual Report.
Dean Sappey and Shane Barnett, the co-founders of DocsCorp, and
their team have set about diligently implementing the plan they
brought to us when they were looking for an investor to help them
grow faster. They have built out and launched the cloud offering for
their most important product, invested in new sales staff in their
European and North American offices, opened new sales offices in
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Letter from the Founders Pittsburgh and Portland, scaled up the London office, invested more
in marketing and established systems and reporting to support a
larger global company. The results have been impressive and in
July this year as a result of strong revenue growth and a greater
proportion of recurring revenue we were able to write up the value of
our investment in DocsCorp by 49%.
Continuing investments
You can read about each of the companies in our portfolio in the
Operating Report on page 14. Taken as a whole the nine companies
now employ 1,050 people, have offices in 13 countries and 24 cities
and combined revenue of $153m which grew at 37% in 2017.
Why an investment in Bailador has a
place in a well-constructed portfolio
As any and every investment manager will tell you, putting together
a well-constructed investment portfolio requires that you pay
attention to risk and return. Most often risk and return is balanced
in a portfolio by investing in a variety of asset classes. The most
common are equities, bonds, property and cash. Within the equity
component, investment will likely be spread across a range of
different companies. More often today than ever before investors
are investing in Indices. And many ‘active’ fund managers establish
portfolios based on the Index, adding a ‘tilt’ toward a sector or a few
particular companies here and there.
Companies like Bailador are not considered appropriate for these
Index-hugging portfolios but they should be. An investment in
Bailador is effective as a risk management strategy in Index-heavy
portfolios because movements in the value of Bailador are not
correlated with movements in the value of the market or market
Indices. We set out in some detail the theory of portfolio risk
management in Figure 1 on pages 8 and 9. Readers in a hurry
can skip it, but those with a bit more time will gain a lot from
understanding the proper use (and regular misuse) of portfolio
risk management.
“
Taken as a whole the nine
companies now employ 1,050
people, have offices in 13 countries
and 24 cities and combined revenue
of $153m which grew at 37%
“
InstaClustr
In November 2016 we invested in InstaClustr. InstaClustr provides
technology and services to the (wait for it) NoSQL open source
database as a service market.
At their simplest, information technology ‘stacks’ (as the jargon goes)
consist of infrastructure, a database and multiple applications. The
most fundamental requirements of a database are that the data it
stores is safe and secure, able to be accessed and processed very
quickly and that as the requirements for storage and access increase
the database is able to handle more and more (and more and
more and more) data without slowing down or requiring expensive
new investment.
Traditional databases – the ones that have been around since the
1970s – are called relational databases because they map and store
data in a series of tables that relate to other tables. The best known
relational databases are SEQUEL or SQL databases. These databases
have served the IT industry well and are still the best databases for
many companies. However, in the last 10 years, the development of
the internet and new business models have led to the growth of very
many globally connected businesses that access tens or hundreds of
millions of customers and their data daily, i.e. “big data” companies.
This had led to a growing demand for databases able to manage
massive data storage and computation requirements. Relational
databases do not scale particularly efficiently and non-relational
or NoSQL databases have been developed for companies that deal
with enormous amounts of data and need to scale their databases
cost-effectively.
InstaClustr provides a technology and services solution for customers
that use NoSQL databases and associated applications. InstaClustr
was founded in Canberra and has close ties to the University of
Canberra, which is able to supply the company with a steady stream
of highly qualified non-relational database technical professionals.
The CEO and head office of the company is in Palo Alto in California
close to the head offices of many of the company’s customers who
include Atlassian, Sonos, Adstage and Campaign Monitor. 95% of
InstaClustr’s revenue comes from outside Australia and New Zealand,
mostly from the US.
We made our first investment in November 2016 and were pleased to
be able to buy some more of the company when early shareholders
exited in March 2017. InstaClustr has grown its revenue by more than
100% since our initial investment and we are very excited by the
company’s prospects.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
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Letter from the Founders (continued) Figure 1: The ‘Portfolio Effect’
The theoretical basis for managing risk by building a portfolio is
summed up by the ‘portfolio effect’, which says the change in value
of a portfolio of investments will be less than the change in value of
an individual investment. For example, if you have 10 companies in
your portfolio each with a 10% weighting and one of them drops in
value by half, the value of your portfolio will drop not by the 50% of the
single investment but by 5% since the remaining nine investments
making up 90% of the portfolio have not changed in value.
The very important assumption underlying the ‘portfolio effect’,
which is too rarely made clear, is that its effectiveness as a risk
management tool depends entirely on the degree of correlation
between the securities in the portfolio.
To continue with the above example, let’s suppose the company
whose value declined by 50% is engaged in producing oil in Nigeria
and it has declined in value so drastically because the Nigerian
government has just doubled the government royalty on oil. Now, if
all nine of the other companies in your portfolio are also engaged in
producing oil in Nigeria they too will decline in value, probably by the
same amount. Notwithstanding you have a portfolio of investments,
there is no ‘portfolio effect’ to protect you.
Chart 1 – ASX100 by Sector
This seems all very obvious when set out this way but even knowing
this many investors, particularly in Australia and New Zealand, have
broad portfolios that are not set up in a way that provides genuine
‘portfolio effect’ protection. For instance, many portfolios, in order
to gain cost-effective exposure to Australian shares, are invested
in the ASX100 Index. There are 100 companies in the ASX100 Index,
which sounds like a broad portfolio and a portfolio that will protect
an investor via the ‘portfolio effect’. But it is not. The ASX100 Index
has a 41% weighting to financial stocks and aside from a few
large companies – BHP and CSL are examples – the remainder of
the ASX100 is largely made up of companies whose fortunes very
much rise and fall with the performance of the Australian domestic
economy (see Chart 1).
Far from having a well hedged portfolio, an investor invested in the
ASX100 has a highly concentrated exposure to Australian banks and
insurance companies and the Australian domestic economy.
What matters in seeking to manage risk through the use of the
‘portfolio effect’ is not the number of companies in your portfolio,
nor how ‘safe’ a certain company is supposed to be, but whether
or not the value of the companies in your portfolio will move in the
same direction at the same time when certain fairly predictable
events, such as the bursting of a property bubble or a change in
interest rates, occur.
Financials 40.6%
Materials 16.6%
Real Estate 7.7%
Health Care 7%
Industrials 6.9%
Consumer Staples 6.9%
Energy 3.9%
Teleco Services 3.8%
Consumer 3.4%
Utilities 2.3%
IT 1%
Based on GICS© sectors as of July 31 2017
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BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Letter from the Founders (continued) The betas and correlations of the three potential securities that may
be added to your portfolio are as follows,
Security
Beta
Correlation
The market Index
Woolworths
Bailador Technology Investments
1.0
0.71
N/A
100%
70%
0%2
1. Estimated form US Food and Grocery sector beta of 0.69
2. Assumed – see body of Founder’s Letter
Depending on which scenario you proceed with the value of
your share portfolio at the end of day in which the Reserve Bank
announces the increase in interest rates and the market drops by 5%,
will be:
Scenario 1
Scenario 2
Scenario 3
Invest in the Index
Invest in Woolworths
Invest in Bailador
$104,500
$104,650
$105,000
As you can see the investment in Bailador produces the best risk
management outcome. In Scenario 1 the full $110,000 investment
declines by 5%. In Scenario 2 the original $100,000 declines by 5%
and the $10,000 investment in Woolworths, since it is 70% correlated
with the market, declines by 3.5% (70% of 5%). In Scenario 3 the
original $100,000 invested in the Index declines by 5% and the value
of the investment in Bailador, being uncorrelated to the market, is
unchanged.
Risk management is about understanding correlation
Two securities, such as shares in two companies listed on the ASX,
are said to be correlated when they both move in the same direction
at the same time in response to market information. Different sectors
and companies are more or less correlated to market movements. In
order to compare the correlation of industry sectors and individual
companies to movements in the market as a whole, finance theory
allocates to the total market a number (called its beta) of 1.0. A
company whose share price moves less than 1% when the market
moves (up or down) by 1% has a lower beta than 1.0 and a company
whose share price moves more than 1% when the market moves 1%
has a higher beta than 1.0.
Now, here’s the interesting bit. It is true to say that a company with a
beta higher than 1.0 is more volatile - up and down - than the market
as a whole (and obviously more volatile than a company with a beta
less than 1.0), but it is not true to say that when you add a company
with a beta higher than the average beta of your portfolio to your
portfolio, that your portfolio has become more volatile. It all depends
on correlation.
Adding a company, whatever its beta may be, that is not correlated
with the rest of your portfolio, such as Bailador, reduces the volatility
of your portfolio.
An example will help demonstrate how this works. Let’s suppose you
have $100,000 invested in the market Index and your great aunt dies
and leaves you $10,000.
You decide to invest the money in the stock market and you are
considering three potential strategies:
1. Invest the $10,000 in the Index. It’s low cost and covers the
market, or
2. Invest the $10,000 in Woolworths. You know Roger Corbett’s no
longer there but the new guy seems pretty good and it’s predictable
and safe, or
3. Invest the $10,000 in Bailador Technology Investments. You don’t
know much about technology but it seems sensible to have some
exposure.
Which of these three strategies is the best risk management strategy?
To assess the risk profile of the portfolio we have to assume a
negative news item and see how the portfolio responds. Let’s say
the day after you invest your aunt’s bequest the Reserve Bank
unexpectedly puts up interest rates by 1% and the share market
declines by 5%.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
9
Letter from the Founders (continued) Figure 2: BTI Share Price vs ASX200
BTI Share Price vs ASX200
e
c
i
r
P
e
r
a
h
S
I
T
B
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
7150
6650
6150
0
0
2
X
S
A
5650
5150
4650
4150
3650
Nov-14
Feb-15
May-15
Aug-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
Feb-17
May-17
BTI
ASX200
How do we know Bailador is not correlated to the ASX200?
First, we can look at the history of changes in the value of a
relevant Index and compare this to changes in the value of Bailador
Technology Investments (BTI). Figure 2 tracks the BTI share price
against the ASX200 since the day of BTI’s listing. There seems to be
very little correlation here.
Secondly, we can use common sense and apply our own judgement.
We do this by asking the right questions. For instance, is it probable
that movements in interest rates and the level of household debt
in Australia, which will certainly move the market, will change the
value of the Bailador portfolio companies? We can ask the same of
movements in iron ore price levels or of movements in the US share
market, both of which will also move the ASX Indices.
The Bailador portfolio contains nine companies which have
developed and are selling information technology that is displacing
traditional higher cost, less effective ways of doing things. The nine
companies collectively are growing revenue at 37% per annum and
are making 60% of their sales outside Australia and New Zealand.
Common sense tells us that it is not probable that movements in
the value of the BTI portfolio are correlated to movements in the
value of the ASX Indices or to the large companies it represents.
Macroeconomic changes, which buffet the market every day, do not
affect the growth and prospects of these companies. Accordingly,
it is highly probable that the addition of a holding in Bailador to a
portfolio weighted to the ASX Indices and/or large capitalisation
Australian stocks will reduce the volatility of the portfolio.
But wait, there’s more! (I feel like a Ginsu knife salesman). This
reduced risk also comes with a high probable expected return.
An investment in Bailador requires no trade off in your portfolio
between the enhanced risk management that comes from investing
in a non-correlated stock and the high probable expected return you
will get from the investment.
10
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Letter from the Founders (continued)
Probable expected return
None of us can know the future. Good investment decisions require
that we make educated guesses based on all the information we
have and accept that we inevitably live in a world of probabilities
not certainties.
Very often the most important thing is to ask the right questions.
We think an important question for investors in Australia or New
Zealand to ask when considering the likely return from an investment
in the technology sector is this: Is it probable that information
technology will be a larger share of the market capitalisation of the
ASX/NZX in the future?
Figure 3 shows you the changes in the market capitalisation of the
top 5 companies in the world over the last 15 years.
Hopefully the chart convinces you that it is highly probable that
information technology will be a larger share of the ASX/NZX Indices
in the future. (Information technology currently makes up just 1% of
the ASX100).
If information technology is to be a larger share of the ASX/NZX
Indices in the future it will be because new internet/IT companies
have successfully joined the market and because those that are
listed now have grown more quickly than the currently listed
companies that are not in the information technology sector.
When we look at the business landscape all over the world it is clear
that many technology companies are growing more quickly than
their traditional incumbents.
Another important question for investors to ask themselves is
whether or not they think this will continue. Is it probable that
companies having their lunch eaten by online and mobile business
models today will somehow get their sandwich and apple back next
week or next year?
We think it is very improbable that this will happen and that the
value shifts that we are seeing today in sectors such as media,
retail, financial services, travel, hotels, taxis and entertainment will
continue and will spread to other sectors. If we are right, billions of
dollars will continue to move from other sectors to the technology
sector in the years ahead.
We believe it is certain that the technology sector will be a larger part
of the ASX/NZX Indices in the future and that many billions of dollars
will be made by investors who think the way we do.
To summarise, we believe it is highly likely the information
technology sector will continue to grow more quickly than the
market as a whole and that investing in the right technology
companies will deliver excellent returns for investors for the
foreseeable future. Further, it is clear that movements in the value of
companies such as Bailador (BTI) are not correlated with movements
in the value of the market and therefore when added to your
portfolio will reduce its volatility.
Figure 3: The Top 5 Companies in the World Are Now Tech Companies
1
2
3
4
5
2001
2006
2011
2016
Source: Jeff Desjardins, Visual Capitalist, Chart: The Largest Companies by Market Cap Over 15 Years, August 12 2016
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
11
Letter from the Founders (continued) Different ways to invest in technology
There are a number of ways to invest in information technology,
including through a private venture capital fund, by buying shares
in large global technology companies or investing in a technology
Index. Each approach has its advantages and disadvantages and we
don’t suppose that an investment in Bailador is right for everyone.
Some investors will prefer the risk and thrill of a pre-revenue new
listing, others will be happy to tie their money up for more than 10
years in a private fund, still others will prefer the lower risk/return of
listed large cap companies.
An investment in Bailador will suit investors who:
• prefer to invest at the growth or expansion stage;
• like the capital structure and contractual protections that can
only be achieved by investing in private companies;
• think a portfolio approach makes sense;
• believe close oversight by experienced people and board
involvement is important;
• understand technology investing requires specialist expertise;
• value the liquidity of a listed share; and
• require the people managing their money to have plenty of
their own wealth at stake.
If this sounds like you then you will find us at ASX:BTI.
Thank you for your support this year. We haven’t delivered the
returns in 2017 we hoped to, but we feel confident that we have a
sound strategy, a great team and are invested in a portfolio of very
high-quality growth-stage information technology companies run by
outstanding founders and their teams.
David Kirk
Chairman
Executive Director
Paul Wilson
Executive Director
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BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Letter from the Founders (continued) We believe it is certain that the
technology sector will be a larger part
of the ASX/NZX Indices in the future
and that many billions of dollars will be
made by investors who think the way we
do.
David Kirk and Paul Wilson
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
13
Principal Activities
Bailador Technology Investments Limited (BTI) was established
in August 2014 to invest in information technology businesses
in Australia and New Zealand that require growth capital.
The target businesses typically have an enterprise valuation
between $10 million and $200 million. In particular, the Company
focuses on software, internet, mobile, data and online market-places
businesses with proven revenue generation and management
capability, demonstrated successful business models and
expansion opportunities.
There have been no significant changes in the nature of the
Company’s principal activities during the financial year.
Our Business Model and Objectives
Providing satisfactory returns to shareholders is our primary
objective. Our success in achieving this objective is determined
by total shareholder return (TSR) over time. The TSR we deliver
will, over time, be directly related to the return on invested capital
we achieve.
Our business model is to identify, buy and hold investments in
a portfolio of private internet-related businesses with strong growth
prospects. Returns to shareholders will be delivered by growth in the
value of investments held and through distributions to shareholders
following the sale of investments. Following sales, we will continue
to make new investments to maintain a portfolio of investments.
Investments made by BTI are typically structured to provide a level
of contractual protection superior to that available to investors
in ordinary shares, thereby reducing risk. Thorough due diligence
is carried out before investments are made and BTI representation
on portfolio company boards ensures BTI’s close involvement with
operational decisions.
BTI continues to assess a strong pipeline of potential investments,
and will continue to make investments as attractive
opportunities arise.
(Instaclustr) has been held for too short a period for any valuation
change to be undertaken. However, the impairment of the
investment in iPRO combined with a reduction in the carrying value
of the investment in Viostream has resulted in a decline in value for
the year.
Review of Operations
New Investments
DocsCorp
In July 2016, BTI made a $5m investment in convertible preference
shares in DocsCorp. DocsCorp has performed strongly since our
investment and was revalued upwards by 49.2% in June 2017. BTI
has valued DocsCorp at $7.5m at 30 June 2017. BTI has two members
on the board of DocsCorp.
InstaClustr
In November 2016, BTI invested $4.0m in convertible preference
shares in Instaclustr. BTI completed a $0.5m follow-on investment
purchasing shares from an Instaclustr shareholder in March 2017.
Instaclustr is growing rapidly with revenue growth of around 100%.
This investment has been held for less than a year and accordingly
no change in valuation has been made since investment. BTI has
one member on the board of Instaclustr.
Follow-on Investments
SMI
In September 2016 BTI committed to a $1.9m follow-on investment
in SMI which was completed by March 2017. SMI has launched a new
product in FY17 which has seen it very well positioned for US growth.
Straker Translations
In October 2016, BTI made a follow-on investment of $3.8m in Straker
Translations. The follow-on investment was at a price 5% higher than
BTI’s previous carrying value and has seen the original investment
in Straker Translations grow by 26% since investment in October 2015.
Operating Results
Viostream
In April 2017 BTI invested $1m in Viostream at the same price as its
previous valuation.
Stackla
BTI invested $3.25m in Stackla in December 2016 at a valuation
5% higher than the previous valuation. In June 2017 BTI invested
a further $1.5m. Stackla’s growth has been strong with Annual
Recurring Revenue (ARR) increasing ~40% year-on-year.
The profit of the Company for the financial year ended 30 June 2017
amounted to a loss of $4,965,000 (2016 $8,864,000 profit), after
providing for income tax. Combined revenue growth for the financial
year ended 30 June 2017 across the entire portfolio was 37%. Further
information on individual portfolio company growth can be found in
the portfolio operating reports.
The underlying investment performance of the Bailador portfolio,
measured as the increase in the NTA between 1 July 2016 and
30 June 2017 (pre-tax, after all fees, adjusted for capital raised),
was a decline of 6.7% pa over the year. Six of the companies
in the portfolio have had positive revaluations in the year and one
14
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Operating and Financial Review Viostream
In April 2017 BTI wrote down its investment in Viostream by $6.9m
or 23% of its previous carrying value. The write down followed
slippage in some of Viostream’s FY17 sales deals. Viostream has
a solid technology platform and with newly structured pricing
models, BTI remains confident in Viostream’s ability to deliver
revenue growth in the medium term.
Valuation of Investments
The Directors have reviewed the value of the investment portfolio
and the net tangible assets of BTI as at 30 June 2017. In conducting
their valuation review, the Directors have had regard to the BTI
investment portfolio Valuation Review Report prepared by BDO
Corporate Finance (Qld) Ltd.
Information regarding the valuation of the investment portfolio is set
out in Note 18 of the financial statements and in the section below
“Operating Reports on Portfolio Companies”.
Investments are currently held at cost (plus accrued interest
where applicable), the valuation implied by the latest third party
investment or in the case of SiteMinder and DocsCorp at a price
determined by globally benchmarked revenue multiples and
trading performance.
Review of Operations (continued)
Rezdy
BTI invested $1.1m in Rezdy in February 2017. BTI had previously
re-valued Rezdy upwards by 39% in October 2016, and this follow-on
was at that same valuation.
Lendi (formerly Click Loans Group)
In May 2017, BTI made a $1.5m follow-on investment in Lendi.
The investment was made alongside other sophisticated investors
at a valuation 42.3% higher than the price BTI paid for its $5m
investment in May 2016.
iPRO
BTI made a number of follow-on investments throughout FY17 in
iPRO to support development of a new platform. These investments
totalled $4.1m. This investment is fully impaired.
Revaluations
The following investments were re-valued upwards during the year
to a new market value set by third party investment:
• Straker Translations: increased by 5% in October 2016
• Rezdy: increased by 39% in October 2016 (with third party
investment in February 2017)
• Stackla: increased by 5% in December 2016
• Lendi: increased by 42.3% in May 2017
The following investments were revalued under BTI’s revaluation
policy by reference to comparable trading and transaction multiples,
following no third party transactions for twelve months.
• SiteMinder: increased by 29% in December 2016
• DocsCorp: increased by 49.2% in June 2017
Impairments
iPRO
On 5 July 2017, BTI announced iPRO Solutions Pty Ltd, a wholly
owned subsidiary of iPRO Holdings Pty Ltd had been placed
into voluntary administration. The decision to place iPRO into
administration followed the failure of the company to deliver
a new technology platform, essential to its success. Earlier delays
in platform development and the consequential delays in revenue,
led BTI to partially write-down its investment in October 2016.
The remainder of BTI’s investment was written down to zero
in June 2017. BTI is a secured creditor of iPRO Holdings Pty Ltd
and may recover some of its investment from the administration.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
15
Operating and Financial Review (continued) Review of Operations (continued) | Operating Reports on Portfolio Companies
SiteMinder
Viostream
SiteMinder is the world leader in hotel channel management
and distribution solutions for online accommodation bookings,
seamlessly connecting to more than 550 distribution partners,
including leading Online Travel Agents (OTAs) such as
Booking.com, Expedia, TripAdvisor, Google and C-Trip. Established
in 2006, SiteMinder has developed a suite of products used by
accommodation providers in over 160 countries to help increase
online revenue, streamline business processes and drive down the
cost of acquisition of bookings. SiteMinder facilitates transactions
in the fast growing market of online accommodation booking.
The company’s flagship product is The Channel Manager, an online
distribution platform. Its suite of products includes The Booking
Button (a booking engine enabling direct hotel bookings via the
web), Canvas (an intelligent website creator for hoteliers), Prophet
(a real-time rate intelligence tool) and GDS by SiteMinder (a single
point of entry to a network of travel agents and the world’s leading
global distribution systems).
SiteMinder is a software-as-a-service (SaaS) business, licencing
all products on its software platform on a monthly basis to over
26,000 customers worldwide, making it the largest hotel channel
management and distribution solution in the world. It operates
a subscription business model with greater than 90% of revenue
being recurring in nature.
SiteMinder has performed very well in the year to 30 June 2017,
with continued top-line growth in excess of 40% and strengthening
of underlying KPIs. The company broadened its senior management
team through the recruitment of a CMO, a VP of Service Delivery,
a Director of Engineering and a Director of Product Marketing.
In December 2016, the company announced the formal opening of
its EMEA headquarters in Galway, Ireland. The company employs 500
people across its six offices in Sydney (global headquarters), Dallas,
Galway, London, Bangkok and Cape Town.
Through additional strategic partnerships secured during the year,
SiteMinder has added to the number of advanced ways a hotel can
distribute its inventory.
Viostream (previously Viocorp) is a cloud based video platform for the
creation, management and distribution of digital video. Viostream’s
platform is used by corporate and government enterprises for
business communications such as marketing, internal employee
engagement and corporate relations.
Over 90% of Viostream’s revenue is recurring in nature, with a licence
fee gross margin above 80%. Viostream’s recurring revenue declined
by 17% in FY17. This decline was the result of slippages in a select
number of key sales opportunities and the exiting of unprofitable
international deals. While it is disappointing some of Viostream’s
sales deals slipped in FY2017, they have not been lost and will
present qualified sales opportunities in FY2018. Once aware of these
slippages, Bailador wrote down its investment in Viostream by 23%
in April 2017.
During FY2017 Viostream implemented substantial cost saving
measures and reduced its monthly operating costs by over 35%.
These savings were largely achieved via personnel changes and
reducing the use of external contractors. As part of the transition
of senior management Neil Jackson (previously Sales Director) was
appointed CEO and he has appointed a strong executive team under
his leadership.
During the latter part of FY2017, Viostream launched two new
subscription packages that are based on per seat pricing. This per
seat pricing model allows Viostream to target companies outside
of the ASX100 along with single departments in large commercial
and government enterprises. This will widen Viostream’s current
addressable market and reduce its reliance on large scale
enterprise customers.
Viostream’s product/market position continues to be solid,
particularly in the Australian market. The core target market for
Viostream – selling SaaS licences to the enterprise and government
sectors – is growing rapidly as both private enterprise and
government make more use of video as a communication tool within
their organisations. This is being reflected in the growing quality and
size of Viostream’s sales pipeline as it enters FY2018.
Valuation 30 June 2017:
Valuation at 30 June 2016:
Investment/(Divestment)
since 30 June 2016:
Basis for valuation:
Securities held:
$40.5m
$31.3m
$0m
Valuation 30 June 2017:
Valuation at 30 June 2016:
$23.0m
$28.5m
Investment since 30 June 2016:
$1.0m – April 2017
Revenue multiples
Convertible preference shares
Basis for valuation:
Securities held:
Cost plus accrued interest, with
cross check of revenue multiples
Convertible preference shares
and convertible notes
16
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Operating and Financial Review (continued) Review of Operations (continued)
Stackla
Straker Translations
Stackla is a User-Generated Content (UGC) management platform
that enables brands to incorporate online content published by their
customers in their brand marketing strategy. UGC is aggregated from
over 30 data sources such as Facebook, Twitter, Instagram, YouTube,
Wordpress and Twitch. Through its recent launch of Co-Pilot, which
leverages predictive intelligence and automation, Stackla identifies
authentic and compelling content for each of a brand’s consumer
segments, delivering personalised experiences at scale.
The use of UGC in a brand’s marketing strategy has two core benefits:
(1) it provides a source of trusted third-party validation, increasing
customer conversion to sale through greater authenticity, and
(2) it reduces the cost to the company of content creation.
Stackla offers customisable displays, plugins for a brand’s marketing
tech stack, and a suite of APIs for developing deep integrations
and custom activations. The platform also offers brands the tools
required to obtain “rights for use” from the content creator.
Established in 2012, Stackla is trusted by more than 450 brands across
travel & hospitality, consumer goods, retail, sport and not-for-profit sectors.
Stackla is designed to meet the needs of enterprise-level organisations
including Ford, Sony, Disney and Dan Murphy’s. The business model
is software-as-a-service (SaaS), licensing its platform to customers
on an annual basis. Over 90% of Stackla’s revenue is recurring in
nature and two thirds of the company’s revenue is generated outside
of APAC.
The geographical spread of offices has changed since prior year:
permanent staff are no longer based in Melbourne and Singapore.
Representatives in the company’s Sydney office are addressing
opportunities in these markets. To achieve greater coverage across
the US, the company opened an office in New York. Stackla
employs 60 FTEs across its offices in Sydney, San Francisco
(headquarters), New York and London. During the year the company
strengthened its senior management team with a VP of Global Sales
and added a US-based seasoned entrepreneur to the Board as
Non-Executive Director.
The company has exhibited solid operational performance over the
past 12 months, launching a core product, Co-Pilot, announcing
a strategic integrated channel partnership with Episerver, and growing
its top-line +40% YoY whilst improving core sales and retention metrics.
In March 2017, BTI’s Convertible Note reached maturity and BTI
converted the note into Convertible Preference Shares. There was
no impact on carrying value as BTI had been accounting for the
Convertible Note on an “as-converted” basis.
Valuation 30 June 2017:
Valuation 30 June 2016:
Investment since 30 June 2016:
Basis for valuation:
Securities held:
$12.6m
$7.4m
$3.3m – December 2016
$1.5m – June 2017
Recent third party investment
Convertible preference shares
Straker Translations (Straker) is a provider of 24/7 cloud-enabled
translation services to 10,000 customers across 20 countries ranging
from small businesses to ASX200 companies. Straker’s proprietary
technology and platform allow it to achieve industry leading
gross margins.
Straker’s growth plans are built on four key areas namely, online
marketing, corporate sales, API partnerships and seeking out
appropriate M&A opportunities.
Straker has made substantial progress in developing its API strategy
which allows mass market content and ecommerce platforms such
as Yellow Pages Canada, The Hut Group UK, Wordpress and Magento
to connect directly into the Straker translation platform. Straker’s
API strategy allows it to leverage the large customer bases of these
content platforms to cost effectively acquire customers.
During FY2017 Straker completed the acquisition of Ireland-based
Eurotext, and US-based Elanex which added additional revenue
to the business in FY2017. Straker will significantly improve the gross
margins of acquired businesses by utilising the superior technology
of the Straker platform and will reduce overhead by removing
duplicate costs.
Straker continues to strengthen its corporate sales efforts by hiring
experienced sales executives, which has proved very successful in
the UK and which is now being rolled out in other markets. Straker
has also added an experienced CFO, recruited from a listed
UK company.
Industry feedback throughout the course of FY2017 continues
to highlight the technology advantage Straker holds, not only in the
setup of its platform, but the translation engine that sits at the heart
of its platform.
The strategic prospects for Straker appear increasingly strong as the
company develops its position in the growing US$40bn translation
market with a technology solution that boasts superior operating
margins relative to the incumbent players.
Valuation 30 June 2017:
Valuation 30 June 2016:
Investment since 30 June 2016:
$8.7m
$4.6m
$3.8m
Basis for valuation:
Securities held:
Recent third party investment
Convertible preference shares
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
17
Operating and Financial Review (continued) Review of Operations (continued)
DocsCorp
Standard Media Index
In FY2017 SMI launched its new full market TV product called AccuTV.
The product provides a comprehensive analytical view of the US
TV ad spend market. This product is used by media companies and
financial investors to make fundamental strategic decisions about
advertising inventory pricing and media company value respectively.
SMI has seen a successful take-up of the new product amongst its
existing customer base and won new customers. During FY2017
SMI successfully upgraded its contract with NBC and signed new
agreements with Fox, Turner and Discovery. A high quality pipeline
of potential sales prospects has been developed.
In the 12 months to June 2017, SMI grew revenue 12% and was
EBITDA profitable with half of its revenue generated outside Australia.
During the year, SMI completed the renegotiation, of its core Media
Agency data supply agreements, extending them and improving
margin considerably. Access to agency data remains exclusive.
Following the successful launch of the AccuTV product there is the
strong potential for SMI to develop additional data products that
will allow US brands and advertisers to better understand the
effectiveness of their TV advertising spend.
Valuation 30 June 2017:
Valuation at 30 June 2016:
Investment since 30 June 2016:
Basis for valuation:
Securities held:
$7.4m
$5.5m
$1.9m
Cost with cross check
of revenue multiples
Convertible notes and
ordinary shares
DocsCorp provides on-premise and cloud-based document productivity
software for law firms, accounting firms and document management
professionals via a suite of four different products. The company
operates within the Enterprise Content Management (ECM) market.
DocsCorp has 3,000 customers in 32 countries deploying over 250,000
licences. Its product suite integrates with over 30 different enterprise
content management systems. DocsCorp generates 80% of its
revenue outside Australasia and the company is EBITDA profitable.
BTI invested in DocsCorp in July 2016 and the company is using
BTI’s investment to build on its strong position in its existing
markets, as well as to grow into new industries. The company is well
positioned to leverage its product leadership in the legal industry
into other sectors, particularly in the accounting industry.
During the course of FY2017 key hires were made across the sales
and marketing functions and new offices were opened in London
and Pittsburgh. The business also brought to market full cloud
functionality for one of its flagship products, CompareDocs,
a product that caters to both the SME and enterprise markets.
DocsCorp continued its strong growth, especially in the Northern
Hemisphere. In the final quarter DocsCorp won two global deals
with two of the “Big 4” accounting firms adding an additional
150,000 users to its user base in FY2018.
The strategic prospects for DocsCorp look increasingly attractive
underpinned by the business’ clear product leadership and strong
opportunities for growth in the US and European markets.
BTI revalued its investment in DocsCorp up by $2.5m (49.2%)
in June 2017 based on the strong revenue growth and improvement
in recurring revenue mix achieved by DocsCorp since BTI’s investment
twelve months ago.
Valuation 30 June 2017:
Investment since 30 June 2016:
Basis for valuation:
Securities held:
$7.5m
$5.0m – July 2016
Revenue multiples
Convertible preference shares
18
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Operating and Financial Review (continued) Standard Media Index
Lendi
Rezdy
Review of Operations (continued)
In FY2017 SMI launched its new full market TV product called AccuTV.
The product provides a comprehensive analytical view of the US
TV ad spend market. This product is used by media companies and
financial investors to make fundamental strategic decisions about
advertising inventory pricing and media company value respectively.
SMI has seen a successful take-up of the new product amongst its
existing customer base and won new customers. During FY2017
SMI successfully upgraded its contract with NBC and signed new
agreements with Fox, Turner and Discovery. A high quality pipeline
of potential sales prospects has been developed.
In the 12 months to June 2017, SMI grew revenue 12% and was
EBITDA profitable with half of its revenue generated outside Australia.
During the year, SMI completed the renegotiation, of its core Media
Agency data supply agreements, extending them and improving
margin considerably. Access to agency data remains exclusive.
Following the successful launch of the AccuTV product there is the
strong potential for SMI to develop additional data products that
will allow US brands and advertisers to better understand the
effectiveness of their TV advertising spend.
Valuation 30 June 2017:
Valuation at 30 June 2016:
Investment since 30 June 2016:
Basis for valuation:
Securities held:
$7.4m
$5.5m
$1.9m
Cost with cross check
of revenue multiples
Convertible notes and
ordinary shares
Lendi (formerly Click Loans Group) is a disruptive technology
business that aims to fundamentally improve the home loan
selection and application process for Australian borrowers.
The Lendi platform is a home loan comparison and fulfilment portal
that uses advanced technology to match borrowers with over
1,600 mortgage products (including its own proprietary mortgage
product – Click Loans) offered by a panel of 34 lenders, and enables
a borrower to complete a home loan application entirely online
(with the assistance of a designated “Home Loan Concierge”).
Click Loans, Lendi’s proprietary home loan, is an end-to-end
online mortgage product for new purchases and refinance,
backed by several of Australia’s largest financial institutions.
Lendi generates revenue by a combination of upfront and trailing
commissions, consistent with the home loan brokerage model.
The business has performed very well over the past 12 months,
successfully launching the Lendi platform in September 2016
and producing top line growth of 100% YoY. In June 2017, Lendi
announced a joint venture to launch Domain Loan Finder with
Domain Group, a leading Australian provider of multi-platform
property solutions.
Lendi’s success to date has enabled it to capture 1% of the Australian
third party home loan market, 20% of the size of Aussie Home Loans.
The business is working towards achieving 5% market share of the
Australian third party loan market within five years.
Established in 2013, Lendi employs over 200 people across Australia,
and is headquartered in Sydney.
Valuation 30 June 2017:
Valuation 30 June 2016:
$7.2m
$4.0m
Investment since 30 June 2016:
$1.5m – May 2017
Basis for valuation:
Securities held:
Recent third party investment
Ordinary shares
Rezdy is Australia’s leading booking software, channel management
tool and B2B marketplace for the tours and activities sector. The
company’s channel management and distribution solutions increase
online and mobile sales of tours and activities and facilitate greater
reach through leading global distribution partners such as Viator,
C-Trip and Expedia. Rezdy’s booking software platform also simplifies
back-end operations for customers with inventory, scheduling and
reservation engines.
Rezdy’s B2B marketplace connects tour and activity operators
with over 3,800 independent Agents and handles activity and
commission payments.
Established in 2012, Rezdy has more than 2,000 active customers
who have collectively processed more than $1.2bn in booking
revenue per annum through the platform. The company generates
approximately half its revenue outside of Australia with the US being
Rezdy’s second biggest market. The core of Rezdy’s business (booking
software) generates revenue through a software-as-a-service (SaaS)
model in which subscription fees are paid on a monthly or annual
basis. The B2B marketplace generates revenue through license
subscriptions and transaction fees. Approximately 90% of Rezdy’s
revenue is recurring in nature.
Over the past 12 months Rezdy demonstrated YoY growth in revenue
in excess of 80%, materially increasing its foothold in the US. The
company has significantly strengthened its senior leadership
team, adding four key hires: a new COO/CFO, Global Customer
Success Director, US Head of Sales and Australian Head of Sales.
Rezdy employs 40 people across its two offices in Sydney (global
headquarters) and Las Vegas (US headquarters).
Valuation 30 June 2017:
Valuation 30 June 2016:
Investment since 30 June 2016:
$4.5m
$2.7m
$1.1m
Basis for valuation:
Securities held:
Recent third party investment
Convertible preference shares
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
19
Operating and Financial Review (continued) Review of Operations (continued)
Instaclustr
iPRO
Instaclustr is a leading global provider of a management platform
and enterprise support solutions for database technologies such
as Apache Cassandra, ScyllaDB, Apache Spark and Ellasandra.
Instaclustr helps companies managing huge data flows and pools
to optimally manage their databases. The company addresses
a multi-billion dollar fast growing industry underpinned by strong
growth in Big Data Analytics investment, particularly within
non-relational analytics data store.
Instaclustr enables companies to focus their in-house development
resources on building proprietary software applications, whilst
it manages complex database, analytics, search and messaging
applications that are critical to success. Instaclustr also enables
companies to de-risk their investment in open-source based
technology, knowing that the back-end of their application
infrastructure meets stringent SLAs and is secure, scalable
and reliable.
Established in 2013, Instaclustr is trusted by global industry leaders
and counts Atlassian, Sonos, Blackberry, Campaign Monitor and
Adstage as its customers. The revenue model is highly recurring,
with customers on either annual contracts (very similar to
a Software-as-a-Service business model) or paying monthly amounts
that vary slightly with usage. Revenue is extremely sticky with ~80%
of total revenue classified as recurring. Instaclustr has demonstrated
excellent operational performance over the twelve months ending
30 June 2017, with top-line growth in excess of 100% YoY and
significant improvement in core margins as the business scales.
The company employs 47 full-time staff across its two offices:
its headquarters in Palo Alto, California, and its founding office
in Canberra, Australia.
iPRO is a cloud based SaaS platform that helps corporate
and government enterprises efficiently manage their vendor
compliance risk.
During FY2017 the company focussed on the launch of its new
version 7 platform upgrade. This platform upgrade was critical
to iPRO being able to effectively service its existing customer base
and acquire new customers.
Towards the end of FY2017, iPRO’s product upgrade plans suffered
persistent delays and cash reserves diminished. Despite repeated
earlier assurances, management informed the iPRO board in
June 2017 that the new product upgrade would not be ready for
its planned launch and that the time to launch of a market ready
version was uncertain and still some time away. iPRO management’s
revised launch date was beyond the existing cash reserves of
the business.
As a result of iPRO’s missed June 2017 product launch date and the
company’s inability to secure further funding, the Board of iPRO
made the decision to place the trading entity, iPRO Solutions Pty Ltd,
into voluntary administration. On 5 July 2017, Grant Thornton was
appointed administrator of iPRO Solutions Pty Ltd.
Bailador is a secured creditor of iPRO Holdings and may recover
some value as a result of the administration process. Given the
uncertainty of this outcome, Bailador has written its investment
in iPRO down to zero.
Valuation 30 June 2017:
Valuation at 30 June 2016:
Additional investment since
30 June 2016:
$0m
$8.5m
$1.0m – September 2016
$1.6m – November 2016
$1.5m – March 2017
Fully impaired
Convertible preference shares
and ordinary shares
Valuation 30 June 2017:
Investment since 30 June 2016:
$4.5m
$4.0m – November 2016
$0.5m – March 2017
Basis for valuation:
Securities held:
Basis for valuation:
Securities held:
Convertible preference shares
Cost
20
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Operating and Financial Review (continued) Significant Changes in State of Affairs
There was no significant change in the Company’s state of affairs
during the year.
Events after the Reporting Period
In August 2017, BTI invested $0.75m in Viostream. Refer to the
Company’s July 2017 NTA release at www.bailador.com.au for
further details.
Other than the aforementioned investment, no matter or
circumstance has arisen since the end of the year that has
significantly affected or may significantly affect the operations of the
Company, the results of those operations or the state of affairs of the
Company in subsequent financial years.
General Investee Company Risks
There are risks relating to the growth stage Internet-related
Businesses in which the Company invests including:
• The business model of a particular investee company may be
rendered obsolete over time by competition or new technology;
• Some investee companies may not perform to the level
expected by the Manager and could fail to implement
proposed business expansion, and/or product development,
reduce in size or be wound up;
• Some investee companies may fail to acquire new funding,
whether by way of debt funding or third party equity funders;
• There is no guarantee of appropriate or timely exit
opportunities for the Company, and accordingly the timeframe
for the realisation of returns on investments may be longer
than expected.
Future Developments, Prospects and
Business Strategies
The Company uses a combination of strategies to minimise business
risks, including structural and contractual protections, a clear
investment strategy and Board representation.
Environmental Regulation
The operations of the Company are not subject to any particular
or significant environmental regulations under a Commonwealth,
State or Territory law.
The BTI portfolio is well positioned for continued growth. In
addition, the pipeline of potential new investment opportunities
remains strong.
Likely developments, future prospects and the business strategies
and operations of the portfolio companies and the economic
entity, and the expected results of those operations have not been
detailed in this report as the directors believe the inclusion of such
information would be likely to result in unreasonable prejudice
to the Company.
Business Risks
The following exposures to business risk may affect the Company’s
ability to deliver expected returns:
Market Risk
Investment returns are influenced by market factors such as changes
in economic conditions, the legislative and political environment,
invest or sentiment, natural disasters, war and acts of terrorism.
The investment portfolio is constructed so as to minimise market
risks but those risks cannot be entirely eliminated and the
investment portfolio may underperform against the broader market.
Liquidity Risk
There is a risk that the investment portfolio’s underlying investments
or securities may not be easily converted to cash. Even where the
Company does have a significant cash holding, that cash will not
necessarily be available to Shareholders.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
21
Operating and Financial Review (continued) Bailador Technology Investments
Limited’s Corporate Governance
Arrangements
The objective of the Board of Bailador Technology Investments
Limited is to create and deliver long-term shareholder value through
a range of diversified investments.
The Board considers there to be an unambiguous and positive
relationship between the creation and delivery of long-term
shareholder value and high quality corporate governance.
Accordingly, in pursuing its objective, the Board has committed
to corporate governance arrangements that strive to foster the
values of integrity, respect, trust and openness among and between
Board members, management and investee companies.
Bailador Technology Investments Limited and its subsidiaries
operate as a single economic entity with a unified Board. As such,
the Board’s corporate governance arrangements apply to all entities
within the Company.
Bailador Technology Investments Limited is listed on the Australian
Securities Exchange (ASX). Accordingly, unless stated otherwise
in this document, the Board’s corporate governance arrangements
comply with the recommendations of the ASX Corporate Governance
Council (including the 2014 amendments) as well as current
standards of best practice for the entire financial year ended
30 June 2017 and have been approved by the Board.
Board Composition
The Board comprises 5 directors, three of whom are non-executive
and meet the Board’s criteria, and ASX Guidelines, as to be considered
independent. The names of the non-executive/independent
directors are:
Andrew Bullock
Heith Mackay-Cruise
Sankar Narayan
Mr. Andrew Bullock was re-elected to the Board at the Company’s
Annual General Meeting held on 13 October 2016.
An independent director is a non-executive director who is not
a member of management and who is free of any business or other
relationship that could materially interfere with, or could reasonably
be perceived to materially interfere with, the independent exercise
of their judgement. For a director to be considered independent,
they must meet all of the following materiality thresholds:
• Not hold, either directly or indirectly through a related person
or entity, more than 5% of the company’s outstanding shares;
• Not benefit, either directly or through a related person or entity,
from any sales to or purchases from the company or any of its
related entities, and
22
• Derive no income, either directly or indirectly through a related
person or entity, from a contract with the company or any of its
related entities
A list of the Board’s directors for the year ended 30 June 2017, along
with their biographical details, is provided in the Directors’ Report.
The Board considers the current board composition reflects
an appropriate balance between executive and non-executive
directors that promotes both the generation of shareholder value
and effective governance.
The Board also considers that the current board composition
reflects an appropriate balance of skills, expertise and experience
to achieve its objective of creating and delivering long-term
shareholder value. The diverse range of investments the company
is involved in necessitates the Board having a correspondingly
diverse range of skills, experience and expertise. As BTI invests
in internet-related businesses, directors are required to have a strong
working knowledge of this sector. In addition, directors need to have
a strong understanding of a range of other business requirements,
including finance and contract law. To this end, the Board considers
its current composition to be appropriate and has in place an active
program for assessing whether individual directors and the Board
as a whole have the skills and knowledge necessary to discharge
their responsibilities in accordance with the Board’s governance
arrangements. Details of the skills, expertise and experience of each
director are provided in the Directors’ Report.
Ethical Standards
The Board is committed to its core governance values of integrity,
respect, trust and openness among and between Board members,
management and portfolio companies. These values are
enshrined in the Board’s Code of Conduct policy which is available
at www.bailador.com.au.
The Code of Conduct policy requires all directors to at all times to:
• Act in good faith in the best interests of the Company and for
a proper purpose;
• Comply with the law and uphold values of good
corporate citizenship;
• Avoid any potential conflict of interest or duty;
• Exercise a reasonable degree of care and diligence;
• Not make improper use of information or position; and
• Comply with the company’s Code of Conduct and Securities
Trading Policy.
Directors are required to be independent in judgment and ensure
all reasonable steps are taken to ensure the Board’s core governance
values are not compromised in any decisions the Board makes.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Corporate Governance Statement Nomination and Remuneration Committee
The role of the Nomination and Remuneration Committee is to assist
the Board by making recommendations to it about the appointment
of new directors of the company and advising on remuneration and
issues relevant to remuneration policies and practices including
for non-executive directors. Specifically, the Nomination and
Remuneration Committee oversees:
• Developing suitable criteria for Board candidates;
• Identifying, vetting and recommending suitable candidates
for the Board;
• Overseeing Board and director performance reviews;
• Developing remuneration policies for directors; and
• Reviewing remuneration packages annually.
The Nomination and Remuneration Committee comprises five
directors (including the Chair of the Board), three of whom are
non-executive/independent directors. Consistent with ASX’s
Corporate Governance Principles and Recommendations, the Chair
of the Nomination and Risk Committee is independent and does not
hold the position of Chair of the Board.
The names and qualifications of the Nomination and Remuneration
Committee members and their attendance at meetings of the
committee are included in the Directors’ Report.
There are no schemes for retirement benefits for directors.
Performance Evaluation
The Board assesses its performance, the performance of individual
directors and the performance of its committees annually through
internal peer review. The Board also formally reviews its governance
arrangements on a similar basis annually. The Board, along with the
Nomination and Remuneration Committee have met throughout
the year and have found the current board performance and
composition to be appropriate.
Further remuneration policy for non-executive/independent
directors is provided at www.bailador.com.au.
Share Ownership and Share
Trading Policy
Details of directors’ individual shareholdings in Bailador Technology
Investments Limited are provided in the remuneration report.
The Bailador Technology Investments Limited Securities Trading
Policy is set by the Board. The policy restricts directors from acting
on material information until it has been released to the market
and adequate time has been given for this to be reflected in the
company’s share price. A detailed description of the Board’s policy
regarding directors trading in Bailador Technology Investments
Limited shares is available from the Board’s Code of Conduct
and Securities Trading Policy, both of which are available at
www.bailador.com.au.
Directors are prohibited from trading for short term speculative gain.
Board Committees
To facilitate achieving its objectives, the Board has established two
sub-committees comprising Board members – the Audit and Risk
Committee and the Nomination and Remuneration Committee.
Each of these committees has formal terms of reference that outline
the committee’s roles and responsibilities, and the authorities
delegated to it by the Board. Copies of these terms of reference
are available at www.bailador.com.au.
Audit and Risk Committee
The role of the Audit and Risk Committee is to assist the Board by
advising on the establishment and maintenance of a framework
of internal controls and to assist the Board with policy on the quality
and reliability of financial information prepared for use by the Board.
Specifically, the Audit and Risk Committee oversees:
• The appointment, independence, performance and
remuneration of the external auditor;
• The integrity of the audit process;
• The effectiveness of the internal controls; and
• Compliance with applicable regulatory requirements.
Information on the Board’s procedures for the selection and
appointment of the external auditor, and for the rotation of the
external audit engagement partners, is available from the company’s
website www.bailador.com.au.
The Audit and Risk Committee comprises five directors (including the
Chair of the Board), three of whom are non-executive/independent
directors. Consistent with ASX’s Corporate Governance Principles
and Recommendations, the Chair of the Audit and Risk Committee
is independent and does not hold the position of Chair of the Board.
The names and qualifications of the Audit and Risk Committee
members and their attendance at meetings of the Committee are
included in the Directors’ Report.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
23
Corporate Governance Statement (continued) Board Roles and Responsibilities
Shareholder Rights
The Board is accountable to the shareholders for creating and
delivering shareholder value through governance of the Company’s
business activities. The discharge of these responsibilities
is facilitated by the Board delivering to shareholders timely and
balanced disclosures about the Company’s performance.
As a part of its corporate governance arrangements, the Board
has established a strategy for engaging and communicating with
shareholders that includes:
• Monthly updates to the ASX and the Company website with
the Company’s net asset backing;
• Presentations to investors and media briefings, which are also
placed on the Company website; and
• Actively encouraging shareholders to attend and participate
in the Company’s Annual General Meeting.
A detailed description of the Board’s communication policy is provided
at www.bailador.com.au.
Shareholders are entitled to vote on significant matters impacting
on the business, which include the election and remuneration
of directors, changes to the constitution and receipt of annual
and interim financial statements. The Board actively encourages
shareholders to attend and participate in the Annual General
Meetings of Bailador Technology Investments Limited, to lodge
questions to be responded to by the Board and/or the Manager,
and to appoint proxies.
The Company ensures its statutory auditor attends the Annual
General Meeting and is available to answer questions from
shareholders relevant to the audit.
Risk Management
The Board considers identification and management of key risks
associated with the business as vital to creating and delivering
long-term shareholder value.
The Board is first and foremost accountable to provide value to its
shareholders through delivery of timely and balanced disclosures.
The main risks that could negatively impact on the performance
of the Company’s investments include:
• General market risk, particularly in worldwide tech sector stocks;
• General interruption to the Australian venture capital sector;
• The ability of the Manager to continue to manage the
portfolio, particularly retention of the Manager’s key
management personnel;
• Minority holdings risk where other larger investors in our
portfolio companies may make decisions the Company
disagrees with; and
• Other operational disruptions within portfolio companies due
to changes in competition or technology, key management
personnel, cash-flow and other general operational matters.
There have been no changes to the risk profile of the Company.
The Manager has been delegated the task of implementing internal
controls to identify and manage risks for which the Audit and Risk
Committee and the Board provide oversight. The effectiveness
of these controls is monitored and reviewed regularly.
A summary of the Board’s risk management policy is available
at www.bailador.com.au.
Other Information
Further information relating to the Company’s corporate governance
practices and policies has been made publicly available on the
company website www.bailador.com.au.
The Board has delegated to the Manager, Bailador Investment
Management, all authorities appropriate and necessary to achieve
the Board’s objective to create and deliver long-term shareholder
value. A complete description of the functions reserved for the Board
and those it has delegated to the Manager along with guidance on the
relationship between the Board and the Manager is available from the
Board Charter available at www.bailador.com.au. Notwithstanding,
the Manager remains accountable to the Board and the Board
regularly monitors the decisions and actions of the Manager.
The Board Charter requires all directors to act with integrity
and objectivity in taking an effective leadership role in relation
to the Company.
The Chair is responsible for ensuring individual directors, the Board
as a whole and the Manager comply with both the letter and spirit
of the Board’s governance arrangements. The Chair discharges their
responsibilities in a number of ways, primarily through:
• Setting agendas in collaboration with other directors and
the Manager;
• Encouraging critical evaluation and debate among directors;
• Managing board meetings to ensure all critical matters are
given sufficient attention; and
• Communicating with stakeholders as and when required.
The Board Charter provides independent directors the right to seek
independent professional advice on any matter connected with the
discharge of their responsibilities at the Company’s expense. Written
approval must be obtained from the Chair prior to incurring any such
expense on behalf of the Company.
24
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Corporate Governance Statement (continued) Your directors submit the financial report of the Company for the financial year ended 30 June 2017. The information in the preceding operating
and financial review forms part of this Directors’ Report for the year ended 30 June 2017 and is to be read in conjunction with this report:
Directors
The names of directors who held office during or since the end of the year:
David Kirk (Chairman)
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
Dividends
There have been no dividends paid or declared during the year.
Indemnifying Officers or Auditor
During the year, Bailador Technology Investments Limited paid a premium to insure officers of the Company. The officers of the Company
covered by the insurance policy include all Directors.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers
in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in connection with such
proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the
officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Company.
Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under the terms
of the contract.
The Company has not otherwise, during or since the end of the financial period, except to the extent permitted by law, indemnified or agreed
to indemnify any current or former officer or auditor of the Company against a liability incurred as such by an officer or auditor.
Proceedings on Behalf of Company
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company
is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Non-audit Services
The Board of Directors, in accordance with advice from the Audit and Risk Committee, is satisfied that the provision of non-audit services
during the period is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors
are satisfied the services disclosed below did not compromise the external auditor’s independence as the nature of the services provided does
not compromise the general principles relating to audit independence in accordance with APES 110: Code of Ethics for Professional Accountants
set by the Accounting Professional and Ethical Standards Board. All non-audit services have been reviewed and approved to ensure they do not
impact the integrity and objectivity of the auditor.
The following fees were paid or payable to Hall Chadwick for non-audit services provided during the year ended 30 June 2017:
Taxation services
$
$28,050
$28,050
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
25
Directors’ Report Auditor’s Independence Declaration
The auditor’s independence declaration for the year ended 30 June 2017 has been received and can be found on page 30 of the Financial Report.
Rounding of Amounts
The Company has applied the relief available to it under ASIC Corporations (rounding in Financial/Directors’ Reports) Instrument 2016/191 and
accordingly certain amounts in the financial report and the Directors’ Report have been rounded off to the nearest $1,000.
Options
There are no unissued ordinary shares of the Company under options as at 30 June 2017.
No shares or options are issued to directors of Bailador Technology Investments Limited as remuneration.
Information Relating to Directors and Company Secretary
Information on directors is located on pages 4 and 5 of this report.
Helen Plesek
Company Secretary
• Helen has over 20 years of experience in finance, corporate development and governance holding
senior roles at Inchcape Motors Australia, Tubemakers of Australia and BRW Fast 100 winner and
technology company, LX Group. In addition, Helen has consulted on best practice finance systems
across a range of companies and government bodies.
• Helen holds a Bachelor of Commerce in Accounting and a Masters in Politics and Public Policy.
She is a Certified Practicing Accountant.
• Appointed Company Secretary 10 November 2015.
Meetings of Directors
During the period, 9 meetings of directors and 4 committee meetings were held. Attendances by each director during the period were as follows:
Directors’ Meetings
Committee Meetings
Committee Meetings
Audit & Risk
Nomination and Remuneration
Number eligible
Number
Number eligible
Number
Number eligible
Number
to attend
attended
to attend
attended
to attend
attended
David Kirk
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
9
9
9
9
9
9
9
8
9
8
3
3
3
3
3
3
3
3
3
3
1
1
1
1
1
1
1
1
1
1
26
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Directors’ Report (continued) Remuneration Report (Audited)
Remuneration Policy
Bailador Technology Investments Limited does not employee any personnel. The Board has delegated management of the investment portfolio
to the Manager, Bailador Investment Management Pty Ltd.
David Kirk and Paul Wilson are directors of Bailador Technology Investments Limited and are also directors and owners of Bailador Investment
Management Pty Ltd.
The Manager is responsible for managing the Investment Portfolio in accordance with the Company’s investment strategy. The Manager was
appointed in 2014 for an initial term of 10 years and will automatically extend after that term until it is terminated in accordance with the
agreement’s terms.
The Board has recognised the Manager as Key Management Personnel (KMP) given it has the authority and responsibility for planning, directing
and controlling the activities of the Company. At least one of David Kirk or Paul Wilson are required to continue to be directors of the Manager
and must continue to be actively involved in the management of the investment portfolio during the initial term of the agreement.
The Board has agreed that the independent Directors, Andrew Bullock, Sankar Narayan and Heith Mackay-Cruise, are to receive $60,000 per
annum. The Executive Directors do not receive any remuneration.
Bailador Technology Investments Limited pays a management fee of 1.75% per annum (plus GST) of the portfolio NAV. Fees are calculated and
paid at the beginning of each quarter in advance. The management fee for a quarter is then adjusted and paid at the end of the quarter based
on increases or decreases in the NAV. All the costs of the Manager, including staff, rent, training, and other costs are paid for from this fee.
In addition, the Manager is entitled to receive a performance fee equal to 17.5% per annum (plus GST) of the investment portfolio’s gain each
year subject to outperforming a hurdle of 8.0% per annum (compounded). The performance fee is only payable from realised gain. The hurdle
was not cleared in the year to 30 June 2017 and no performance fee has been accrued for payment. The performance fee relating to gains in
the financial year to 30 June 2016 was paid in cash to the Manager in line with the agreement to only make performance fee payments out of
realised gains. The cash performance fee payments made to the Manager during the financial year ended 30 June 2017 were paid from the
proceeds of the partial realisation of SiteMinder in December 2015.
Amounts paid or payable to the Manager relating to the year ended 30 June 2017 are as follows:
Base management fee
Performance fee
Reimbursement of portfolio management expenses
$2,316,209
–
$66,145
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
27
Directors’ Report (continued) Key Management Personnel (KMP) Remuneration
Remuneration paid or payable to each KMP of the Company during the financial year is as follows:
David Kirk
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
Position
Chairman and Executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-recoverable GST incurred on director payments
Directors’ Fees
–
–
60,000
60,000
60,000
12,000
192,000
KMP Shareholdings
The number of ordinary shares in Bailador Technology Investments Limited held by each KMP of the Company during the financial year
is as follows:
David Kirk
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
Shares
Net number
Net number
Balance at
acquired
30 June 2016
under SPP
of shares
acquired
of shares
Balance at
disposed
30 June 2017
8,373,278
3,068,136
410,422
200,000
488,029
12,539,865
14,563
–
–
–
14,563
29,126
–
–
–
–
–
–
–
–
–
–
–
–
8,387,841
3,068,136
410,422
200,000
502,592
12,568,991
Directors David Kirk, Paul Wilson, Andrew Bullock and Heith Mackay-Cruise had shares held in mandatory escrow from date of listing
in November 2014. These shares were released from escrow in November 2016.
KMP Option Holdings
The number of options issues and held by each KMP of the Company during the financial year is as follows:
Balance at
Options
of options
of options
Options
Balance at
30 June 2016
Exercised
acquired
disposed
lapsed
30 June 2017
Net number
Net number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
David Kirk
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
28
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Directors’ Report (continued) Other Transactions with KMP and their Related Parties
David Kirk and Paul Wilson receive directors’ fees in relation to directorships of portfolio companies. For the year 1 July 2016 to 30 June 2017,
David Kirk earned $50,000 from SiteMinder and $30,000 from Viostream and $47,312 from DocsCorp. Paul Wilson earned $50,000 from SiteMinder,
$30,000 from Viostream, $40,000 from iPRO, $40,000 from Stackla and $37,200 from Straker Translations.
There were no other transactions conducted between the Company and related parties, (other than those disclosed above with the Manager),
relating to equity, compensation and loans, that were conducted other than in accordance with normal supplier relationships on terms no more
favourable than those reasonably expected under arm’s length dealings with unrelated persons.
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.
David Kirk
Director
Dated this 15th day of August 2017
Paul Wilson
Director
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
29
Directors’ Report (continued) BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF BAILADOR TECHNOLOGY INVESTMENTS LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 30 June
2017 there have been no contraventions of:
(i)
the auditor independence requirements as set out in the Corporations Act 2001
in relation to the review; and
(ii)
any applicable code of professional conduct in relation to the review.
HALL CHADWICK
LEVEL 40, 2 PARK STREET
SYDNEY, NSW 2000
SANDEEP KUMAR
Partner
Dated: 15 August 2017
30
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Auditor’s Independence Declaration
(Decrease)/Increase in value of financial assets
Interest income
Accounting fees
ASX fees
Audit fees
Directors’ fees
Due diligence costs
Independent valuations
Legal fees
Manager’s fees
Manager’s performance fees
Registry administration
Other expenses
(Loss)/Profit before income tax
Income tax expense
(Loss)/Profit for the year
Other comprehensive income
Total comprehensive (loss)/income for the year
Earnings per share
– basic earnings per share (cents)
– diluted earnings per share (cents)
The accompanying notes form part of these financial statements.
Note
2
6
5
5
2
3
7
7
30 June 2017
30 June 2016
$000
(4,158)
343
(156)
(91)
(61)
(192)
(21)
(112)
(78)
(2,316)
–
(25)
(220)
(7,087)
2,122
(4,965)
–
(4,965)
(4.44)
(4.44)
$000
18,152
310
(151)
(52)
(58)
(197)
(51)
(173)
(192)
(1,585)
(2,978)
(16)
(335)
12,674
(3,810)
8,864
–
8,864
12.38
12.38
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
31
Statement of Profit or Loss and Other Comprehensive Incomefor the Year Ended 30 June 2017 As at
As at
30 June 2017
30 June 2016
Note
$000
$000
8
9
4
11
10
11
11
12
12,517
105
12,622
115,919
7,955
123,874
136,496
240
–
240
11,859
11,859
12,099
124,397
116,475
7,922
124,397
27,784
98
27,882
92,442
1,283
93,725
121,607
2,776
1,461
4,237
7,512
7,512
11,749
109,858
96,971
12,887
109,858
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Financial assets
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Retained earnings
TOTAL EQUITY
The accompanying notes form part of these financial statements.
32
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Statement of Financial Positionas at 30 June 2017 Ordinary
Share Option
Share Capital
Reserve
Retained
Earnings
Note
Balance at 1 July 2015
Comprehensive income
Profit for the period
Total comprehensive income for the period
Transactions with owners, in their capacity as
owners, and other transfers
Shares and options issued during the year
12
Transaction costs, net of tax
Transfer from share option reserve
Total transactions with owners and other
transfers
Balance at 30 June 2016
Balance at 1 July 2016
Comprehensive income
Profit for the year
Total comprehensive income for the period
Transactions with owners, in their capacity as
owners, and other transfers
Shares and options issued during the year
12
Transaction costs, net of tax
Total transactions with owners and other
transfers
Balance at 30 June 2017
The accompanying notes form part of these financial statements.
$000
55,379
–
–
38,382
(538)
3,748
41,592
96,971
96,971
–
–
19,985
(481)
19,504
116,475
$000
3,748
–
–
–
–
(3,748)
(3,748)
–
–
–
–
–
–
–
–
$000
4,023
8,864
8,864
–
–
–
–
12,887
Total
$000
63,150
8,864
8,864
38,382
(538)
–
37,844
109,858
12,887
109,858
(4,965)
(4,965)
(4,965)
(4,965)
–
–
–
7,922
19,985
(481)
19,504
124,397
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
33
Statement of Changes in Equityfor the Year Ended 30 June 2017 30 June 2017
30 June 2016
Note
$000
$000
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
Net cash used in operating activities
14
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through profit and loss
Sale of financial assets at fair value through profit and loss
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares, net of payouts
Payments relating to costs of capital raising
Net cash provided by financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements.
(7,294)
365
(6,929)
(27,637)
–
(27,637)
19,985
(687)
19,298
(15,267)
27,784
12,517
(4,312)
292
(4,020)
(24,568)
5,000
(19,568)
38,382
(769)
37,613
14,025
13,759
27,784
34
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Statement of Cash Flowsfor the Year Ended 30 June 2017 Note 1: Summary of Significant
Accounting Policies
Basis of Preparation
These general purpose financial statements have been prepared
in accordance with requirements of the Corporations Act 2001,
Australian Accounting Standards and Interpretations of the
Australian Accounting Standards Board and International Financial
Reporting Standards as issued by the International Accounting
Standards Board. The Company is a for-profit entity for financial
reporting purposes under Australian Accounting Standards.
It is recommended that this financial report be read in conjunction
with any public announcements made during the period. Material
accounting policies adopted in the preparation of these financial
statements are presented below and have been consistently applied
unless stated otherwise.
These financial statements were authorised for issue on
15th August 2017.
Accounting Policies
Except for cash flow information, the financial statements have been
prepared on an accruals basis and are based on historical costs,
modified, where applicable, by the measurement at fair value of
selected non-current assets, financial assets and financial liabilities.
a. Investments
The Company has been classified under AASB 2013-5 as an Investment
Entity whose business purpose is to invest funds solely for returns via
capital appreciation and/or investment returns. As the Company has
been classified as an Investment Entity, the portfolio investments have
been accounted for at fair value through the profit or loss and shown
as Financial Assets in the Statement of Financial Position.
Investments held at fair value through profit or loss are initially
recognised at fair value. Transaction costs related to acquisitions
are expensed to profit and loss immediately. Subsequent to initial
recognition, all financial instruments held at fair value are accounted
for at fair value, with changes to such values recognised in the profit
or loss.
In determining year-end valuations, the board considers the annual
valuation review by an independent valuation expert and the
valuation report prepared by the Manager.
Investments are recognised on a trade date basis.
The entity is exempt from consolidating underlying investees it controls
in accordance with AASB 10 Consolidated Financial Statements.
b. Fair Value of Assets and Liabilities
The Company measures some of its assets and liabilities at fair
value on either a recurring or non-recurring basis, depending
on the requirements of the applicable accounting standard.
Fair value is the price the Company would receive to sell an asset
or would have to pay to transfer a liability in an orderly (i.e. unforced)
transaction between independent, knowledgeable and willing
market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent
observable market pricing information is used to determine fair
value. Adjustments to market values may be made having regard
to the characteristics of the specific asset or liability. The fair values
of assets and liabilities that are not traded in an active market are
determined using one or more valuation techniques. These valuation
techniques maximise, to the extent possible, the use of observable
market data.
To the extent possible, market information is extracted from either
the principal market for the asset or liability (i.e. the market with the
greatest volume and level of activity for the asset or liability) or in the
absence of such a market, the most advantageous market available
to the entity at the end of the reporting period (i.e. the market that
maximises the receipts from the sale of the asset or minimises the
payments made to transfer the liability, after taking into account
transaction costs).
The fair value of liabilities and the entity’s own equity instruments
(excluding those related to share-based payment arrangements)
may be valued, where there is no observable market price in
relation to the transfer of such financial instruments, by reference
to observable market information where such instruments are held
as assets. Where this information is not available, other valuation
techniques are adopted and, where significant, are detailed in the
respective note to the financial statements.
c. Taxation
The income tax expense for the period comprises current income
tax expense and deferred tax expense.
Current income tax expense charged to profit or loss is the tax
payable on taxable income. Current tax liabilities / (assets) are
measured at the amounts expected to be paid to / (recovered from)
the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax
asset and deferred tax liability balances during the period as well
as unused tax losses.
No deferred income tax is recognised from the initial recognition
of an asset or liability, where there is no effect on accounting
or taxable profit or loss.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
35
Notes to the Financial Statementsfor the Year Ended 30 June 2017 Note 1: Summary of Significant Accounting Policies (continued)
Deferred tax assets and liabilities are calculated at the tax rates that
are expected to apply to the period when the asset is realised or the
liability is settled and their measurement also reflects the manner
in which management expects to recover or settle the carrying
amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax
losses are recognised only to the extent that it is probable that future
taxable profit will be available against which the benefits of the
deferred tax asset can be utilised.
Current tax assets and liabilities are offset where a legally enforceable
right of set-off exists and it is intended that net settlement or
simultaneous settlement of the respective asset and liability will
occur. Deferred tax assets and liabilities are offset where: (a) a legally
enforceable right of set-off exists; and (b) the deferred tax assets and
liabilities relate to income taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities where
it is intended that net settlement or simultaneous realisation and
settlement of the respective asset and liability will occur in future
periods in which significant amounts of deferred tax assets
or liabilities are expected to be recovered or settled.
d. Financial Instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when
the entity becomes a party to the contractual provisions to the
instrument. For financial assets, this is equivalent to the date that
the Company commits itself to either the purchase or sale of the
asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus
transaction costs, except where the instrument is classified
“at fair value through profit or loss”, in which case transaction
costs are expensed to profit or loss immediately.
Classification and Subsequent Measurement
Financial instruments are subsequently measured at fair value,
amortised cost using the effective interest method, or cost.
Amortised cost is calculated as the amount at which the financial
asset or financial liability is measured at initial recognition less
principal repayments and any reduction for impairment, and
adjusted for any cumulative amortisation of the difference between
that initial amount and the maturity amount calculated using the
effective interest method.
The effective interest method is used to allocate interest income
or interest expense over the relevant period and is equivalent to
the rate that discounts estimated future cash payments or receipts
(including fees, transaction costs and other premiums or discounts)
over the expected life (or when this cannot be reliably predicted,
the contractual term) of the financial instrument to the net carrying
amount of the financial asset or financial liability. Revisions
to expected future net cash flows will necessitate an adjustment
to the carrying amount with a consequential recognition
of an income or expense item in profit or loss.
(i) Financial assets at fair value through profit or loss
Financial assets are classified at “fair value through profit or loss”
when they are held for trading for the purpose of short-term profit
taking, derivatives not held for hedging purposes, or when they are
designated as such to avoid an accounting mismatch or to enable
performance evaluation where a company of financial assets
is managed by key management personnel on a fair value basis
in accordance with a documented risk management or investment
strategy. Such assets are subsequently measured at fair value with
changes in carrying amount being included in profit or loss.
(ii) Loan and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market
and are subsequently measured at amortised cost. Gains or losses
are recognised in profit or loss through the amortisation process and
when the financial asset is derecognised.
(iii) Financial liabilities
Financial liabilities other than financial guarantees are subsequently
measured at amortised cost. Gains or losses are recognised in profit
or loss through the amortisation process and when the financial
liability is derecognised.
Impairment
A financial asset (or a group of financial assets) is deemed to be
impaired if, and only if, there is objective evidence of impairment
as a result of one or more events (a “loss event”) having occurred,
which has an impact on the estimated future cash flows of the
financial asset(s).
Impairment losses are recognised in the profit or loss immediately.
At the end of each reporting period, the Company assesses whether
there is any indication that an asset may be impaired. The assessment
will include the consideration of external and internal sources of
information. If such an indication exists, an impairment test is carried
out on the asset by comparing the recoverable amount of the asset,
to the asset’s carrying amount. Any excess of the carrying amount
over its recoverable amount is recognised immediately in the profit
or loss.
Derecognition
Financial assets are derecognised when the contractual rights
to receipt of cash flows expire or the asset is transferred to another
party whereby the entity no longer has any significant continuing
involvement in the risks and benefits associated with the asset.
36
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Financial liabilities are derecognised when the related obligations
are discharged, cancelled or have expired. The difference between
the carrying amount of the financial liability extinguished or
transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed,
is recognised in profit or loss.
e. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits available
on demand with banks, other short term highly liquid investments
with original maturities of 3 months or less.
f. Trade and Other Receivables
Trade and other receivables include amounts due from government
authorities and prepayments for services performed in the ordinary
course of business. Receivables expected to be collected (or utilised)
within 12 months of the end of the reporting period are classified
as current assets.
Trade and other receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest
method, less any provision for impairment. Refer to note 1(d) for
further discussion on the determination of impairment losses.
g. Trade and Other Payables
Trade and other payables represent the liabilities for goods and
services received by the entity that remain unpaid at the end of the
reporting period. The balance is recognised as a current liability
with the amounts normally paid within 30 days of recognition
of the liability.
h. Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount
of GST, except where the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from,
or payable to, the ATO is included with other receivables or payables
in the statement of financial position.
Cash flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities which are
recoverable from, or payable to, the ATO are presented as operating
cash flows included in receipts from customers or payments
to suppliers.
i. Interest Income
Interest revenue is recognised using the effective interest method.
j. Rounding of Amounts
The Company has applied the relief available to it under ASIC
Corporations (rounding in Financial/Directors’ Reports) Instrument
2016/191 and accordingly certain amounts in the financial report and
the directors’ report have been rounded off to the nearest $1,000.
k. Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgements incorporated
into the financial statements based on historical knowledge and
best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and
economic data, obtained both externally and within the Company.
Detailed information about each of these estimates and judgements
is included in Note 18 in the financial statements.
l. Comparative Figures
When required by accounting standards, comparative figures have
been adjusted to conform to changes in presentation for the current
financial year. The comparative period represents the period from
1 July 2015 to 30 June 2016.
m. New Accounting Standards for Application in Future Periods
Accounting standards and interpretations issued by the AASB that
are not yet mandatorily applicable to the Company, together with
an assessment of the potential impact of such pronouncements
on the Company when adopted in future periods, are discussed below:
AASB 9 : Financial Instruments and associated Amending Standards
(applicable to annual reporting periods beginning on or after
1 January 2018)
The Standard will be applicable retrospectively (subject to certain
provisions on hedge accounting) and includes revised requirements
for the classification and measurement of financial instruments,
revised recognition and derecognition requirements for financial
instruments and simplified requirements for hedge accounting.
The key changes that may affect the Company on initial application
include certain simplifications to the classification of financial assets.
This Standard is not expected to significantly impact the Company’s
financial statements.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
37
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 2: Profit For The Year
30 June 2017
30 June 2016
$000
$000
The following revenue and expense items are relevant in explaining the financial performance
for the year:
Fair value (losses)/gains on financial assets at fair value through profit or loss
(4,158)
18,152
During the period, the investment in iPRO was revalued to zero (profit impact -$12,518). In addition Viostream was revalued downwards (profit
impact -$6,455). These impairments were offset by gains in six of the ten portfolio companies, most notably SiteMinder (profit impact $9,212)
and DocsCorp (profit impact $2,458). Valuation methodology of all financial assets is consistent with the methodology discussed in Note 18
of the financial statements.
Note 3: Tax Expense
a. The components of tax expense comprise:
Current tax
Deferred tax
b. The prima facie tax on profit from ordinary activities before income tax is reconciled
to income tax payable as follows:
(Loss)/Profit for the period before income tax expense
Prima facie tax payable on profit from ordinary activities before income tax at 30%
Tax effect of:
– Other deductions
Income tax attributable to entity
The weighted average effective tax rate is as follows:
c. Tax effects of items credited to equity:
Amounts credited to equity in relation to the income tax effect of amounts recognised in equity:
Share capital
30 June 2017
30 June 2016
$000
$000
(4,447)
2,325
(2,122)
(7,087)
(2,126)
4
(2,122)
30%
206
206
1,461
2,349
3,810
12,673
3,802
8
3,810
30%
231
231
38
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 4: Financial Assets
SiteMinder
Viostream
Stackla
Straker Translations
DocsCorp
SMI
Lendi
Rezdy
Instaclustr
iPRO
As at
As at
30 June 2017
30 June 2016
$000
40,500
23,013
12,577
8,704
7,458
7,414
7,201
4,547
4,505
–
115,919
$000
31,288
28,469
7,449
4,576
–
5,500
4,000
2,701
–
8,459
92,442
Note 5: Management Fees
The Company has outsourced its investment management function to Bailador Investment Management Pty Ltd. Bailador Investment
Management Pty Ltd is a privately owned investment management company and is a related party of Bailador Technology Investments Limited.
a. Management fees
The Manager is entitled to be paid a management fee equal to 1.75% of the portfolio Net Asset Value (NAV) plus GST per annum.
The management fee is calculated and paid quarterly in advance. Each quarter the average of the opening and closing NAV for the quarter
is calculated and an adjustment to the pre-paid fee is made depending on whether NAV has increased or decreased during the quarter.
During the period, the Company incurred $2,316,209 of management fees payable to the Manager, of which $56,460 was unclaimable GST
the manager remitted as GST to the ATO.
b. Reimbursement of portfolio management expenses
Under the management agreement, the Manager is also entitled to be reimbursed for certain out of pocket expenses incurred in the acquisition
and disposal of portfolio assets and in the management of portfolio assets.
During the period, the Company reimbursed the Manager $66,145 for travel and other expenses incurred in the management of the investment portfolio.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
39
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 5: Management Fees (continued)
c. Performance fees
At the end of each financial year, the Manager is entitled to receive a performance fee from the Company, the terms of which are outlined below:
The performance fee will be calculated as 17.5% of the NAV gain per annum plus GST, being the amount by which the portfolio NAV at the end of
a financial year exceeds or is less than the portfolio NAV at the start of the financial year and where that gain exceeds a compound hurdle rate of 8%.
The performance fee will be accrued on an annual basis in arrears and will only be paid at times when proceeds received from realisation
of investments is available to the Company and will be paid in respect of the whole amount of the gain (not just the amount over the 8% hurdle),
subject to the following caveats:
• If the performance fee for a financial year is a positive amount but the investment return for the financial year does not exceed the hurdle
return for the financial year, no performance fee shall be payable to the manager in respect of that financial year, and the positive amount
of the performance fee shall be carried forward to the following financial year;
• If the performance fee for a financial year is a negative amount, no performance fee shall be payable to the manager in respect of that
financial year, and the negative amount shall be carried forward to the following year; and
• Any negative performance fee amounts from previous financial years that are not recouped in a financial year shall be carried forward
to the following financial year.
The performance fee can be fully or partially paid by the issue of shares in Bailador Technology Investments Limited or in cash at the Manager’s
election, the details of which are outlined below:
If the Manager elects at least 5 business days prior to the performance fee payment date that all or part of the performance fee is to be applied
to the issue of shares in the company, the company must, if permitted by applicable laws (including the Listing Rules and the Corporations Act)
without receiving any approvals from the shareholders of the Company, apply the cash payable in respect of the relevant amount to the issue
of shares to the Manager or its nominee on the performance fee payment date where
N = PF / Issue Price
Where
N is the number of shares issued
PF is the cash value of the performance fee to be paid in shares
Issue Price is the lesser of:
• The volume weighted average price of shares traded on the ASX during the period of 340 calendar days up to but excluding the
performance fee payment date; and
• The last price on the last day on which the shares were traded on the ASX prior to the performance fee payment date.
During the period, the Company did not accrue any performance fees paid or payable to the Manager. The manager was paid a cash payment
of $2,480,700 plus GST throughout the year for performance fees accrued in prior years.
Note 6: Auditor’s Remuneration
Remuneration of the auditor for:
Auditing or reviewing the financial statements
Taxation services
30 June 2017
30 June 2016
$000
$000
61
28
89
58
17
75
40
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued)
Note 7: Earnings per Share
(Loss)/Profit after income tax
30 June 2017
30 June 2016
$000
(4,965)
$000
8,864
No.
No.
Weighted average number of ordinary shares used in calculating basic and diluted earnings per share
111,753,525
71,593,968
Basic earnings per share
Diluted earnings per share
Cents
(4.44)
(4.44)
Cents
12.38
12.38
In the calculation of diluted earnings per share, options are not considered to have a dilutive effect, as the average market price of ordinary
shares of the Company during the period did not exceed the exercise price of the options.
Note 8: Cash and Cash Equivalents
Cash at bank
Note 9: Trade and Other Receivables
CURRENT
Trade debtors
GST receivable
Interest receivable
Other prepayments
As at
As at
30 June 2017
30 June 2016
$000
12,517
12,517
$000
27,784
27,784
As at
As at
30 June 2017
30 June 2016
$000
$000
5
46
11
43
105
–
47
33
18
98
All of the Company’s trade and other receivables have been reviewed for indicators of impairment. The Company has determined that
no impairment is required.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
41
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) As at
As at
30 June 2017
30 June 2016
$000
$000
135
–
105
240
119
2,543
114
2,776
As at
As at
30 June 2017
30 June 2016
$000
$000
–
1,461
Balance at
Charged to
Charged
directly
Balance at
1 July 2015
profit or loss
to equity
30 June 2016
$000
$000
$000
$000
1,855
2,860
4,715
3,199
(402)
2,797
–
–
–
5,054
2,458
7,512
Balance at 30
Charged to
Charged
directly
Balance at
June 2016
profit or loss
to equity
30 June 2017
$000
$000
$000
$000
5,054
2,458
7,512
4,347
–
4,347
–
–
–
9,401
2,458
11,859
Note 10: Trade and Other Payables
CURRENT
Trade creditors
Manager’s performance fees accrued
Other payables
Note 11: Income Tax
CURRENT
Income tax payable
NON-CURRENT
Deferred tax liability
Tax on unrealised gains
Tax on acquisition assets on opening
Deferred tax liability
Tax on unrealised gains
Tax on acquisition assets on opening
42
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 11: Income Tax (continued)
Deferred tax asset
Provisions
Transaction costs on acquisitions
Transaction costs on equity issue
Deferred tax asset
Provisions
Transaction costs on acquisitions
Transaction costs on equity issue
Deferred losses on financial assets
Losses carried forward
Balance at
Charged to
Charged
directly
Balance at
1 July 2015
profit or loss
to equity
30 June 2016
$000
$000
$000
$000
244
28
333
605
553
28
(133)
448
–
–
230
230
Charged
797
56
430
1,283
Balance at 30
Charged to
directly
Balance at 30
June 2016
profit or loss
to equity
June 2017
$000
$000
$000
$000
797
56
430
–
–
1,283
(770)
27
(166)
3,729
3,646
6,466
–
–
206
–
–
206
27
83
470
3,729
3,646
7,955
The benefits of the above temporary differences and unused tax losses will only be realised if the conditions for deductibility set out in Note 1(c)
occur. These amounts have no expiry date.
Note 12: Issued Capital and Share Option Reserve
Movements in share capital are set out below:
Opening balance at 1 July 2015
Ordinary shares issued following exercise of options
Transfer from share option reserve
Less Costs directly attributable to the issue of ordinary shares
Closing balance at 30 June 2016
Opening balance at 1 July 2016
Ordinary shares issued
Less Costs directly attributable to the issue of ordinary shares
Closing balance at 30 June 2017
No.
$
62,462,893
38,382,025
–
–
55,379,410
38,382,025
3,747,774
(538,499)
100,844,918
96,970,710
100,844,918
19,402,913
96,970,710
19,985,000
–
(480,554)
120,247,831
116,475,156
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
43
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 12: Issued Capital and Share Option Reserve (continued)
Movements in share option reserve are set out below:
Opening balance at 1 July 2015
Options exercised during the year
Options lapsed during the year
Closing balance at 30 June 2016
Opening balance at 1 July 2016
Closing balance at 30 June 2017
Capital Management
No.
$
62,462,892
(38,382,025)
(24,080,867)
3,747,774
–
(3,747,774)
–
No.
–
–
–
$
–
–
The Company’s objectives for managing capital are as follows:
• to invest the capital in investments meeting the description, risk exposure and expected return of the investment strategy of the Company;
• to maximise the returns to shareholders while safe-guarding capital by investing in a portfolio in line with investment strategies of the
Company; and
• to maintain sufficient liquidity to meet the ongoing expenses of the Company.
Note 13: Operating Segments
The Company has one operating segment: Internet-related Businesses in Australia. It earns revenue from gains on revaluation of financial
assets held at fair value through profit or loss, interest income and other returns from investment. This operating segment is based on the
internal reports that are reviewed and used by the Directors in assessing performance and in determining the allocation of resources. There is no
aggregation of operating segments.
The Company invests in securities recorded as financial assets held at fair value through profit or loss.
44
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 14: Cash Flow Information
Reconciliation of Cash Flow from Operation with Profit after Income Tax
(Loss)/Profit after income tax
Non-cash flows in profit:
Unrealised fair value losses/(gains) on financial assets at fair value through profit or loss
Increase in trade and other receivables
(Decrease)/Increase in trade and other payables
(Decrease)/Increase in current tax liabilities
(Decrease)/Increase in deferred tax
Cash flow from operating activities
Note 15: Contingent Liabilities
There were no contingent liabilities at 30 June 2016 and 30 June 2017.
Note 16: Events After the Reporting Period
30 June 2017
30 June 2016
$000
$000
(4,965)
4,158
(7)
(2,535)
(1,461)
(2,119)
(6,929)
8,864
(18,152)
(52)
1,850
1,120
2,350
(4,020)
In August 2017, BTI invested $0.75m in Viostream. Refer to the Company’s July 2017 NTA release at www.bailador.com.au for further details.
Other than the aforementioned investment, no matter or circumstance has arisen since the end of the period that has significantly affected
or may significantly affect the operations of the Company, the result of those operations or the state of affairs of the Company in subsequent
financial years.
Note 17: Financial Risk Management
The Company’s financial instruments consist mainly of cash (cash at bank) and financial assets designated at fair value through profit or loss,
accounts receivable and payable.
The total for each category of financial instrument, measured in accordance with AASB 139 : Financial Instruments: Recognition and
Measurement as detailed in the accounting policies to these financial statements are as follows:
Financial assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Trade and other receivables
Total financial assets
Financial liabilities
Financial liabilities at amortised cost
Total financial liabilities
30 June 2017
30 June 2016
Note
$000
$000
8
4
9
10
12,517
115,919
105
128,541
240
240
27,784
92,442
98
120,324
2,776
2,776
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
45
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 17: Financial Risk Management (continued)
Financial Risk Management Policies
2. Credit Risk
Exposure to credit risk relating to financial assets arise from the
potential non-performance by counterparties that could lead
to a financial loss to the Company. The Company’s objective in
managing credit risk is to minimise the credit losses incurred mainly
on trade and other receivables.
Credit risk is managed by the Company through maintaining
procedures that ensure, to the extent possible, that counterparties
to transactions are of sound credit worthiness. As the Company
generally does not have trade receivables, receivables are usually
in the order of prepayments for particular services. The Company
ensures prepayments are only made where the counterparty is
reputable and can be relied on to fulfil the service.
The Company’s maximum credit risk exposure at the end of the
reporting period in relation to each class of recognised financial
assets is the carrying amount of those assets as indicated in the
statement of financial position. None of these assets are past due or
considered to be impaired.
The cash and cash equivalents are all held with one of Australia’s
reputable financial institutions.
3. Liquidity Risk
Liquidity risk arises from the possibility that the Company might
encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities. As the Company’s major
cash outflows are the purchase of investments, the level of this is
managed by the Manager. The Company also manages this risk
through the following mechanisms:
• preparing forward-looking cash flow analyses in relation
to operating, investing and financing activities;
• managing credit risk related to financial assets;
• maintaining a clear exit strategy on financial assets; and
•
investing surplus cash only with major financial institutions.
The Company is exposed to a variety of financial risks as a result
of its activities. These risks include market risk (price risk), credit
risk, and liquidity risk. The Company’s risk management investment
policies, approved by the directors of the responsible entity,
aim to assist the Company in meeting its financial targets while
minimising the potential adverse effects of these risks on the
Company’s financial performance.
Specific Financial Risk Exposures and Management
1. Market Risk
Market risk is the risk that the fair value of future cash flows of
a financial instrument will fluctuate because of changes in market
prices. The Company is currently exposed to the following risks
as it presently holds financial instruments measured at fair value
and short-term deposits:
i. Price Risk
The Company is exposed to equity securities price risk. This arises
from investments held by the Company and classified in the
statement of financial position as financial assets at fair value
through profit or loss.
The Company seeks to manage and constrain market risk
by diversification of the investment portfolio across multiple
investments and through use of structural and contractual
protections in its investments such as investing in preference shares
or convertible notes, requiring minority protections in investment
documentation and maintaining active directorships in its
investment companies.
The portfolio is monitored and analysed by the Manager.
The Company’s net equity exposure is set out in Note 4 of the
financial statements.
Sensitivity analysis
The following table illustrates sensitivities to the Company’s
exposures to changes in equity prices. The table indicates the impact
on how profit and equity values reported at the end of the reporting
period would have been affected by changes in the relevant risk
variable that management consider to be reasonably possible.
30 June 2017
Profit
$000
Equity
$000
+/- 5% in gain on equity investments
(143)
(143)
46
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 18: Fair Value Measurement
a. Fair Value Hierarchy
AASB 13 : Fair Value Measurement requires the disclosure of fair value
information by level of the fair value hierarchy, which categorises fair
value measurements into one of three possible levels based on the
lowest level that an input that is significant to the measure can
be categorised into, as follows:
Level 1
Level 2
Measurements based on quoted prices (unadjusted)
in active markets for identical assets or liabilities that
the entity can access at the measurement date.
Measurements based on inputs other than quoted prices
included in level 1 that are observable for the asset
or liability, either directly or indirectly.
Level 3
Measurements based on unobservable inputs for the
asset or liability.
The fair values of assets and liabilities that are not traded in an active
market are determined using one or more valuation techniques.
These valuation techniques maximise, to the extent possible,
the use of observable market data. If all significant inputs required
to measure fair value are observable, the asset or liability is included
in level 2. If one or more significant inputs are not based on
observable market data, the asset or liability is included in level 3.
b. Valuation Techniques
In the absence of an active market for an identical asset or liability,
the Company selects and uses one or more valuation techniques
to measure the fair value of the asset or liability. The Company
selects a valuation technique that is appropriate in the circumstances
and for which sufficient data is available to measure fair value.
The availability of sufficient and relevant data primarily depends
on the specific characteristics of the asset or liability being measured.
The valuation techniques selected by the Company are consistent
with one or more of the following valuation approaches:
• Market approach: valuation techniques that use prices and
other relevant information generated by market transactions
for identical or similar assets or liabilities.
and reflect the assumptions that buyers and sellers would generally
use when pricing the asset or liability are considered observable,
whereas inputs for which market data is not available and therefore
are developed using the best information available about such
assumptions are considered unobservable.
The Australian Private Equity and Venture Capital Association (AVCAL)
has prepared the International Private Equity and Venture Capital
Guidelines (Valuation Guidelines). The Valuation Guidelines set out
recommendations on the valuation of private equity investments
which are intended to represent current best practice. The directors
have referred to the Valuation Guidelines in order to determine the
"fair value" of the Company’s financial assets.
The "fair value" of financial assets is assumed to be the price that
would be received for the financial asset in an orderly transaction
between knowledgeable and willing but not anxious market
participants acting at arm's length given current market conditions
at the relevant measurement date. Fair value for unquoted or illiquid
investments is often estimated with reference to the potential
realisation price for the investment or underlying business if it were
to be realised or sold in an orderly transaction at the measurement
date, regardless of whether an exit in the near future is anticipated
and without reference to amounts received or paid in a distressed sale.
AVCAL suggests that one or more techniques should be adopted
to calculate a private equity investment based on the valuer's opinion
of which method or methods are considered most appropriate given
the nature, facts and circumstances of the particular investment.
In considering the appropriateness of each technique, AVCAL
suggests the economic substance of the investment should take
priority over the strict legal form.
AVCAL provides guidance on a range of valuation methodologies
that are commonly used to determine the value of private equity
investments in the absence of an active market, including:
• price of recent investments;
• earnings multiples;
• revenue multiples;
• net asset values;
• discounted cash flows of the underlying assets;
• Income approach: valuation techniques that convert estimated
• discounted cash flows of the investment; and
future cash flows or income and expenses into a single
discounted present value.
• Cost approach: valuation techniques that reflect the current
replacement cost of an asset at its current service capacity.
Each valuation technique requires inputs that reflect the assumptions
that buyers and sellers would use when pricing the asset or liability,
including assumptions about risks. When selecting a valuation
technique, the Company gives priority to those techniques that
maximise the use of observable inputs and minimise the use
of unobservable inputs. Inputs that are developed using market
data (such as publicly available information on actual transactions)
•
industry valuation benchmarks.
The "price of recent investment" methodology refers to the price
at which a significant amount of new investment into a company
has been made which is used to estimate the value of other
investments in the company, but only if the new investment
is deemed to represent fair value and only for a limited period
following the date of the investment. The methodology therefore
requires an assessment at the measurement date of whether any
changes or events during the limited period following the date
of the recent investment have occurred that imply a change in the
investment's fair value.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
47
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 18: Fair Value Measurement (continued)
The "cost plus accrued interest" methodology refers to the face value of securities including any interest which has accrued at the measurement
date. It is particularly relevant where the security has either a structural or a contractual liquidity preference.
A "revenue multiple" methodology is often used as the basis of valuation for early and development stage businesses. Under this method, the
enterprise value is derived by multiplying the normalised historical or projected revenue of the business with a multiple or range of multiples.
The multiple or range of multiples applied should be an appropriate and reasonable indication of the value of each company, given the
company's size, risk profile and growth prospects. The multiple or range of multiples is usually derived from market data observed for entities
considered comparable to the companies being valued.
c. Financial Instruments
The following table represents a comparison between the carrying amounts and fair values of financial assets and liabilities:
Financial assets:
Cash and cash equivalents
Trade and other receivables
Financial assets
Financial liabilities:
Trade and other payables
30 June 2017
Carrying Amount
Fair Value
$000
$000
12,517
105
115,919
128,541
240
240
12,517
105
115,919
128,541
240
240
d. Recurring and Non-recurring Fair Value Measurement Amounts and the Level of the Fair Value Hierarchy within which the Fair Value
Measurements Are Categorised
Fair Value Measurements
at 30 June 2017 Using:
Quoted Prices in
Significant
Observable
Significant
Active Markets for
Inputs Other than
Unobservable
Identical Assets
Level 1 Inputs
$000
(Level 1)
$000
(Level 2)
–
–
37,534
37,534
Inputs
$000
(Level 3)
78,386
78,386
Description
Recurring fair value measurements
Financial assets at fair value through profit or loss
48
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 18: Fair Value Measurement (continued)
Description
Recurring fair value measurements
Financial assets at fair value through profit or loss
Fair Value Measurements
at 30 June 2016 Using:
Quoted Prices in
Significant
Observable
Significant
Active Markets for
Inputs Other than
Unobservable
Identical Assets
Level 1 Inputs
$000
(Level 1)
–
–
$000
(Level 2)
50,014
50,014
Inputs
$000
(Level 3)
42,428
42,428
e. Valuation Techniques and Inputs Used to Determine Level 2 Fair Values
Fair Value
at 30 June 2016
Stackla
Straker Translations
Lendi
Rezdy
Instaclustr
$000
Valuation Techniques
Range of Unobservable Inputs
12,577
Price of recent third party transaction
Price of recent third party transaction
8,704
7,201
4,547
4,504
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
Price of recent third party transaction
There were no transfers between Level 1 and Level 2 for assets measured at fair value on a recurring basis during the year.
f. Valuation Techniques and Inputs Used to Determine Level 3 Fair Values
Fair Value at
30 June 2017
$000
Valuation Techniques
Significant Unobservable Inputs
40,500
23,014
7,457
7,414
Revenue multiple
Revenue multiple
Cost plus accrued interest
Revenue multiple
Interest on convertible notes
Revenue multiple
Revenue multiple
Revenue multiple
Cost plus accrued interest
Revenue multiple
Interest on convertible preference shares
Revenue multiple
Range of
Unobservable
Inputs
6.5x – 8.0x
2.5x – 3.5x
2.0x – 3.5x
1.0x – 2.0x
–
Internal assessment of fair value
Company placed in administration
N/A
SiteMinder
Viostream
DocsCorp
SMI
iPRO
There were no changes during the year in the valuation techniques used by the Company to determine level 3 fair values.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
49
Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) Note 18: Fair Value Measurement (continued)
g. Sensitivity Information
The relationships between the significant unobservable inputs and the fair value are as follows:
Inputs
Revenue multiple
Cost plus accrued interest
Impact on Fair Value from
Impact on Fair Value from
Increase in Input
Decrease in Input
Increase
Increase
Decrease
Decrease
There were no significant interrelationships between unobservable inputs except as indicated above.
h. Reconciliation of Recurring Fair Value Measurement Amounts (Level 3)
Opening balance 30 June 2016
Transfers in from Level 2
Additions/purchases made during the period
Gains and losses recognised in profit or loss
Closing balance 30 June 2017
Financial Assets
$000
42,428
36,287
6,973
(7,302)
78,386
Note 19: Related Party Transactions
Remuneration paid or payable to key management personnel (KMP) of the Company during the period are $2,508,209 plus reimbursement
of expenses of $66,145. Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable
to each member of the Company’s KMP for the year ended 30 June 2017.
Note 20: Company Details
The principal place of business and registered office of the company is:
Suite 4, Level 11
6 O'Connell Street
Sydney NSW 2000
50
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Notes to the Financial Statement for the Year Ended 30 June 2017 (continued) In accordance with a resolution of the directors of Bailador Technology Investments Limited, the directors of the Company declare that:
1.
The financial statements and notes, as set out on pages 31–50, are in accordance with the Corporations Act 2001, and:
a.
comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes
compliance with International Financial Reporting Standards (IFRS); and
b.
give a true and fair view of the financial position as at 30 June 2017 and of the performance for the period ended on that date.
2.
3.
In the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by s295A of the Corporations Act 2001 from the Chief Executive Officer and
Chief Financial Officer.
David Kirk
Director
Paul Wilson
Director
Dated this 15th day of August 2017
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
51
Directors’ Declaration BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
Opinion
We have audited the accompanying financial report of Bailador Technology Investments Limited
(the Company), which comprises the Statement of Financial Position as at 30 June 2017, the
Statement of Profit or Loss and Other Comprehensive Income, the Statement of Changes in
Equity, the Statement of Cash Flows for the year then ended and notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration of
the Company comprising the Company and the entities it controlled at the year’s end or from time
to time during the financial year.
In our opinion:
(a) The accompanying financial report of the Company is in accordance with the
Corporations Act 2001, including:
i.
giving a true and fair view of the Company’s financial position as at 30 June 2017
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and
Regulations 2001
the Corporations
ii.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards
require that we comply with relevant ethical requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance about whether the financial report is free
from material misstatement. Our responsibilities under those standards are further described in
the Auditor’s responsibility section of our report. We are independent of the Company in
accordance with 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
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.
52
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017Independent Auditor's Report
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSSED THE KEY
AUDIT MATTER
Valuation of Investments $116 million
Refer to Note 4 - Financial Assets
Accounting policy – Note 18 Fair Value Measurement
The Company has been classified under AASB 2013-5
as an Investment Entity whose business purpose is to
invest funds solely for returns via capital appreciation
and/or investment returns.
The entity is exempt from consolidating underlying
investees it controls in accordance with AASB 10
Consolidated Financial Statements.
As the Company has been classified as an Investment
Entity, the portfolio investments have been accounted for
at fair value through the profit or loss and shown as
Financial Assets in the Statement of Financial Position.
In determining year-end valuations, the board considers
the annual valuation review by an independent valuation
expert and the valuation report prepared by the Manager.
Of these financial assets, $38 million were classified as
‘level 2’ financial instruments in accordance with AASB
13 Fair Value Measurement.
Our procedures included amongst others:
• Evaluating
valuation
the manager’s
approach to value the investments; cross
checking with growth achieved and
comparable market data.
• Assessing
the valuation range
the
manger’s valuation and implied revenue
multiple.
to
• Assessing the scope, expertise and the
independence of external valuer engaged
by the Company.
• Evaluating
the appropriateness of
the
valuation methodologies selected by the
manager and separately by the external
valuer
the
investment to accepted market practices
and our industry experience.
fair value of
to determine
The measurement of level 2 financial assets are based
on inputs other than quoted prices that are observable for
the asset , either directly or indirectly. The valuation of
the level 2 financial instruments therefore requires a
higher level of judgement.
•
We have focussed on this area as a key audit matter due
to the company being an investment entity; amounts
involved being material; and the inherent judgement
involved in determining the fair value of investments.
The remaining financial assets of $78 million were
classified as ‘level 3’ in accordance with AASB 13 Fair
Value Measurement. The measurements of level 3
financial assets are based on unobservable inputs for the
asset. This requires a higher level of judgement.
Independently assessing and comparing
the key inputs adopted by the manager and
the external valuer to available market
information relating to similar transactions.
We involved our valuation specialist to
assess
the market data used
seperately by the manager and the valuer is
reasonable in comparison to a credible
external source; the rationale for selected
multiples;
to market data;
revenue growth rates and other business
characteristics that are reasonable.
reference
that
• Assessing the adequacy of disclosure of
level 2 and level 3 finacial assets in
accordance with AASB 13 Fair Value
Measurement.
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
53
Independent Auditor's Report (continued)
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
Other Information
The directors are responsible for the other information. The other information comprises the information in
the entity’s annual report for the year ended 30 June 2017, but does not include the financial report and the
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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 the 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 Company 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 Company or to cease operations, or have 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 Company’s internal control.
– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
– 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
54
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Independent Auditor's Report (continued)
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
conditions that may cast significant doubt on the Company’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 Company 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 Company to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Company 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 these 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
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
55
Independent Auditor's Report (continued)
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
ABN 38 601 048 275
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
BAILADOR TECHNOLOGY INVESTMENTS LIMITED
We have audited the remuneration report included in pages 27 to 29 of the directors’ report for the year
ended 30 June 2017.
The directors of the company are responsible for the preparation and presentation of the remuneration report
in accordance with s 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.
Opinion
In our opinion the remuneration report of Bailador Technology Investments Limited for the year ended 30
June 2017 complies with s 300A of the Corporations Act 2001.
HALL CHADWICK
LEVEL 40, 2 PARK STREET
SYDNEY NSW 2000
SANDEEP KUMAR
Partner
Dated: 15 August 2017
56
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Independent Auditor's Report (continued)
Additional Information
The additional information required by the Australian Stock Exchange Limited Listing Rules is set out below.
20 Largest Shareholders
Details of the 20 largest ordinary shareholders and their respective holdings as at 30 June 2017.
Holder Name
Washington H Soul Pattinson and Company Limited
David Kirk
National Nominees Limited
Forsyth Barr Custodians Ltd
HSBC Custody Nominees (Australia) Limited
Paul Wilson
Bond Street Custodians Limited
Corom Pty Ltd
Patagorang Pty Ltd
Pepstock II Pty Ltd
Yolo Limited
Ladybird Limited
BNP Paribas Nominees Pty Ltd
Gwynville Trading Pty Ltd
JP Morgan Nominees Australia Limited
Mr Paul Anthony Kendrick
Mr Paul Meehan
Mr Jonathan George Edgar
Mr Ralph James Norris
Macareus Pty Ltd
Total
Substantial Shareholders
The names of the substantial shareholders in the Company’s register are:
Washington H Soul Pattinson and Company Limited
David Kirk
National Nominees Limited
Ordinary
% of
Shares Held
Issued Shares
23,000,000
19.13%
8,387,841
6,298,170
4,104,191
3,564,571
3,068,136
2,053,308
2,000,000
1,908,810
1,435,274
1,253,088
1,253,088
1,152,722
1,113,782
1,019,779
999,978
926,545
911,487
816,250
802,114
6.98%
5.24%
3.41%
2.96%
2.55%
1.71%
1.66%
1.59%
1.19%
1.04%
1.04%
0.96%
0.93%
0.85%
0.83%
0.77%
0.76%
0.68%
0.67%
66,069,134
54.94%
Ordinary Shares
23,000,000
8,387,841
6,298,170
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017
57
Shareholder Information Distribution of Shares
Analysis of numbers of equity security holders, by size of holding as at 30 June 2017.
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Numbers of
Ordinary
% of
Shareholders
Shares Held
Issued Shares
75
289
267
643
137
45,165
993,634
2,351,225
22,199,563
94,658,244
1,411
120,247,831
0.04%
0.83%
1.96%
18.46%
78.72%
100%
The number of holders possessing less than a marketable parcel of the Company’s ordinary shares, based on the closing market price
as at 30 June 2017 is 30.
Other Stock Exchanges Listing
Quotation has been granted for all ordinary shares and options of the Company on all member exchanges of the ASX.
Restricted Securities
The Company has no restricted securities.
Unquoted Securities
There are no unquoted securities on issue by the Company
Buy-Back
There is currently no on market buy-back
Use of Funds
For the purposes of ASX Listing Rule 4.10.19, the Company confirms that it has used its cash and assets in a form readily convertible to cash,
that it had at the time of admission, in a manner consistent with its business objectives, for the financial year.
58
BAILADOR TECHNOLOGY INVESTMENTS LIMITED ANNUAL REPORT 2017 Shareholder Information (continued) Corporate Information
Registered Office
Bailador Technology Investments Limited
Suite 4, Level 11
6 O’Connell Street
Sydney NSW 2000
www.bailador.com.au
Directors
David Kirk (Chairman)
Paul Wilson
Andrew Bullock
Sankar Narayan
Heith Mackay-Cruise
Share Registry
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
www.linkmarketservices.com.au
Auditor
Hall Chadwick
Level 40
2 Park Street
Sydney NSW 2000
www.hallchadwick.com.au
Company Secretary
Helen Plesek
Australian Stock Exchange Codes
Shares : BTI
Manager
Bailador Investment Management Pty Ltd
Suite 4, Level 11
6 O’Connell Street
Sydney NSW 2000
(AFSL 400811)
Bailador Technology Investments Limited
ABN 38 601 048 275
Suite 4, Level 11, 6 O’Connell St, Sydney NSW 2000
+61 2 9223 2344 | www.bailador.com.au