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ABN 89 008 108 227
Annual Report
For the year ended 30 June 2018
Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2018
Contents
Corporate Directory
Review of Operations and Activities
Corporate Governance Statement
Investment Manager Report
Portfolio Shareholdings at 30 June 2018
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
Page
1
2
4
5
8
10
15
16
38
39
44
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Directory
Directors
Michael J Cole B Ec, M Ec (Syd), F Fin
Ross J Finley B Comm (NSW)
Ian J Hunter BA LLB (Syd), MBA (MGSM)
Company Secretary
Jill Brewster MBA (MGSM), AGIA, ACIS, FIPA, FFA
Principal Registered Office
Share Registrar
Investment Manager
Accounting & Administration
Auditors
Suite 607
180 Ocean Street
Edgecliff NSW 2027
Telephone: (02) 8917 0399
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Shareholder enquiries telephone:
(within Australia) 1300 737 760
(outside Australia) +61 2 9290 9600
Kaplan Funds Management Pty Limited
Suite 607
180 Ocean Street
Edgecliff NSW 2027
Telephone: (02) 8917 0300
Kaplan Funds Management Pty Ltd
Suite 607, 180 Ocean Street
Edgecliff NSW 2027
Telephone: (02) 8917 0399
Fax: (02) 8917 0355
MNSA Pty Ltd
Level 1
283 George Street
Sydney NSW 2000
Website
www.ironbarkcapital.com
Company Secretarial & all other enquiries
Telephone: (02) 8917 0399
Email: enquiries@ironbarkcapital.com
Stock Exchange
Australian Securities Exchange
ASX code: IBC
1
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2018
Review of Operations and Activities
The 2018 year was a year where markets were increasingly affected by global and domestic activities
resulting in higher volatility. The banking sector experienced a material negative impact of the Banking
Royal Commission and the telecommunications sector sustained significant adverse structural
adjustments from the rollout of the NBN.
Investment Performance
The Ironbark Capital Limited (“Ironbark”) portfolio returned 5.6% for the year inclusive of franking
credits, underperforming the benchmark (one year swap interest rate plus 6%) by 2.3%. The
performance was achieved with a portfolio that has a much lower volatility than the market. The
volatility of the Ironbark portfolio was around half of the ASX 300 Accumulation.
The significant gains made in 2018 were not repeated this year with a more subdued outlook from a
number of the large companies in the market. This resulted in a change in the portfolio holdings as
Ironbark realised losses from call option positions and switched to more significant contributors such as
BHP.
The Ironbark performance continues to reflect the Investment Manager’s absolute return focus and
income emphasis which includes the writing of call options. NTA after provision for tax on unrealised
losses was $0.536, compared to $0.538 from the previous period. The NTA is after a 1.85 cents per share
fully franked dividend paid in the period.
Results for the Full Year
The profit after tax of $2.28 million, was down on the $4.56 million of the prior year reflecting the poor
performance of some of the large cap stock holdings. Income from the trading portfolio was $2.85
million. The underlying income of dividends, interest and distributions increased 10% on the prior year.
Losses of $1.86 million were realised as the Company exited out of poor performing companies.
Ironbark’s MER increased marginally from 0.77% to 0.81%.
Dividends
The primary focus of Ironbark is the payment of fully franked dividends as corporate profits create the
opportunity to do so. In 2018, fully franked dividends of 1.85 cents per share were paid to shareholders.
Ironbark has declared a fully franked dividend of 0.85 cents per share out of the Profit Reserve as at 31
July 2018 payable 18 September 2018. As per the current legislation, this dividend will be franked at the
27.5% tax rate.
Ironbark Corporate Outlook
The Directors of Ironbark have a current policy to provide liquidity to shareholders every three years via
a buy-back facility. This policy was introduced to assist the narrowing of the NTA discount by providing
the certainty of a periodic exit at approximately NTA. A resolution for the buy-back will be put to
shareholders at the Annual General Meeting on 13 November 2018. Further information is provided in
the explanatory notes to the Notice of Meeting.
We uphold our view that there continues to be investor demand for a low volatility, absolute return and
fully franked dividend focused investment portfolio offered in a LIC structure.
2
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2018
Conclusion
The Directors will continue to set a policy direction for Ironbark consistent with our view of the best
opportunities for the Company in the current investment climate.
Michael J Cole
Chairman
3
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Statement
For the year ended 30 June 2018
Corporate Governance Statement
The Board of Ironbark Capital Limited are committed to achieving high standards of corporate
governance. Ironbark Capital Limited has reviewed its corporate governance practices against the ASX
Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate
Governance Council.
The 2018 Corporate Governance Statement is dated as at 30 June 2018 and reflects the corporate
governance practices in place throughout the 2018 financial year. The 2018 Corporate Governance
statement was approved by the Board on 15 August 2018.
The Corporate Governance Statement can be viewed on
www.ironbarkcapital.com/about/corporate-governance
the Company’s website at
4
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2018
Investment Manager Report
The manager’s focus is to deliver consistent returns and a high fully franked dividend yield from the
portfolio. Commensurate with its investment objective IBC’s performance benchmark is the 1 year
swap rate plus 6%.
Performance measurement includes franking credits and option premium income. Franking credits are
a significant source of return from IBC’s hybrid investments and for shareholders. Option premium
income is generated from buy & write activity and varies with market conditions. Over the financial
year, realised option premium income was approximately $990,000. The calculation of the portfolio’s
current running yield of 6.8% excludes option income because realised option premiums are highly
variable from year to year.
IBC recorded a portfolio return of 5.6% over the financial year underperforming its benchmark return
of 7.9%. Since inception, over 15.5 years including two years of the disastrous GFC, the portfolio
achieved a return of 9.0%pa with risk measuring approximately 53% of equity market risk.
IBC Performance
since inception to 30 June 2018
10.1
9.0
9.1
7.4
9.0
8.9
8.5
7.2
8.3
7.7
8.1
8.0
7.9
7.8
8.3
7.9
6.8
5.8
5.1
5.6
n
r
u
t
e
r
%
12
10
8
6
4
2
0
15.5yrs
%pa
10yrs
%pa
BENCHMARK (1 yr swap+6%pa)
9yrs
%pa
7yrs
%pa
6yrs
%pa
5yrs
%pa
2yrs
3yrs
4yrs
%pa
%pa
%pa
IBC portfolio+franking
1 yr %pa
IBC’s focus on income generation and capital preservation from a balanced portfolio structure has
delivered superior risk adjusted returns compared to the equity market. Over the 10 year period the
portfolio’s return was 7.4%pa with 52% less risk than the ASX200 Accumulation Index return of 8.4%
(inclusive of franking credits). In the most recent year a return of 5.6% was delivered with 44% less risk
than the equities market.
IBC & ASX
IBC & ASX
IBC & ASX
IBC & ASX
30/6/18
17.0
14.0
11.0
8.0
5.0
2.0
‐1.0
‐4.0
‐7.0
‐10.0
‐13.0
‐16.0
a
p
%
n
r
u
t
e
R
k
s
i
R
e
v
i
t
a
e
R
l
14.6
10.7
11.7
5.6
5.8
6.8
8.4
7.4
1yr
3yrs
5yrs
10yrs
‐44%
‐44%
‐51%
‐52%
0%
‐10%
‐20%
‐30%
‐40%
‐50%
‐60%
5
IRONBARK CAPITAL (incl Franking)
S&P ASX 200 Accum (incl Franking)
Relative Volatility/Risk
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2018
Portfolio
The portfolio is structured with an emphasis on income through yield orientated securities (hybrids
and corporate bonds, utilities, property trusts) and buy & write positions in Banks, BHP, Telstra and
other leading companies. The portfolio’s running yield was 6.8% inclusive of franking credits but
excluding option premium income.
The buy & write strategy involves buying selective shares and selling, subject to appropriate timing,
call options over those shares. This strategy gives away some of the upside potential from a
shareholding but generates option premium income consistent with the income emphasis of the
portfolio.
The portfolio is diversified across 39 different entities. Higher risk exposures in banks, industrials and
resources are largely held through buy & write option positions for income enhancement or added
protection. The portfolio’s hybrid and corporate bond holdings are mostly floating rate securities with
little duration risk.
Approximately 44% of the portfolio was held in hybrids and corporate bonds and 26% in buy & writes
in Banks, Telstra and BHP. The balance is represented by: 13.1% in property trusts, 2.9% in mid-cap
and small companies, 1% in utilities and 13% held in cash & option delta.
Bank Notes & Hybrids
Basel III
Corporate Sub Notes
Non Bank Hybrids & Corp
Prefs
Utilities & Infrastructure
Property Trusts
Banks
Top 50 Industrials
Ex Top 50 Industials
Materials & Energy
Cash & Option Delta
(Buy&Write)
Asset allocation reflects a cautious stance.
IRONBARK CAPITAL ASSET ALLOCATION ‐ 30 June 2018
13.0%
26.4%
3.4%
2.9%
1.7%
21.2%
7.8%
13.1%
9.7%
0.9%
portfolio running yield 6.8%
(includes franking credits but excludes option premium income)
6
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2018
Portfolio Performance – financial year to 30 June 2018
The portfolio produced a return of 5.6% for the financial year.
Corporate credit and hybrid securities representing 44% of the portfolio delivered more normalised
returns of 5.3% compared to the double digit returns achieved last year. A number of listed corporate
bonds matured during the year that were issued around 5 years ago, but without replacement due to
the absence of equity credit previous afforded by the credit rating agencies to these securities. A
further $2.4bn in corporate sub notes will mature over the next six months. The manager introduced
unlisted investment grade corporate debt to improve diversity away from financials. The unlisted
market is very liquid. New issues of Basel III bank hybrid securities during the year were largely
replacement securities. All hybrids to date have been redeemed on the first optional call date. The
demand supply balance remains favourable with around $4.9bn of bank hybrids maturing in the next
nine months. The floating rate structures of corporate debt and hybrid securities received the benefit
of a widening in the bank bill rate by 0.6% over the official cash rate in the June quarter.
The equities markets rallied strongly but returns were heavily skewed towards resources with BHP up
51%. At the other end, Telstra fell by a massive -30% and the banks collectively struggled to produce a
positive return impacted by the banking royal commission. CBA was the worst performing bank falling
6.8% and ANZ the best of the major banks gaining 3.9%. Buy & write returns were overall modest due
to the negative contribution from Telstra. Over the year, the physical weighting in Telstra was
significantly reduced and replaced with an increased weighting to BHP.
The property trusts sector produce a strong return of 13% driven by corporate activity and continued
yield compression. The portfolio weighting was increase during the year from 9% to 13% and returns
benefited from a takeover bid for Investa Office Fund by Blackstone.
Cash exposure (including option delta) was 13% at the end of the period reflecting the manager’s
cautious outlook.
Resources
Gold
ASX 300 Accum INDEX
Property Trusts
Benchmark (1yr swap +6%)
Industrials
IRONBARK CAPITAL
Hybrid & Corp Bond Index
Financials
Utilities
Telecoms
-30.0
Comparative Returns (accumulation)
Indices & Fund
12 months to 30 June 2018
40.7
23.6
13.2
13.0
7.9
7.8
5.6
5.3
1.6
-0.8
-40
-30
-20
0
-10
% Percentage Return
10
20
30
40
50
Kaplan Funds Management
7
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2018
Market
Value*
$'000
3,061
5,961
98
2,280
5,973
17,373
819
494
313
732
1,432
2,292
2,997
512
506
1,357
506
2,617
2,570
502
516
1,047
930
2,941
1,904
604
3,247
362
2,368
31,568
1,398
1,398
7,846
44
7,890
313
218
3,175
51
163
612
448
643
3,816
9,439
% of
%
portfolio
exposure**
4.3
8.5
0.1
3.2
8.5
24.6
1.2
0.7
0.4
1.0
2.0
3.3
4.2
0.7
0.7
1.9
0.7
3.7
3.6
0.7
0.7
1.5
1.3
4.2
2.7
0.9
4.6
0.5
3.4
44.6
2.0
2.0
11.1
0.1
11.2
0.4
0.3
4.5
0.1
0.2
0.9
0.6
0.9
5.4
13.3
3.0
7.2
0.1
2.9
8.0
21.2
1.2
0.7
0.4
1.0
2.0
3.3
4.2
0.7
0.7
1.9
0.7
3.7
3.6
0.7
0.7
1.5
1.3
4.2
2.7
0.9
4.6
0.5
3.4
44.6
1.7
1.7
3.3
0.0
3.3
0.4
0.3
4.5
0.1
0.2
0.9
0.6
0.9
5.4
13.3
ASX Code
Security
ANZ
CBA
CYB
NAB
WBC
AGLHA
AMP011227
AMPPA
ANZPG
BENPE/PG
BOQPE
CBAPC/PD/PG
CGFPB
CTX170425
CWNHA/HB
IAG150644
IAGPD
IANG
MEB091120
MEB281120
MQGPB/PC
NABHA
NABPA/PD
QUBHA
RHCPA
SUNPF/PG
SVWPA
WBCPG/PH
TLS
BHP
BLD
CHC
CIP
CLW
CMA
CRR
FLK
GOZ
IOF
VVR
Banks
ANZ Banking Group Limited
Commonwealth Bank of Australia Limited
CYBG PLC
National Australia Bank Limited
Westpac Banking Corporation Limited
Hybrids & Corporate Bonds
AGL Energy Limited - Subordinated Notes
AMP Limited - Subordinated Notes (Unlisted)
AMP Limited - Capital Notes
ANZ Banking Group Limited - Capital Notes
Bendigo & Adelaide Bank Limited - Capital Notes
Bank of Queensland Limited - Capital Notes
Commonwealth Bank of Australia Perls VI, VII & X
Challenger Limited - Capital Notes
Caltex Australia Limited - Fixed Rate Bonds (Unlisted)
Crown Limited - Subordinated Notes
Insurance Australia Group - Subordinated Notes (Unlisted)
Insurance Australia Group Limited - Capital Notes
Insurance Australia Group Limited - Perpetual Reset Exchangeable Notes
Members Equity Bank Limited - Floating Rate Senior Notes (Unlisted)
Members Equity Bank Limited - Capital Notes (Unlisted)
Macquarie Group Limited - Capital Notes
National Australia Bank Limited Income Securities
National Australia Bank Limited - Capital Notes
Qube Holdings Limited - Subordinated Notes
Ramsay Healthcare Limited - Perpetual Preference Securities
Suncorp Group Limited - Capital Notes
Seven Group Holdings Limited - Perpetual Preference Securities
Westpac Banking Group Corporation Limited - Capital Notes
Large industrial
Telstra Corporation Limited
Materials & Energy
BHP Billiton Limited
Boral Limited
Property
Charter Hall Group Limited
Centuria Industrial REIT
Charter Hall Long WALE REIT
Centuria Metropolitan REIT
Convenience Retail REIT
Folkestone Limited
Growthpoint Properties
Investa Office Fund
VIVA Energy REIT
*Includes market value of options written against holdings
**Includes option delta written against holdings
8
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2018
ASX Code
Security
BUB
ING
PYG
RWC
SCO
SDF
SKI
Small Industrial
Bubs Australia Limited
Inghams Group Limited
Paygroup Limited
Reliance Worldwide Corporation Limited
Scottish Pacific Group Limited
Steadfast Group Limited
Utilities & Infrastructure
Spark Infrastructure Group
Cash
Market
Value*
$'000
36
57
93
97
100
1,684
2,067
676
676
314
% of
portfolio
%
exposure**
0.1
0.1
0.1
0.1
0.1
2.4
2.9
1.0
1.0
0.4
0.1
0.1
0.1
0.1
0.1
2.4
2.9
1.0
1.0
12.0
100.0
*Includes market value of options written against holdings
**Includes option delta written against holdings
70,725
100.0
9
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2018
Directors’ Report
Your Directors present their report on the Company for the year ended 30 June 2018.
Directors
The following persons were Directors of Ironbark Capital Limited during the financial year and up to
the date of this report:
Michael J Cole
Ross J Finley
Ian J Hunter
Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
Principal activities
During the year the principal activities of the Company included investments in securities listed on the
Australian Securities Exchange.
Dividends
Dividends paid to members since the end of the previous financial year were as follows:
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2018
Ordinary shares -
Final
Ordinary shares -
Interim
2017
Ordinary shares -
Final
Ordinary shares –
Interim
Ordinary shares –
Interim
16/02/2018
1.1cps
$1,510
05/03/2018
100
31/08/2017
0.75cps
$1,029
20/09/2017
100
28/02/2017
1.05cps
$1,321
20/03/2017
100
15/12/2016
1.0cps
$1,258
16/01/2017
100
17/08/2016
0.95cps
$1,196
31/08/2016
100
Review of Operations
The profit from ordinary activities after income tax amounted to $2,280,000 (2017: $4,556,000).
The net tangible asset backing for each ordinary share as at 30 June 2018 amounted to $0.531 per
share (2017: $0.528 per share).
Earnings per share
2018
Basic and diluted earnings per share (cents per share) 1.66
2017
3.55
10
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2018
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Company during the financial year
other than as disclosed in the financial statements.
Matters subsequent to the end of the financial year
No other matter or circumstance has occurred subsequent to year end 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 or economic entity in subsequent financial years.
Likely developments and expected results of operations
The Company will continue to be managed in accordance with the investment objectives set out in the
governing documents and in accordance with the Constitution. The Company will continue to pursue
its investment objectives for the long term benefit of the members. This will require continual review of
the investment strategies that are currently in place and may require changes to these strategies to
maximise returns.
Environmental regulation
The Company is not affected by any significant environmental regulation in respect of its operations.
To the extent that any environmental regulations may have an accidental impact on the Company’s
operations the Directors of the Company are not aware of any breach by the Company of those
regulations.
Information on directors
Michael J Cole B Ec, M Ec (Syd), F Fin Chairman
Experience and expertise
Investment manager and investment banker
Other current directorships
Chairman of Platinum Asset Management Limited.
Former directorships
Chairman, IMB Limited.
Interests in shares
3,000,000 shares
Ross J Finley B Comm (NSW)
Experience and expertise
Investment manager and stockbroker
Other current directorships
Director, Century Australia Investments Limited
Interests in shares
600,000 shares
11
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2018
Ian J Hunter BA LLB (Syd), MBA (MGSM) Audit Committee Chairman
Experience and expertise
Banking and finance
Other directorships
Director, Platinum Asia Investments Limited
Interests in shares
1,575,000 shares
The particulars of directors’ interests in shares of the Company are as at the date of this report.
Company Secretary
The Company Secretary is Ms Jill Brewster. She is the Company Secretary for Kaplan Funds
Management Pty Limited and has held senior management and advisory roles across corporate,
finance and operations in the investment and financial services industry. She is a member of The
Governance Institute of Australia, formerly known as Chartered Secretaries Australia.
Meetings of directors
The numbers of meetings of the Company’s Board of Directors and Audit Committee held during the
year ended 30 June 2018, and the numbers of meetings attended by each Director were:
Board meetings
Audit Committee
Michael J Cole
Ross J Finley
Ian J Hunter
A
4
4
4
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the
Committee during the year
B
4
4
4
A
2
2
2
B
2
2
2
Audit Committee
The Audit Committee consists of Mr Ian Hunter, Mr Michael Cole and Mr Ross Finley. The Chairman
is Mr Ian Hunter, who is not the Chairman of the Board.
Remuneration report
This report details the nature and amount of remuneration for each Director and Key Management
Personnel of Ironbark Capital Limited in accordance with the Corporations Act 2001.
Remuneration policy
The Board determines the remuneration structure of Non-Executive Directors, having regards to the
scope of the Company’s operations and other relevant factors including the frequency of Board
meetings as well as directors’ length of service, particular experience and qualifications. The Board
makes a recommendation to shareholders as to the level of Non-Executive Directors’ remuneration
which is then put to shareholders at the Annual General Meeting for approval. The Company has no
employees as the investment management and administration services are outsourced.
As the Company does not provide share or option schemes to Directors, remuneration of Non-
Executives is not explicitly linked to the Company’s performance. Notwithstanding this, Board
members are subject to ongoing performance monitoring and regular performance reviews.
12
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2018
Directors’ benefits
No Director of the Company has, since the end of the previous financial year, received or become
entitled to receive a benefit, other than a remuneration benefit as disclosed in the Directors’ Report,
by reason of a contract made by the Company or a related entity with the director or with a firm of
which he is a member, or with a Company in which he has a substantial interest.
Details of remuneration
The following table shows details of the remuneration received by the Directors of the Company for
the current and previous financial year.
2018
Name
MJ Cole
RJ Finley
IJ Hunter
2017
Name
MJ Cole
RJ Finley
IJ Hunter
Cash salary
and fees
$
Superannuation
$
22,000
22,000
22,000
66,000
-
-
-
-
Cash salary
and fees
$
Superannuation
$
22,000
22,000
22,000
66,000
-
-
-
-
Total
$
22,000
22,000
22,000
66,000
Total
$
22,000
22,000
22,000
66,000
Directors are paid a maximum remuneration of $22,000 each per annum.
Accounting and company secretarial duties are outsourced to Kaplan Funds Management Pty
Limited. Ms Brewster received no fees from Ironbark Capital Limited. Kaplan Funds Management Pty
Limited is remunerated for services rendered pursuant to an Administrative Services Agreement
effective 1 April 2014.
Equity instruments held by key management personnel
Options
(i)
No options were granted over issued shares or interests during the financial year or since the financial
year end by the Company to Directors or any other officers.
(ii)
Share holdings
The relevant interest in the shares of the Company of each director and as notified to the ASX is as
follows:
13
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2018
2018
Name
Balance at the
start of the
year
Net movement
Balance at
the end of
the year
Directors of Ironbark Capital Limited
Ordinary shares
Michael J Cole
Ross J Finley
Ian J Hunter
3,000,000
600,000
1,575,000
5,175,000
-
-
-
-
3,000,000
600,000
1,575,000
5,175,000
Insurance and indemnification of officers and auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors
of the Company, the Company Secretary and any related body corporate against liability incurred as
such by a Director or Secretary to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
No indemnities have been given or insurance premiums paid during or since the end of the financial
year, for any person who is or has been an auditor of the Company.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to 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 part of those
proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court
under section 237 of the Corporations Act 2001.
Non-audit services
No non-audit services were performed by the auditors or consultation fees were incurred by the
Company during the year ended 30 June 2018 (2017: $nil).
Auditor’s independence declaration
A copy of the auditor‘s independence declaration as required under section 307C of the Corporations
Act 2001 is set out on page 15.
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and
Investments commission, relating to the ‘rounding off’ of amounts in the financial statements and
Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that
Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the Directors.
Michael J Cole
Director
Sydney
17 August 2018
14
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2018
Notes
6
6
19 (b)
19 (a)
17
2018
$'000
2017
$'000
3,754
(902)
2,852
3,408
2,609
6,017
(294)
(23)
(41)
(33)
(32)
(11)
(16)
(66)
(46)
(35)
(18)
(20)
(635)
(279)
(28)
(47)
(41)
(27)
(9)
(16)
(66)
(43)
(35)
(28)
(6)
(625)
2,217
5,392
Investment income from trading portfolio
Revenue
Net (losses)/gains on trading portfolio
Total investment income from trading portfolio
Expenses
Management fees
Brokerage expense
Accounting fees
Share registry fees
Custody fees
Tax fees
Directors' liability insurance
Directors' fees
ASX fees
Audit fees
Options expense
Other expenses
Total expenses
Profit before income tax
Income tax benefit/(expense)
7
63
(836)
Net profit for the year
Other comprehensive income/(loss) for the year net of tax
Total comprehensive income for the year
Basic and diluted earnings per share
22
2,280
-
2,280
Cents
1.66
4,556
-
4,556
Cents
3.55
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with
the accompanying notes.
16
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Financial Position
As at 30 June 2018
Notes
2018
$'000
2017
$'000
8
9
10
12
13
14
15
314
1,227
70,411
-
3
71,955
1,791
1,791
6,565
456
65,226
102
3
72,352
1,722
1,722
73,746
74,074
64
64
7
7
71
114
114
7
7
121
73,675
73,953
74,644
527
(1,496)
74,663
786
(1,496)
73,675
73,953
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Current tax assets
Other assets
Total current assets
Non- current assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Profit reserve
Accumulated losses
Total equity
The above Statement of Financial Position should be read in conjunction with the accompanying notes
17
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Changes in Equity
For the year ended 30 June 2018
Issued
capital
$'000
Profit
reserve
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2017
74,663
786
(1,496)
73,953
Profit for the year
Transfer to profit reserve
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Dividends paid
Contributions of equity from rights
issue, net of transaction costs
-
-
-
-
16
-
2,280
2,280
2,280
(2,280)
-
2,280
(2,539)
-
-
-
2,280
(2,539)
(19)
15(c),(d)
(19)
-
Balance at 30 June 2018
74,644
527
(1,496)
73,675
Balance at 1 July 2016
69,537
Profit for the year
Transfer to profit reserve
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Dividends paid
Contributions of equity from rights
issue, net of transaction costs
-
-
-
-
16
5
-
(1,496)
68,046
4,556
4,556
4,556
(4,556)
-
4,556
(3,775)
-
-
-
4,556
(3,775)
5,126
15(c),(d)
5,126
-
Balance at 30 June 2017
74,663
786
(1,496)
73,953
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
18
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Cash Flows
For the year ended 30 June 2018
Notes
2018
$'000
2017
$'000
Cash flows from operating activities
Interest received
Net payments for purchase of trading portfolio
Dividends and trust distributions received
Other income received
Management fees paid
Other expenses paid
Taxes refunded/(paid)
Net cash (outflow)/inflow from operating activities
Cash flows from financing activities
Dividends paid to shareholders
Proceeds from rights issue
Transaction costs paid for rights issue
Net cash (outflow)/inflow from financing activities
21
16
15(c)
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at the end of the financial
year
454
(6,834)
3,160
67
(294)
(343)
102
(3,688)
(2,539)
-
(24)
(2,563)
(6,251)
6,565
493
(2,298)
2,884
61
(297)
(289)
(207)
347
(3,775)
5,147
(29)
1,343
1,690
4,875
8
314
6,565
The above Statement of Cash Flows should be read in conjunction with the accompanying notes
19
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
1. General information
Ironbark Capital Limited (the "Company") is a listed public company domiciled in Australia. The address of
Ironbark Capital Limited's registered office is Suite 607, 180 Ocean Street, Edgecliff NSW 2027. The
financial statements of Ironbark Capital Limited are for the year ended 30 June 2018. The Company is
primarily involved in making investments, and deriving revenue and investment income from listed
securities and unit trusts in Australia.
2. Significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
The financial statements are for the entity Ironbark Capital Limited.
Basis of preparation
(a)
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations
Act 2001. The Company is a ‘for profit’ entity.
The Financial Statements were authorised for issue by the directors on 17 August 2018.
(i)
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting
Standards (AIFRS). AIFRS ensures that the financial statements and notes comply with International
Financial Reporting Standards (IFRS).
(ii)
New and amended standards adopted by the Company
The Company has adopted the following new amendment standards for the first time for the annual
reporting period commencing 1 July 2018:
AASB 2016-1 Recognition of deferred tax assets for unrealised tax losses (effective from 1 January
2017)
AASB 2016-1 clarifies the accounting for deferred tax where an asset is measured at fair value and that fair
value is lower than the asset’s tax cost base. This does not change the underlying principles for the
recognition of deferred tax assets.
AASB 2016-2 Disclosure Initiative: Amendments to AASB 107 Statement of Cash Flows (effective
from 1 January 2017)
This amendment requires entities to provide disclosures that enable users of financial statements to
evaluate cash and non-cash changes in their financial activities.
The adoption of these standards did not have any impact on the current period or any prior period and is
not likely to affect any future periods.
(iii)
Historical cost convention
These Financial Statements have been prepared under the accruals basis and are based on historical cost
convention, except that financial instruments are stated at their fair value through profit or loss.
(iv)
Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Company's accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the financial statements, refer to Note 4.
20
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2. Significant accounting policies (continued)
Revenue recognition
(b)
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are net of returns and trade allowances.
(i)
Trading income
Profits and losses realised from the sale of investments and unrealised gains and losses on securities held
at fair value are included in the Statement of Profit or Loss and Other Comprehensive Income in the year
they are earned/incurred.
(ii)
Dividends and trust distributions
Dividends and trust distributions are recognised as revenue when the right to receive payment is
established.
(iii)
Interest income
Interest income is recognised using the effective interest method.
(iv)
Other income
The Company recognises other income when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been met for each of
the Company's activities as described below.
(c)
Income tax
The income tax expense or income for the period is the tax payable on the current period's taxable income
based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at
the end of the reporting period. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred
income tax is determined using tax rates that have been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss in the Statement of Profit or Loss and Other
Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
21
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2. Significant accounting policies (continued)
(d)
Cash and cash equivalents
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
(e)
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. Trade and other receivables are
generally due for settlement within 30 days. They are presented as current assets unless collection is not
expected for more than 12 months after the reporting date.
Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off by reducing the carrying amount directly.
(f)
Trading portfolio
Classification
The trading portfolio comprises securities held for short term trading purposes, including exchange traded
option contracts that are entered into, as described below. The purchase and the sale of securities are
accounted for at the date of trade. Trade date accounting is adopted for financial assets that are delivered
within timeframes established by market place convention.
Options are initially brought to account at the amount received upfront for entering the contract (the
premium) and subsequently revalued to current market value. Increments and decrements are taken
through the Statement of Profit or Loss and Other Comprehensive Income.
Securities in the trading portfolio are classified as "assets measured at fair value through profit or loss".
Recognition and derecognition
Purchases and sales of financial assets are recognised on trade date - the date on which the Company
commits to purchase or sell the asset. Financial assets are derecognised when the right to receive cash
flows from the financial assets have expired or have been transferred and the Company has transferred
substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or
loss.
Subsequent to initial recognition, the financial instruments are measured at fair value with changes in their
fair value recognised in the Statement of Profit or Loss and Other Comprehensive Income.
When disposal of an investment occurs, the cumulative gain or loss is recognised as realised gains and
losses on trading portfolio in the Statement of Profit or Loss and Other Comprehensive Income.
The objective of determining fair value for a financial instrument that is traded in an active market is to
arrive at the price at which a transaction would occur at the end of the reporting period. The existence of
published price quotations in an active market is the best evidence of fair value and is used to measure the
financial asset or financial liability.
Financial assets are valued at their fair value without any deduction for transaction costs that may be
incurred on sale or other disposal. Certain costs in acquiring investments, such as brokerage and stamp
duty are expensed in the Statement of Profit or Loss and Other Comprehensive Income.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2. Significant accounting policies (continued)
(g)
Derivatives
The Company may invest in financial derivatives. Derivative financial instruments are accounted for on the
same basis as the underlying investment exposure. Gains and losses relating to derivatives are included in
investment income as part of realised or unrealised gains and losses on investments.
(h)
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the
end of financial year that remain unpaid. The amounts are unsecured and are usually paid within 30 days
of recognition. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months from the reporting date. They are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.
(i)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
(j)
Profit reserve
The Profit Reserve is made up of amounts transferred from current and retained earnings that are
preserved for future dividend payments.
(k)
Dividends
In accordance with the Corporations Act 2001, the Company may pay a dividend where the Company's
assets exceed its liabilities, the payment of the dividend is fair and reasonable to the Company's
shareholders as a whole and the payment of the dividend does not materially prejudice the Company's
ability to pay its creditors.
It is the Directors’ policy to only pay fully franked dividends and to distribute the majority of franking credits
received each year. Franking credits are generated by receiving fully franked dividends from shares held in
the Company's investment portfolio, and from the payment of corporate tax on its other investment income,
namely share option premiums, unfranked income and net realised gains.
A provision for dividends payable is recognised in the reporting period in which dividends are
declared, for the entire undistributed amount, regardless of the extent to which they will be paid in cash.
(l)
(i)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Company, excluding any costs of servicing equity other than
ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted
for bonus elements in ordinary shares issued during the year and excluding treasury shares.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account:
the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2. Significant accounting policies (continued)
(m)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the Australian Taxation Office (ATO). In this case it is recognised as part of
the cost of acquisition of the asset or as part of the expense.
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 in the Statement of Cash Flows on a gross basis, except for the GST
components of cash flows arising from investing or financing activities which are recoverable from, or
payable to the ATO and are presented as operating cash flows.
(n)
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in
the financial statements have been rounded off in accordance with that Instrument to the nearest thousand
dollars, or in certain cases, the nearest dollar.
(o)
Functional and presentation currency
The functional and presentation currency of the Company is Australian dollars.
(p)
Operating Segments
The Company operated in Australia only and the principal activity is investment.
(q)
New accounting standards for application in future periods
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2018 reporting periods and have not yet been applied in the Financial Statements. The Company's
assessment of the impact of these new standards and interpretations is set out below.
(i)
AASB 9 Financial Instruments, (effective from 1 January 2018)
AASB 9 Financial Instruments addresses revised requirements for the classification, measurement,
recognition and derecognition of financial assets and financial liabilities, including hedge accounting. The
standard is not applicable until 1 January 2018 but is available for early adoption. AASB 9 permits the
recognition of fair value gains and losses in other comprehensive income if they relate to equity
investments that are not held for trading. The Directors do not expect there will be any impact on the
accounting for the Company’s financial assets or liabilities.
(ii)
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods
commencing on or after 1 January 2018)
When effective, this Standard will replace the current accounting requirement applicable to revenue with a
single, principles-based model. Except for a limited number of exceptions, including leases, the new
revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges
between entities in the same line of business to facilitate sales to customers and potential customers.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2. Significant accounting policies (continued)
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the
following five-step process:
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s); and
recognise revenue when (or as) the performance obligations are satisfied.
This Standard requires retrospective restatement, as well as enhanced disclosures regarding revenue.
There is no expected impact on the Company’s financial statements.
There are no other standards that are not yet effective and are expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
3. Financial risk management
The Company’s activities expose it to a variety of financial risks: market risk (including interest rate risk and
price risk), credit risk and liquidity risk. The Board of the Company has implemented a risk management
framework to mitigate these risks.
(a)
Market risk
The standard defines this as the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices.
(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 trading portfolio.
The Company seeks to manage and constrain market risk by diversification of the investment portfolio
across multiple stocks and industry sectors. The Investment Manager of the trading portfolio has been
granted specific risk tolerance boundaries as set out in the Investment Management Agreement.
The Company's investments split by sector as at 30 June are set out below:
Sector
Financials
Property Trusts
Materials
Corporate floating rate notes
Small Industrials
Telecommunications services
Utilities
Healthcare & biotechnology
Corporate fixed rate bonds
Cash
Consumer staples
Total
2018
(%)
2017
(%)
57.1
12.5
11.2
9.9
4.2
2.0
1.0
0.9
0.7
0.4
0.1
100.0
52.9
9.4
4.2
11.2
2.6
9.1
0.6
0.8
-
9.1
0.1
100.0
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
3.
Financial risk management (continued)
Securities representing over 5 percent of the trading portfolio at 30 June 2018 were:
BHP Billiton Limited
Commonwealth Bank of Australia Limited
Westpac Banking Corporation Limited
2018
(%)
11.1
8.5
8.5
28.1
The Company is also not directly exposed to currency risk as all its investments are quoted in Australian
dollars.
The following table illustrates the effect on the Company's profit or loss based on a fall in market prices of
5% and 10% on the investment assets in the Company’s portfolio at reporting date, assuming a flat tax rate
of 27.5 percent (2017: 30 percent):
Index
Change in variable by +5%/-5% (2017: +5%/-5%)
Change in variable by +10%/-10% (2017: +10%/-10%)
This illustration does not take into account covered call option positions
(ii)
Cash flow and fair value interest rate risk
Impact on post-tax profit
2018
2017
$'000
$'000
$'000
$'000
2,552
5,105
(2,552)
(5,105)
2,283
4,566
(2,283)
(4,566)
The Company's interest bearing financial assets expose it to risks associated with the effects of fluctuations
in the prevailing levels of market interest rates on its financial position and cash flows. The risk is measured
using sensitivity analysis.
The table below summarises the Company's exposure to interest rate risk. It includes the Company's
assets and liabilities at fair values, categorised by the earlier of contractual repricing or maturity dates.
Floating
interest rate
$'000
Fixed
interest rate
$'000
Non-interest
bearing
$'000
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Financial liabilities
Trade and other payables
314
-
7,029
7,343
-
-
-
-
506
506
-
Total
$'000
314
1,227
70,411
71,952
-
1,227
62,876
64,103
(64)
(64)
(64)
(64)
Net exposure
7,343
506
64,039
71,888
The weighted average interest rate of the Company's cash and cash equivalents at 30 June 2018 is
1.09% pa (2017: 1.23% pa).
Sensitivity
At 30 June 2018, if interest rates had increased or decreased by 75 basis points from the year end rates
with all other variables held constant, post-tax profit for the year would have been $39,925 higher/$39,925
lower (2017: changes of 75 bps/75 bps: $76,419 higher/$76,419 lower).
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
3. Financial risk management (continued)
(b)
Credit risk
The standard defines this as the risk that one party to a financial instrument will cause a financial loss for
the other party by failing to discharge an obligation.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those
assets, as disclosed in the Statement of Financial Position and Notes to the Financial Statements.
There are no material amounts of collateral held as security at 30 June 2018.
Credit risk is managed as noted in Note 8 with respect to cash and cash equivalents, Note 9 for trade and
other receivables and Note 10 for floating rate note trading portfolio. None of these assets are over-due or
considered to be impaired.
(c)
Liquidity risk
The standard defines this as the risk that an entity will encounter difficulty in meeting obligations associated
with financial liabilities.
The Investment Manager monitors cash-flow requirements daily taking into account upcoming dividends,
tax payments and investing activity.
The Company's inward cash flows depend upon the level of dividend and distribution revenue received.
Should these decrease by a material amount, the Company would amend its outward cash flows
accordingly. As the Company's major cash outflows are the purchase of securities and dividends paid to
shareholders, the level of both of these is managed by the Board and Investment Manager.
The assets of the Company are largely in the form of readily tradable securities which can be sold on-
market if necessary.
The table below analyses the Company's non-derivative financial liabilities in relevant maturity groupings
based on the remaining period to the earliest possible contractual maturity date at the year-end date. The
amounts in the table are contractual undiscounted cash flows.
At 30 June 2018
Non-derivatives
Trade and other payables
Total non-derivatives
At 30 June 2017
Non-derivatives
Trade and other payables
Total non-derivatives
Less than 1
month
$'000
More than 1
month
$'000
64
64
-
-
Less than 1
month
$'000
More than 1
month
$'000
114
114
-
-
27
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
3. Financial risk management (continued)
(d)
Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following
fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)
(level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is
determined on the basis of the lowest level input that is significant to the fair value measurement in its
entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a
particular input to the fair value measurement in its entirety requires judgment, considering factors specific
to the asset or liability.
The determination of what constitutes ‘observable’ requires significant judgment by the Directors. The
Directors consider observable data to be that market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following table presents the Company's financial assets and liabilities (by class) measured and
recognised at fair value according to the fair value hierarchy at 30 June 2018 and 30 June 2017:
30 June 2018
Financial assets
Trading portfolio
Total
30 June 2017
Financial assets
Trading portfolio
Total
Level 1
$'000
67,886
67,886
Level 1
$'000
65,226
65,226
Level 2
$'000
Level 3
$'000
2,525
2,525
-
-
Level 2
$'000
Level 3
$'000
-
-
-
-
Total
$'000
70,411
70,411
Total
$'000
65,226
65,226
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the end of the reporting
period. The quoted market price used for financial assets held by the Company is included in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation
techniques. These valuation techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in
level 3. This is the case for unlisted equity securities and loans.
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances.
5. Segment information
The Company has only one reportable segment. The Company operates predominantly in Australia and in
one industry being the securities industry, deriving revenue from dividend, distribution and interest income
and from the sale of its trading portfolio.
6. Investment income
Revenue
Dividends
Interest
Distributions
Other income
Net gains/(losses) on trading portfolio
Net realised (losses)/gains on trading portfolio
Net unrealised gains/(losses) on trading portfolio
7. Income tax expense
2018
$'000
2,699
457
531
67
3,754
(1,865)
963
(902)
2017
$'000
2,563
508
276
61
3,408
(840)
3,449
2,609
2,852
6,017
(a)
Income tax expense recognised in the Statement of Profit or Loss and Other Comprehensive
Income
Current tax
Deferred tax
Income tax (benefit) / expense is attributable to:
Profit from continuing operations
2018
$'000
(714)
651
(63)
2017
$'000
(333)
1,169
836
(63)
836
29
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
7. Income tax expense (continued)
(b) Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit from continuing operations before income tax expense/(benefit)
Tax at the Australian rate of 27.5% (2017: 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Franking credits on dividends received
Imputation gross up on dividend income
Timing differences
Realised taxable investment (loss)/gain
Realised accounting investment loss
Adjustments for current tax of prior year
Income tax (benefit)/expense
8. Cash and cash equivalents
Cash at bank and in hand
Risk exposure
2018
$'000
2,217
610
(1,132)
311
266
(749)
513
118
(63)
2017
$'000
5,392
1,618
(1,103)
331
159
(399)
252
(22)
836
2018
$'000
2017
$'000
314
6,565
The Company's exposure to interest rate risk is discussed in Note 3. The maximum exposure to credit risk
at the end of the reporting period is the carrying amount of each class of cash and cash equivalents
mentioned above.
Cash investments are made with National Australia Bank Limited which is rated AA- (2017: JP Morgan A+)
by Standard & Poor's.
9. Trade and other receivables
Dividends and distributions receivable
Interest receivable
GST Receivable
Unsettled sales
2018
$'000
495
27
7
698
1,227
2017
$'000
425
24
7
-
456
Outstanding settlements are on the terms operating in the securities industry, which usually require
settlement within two days of the date of a transaction. None of the receivables is past due or impaired at
the end of the reporting period.
30
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
9. Trade and other receivables (continued)
Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their
fair value.
Risk exposure
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class
of receivables mentioned above.
10. Trading portfolio – held at fair value through profit or loss
Listed equities
Property and infrastructure trusts
Floating rate notes - listed
Floating rate notes - unlisted
Fixed rate bonds - unlisted
2018
$'000
53,373
9,503
5,010
2,018
507
70,411
2017
$'000
50,520
6,715
7,991
-
-
65,226
The value of the trading portfolio includes the market value of options written against holdings (note 11).
Risk exposure and fair value measurements
Information about the Company's exposure to price risk and about the methods and assumptions used in
determining fair value is provided in note 3.
11. Derivative financial instruments
In the normal course of business, the Company enters into transactions in derivative financial instruments
with certain risks. A derivative is a financial instrument or other contract whose value depends on, or is
derived from, underlying assets, liabilities or indices. Derivative transactions include a wide assortment of
instruments, such as forwards, futures, options and swaps.
Derivatives are considered to be part of the investment process. The use of derivatives is an essential part
of the Company's portfolio management. Derivatives are not managed in isolation. Consequently, the use
of derivatives is multi-faceted and includes:
(i) hedging to protect an asset of the Company against a fluctuation in market values or to reduce volatility;
(ii) as a substitute for physical securities; and
(iii) adjustment of asset exposures within the parameters set out in the investment strategy.
The Company holds the following derivative instruments:
Options
An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the
right, but not the obligation, either to buy a call option or buy a put option at or by a set date or during a set
period, a specific amount of securities or a financial instrument at a predetermined price. The seller
receives a premium from the purchaser in consideration for the assumption of future securities price.
Options held are exchange-traded.
31
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
11. Derivative financial instruments (continued)
At year end, the notional principal amounts of derivatives held by the Company were as follows:
Notional
principal
amounts
Notional
principal
amounts
2018
$'000
(917)
2017
$'000
(506)
2018
$'000
2017
$'000
707
1,036
48
1,791
1,722
69
1,791
2018
$'000
26
38
64
1,353
342
27
1,722
2,568
(846)
1,722
2017
$'000
26
88
114
2018
$'000
2017
$'000
7
7
7
-
7
7
7
17
(10)
7
Australian exchange traded options
12. Deferred tax assets
The balance comprises temporary differences attributable to:
Net unrealised losses of investments
Tax losses
Other temporary differences
Movements:
Opening balance:
Charged/credited:
- to profit or loss
13. Trade and other payables
Management fees payable
Other payables
14. Deferred tax liabilities
Notes
19(c)
The balance comprises temporary differences attributable to:
Accrued income
Movements:
Opening balance
Charged/credited - to profit or loss
32
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
15. Issued capital
(a)
Issued capital
30 June
2018
Shares
30 June
2017
Shares
2018
$'000
2017
$'000
Ordinary shares - fully paid
137,258,651
137,258,651
74,644
74,663
(b)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled
to one vote, and upon a poll each share is entitled to one vote.
(c)
Movements in ordinary share capital
Balance at 1 July 2017
Less:
Transaction costs (net of tax)
Deferred tax adjustments
Balance at 30 June 2018
Number of
shares
$'000
137,258,651
74,663
-
-
137,258,651
(17)
(2)
74,644
Transaction costs relate to a non-renounceable offer of 1 share for every 8 fully paid ordinary shares issued
on 1 May 2017.
(d)
Dividend reinvestment plan
Under the Company's dividend reinvestment plan (DRP), additional shares are allotted at a price calculated
at 97.5% of the weighted average share price. The DRP is currently suspended and as such, there were no
shares issued under the dividend reinvestment plan during the year.
(e)
Capital risk management
To achieve this, the Board of Directors monitor the monthly NTA results, investment performance, the
Company's Indirect Cost Ratio (formerly known as 'Management Expense Ratio') and share price
movements.
The Company is not subject to any externally imposed capital requirements.
33
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
16. Dividends
(a)
Ordinary Shares recognised as paid
Final dividend
Interim dividend
2018
$'000
1,510
1,029
2,539
In respect of the financial year ended 30 June 2018, no further dividend has been declared.
(b)
Dividend franking account
Opening balance of franking account
Franking credits on dividends received
Net tax refunded during the year
Franking credits on ordinary dividends paid
Closing balance of franking account
Adjustments for tax payable/(refundable) in respect of the current year's profits
Franking credits on dividends received after year end
2018
$'000
804
1,132
(102)
(963)
871
-
173
173
1,044
2017
$'000
1,321
2,454
3,775
2017
$'000
1,112
1,103
207
(1,618)
804
(102)
160
58
862
(c)
Dividend rate
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2018
Ordinary shares -
Final
16/02/2018
1.1cps
$1,510
05/03/2018
100
Ordinary shares -
Interim
31/08/2017
0.75cps
$1,029
20/09/2017
100
2017
Ordinary shares -
Final
Ordinary shares –
Interim
Ordinary shares –
Interim
28/02/2017
1.05cps
$1,321
20/03/2017
100
15/12/2016
1.0cps
$1,258
16/01/2017
100
17/08/2016
0.95cps
$1,196
31/08/2016
100
34
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
17. Remuneration of auditors
During the year the following fees were paid or payable (GST inclusive) for services provided by the auditor
of the Company, its related practices and non-related audit firms:
Audit and other assurance services
MNSA Pty Ltd - Audit and review of financial statements
18. Contingencies
30 June
2018
$'000
30 June
2017
$'000
35
35
The Investment Management Agreement entered into by the Company with Kaplan Funds Management
Pty Ltd may be terminated by either party giving to the other no less than one-year written notice of its
intention to do so.
The Company had no other contingent liabilities at 30 June 2018 (2017: nil).
19. Related party transactions
(a) Key management personnel
Short-term benefits
(b) Transactions with other related parties
The following transactions occurred with related parties (exclusive of RITC):
Management fees paid or payable
2018
$'000
66
2018
$'000
294
2017
$'000
66
2017
$'000
279
The Company has entered into a Management Agreement with Kaplan Funds Management Pty Ltd such
that it will manage investments of the Company, ensure regulatory compliance with all the relevant laws
and regulations, and provide administrative and other services for a fee. No performance fees were paid or
payable to Kaplan Funds Management Pty Ltd for the year ended 30 June 2018 (2017: nil).
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
19. Related party transactions (continued)
(c) Outstanding balances
The following balances (GST inclusive) are outstanding at the end of the reporting period in relation to
transactions with related parties:
Management fees payable
(d) Terms and conditions
30 June
2018
$'000
30 June
2017
$'000
26
26
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
20. Events occurring after the reporting period
Since the end of the financial year, Ironbark has declared a fully franked dividend of 0.85 cents per share
out of the Profit Reserve as at 31 July 2018 payable 18 September 2018. As per the current legislation, this
dividend will be franked at the 27.5% tax rate.
No other matter or circumstance has occurred subsequent to year end 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 or economic entity in subsequent financial years.
21. Reconciliation of profit after income tax to net cashflow from operating
activities
Profit for the year
Unrealised (gains)/losses on trading portfolio
Realised losses/(gains) on trading portfolio
Change in operating assets and liabilities
(Increase)/Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
Increase in tax liabilities
(Increase) in trading portfolio
Net cash (outflow)/inflow from operating activities
22. Earnings per share
(a)
Basic earnings per share
From continuing operations attributable to the ordinary equity
holders of the company
Total basic earnings per share attributable to the ordinary
equity holders of the company
36
2018
$'000
2,280
(963)
1,866
(771)
(51)
39
(6,088)
(3,688)
2017
$'000
4,556
(3,449)
840
63
7
629
(2,299)
347
2018
Cents
2017
Cents
1.66
1.66
3.55
3.55
22. Earnings per share (continued)
(b)
Diluted earnings per share
From continuing operations attributable to the ordinary equity
holders of the company
Total diluted earnings per share attributable to the ordinary
equity holders of the company
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2018
2018
Cents
2017
Cents
1.66
1.66
3.55
3.55
Diluted earnings per share is the same as basic earnings per share. The Company has no securities
outstanding which have the potential to convert to ordinary shares and dilute the basic earnings per share.
(c)
Weighted average number of shares used as denominator
Weighted average number of ordinary shares used as the
denominator in calculating basic and diluted earnings per
share
2018
Number
2017
Number
137,258,651
128,420,924
37
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Declaration
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 16 to 37 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements, and
giving a true and fair view of the entity's financial position as at 30 June 2018 and of its
performance for the year ended on that date, and
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given a declaration by Jill Brewster on behalf of Kaplan Funds Management Pty
Limited, as a person who performs the Chief Executive functions of the Company, required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Michael J Cole
Director
Sydney
17 August 2018
38
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
Shareholder Information
Stock Exchange Listing
Ironbark has 137,258,651 fully paid ordinary shares on issue held by 1,841 security holders. These
are listed on the Australian Securities Exchange under ASX code: IBC.
Transaction Summary
The Company conducted 411 security transactions during the financial year. Brokerage paid during
the year net of RITC claimable was $22,846.
Voting rights
The Constitution provides for votes to be cast for fully paid ordinary shares as follows:
i.
ii.
on a show of hands, every member present in person, by proxy, by attorney or corporate
representative has 1 vote; and
on a poll, every member present in person, by proxy, by attorney or corporate representative
has 1 vote for each share held by the member.
Distribution of security holdings
As at 21 September 2018 there were 1,841 shareholders of fully paid ordinary shares in Ironbark
Capital Limited. These holders were distributed as follows:
Holdings Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
No. of
Shareholders
275
363
235
830
138
1,841
Shares
99,386
1,058,009
1,766,519
27,963,830
106,370,907
137,258,651
%
0.07
0.77
1.29
20.37
77.50
100.00
There were 250 shareholders holding less than a marketable parcel of 990 ordinary shares/$500,
based on a share price of $0.505.
44
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
Largest twenty shareholders
The largest 20 shareholders of the Company’s shares as at 21 September 2018 are listed below:
Ordinary Shares
Holder Name
KAPLAN PARTNERS PTY LIMITED
NATIONAL NOMINEES LIMITED
IOOF INVESTMENT MANAGEMENT LIMITED
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