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QV Equities LimitedMILTON CORPORATION LIMITED
ABN 18 000 041 421
An Australian Listed Investment Company
Listed since 1958
ANNUAL REPORT 2018
Profile
Milton was established as a private investment company for four shareholders in 1938. It became a public
company in 1950 and listed on the Sydney Stock Exchange in 1958. Milton is now an investment company for
more than 25,800 shareholders and is listed on the Australian Securities Exchange under the code MLT.
Investment philosophy
Milton is predominantly a long term investor in companies and trusts listed on the ASX that are well managed,
with a profitable history and an expectation of increasing dividends and distributions. Turnover of investments is
low and capital gains arising from disposals are reinvested.
Milton also holds liquid assets such as cash and term deposits and it may invest in hybrid securities as well as
real property development through joint ventures.
Benefits of an investment in Milton Corporation Limited
Shareholders receive fully franked dividends semi-annually – normally March and September.
Ordinary fully franked dividends are paid out of profit after tax excluding special investment revenue and costs
associated with the acquisition of subsidiaries. Dividends have been paid every year since listing and they have
been fully franked since the introduction of franking. Special fully franked dividends may be paid out of special
investment revenue.
The investment portfolio provides shareholders with exposure to diversified assets
Milton’s $2.9 billion equity investment portfolio comprises interests in companies and trusts which are listed on
the Australian Securities Exchange and are expected to deliver increased investment revenue over the long term.
Consistent application of this investment philosophy over many years has created a portfolio that is not aligned
with any securities exchange index.
Shareholders have an investment in a low cost, efficiently managed company with total administration costs that
represent 0.14% per annum of total assets.
Milton’s board oversees the performance of its executives who are employed by the company to manage its
investments for the benefit of shareholders.
Contents*
Milton’s Objectives
Chairman’s Review of the 2018 Financial Year
Five Year Financial Summary
Classification of Investments by Sector
Milton Corporation Foundation
Listed Investments by Sector
Directors’ Report
1
2
5
5
6
7
11
Remuneration Report
Auditor’s Independent Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Directory
ASX Information
14
18
19
44
45
50
51
*Corporate Governance Statement is available on the company website:
www.milton.com.au/shareholders.html and is lodged with ASX with this Annual Report.
Important dates
Final Dividend:
Ex date
Payment date
9 August 2018
4 September 2018
Company Briefing - Melbourne
on 16 October 2018 at 10.30am
DRP application closing date
13 August 2018
at State Library of Victoria
Annual General Meeting:
To be held at
11 October 2018 at 3.00pm
Sofitel Sydney Wentworth,
Level 4, Adelaide Room,
61-101 Phillip Street, Sydney
Company Briefing – Adelaide
on 17 October 2018 at 10.30am
at Intercontinental Adelaide
Milton has three objectives:
Increase fully franked dividends paid to
shareholders over time
Provide capital growth in the value of the
shareholders’ investments
Net tangible assets before provision for
tax on unrealised capital gains
MLT share price
Dividend History
10.0
8.0
6.0
s
t
n
e
C
4.0
2.0
0.0
5.50
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
-
Interim
Final
Special
Price History
Invest in a diversified portfolio of assets which are predominantly Australian listed companies and
trusts
1
Chairman’s Review of the 2018 financial year
Dear Shareholders
I am pleased to enclose the 2018 Annual Report for Milton Corporation, which is celebrating its 80 th anniversary
of incorporation and its 60th year of listing.
.
Financial Highlights
2018 was a year of uncertainty for investors both domestically and globally, with many regulatory and geopolitical
concerns affecting markets. Volatility returned after an extended period of calm and global interest rates have
begun to rise as central banks reduce their balance sheets. Domestically, the banking Royal Commission has
had a material effect on certain companies resulting in a market with strong divergence between sector valuations.
The total return from the Australian stock market, however, was strong with coordinated global economic growth
producing a robust corporate earnings environment.
Milton aims to look through market noise and invest in quality companies with growing earnings and dividends
over the long term. Milton’s portfolio is not aligned to any index, with earnings generated from dividend income
received from the portfolio, rather than through trading.
Net profit after tax for the 2018 financial year was $130.0 million, including special investment revenue of $1.3
million, an increase of 6.2% on the prior year.
Underlying profit after tax, which excludes special investment revenue and acquisition costs for the 2018 financial
year was $128.8 million, an increase of 5.6% on the prior year. To enhance the reliability of our dividend payments
the Board primarily uses underlying profit as a measure of core earnings.
Ordinary investment revenue for 2018 was $132.5 million, an increase of 6.0% on the prior year, and was received
from Milton’s portfolio of Australian listed equities. Increased dividends were received from over two thirds of
Milton’s portfolio, offsetting disappointing declines from investments in the telecommunications sector. Larger
increases were seen from BHP, RIO, Woolworths, Wesfarmers and AGL.
Dividends
A large part of the long term return from investing in the Australian stock market is due to tax effective dividend
income. Milton aims to pay increasing, fully franked, dividends to shareholders.
The full year ordinary dividend for 2018 has been increased to 19.0 cents per share, from 18.7 cents in 2017, and
represents the 8th consecutive increase. In determining the dividend for the year the board considered Milton’s
strong financial position and expectations for further underlying profit growth in 2019.
Milton’s profit reserves, strong balance sheet with no debt, and available franking credit balances provides
confidence that this level of fully franked dividend is well supported.
e
r
a
h
s
r
e
p
s
t
n
e
C
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
Dividend History
200120022003200420052006200720082009201020112012201320142015201620172018
Special
Ordinary
4.0
8.8
-
-
2.0
-
2.0
-
1.6
-
-
1.0
-
0.5
0.4
0.4
-
-
-
9.0
9.6
10.6 12.0 14.0 16.2 17.6 15.6 14.2 15.2 15.6 16.4 17.6 18.4 18.6 18.7 19.0
2
Dividend Reinvestment Plan (DRP)
Milton’s DRP will be in operation for the final dividend. The last day for receipt of an election to participate is 13
August 2018. We have been pleased to see continued growth in participation as investors take advantage of the
opportunity to add to their Milton holdings in a cost effective manner.
Management Expense Ratio (MER)
Milton is internally managed, with no performance or management fees paid. This structure ensures that
investment staff are focused on maximising net returns to shareholders. Milton’s MER for the 2018 year was
0.14%, an increase from 0.12% in 2017. The primary reason for the increase is costs associated with the
recruitment and succession of the Managing Director. Milton remains one of the lowest cost professional
managers of Australian equities available to investors.
Investments
Milton’s portfolio reflects the emphasis placed on investing in companies that pay increasing dividends over the
long term from quality earnings streams. Milton’s portfolio is not aligned to any index so it may underperform
broad market indices over the short term. Milton’s long term returns are shown below, the returns are not adjusted
for franking credits, which may be utilised by some shareholders.
Total Portfolio Return %
Total Shareholder Return %
9.3
6.5
8.5
9.1
6.9
6.5
9.0
8.6
10.2
9.5
1 Year
5 Years
10 Years
15 Years
20 Years
In 2018 Milton’s diverse, $2.9 billion, portfolio of 86 companies benefited from the strong performance of the
resource, energy and consumer staples sectors. Details of Milton’s portfolio are shown on pages 7-10.
During the year the portfolio was fine-tuned with positions in 26 companies and trusts increased by a total of $70
million. Investments were made in AGL, Woodside Petroleum, Technology One and Janus Henderson.
Investments were partially funded by the complete disposal of positions in AMP, Origin Energy and Fletcher
Building.
The 25 largest investments at 30 June 2018 are set out below.
Westpac Banking Corporation
Commonwealth Bank of Australia
Washington H. Soul Pattinson
Wesfarmers Limited
National Australia Bank
BHP Billiton
CSL Limited
ANZ Banking Group
Woolworths Group
Macquarie Group
Bank of Queensland
AGL Energy
Bendigo and Adelaide Bank
Blackmores Limited
MARKET
VALUE
$ million
51.3
50.6
49.9
49.8
48.7
48.4
45.8
45.5
43.4
39.5
35.3
2,266.6
2,931.5
MARKET
VALUE
$ million
307.4
227.2
189.8
140.0
132.2
123.8
114.1
96.3
88.6
81.6
74.4
68.8
61.9
52.3
Perpetual Limited
Brickworks Limited
IAG Limited
A P Eagers Limited
RIO Tinto Limited
Suncorp Group
ALS Limited
Transurban Group
Woodside Petroleum Limited
Telstra Corporation
ASX Limited
Total market value of Top 25
Total Listed Investments
3
Executive Changes
Milton’s Board notes the retirement of Mr Frank Gooch, who retired on 31 July 2018 after 22 years with Milton.
Mr Gooch contributed greatly to the success of Milton in his time as Managing Director overseeing growth in
assets from $0.2 billion to $3.1 billion. Mr Gooch provided strong leadership throughout that time and contributed
to the overall LIC industry through his involvement in industry bodies. Mr Gooch has been succeeded by Mr
Brendan O’Dea who worked with Mr Gooch since January 2018 as part of an orderly transition. I am confident
Mr O’Dea will be an outstanding leader of the company and a valuable contributor to the Board.
Outlook
Synchronised global growth currently provides a solid underlying economic backdrop for equity investors. 2018
was a strong year globally for equity returns with price growth providing a large part of the total return. Equity
valuations, however, now have a high degree of divergence with Australian listed companies exposed to global
growth trading at high valuations and dividend paying companies at cycle lows.
The impact of technology and the rate of change in the business environment presents challenges for all
companies. Milton’s investment team will continue to review our portfolio for disruption to business models and
to ensure that long term earnings and dividend growth are present.
The Australian stock market remains a strong choice for investors seeking growing, tax effective dividends with
valuations, in most cases, reasonable and positive underlying investor flows. Companies are well positioned to
deliver earnings growth in 2019.
Milton has the resources to invest, when opportunities arise, given our balance sheet strength and cash position.
As a long term investor Milton can take advantage of market volatility.
A further update on the portfolio and underlying market conditions will be provided at Milton’s Annual General
Meeting to be held on 11 October 2018.
R. D. MILLNER
Chairman
Sydney, 2 August 2018
4
Five Year Financial Summary
Underlying operating profit after tax(1) ($million)
128.8
122.0
126.4
125.0
117.4
Underlying earnings per share (cents)
19.6
18.7
19.5
19.6
18.8
2018
2017
2016
2015
2014
Profit after tax ($million)
Earnings per share (cents)
Administration costs as % of average total assets
Interim dividend (cents per share)
Final dividend (cents per share)(2)
Full year ordinary dividend (cents per share)
Special dividend (cents per share)
Net assets(2) at 30 June ($million)
Net asset backing per share pre-tax(2) at 30 June($)
Net asset backing per share post-tax(3) at 30 June($)
Last sale price at 30 June ($)
All Ordinaries Index at 30 June
Ten year Total Shareholder Return (% per annum)
Five year Total Shareholder Return (% per annum)
Shares on issue (million)
Number of shareholders
130.0
122.4
127.9
128.0
120.3
19.8
0.14
8.8
10.2
19.0
-
18.8
0.12
8.7
10.0
18.7
-
19.8
0.13
8.7
9.9
18.6
-
20.1
0.12
8.5
9.9
18.4
0.4
19.3
0.13
8.2
9.4
17.6
0.4
3,114
2,939
2,746
2,811
2,746
4.73
4.16
4.61
6290
6.5
9.1
4.51
3.99
4.51
5764
4.7
12.9
4.22
3.79
4.28
5310
5.3
11.4
4.39
3.90
4.50
5451
8.0
12.1
4.35
3.86
4.54
5382
10.2
14.5
658.2
651.9
649.9
640.2
630.8
25,864
24,726
23,729
22,514
21,055
(1) Underlying operating profit after tax excludes special investment revenue and costs associated with the acquisition of subsidiaries.
(2) Before provision for tax on unrealised capital gains and before providing for the ordinary final and special dividends.
(3) After provision for tax on unrealised capital gains and before providing for the ordinary final and special dividends.
Classification of Investments by Sector
The following asset classification table shows the composition of Milton’s assets by sector.
Opening
position
$ million
Additions(3)
Disposals
$ million
$ million
Change in
value
$ million
Closing
position
$ million
Income
$ million
Position
Weighting
%
Classification(1)
Banks
Consumer staples
Materials
Diversified financials
Energy
Insurance
Healthcare
Real estate
Telecommunications
Utilities
Retailing
Transport
Commercial services
Capital goods
Consumer services
Media
Other shares
965.5
256.6
254.8
219.9
205.8
144.3
122.3
87.8
87.6
87.2
81.9
80.2
67.7
39.7
36.6
14.0
12.1
Total equity investments
2,764.0
Liquids(2)
Property joint ventures
Other assets
Total
149.0
22.9
5.3
2,941.2
5.4
-
1.3
25.8
11.6
0.1
4.1
18.6
0.4
7.9
0.3
6.0
0.5
0.9
-
-
6.5
89.4
(0.4)
(4.8)
(4.9)
-
(15.7)
(15.4)
-
(10.6)
(3.3)
-
-
-
-
-
(4.6)
-
-
66.3
61.9
58.1
9.6
48.2
2.5
28.9
8.8
27.0
6.6
8.2
0.3
1.0
7.6
0.1
0.1
3.6
904.2
313.7
309.3
255.3
249.9
131.5
155.3
104.6
57.7
88.5
90.4
85.9
69.2
48.2
31.9
14.1
22.2
58.1
11.2
11.3
11.5
7.2
6.1
2.4
5.0
3.6
3.7
3.4
3.6
1.9
1.3
1.1
0.6
0.5
29.0
10.1
9.9
8.2
8.0
4.2
5.0
3.4
1.9
2.8
2.9
2.8
2.2
1.5
1.0
0.5
0.0
(59.7)
138.2
2,931.9
132.5
94.1
159.8
21.3
3.1
2.7
0.4
2.9
5.1
0.7
0.1
3,116.1
138.5
100.0
(1)
(2)
(3)
Investments are grouped according to their asset classes using the Global Industry Classification (“GICS”) codes.
Liquids include cash, term deposits, hybrid securities and dividends receivable.
Includes acquisition of an unlisted investment company.
5
Milton Corporation Foundation (ABN 95 051 921 133)
The Foundation was established in 1988 to support charitable organisations, particularly those which direct
assistance to persons that are disadvantaged in the community.
The objective is to create a vehicle with sufficient capital that can make regular meaningful donations from the
earnings derived from its investments. Contributions from Milton, shareholders and others over the years have
helped to grow the Foundation’s total assets at 30 June 2018 to $2.1 million.
Milton Foundation’s assets can now support annual distributions of over $100,000. In 2018, a total of $114,000
was distributed to seventeen organisations which provide much needed support for the disadvantaged in society
in Australia.
The Foundation has provided $2.21 million of assistance to the community since its establishment.
Shareholders can support the Foundation by either:
Forwarding a cheque to:
The Trustees
Milton Corporation Foundation or BSB: 082-067
PO Box R1836
Royal Exchange NSW 1225.
Direct deposit into the bank account:
Account Name: Milton Corporation Foundation
Account No: 038263869
The Foundation is a deductible gift recipient registered with the Australian Charities and Not-for-profits
Commission (ACNC) and donations of $2 or more are tax deductible.
J F Church
Chairman of Trustees
Sydney, 2 August 2018
6
LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2018
Holding
Fair Value
$'000
3,408,473
2,000
433,570
7,306,078
5,709,708
3,118,305
444,992
4,821,472
10,490,827
367,014
1,011,434
362,290
1,194,085
2,835,533
2,903,973
2,947,554
1,321,512
3,650,921
2,089,293
3,234,567
1,655,184
1,610,689
188,987
1,094,512
583,618
452,368
96,255
201
2,441
74,449
61,893
227,231
2,229
132,157
307,381
904,237
52,299
9,305
2,782
20,765
139,962
88,629
313,742
20,486
19,043
123,803
13,643
50,589
12,662
5,847
3,355
3,907
48,697
7,274
309,306
Banks
Australia & New Zealand Banking Group Limited
- ordinary shares
- capital notes 2
Auswide Bank Limited
Bank of Queensland Limited
Bendigo and Adelaide Bank Limited
Commonwealth Bank of Australia
MyState Limited
National Australia Bank Limited
Westpac Banking Corporation
Consumer Staples
Blackmores Limited
Coca-Cola Amatil Limited
Graincorp Limited
Treasury Wine Estates Limited
Wesfarmers Limited
Woolworths Limited
Materials
Adelaide Brighton Limited
Amcor Limited
BHP Billiton Limited
Boral Limited
Brickworks Limited
Dulux Group Limited
Incitec Pivot Limited
Orica Limited
Orora Limited
Rio Tinto Limited
Sims Metal Management Limited
7
LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2018
Diversified Financials
Argo Investments Limited
ASX Limited
Australian Foundation Investment Co
BKI Investment Company Limited
Carlton Investments Limited
Challenger Limited
EQT Holdings Limited
IOOF Holdings Limited
Janus Henderson Group
Macquarie Group Limited
Pendal Group Limited (formerly BT Investment Management)
Perpetual Limited
Energy
Caltex Limited
New Hope Corporation Limited
Washington H. Soul Pattinson & Company Limited
Woodside Petroleum Limited
Healthcare
Cochlear Limited
CSL Limited
Ramsay Health Care Limited
Regis Healthcare Limited
Sonic Healthcare Limited
Insurance
AUB Group Limited
Insurance Australia Group Limited
QBE Insurance Group Limited
Suncorp Group Limited
Real Estate
Charter Hall Group
Charter Hall Long WALE REIT
Finbar Group Limited
Goodman Group
Growthpoint Properties Australia
Lendlease Group
Scentre Group
Stockland Group
Unibail-Rodamco-Westfield
Vicinity Centres
8
Holding
1,809,575
548,965
762,192
1,223,866
356,778
544,000
500,697
2,009,086
217,500
659,990
1,046,643
1,231,982
394,000
1,290,107
9,174,640
1,222,911
33,800
592,198
225,283
1,856,076
659,425
1,049,153
5,847,282
1,949,375
3,314,232
1,751,000
1,866,997
3,642,464
1,475,376
403,010
969,539
2,669,474
3,589,940
317,520
6,168,335
Fair Value
$’000
14,422
35,348
4,695
1,866
11,802
6,436
10,414
18,062
9,057
81,608
10,372
51,250
255,332
12,821
3,857
189,823
43,364
249,865
6,766
114,069
12,161
6,088
16,176
155,260
14,247
49,877
18,987
48,355
131,466
11,417
8,215
3,497
14,193
1,455
19,207
11,719
14,252
4,658
15,976
104,589
LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2018
Retailing
A.P. Eagers Limited
ARB Corporation Limited
Automotive Holdings Group Limited
Premier Investments Limited
Utilities
AGL Energy Limited
APA Group
Transport
Lindsay Australia Limited
Qube Holdings Limited
Sydney Airport
Transurban Group
Commercial Services
ALS Limited
Brambles Limited
McMillan Shakespeare Limited
Telecommunication
Telstra Corporation Limited
TPG Telecom Limited
Capital Goods
CIMIC Group Limited
Reece Limited
Consumer Services
Flight Centre Travel Group Limited
InvoCare Limited
Information Technology
Carsales.com Limited
Technology One Limited
9
Holding
5,833,107
911,065
3,466,366
590,321
3,060,000
2,005,833
12,843,330
5,994,164
2,944,629
3,797,811
6,079,431
1,431,966
662,538
15,065,253
3,530,984
791,239
1,167,950
80,300
1,950,914
995,000
1,370,000
Fair Value
$’000
49,756
20,800
9,879
9,965
90,400
68,789
19,757
88,546
4,880
14,446
21,084
45,460
85,870
45,839
12,716
10,601
69,156
39,471
18,255
57,726
33,469
14,775
48,244
5,111
26,806
31,917
15,044
5,823
20,867
LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2018
Media
Event Hospitality & Entertainment
Seven Group Holdings Limited – TELYS4 preference shares
Automobiles & Components
Schaffer Corporation Limited
Total Listed Investments by Sector
Holding
Fair Value
$’000
1,010,921
7,000
68,999
13,536
556
14,092
914
914
2,931,529
10
Directors’ Report
For the year ended 30 June 2018
The directors present their report together with the financial statements of the consolidated entity (“Milton”)
consisting of Milton Corporation Limited and its subsidiaries for the financial year ended 30 June 2018 and the
independent auditor’s report thereon.
Directors
The directors of Milton at any time during or since the end of the financial year are:
Robert D. Millner FAICD Independent non-executive chairman.
Director of Milton Corporation Limited since 1998 and appointed chairman in 2002.
Chairman of the Investment and Remuneration Committees. Extensive experience in the investment industry.
Other current directorships:
Director of Australian Pharmaceutical Industries Limited since 2000, Chairman of BKI Investment Company
Limited since 2003, Director of Brickworks Limited since 1997 and appointed chairman in 1999, Director of New
Hope Corporation Limited since 1995 and appointed chairman in 1998, Director of TPG Telecom Limited since
2000, Director of Washington H. Soul Pattinson & Company Limited since 1984 and appointed chairman in 1998.
Former directorships in the last three years:
Hunter Hall Global Value Limited from April to June 2017
John F. Church FCSA, F Fin, FAICD Independent non-executive director.
Director of Milton Corporation Limited since 1986 and retired on 12 Oct 2017 after 31 years of dedicated service.
He was a member of the Investment Committee.
Graeme L. Crampton B.Ec, FCA, FAICD Independent non-executive director.
Director of Milton Corporation Limited since 2009.
Chairman of the Audit & Risk Committee and a member of the Remuneration Committee.
A Chartered Accountant and former partner of a major firm of Chartered Accountants for more than 28 years and
has extensive experience in the investment industry.
Kevin J. Eley CA, F Fin, FAICD Independent non-executive director.
Director of Milton Corporation Limited since 2011.
Member of the Investment and Audit & Risk Committees.
A Chartered Accountant and has extensive experience in the investment industry.
Other current directorships:
Director of EQT Holdings Limited since 2011 and HGL Limited since 1985. Director of Pengana Capital Group
Limited since 2017 (formerly Hunter Hall International Limited from 2015 to 2017).
Former directorships in the last three years:
PO Valley Energy Limited from 2012 to April 2016.
Francis G. Gooch B.Bus, CPA Managing director.
Managing Director of Milton Corporation Limited since 2004 and chief executive since 1999.
Member of the Investment Committee.
A Certified Practising Accountant and over 33 years’ experience in the finance and investment industries.
Other current directorships:
Director of Pengana International Equities Limited since June 2017 and appointed Chairman in December 2017.
Ms. Justine E. Jarvinen BE(Chem), F Fin, GAICD Independent non-executive director.
Appointed a non-executive director of Milton effective from 3 August 2017.
Member of the Investment Committee.
An Engineer with experience in equity markets and strategy development
Brendan J. O’Dea, B. Ec, M. Bus, CA, MAICD
Managing Director of Milton Corporation Limited with effect from 1 August 2018
Member of the Investment Committee.
A Chartered Accountant and has extensive investing and business management experience with over 22 years
at a global investment bank as a Managing Director.
Ian A. Pollard BA (Macq), MA (Oxon), D Phil (IMC), FIAA, FAICD Independent non-executive director.
Director of Milton Corporation Limited since 1998.
Member of the Audit & Risk and Remuneration Committees.
An Actuary and over 41 years of involvement in the investment industry.
Former directorships in the last three years:
Billabong International Limited from 2012 to 2018
SCA Property Group from 2012 to 2018.
11
Directors’ meetings
The number of directors’ meetings (including meetings of committees of directors) and the number of meetings
attended by each of the directors of Milton during the financial year were:
Director
Directors’
Meetings
Investment
Committee Meetings
Audit & Risk
Committee
Meetings
Nomination
Committee
Meetings
Remuneration
Committee
Meetings
R.D. Millner
J.F. Church(1)
G.L. Crampton
K.J. Eley
F.G. Gooch
I.A. Pollard
J.E. Jarvinen(2)
A
7
3
7
7
7
7
6
B
7
3
7
7
7
7
6
A
20
8
*
19
21
*
21
B
21
8
*
21
21
*
21
A
*
*
5
5
*
5
*
B
*
*
5
5
*
5
*
A
*
*
*
*
1
1
1
B
*
*
*
*
1
1
1
A
1
*
1
*
*
1
*
B
1
*
1
*
*
1
*
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.
* - Not a member of the relevant committee.
(1)J.F. Church retired 12 October 2017
(2)J.E. Jarvinen appointed 3 August 2017
B.J. O’Dea appointed as director after 30 June 2018
Principal activities
The principal activity of Milton is investment. Milton invests in companies and trusts, real property development,
fixed interest securities, and liquid assets such as cash and term deposits. There has been no significant change
in the nature of this activity during the financial year.
Operating and financial review
The consolidated profit after income tax of Milton for the year was $130.0 million (2017: $122.4 million). Milton
is in a sound financial position with net assets after provision for tax on unrealised capital gains at 30 June 2018
of $2.7 billion (2017: $2.6 billion) and no debt.
The operating and financial reviews are contained in the Chairman’s Review which begins on page 2.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of Milton during the past financial year other than as
disclosed in the financial statements.
Dividends
Dividends paid or declared by Milton to members since the end of the previous financial year were:
Declared and paid during the year
- Final 2017 ordinary fully franked
- Interim 2018 ordinary fully franked
Declared after end of year and not provided for
Cents
per share
Total amount
$’000
Date of payment
10.0
8.8
65,196
57,833
5 September 2017
1 March 2018
- Final 2018 ordinary fully franked
10.2
67,133
4 September 2018
No LIC capital gain was included in the above dividends.
All the dividends paid by Milton since franking was introduced in 1987 have been fully franked.
Events subsequent to reporting date
Apart from the information contained in note 25 to the financial statements, no matter or circumstance has arisen
since the end of the financial year that has or may significantly affect the operations, results or state of affairs of
Milton in subsequent financial years.
12
Likely developments
Milton will continue its investment activities consistent with its objective of generating increasing revenue for
distribution to its shareholders from its diversified portfolio of assets.
The performance of Milton’s investments is subject to and influenced by many external factors and therefore it is
not appropriate to predict the future results of the investments and Milton’s performance.
The Chairman’s Review commencing on page 2 of the Annual Report contains information relating to Milton’s
past performance, operations and outlook.
Environmental regulations
There are no significant environmental regulations that apply directly to Milton.
Directors’ relevant interests
No director has or has had any interest in a contract entered into since the last Directors’ Report or any contract
or proposed contract with Milton or any subsidiary or any related entity other than as disclosed in note 18 to the
financial statements.
The relevant interest of each director in the capital of Milton at the date of this report is as follows:
Director
R.D. Millner
G.L. Crampton
K.J. Eley
F.G. Gooch(1)
B.J. O’Dea(2)
J.E. Jarvinen
I.A. Pollard
No. of Shares
12,617,096
169,172
110,879
1,052,100
50,000
12,000
91,129
(1)Mr F.G. Gooch retired with effect from 31 July 2018 (2)Mr B.J. O’Dea was appointed a director on 1 August 2018
Indemnification and insurance of directors, officers and auditors
Neither Milton nor any related entity has indemnified or agreed to indemnify, paid or agreed to pay any insurance
premium which would be prohibited under Section 199A or Section 199B of the Corporations Act 2001 during or
since the financial year ended 30 June 2018.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid
in respect of the directors’ and officers’ liability and legal expenses insurance contracts as such disclosure is
prohibited under the terms of the contracts.
Secretary
Mr Nishantha Seneviratne MBA, ACMA, CGMA, CPA, AICM, AGIA, ACIS was appointed secretary and Chief Financial
Officer in December 2012. Mr. Seneviratne joined Milton as the senior accountant in March 2010 and also held
the position of assistant company secretary from March 2012. Prior to joining Milton, he has held a number of
senior managerial roles with private companies as Finance Controller for over 6 years and prior to that in the
banking and financial services sector for over 4 years. He is an associate member of the Governance Institute of
Australia and Institute of Chartered Secretaries and Administrators.
Non-audit services
During the year, Pitcher Partners, Milton’s auditor, has performed certain non-audit services in addition to its
statutory duties. Details of the amounts paid to the auditors and related practices of the auditor are disclosed in
note 20 to the consolidated financial statements.
The board has considered the non-audit services provided during the year by the auditor and is satisfied that the
provision of those non-audit services during the year by the auditor is compatible with, and did not compromise,
the auditor independence requirements of the Corporations Act 2001 for the following reasons:
- All non-audit services were subject to the corporate governance procedures adopted by Milton and have
been reviewed and approved by the Audit & Risk Committee to ensure they do not impact on the
integrity and objectivity of the auditor, and
- The non-audit services provided do not undermine the general principles relating to auditor
independence as set out in Professional Statement APES110 Code of Ethics for Professional
Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for Milton, acting as an advocate for Milton or jointly sharing
risks and rewards.
The auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out
on page 18.
13
Remuneration Report
This report, which is audited, details the policy for determining the remuneration of directors and executives and
provides specific details of their remuneration.
Remuneration of non-executive directors
Non-executive directors are paid base fees, committee fees and superannuation contributions.
Fees are not linked to Milton’s performance and no bonuses are paid or options issued.
Each year the base fees and committee fees are determined by the board of directors who take into account the
demands made on directors and the remuneration of non executive directors of comparable Australian
companies.
Base fees and committee fees (including superannuation contributions)
Chairman base fee
Director base fee
Chairman of the Audit & Risk Committee fee
Member of the Audit & Risk Committee fee
Member of the Investment Committee fee
2018
$
140,257
70,128
6,206
3,518
6,206
2017
$
137,507
68,753
6,084
3,449
6,084
The total remuneration paid to non-executive directors in 2018 was $557,993 (2017: $443,754).
In October 2011 shareholders approved an increase in the maximum non-executive directors’ total remuneration
to $700,000.
Non-executive directors, who were appointed before 30 June 2003, are entitled to retirement benefits in
accordance with a shareholder approved scheme. In June 2003 the board resolved to cap retirement benefits for
all directors at the amounts provided as at 30 June 2003. During the year, retirement benefits of $90,000 was
paid to Mr. John Church who retired in October 2017. The total balance provided at 30 June 2018 is $100,905
(2017: $190,905).
Remuneration of executives
Executive remuneration is a key element of the staff retention strategy which is designed to attract and retain
appropriately qualified and experienced professionals who share Milton’s goals and values and will seek to deliver
superior long term returns to its shareholders.
The remuneration of the managing director and senior executives is reviewed annually by the Remuneration
Committee which then makes recommendations to the board for its consideration and approval.
In formulating its recommendations, the Remuneration Committee considers:
• the short term and long term performance of the Company as measured by dividend growth and total returns.
• the contribution of the managing director and the senior executives to this performance,
• market trends in remuneration in terms of both quantum and structure and
• the remuneration of key management personnel of other listed investment companies with similar long term
investment philosophies and objectives.
Executive remuneration includes a component known as the Total Employment Cost Package (TECP), and it
may include a cash bonus component and an equity component.
The TECP includes cash salary, company contributions to superannuation and it may include non monetary
benefits such as the provision of a motor vehicle and car parking.
No executive is entitled to a guaranteed bonus however the board may award a cash bonus to reward an
executive’s outstanding contribution to the achievement of Milton’s objectives. The board will consider qualitative
measures such as contribution to the investment process, participation in board discussions, timeliness and
accuracy of reports and staff development when assessing executive performance.
In determining the amount of any bonus the board has regard to quantitative measures such as underlying
operating earnings per share, dividends per share and total returns relative to the market as a whole. Average
cash bonus paid was 13% of TECP for 2018.
The equity component of the remuneration package encourages executives to have an investment in Milton to
align their interests with shareholders.
The equity component is delivered through participation in the Senior Staff Share Plan (“SSSP”), which was
approved by shareholders at Milton’s Annual General Meeting on 9 October 2001 (refer note 19b to the financial
statements).
14
In accordance with the terms of the SSSP, the directors determine the maximum number of shares for which the
executive may apply. All SSSP shares are acquired on the market and held on behalf of the executives by the
trustee of the SSSP. The price offered to the executive shall be at a discount of one cent per share to the market
value of the shares.
Executives are required to hold the SSSP shares for a minimum period of three years however the benefit to the
executive is increased through long term ownership to the extent dividends are paid and the Milton share price
appreciates.
Milton provides an interest free loan to the executives to fund the acquisition of each parcel of SSSP shares.
Each loan is repaid by the application of the after tax proceeds from the dividends paid on the SSSP shares. The
opportunity cost to Milton of providing the loan is the notional interest. The Remuneration Committee includes
this cost when it reviews each executive’s TECP.
SSSP shares may not be sold, transferred, mortgaged or otherwise dealt with by the executive for a period of
three years from the date of issue or until the executive ceases employment with Milton.
If the executive’s employment ceases, the executive may within 30 days repay the loan and direct the trustee to
transfer the shares to the executive or, provided the value of the shares is greater than the loan outstanding,
direct the trustee to sell the shares, repay the loan and distribute the balance to the executive. Otherwise the
trustee will sell the shares when so directed by Milton and apply the proceeds to the repayment of the loan.
The board considers that the SSSP is appropriately designed to encourage long term ownership of shares by
executives, which then aligns their interests with that of Milton’s predominantly long term shareholder base.
Executives, other than the managing director, may participate in the Employee Share Plan (“ESP”) which provides
for a bonus of up to $1,000 to be paid in the form of Milton shares (refer note 19a to the financial statements).
Eligible executives are provided with life, total and permanent disablement and salary continuance insurance.
The overall level of executive reward takes into account the performance of Milton over a number of years. Key
performance indicators for Milton over five years are tabled below.
Key performance indicators
Profitability
2018
2017
2016
2015
2014
Underlying operating profit ($million)
128.8
122.0
126.4
125.0
117.4
Growth (Decline) in underlying operating profit (%)
Underlying earnings per share (cents)
Growth (Decline) in underlying earnings per share (%)
Dividend
Full year ordinary dividend (cents per share)
Growth in full year ordinary dividend (%)
Special dividend (cents per share)
Capital
Net asset backing per share pre-tax(1) at 30 June($)
Growth (decline) in net asset backing per share (%)
5.6
19.6
4.7
19.0
1.6
-
4.73
4.9
(3.5)
18.7
(4.1)
18.7
0.5
-
4.51
6.9
1.1
19.5
(0.4)
18.6
1.1
-
4.22
(3.8)
6.5
19.6
4.3
18.4
4.6
0.4
4.39
0.9
8.2
18.8
5.5
17.6
7.3
0.4
4.35
11.9
Net assets(1) at 30 June ($million)
3,114
2,939
2,746
2,811
2,746
Total Return
Ten year Total Shareholder Return
Ten year Total Portfolio Return
Ten year accumulation return
of the All Ordinaries Index
(1) Before provision for tax on unrealised capital gains
6.5
6.9
6.2
4.7
4.2
3.5
5.3
5.6
4.9
8.0
7.3
7.0
10.2
9.2
8.8
At Milton’s 2017 Annual General Meeting, shareholders supported the remuneration report for the 2017 financial
year with 83.7% of the proxies in favour of the resolution to approve the report. The resolution to approve the
remuneration report was passed by a show of hands at the Annual General Meeting held in October 2017.
15
Details of remuneration
Amounts of remuneration
Details of the remuneration of each non-executive director of Milton Corporation Limited, the managing director
and specified executives of Milton for the years ended 30 June 2017 and 2018 are set out in the following tables.
Non-executive directors of Milton Corporation Limited
Total
paid
Retirement
Provision(1)
R.D. Millner
Chairman
J.F. Church(2)
Director
G.L. Crampton
Director
K.J. Eley
Director
I.A. Pollard
Director
J.E. Jarvinen(3)
Director
Total remuneration
Short
Term
Benefits
Fees $
133,756
131,133
19,841
68,344
52,334
50,837
72,924
71,494
67,257
65,938
63,902
-
410,014
387,746
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Post
Employment
Superannuation
$
12,707
12,458
1,885
6,493
24,000
24,000
6,928
6,792
6,389
6,294
6,070
-
57,979
56,007
Retirement
Benefits
paid
$
-
-
90,000
-
-
-
-
-
-
$
146,463
143,591
111,726
74,837
76,334
74,837
79,852
78,286
73,646
72,202
69,972
-
90,000
557,993
-
443,753
$
55,905
55,905
-
90,000
-
-
-
45,000
45,000
-
-
100,905
190,905
(1) The directors’ retirement benefits have been capped at the balance provided at 30 June 2003.
(2) J.F. Church retired 12 October 2017
(3) J.E. Jarvinen appointed 3 August 2017
Managing director and executives of Milton Corporation Limited and its subsidiaries
Short Term Benefits
Salary
$
560,287
536,805
241,885
-
174,141
169,863
Cash
bonus
(1)
$
70,000
65,000
35,000
-
29,000
20,179
Non
monetary
benefits
(2)
$
4,508
Post
Employ-
ment
Super-
annuation
$
Other
long term
benefits
(3)
Share
based
payments
(4)
Total
$
$
$
19,008
19,196
134,924
807,923
4,508
30,020
13,525
134,814
784,672
-
-
-
-
17,317
-
15,859
16,958
-
-
3,333
3,298
-
-
294,202
-
29,115
251,448
25,533
235,831
976,313
134,000
706,668
85,179
4,508
4,508
52,184
22,529
164,039
1,353,573
46,978
16,823
160,347
1,020,503
F.G. Gooch
Managing director
B.J. O’Dea(5)
Deputy CEO
D.N. Seneviratne
CFO, secretary
Total remuneration
2018
2017
2018
2017
2018
2017
2018
2017
(1) Represents 100% of cash bonus paid or payable which vested in the year.
(2) Non-monetary benefits include the provision of a motor vehicle, parking, the cost of life, total & permanent disablement
insurance and salary continuance insurance provided through nominated superannuation funds.
(3) Other long term benefits comprise changes in long service leave provisions.
(4) Represents the notional value of interest on loans provided to acquire Milton shares under the Senior Staff Share Plan.
(5) B.J. O’Dea appointed Deputy CEO on 22 January 2018 and appointed the CEO and Managing Director on 1 August 2018
upon retirement of Mr. F.G. Gooch.
The relative proportions of total remuneration of above key management personnel that are fixed or related to performance
are as follows:
F.G. Gooch
B.J. O’Dea
D.N. Seneviratne
Fixed remuneration
Performance-related - STI
Performance-related - LTI
2018
74.6%
88.1%
76.9%
2017
74.5%
-
80.6%
2018
8.7%
11.9%
11.5%
2017
8.3%
-
8.6%
2018
16.7%
-
11.6%
2017
17.2%
-
10.8%
16
There are no fixed term employment contracts between Milton and its employees. Employment may be
terminated with four weeks’ notice by either Milton or the employee. There are no provisions for any termination
payments other than for unpaid annual and long service leave.
Share based compensation, Senior Staff Share Plan equity holdings and loans
The movements during the reporting period are as follows:
Executives’ shareholdings in relation to the Senior Staff Share Plan - Number of shares held
F.G. Gooch
Managing director
D.N. Seneviratne
CFO, secretary
Opening
Balance
945,000
885,000
127,500
102,500
Received as
Remuneration
60,000
60,000
25,000
25,000
Closing
Balance
1,005,000
945,000
152,500
127,500
2018
2017
2018
2017
Loans in relation to the Senior Staff Share Plan
Details regarding loans outstanding at the reporting date to specified directors and specified executives, are as
follows:
F.G. Gooch
Managing director
D.N. Seneviratne
CFO, secretary
Opening
Balance
$
2018
2,429,142
2017
2018
2017
2,296,561
471,968
380,645
Net
change
$
127,450
132,581
91,003
91,323
Closing
Balance
$
Highest
balance in
the period
$
2,556,592
2,695,104
2,429,142
2,552,875
562,971
582,785
471,968
487,442
Notional
Interest
(1)
$
134,924
134,814
29,115
25,533
(1) The notional interest has been included under “Share Based Payment” in the remuneration of the managing director and the executive
disclosed on page 16. Notional interest is based on the applicable FBT benchmark interest rate, which for the year averaged 5.23%
(2017: 5.52%).
Apart from the loan balances shown above, there were no loans outstanding to key management personnel.
Terms and conditions of the loans are referred to in note 19b to the financial statements.
Share holdings of key management personnel and their related parties – Number of shares held
Opening
Balance
Received as
Remuneration
Other
Acquisitions
1,250,025
60,000
1,189,940
60,000
85
85
Closing
Balance
1,310,110
1,250,025
-
-
128,907
103,907
-
-
25,000
25,000
50,000
50,000
-
-
-
-
153,907
128,907
2018
2017
2018
2017
2018
2017
F.G. Gooch
Managing director
B.J. O’Dea
Deputy CEO
D.N. Seneviratne
CFO, secretary
Rounding off
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument
2016/191, and in accordance with that legislative instrument, amounts in the Directors’ Report and financial report
have been rounded off to the nearest thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the directors.
R. D. MILLNER
Chairman
Sydney, 2 August 2018
17
TO THE DIRECTORS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
In relation to the independent audit for the year ended 30 June 2018, to the best of my knowledge
and belief there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001;
and
b) no contraventions of any applicable code of professional conduct.
This declaration is in respect of Milton Corporation Limited and the entities it controlled during the
year.
M A ALEXANDER
Partner
2 August 2018
An independent New South Wales Partnership. ABN 17 795 780 962.
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Liability limited by a scheme approved under Professional Standards Legislation
18
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
FINANCIAL STATEMENTS CONTENTS
Financial Statements Page No.
Consolidated Income Statement 20
Consolidated Statement of Comprehensive Income 21
Consolidated Statement of Financial Position 22
Consolidated Statement of Changes in Equity 23
Consolidated Statement of Cash flows 24
Notes to the financial statements
Key Numbers:
1. Revenue 25
2. Tax 26
3. Earnings Per Share 28
4. Dividends Paid 28
5. Franking Account 29
6. Listed Investment Company Capital Gain Account 29
Assets:
7. Investments in Equity Instruments 30
8. Investment in Joint Venture Entities 31
9. Cash 32
10. Receivables 32
11. Other Financial Assets 32
Capital Management:
12. Share Capital 33
13. Reserves 33
Risk:
14. Critical accounting estimates, judgements and assumptions 34
15. Management of Financial Risk 34
16. Capital risk management 35
Group Structure:
17. Subsidiaries 36
Other Information:
18. Related Party Transactions 37
19. Share Based Payments 38
20. Auditor’s Remuneration 39
21. Parent Entity Disclosures 39
22. Summary of other accounting policies 40
23. Cash flow information 41
24. Contingent Liabilities 41
25. Events subsequent to reporting date 41
26. Holdings at Fair Value through Other Comprehensive Income at 30 June 2018 42
19
Milton Corporation Limited
Consolidated income statement
for the year ended 30 June 2018
Ordinary dividends and distributions
Interest
Net gains on trading portfolio
Other revenue
Operating Revenue
Share of net profits of joint ventures – equity accounted
Special dividends and distributions
Income from operating activities
Administration expenses
Acquisition related costs of subsidiaries
Profit before income tax expense
Note
2018
$'000
1a
132,540
1c
2,677
807
847
2017
$'000
125,026
2,726
346
577
1d
8a
1b
136,871
128,675
388
1,275
1,204
366
138,534
130,245
(4,116)
(90)
(3,581)
-
134,328
126,664
Income tax expense thereon
2a
(4,321)
(4,287)
Profit attributable to shareholders of Milton
130,007
122,377
Basic and diluted earnings per share
Cents
19.80
3
Cents
18.79
The consolidated income statement is to be read in conjunction with the notes to the consolidated financial
statements.
20
Milton Corporation Limited
Consolidated statement of comprehensive income
for the year ended 30 June 2018
2018
$’000
2017
$’000
Profit
130,007
122,377
Other comprehensive income
Items that will not be reclassified to profit and loss
Revaluation of investments
139,282
182,810
Provision for tax (expense) benefit on revaluation of
investments
(43,518)
(55,059)
Other comprehensive income, net of tax
95,764
127,751
Total comprehensive income for the period attributable
to the shareholders of Milton
225,771
250,128
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the
consolidated financial statements.
21
Milton Corporation Limited
Consolidated statement of financial position
as at 30 June 2018
Current assets
Cash
Receivables
Other financial assets
Total current assets
Non-current assets
Receivables
Investments
Joint ventures – equity accounted
Plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Issued capital
Capital profits reserve
Asset revaluation reserve
Retained profits
Note
2018
$’000
2017
$’000
9
10a
11
10b
7
8b
2c
2d
131,815
27,829
144
159,788
2,605
2,931,879
21,389
68
360
2,956,301
118,376
24,336
6,336
149,048
4,786
2,763,980
22,901
77
388
2,792,132
3,116,089
2,941,180
1,135
349
248
1,732
378,769
258
379,027
380,759
1,142
267
128
1,537
335,148
442
335,590
337,127
2,735,330
2,604,053
12
13b
13a
1,582,431
51,651
898,111
203,137
1,553,896
59,545
794,453
196,159
Total equity attributable to shareholders of Milton
2,735,330
2,604,053
The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated
financial statements.
22
Milton Corporation Limited
Consolidated statement of changes in equity
for the year ended 30 June 2018
Issued
capital
$’000
Capital
profits
reserve
$’000
Asset
revaluation
reserve
$’000
Retained
profits
Total
equity
$’000
$’000
Balance at 1 July 2017
1,553,896
59,545
794,453
196,159
2,604,053
Profit
Other Comprehensive Income:
Total comprehensive income
Net realised losses
Transactions with
shareholders:
Share issues
Dividends paid
Balance at 30 June 2018
-
-
-
-
-
-
-
-
95,764
95,764
130,007
-
130,007
130,007
95,764
225,771
(7,894)
7,894
-
-
28,535
-
1,582,431
-
-
51,651
-
-
898,111
-
(123,029)
203,137
28,535
(123,029)
2,735,330
Balance at 1 July 2016
1,545,122
68,236
658,011
194,762
2,466,131
Profit
Other Comprehensive Income:
Total comprehensive income
-
-
-
-
-
-
-
127,751
127,751
122,377
-
122,377
122,377
127,751
250,128
Net realised losses
Transactions with
shareholders:
(8,691)
8,691
-
-
Share issues
Dividends paid
Balance at 30 June 2017
8,774
-
1,553,896
-
-
59,545
-
-
794,453
-
(120,980)
196,159
8,774
(120,980)
2,604,053
The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated
financial statements.
23
2017
$’000
123,703
3,120
1,683
548
346
-
(3,495)
(3,805)
122,100
44,052
-
(55,775)
(2,256)
-
(17)
302
(1,221)
(14,915)
Milton Corporation Limited
Consolidated statement of cash flows
for the year ended 30 June 2018
Cash flows from operating activities
Dividends and distributions received
Interest received
Distributions received from joint venture entities
Other receipts in the course of operations
Proceeds from sales of trading securities
Payments for trading securities
Other payments in the course of operations
Income taxes paid
Note
2018
$’000
132,644
2,923
3,086
732
1,018
(211)
(4,078)
(2,853)
Net cash provided by operating activities
23a
133,261
Cash flows from investing activities
Proceeds from disposal of investments
Proceeds from redemption of other financial assets
Payments for investments in equities and trusts
Payments for investments in joint ventures
Payments for acquisition related costs of subsidiaries
Payments for plant and equipment
Loans repaid by other entities
Loans advanced to other entities
Net cash used in investing activities
Cash flows from financing activities
Payments for issue of shares
Ordinary dividends paid
Net cash used in financing activities
7c
59,719
6,011
(70,184)
(1,188)
(90)
(25)
415
(862)
(6,204)
(28)
(113,590)
(25)
(112,187)
(113,618)
(112,212)
Net (decrease) increase in cash assets held
13,439
(5,027)
Cash assets at the beginning of the year
Cash assets at the end of the year
118,376
9
131,815
123,403
118,376
The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated
financial statements
24
Milton Corporation Limited
Notes to the consolidated financial statements: Key Numbers
for the year ended 30 June 2018
1.
Revenue
Milton’s revenue is derived from dividends, distributions, interest income, profit from joint ventures and
income arising from the trading.
2018
$’000
2017
$’000
a.
Ordinary dividends and distributions
Milton receives ordinary dividend income and trust distributions from its long term investments in
companies and trusts listed on the Australian Securities Exchange.
Investments held in portfolio at 30 June
Investments sold during the year
b.
Special dividends and distributions
130,860
1,680
132,540
124,118
908
125,026
This special investment revenue is received on an ad hoc basis and cannot be relied upon each year.
Investments held in portfolio at 30 June
Investments sold during the year
1,275
-
1,275
251
115
366
Dividends and distributions are brought to account on the dates that the securities trade ex-dividend.
Demerger dividends arising from company de-consolidations are treated as a return of capital and not
as a dividend.
c.
Interest
Milton earns interest on its cash, term deposits and other liquid assets.
Interest from deposits & cash
Interest income from other liquid securities
2,630
47
2,677
2,625
101
2,726
Interest on cash and term deposits is brought to account on an accruals basis. Interest on other liquid
securities is recognised on the date these securities trade ex-dividend.
d. Net gains from trading portfolio
Net gains from trading portfolio
807
346
Trading securities are recognised initially at cost and subsequently measured at fair value. Changes in
fair value are taken directly through the income statement.
Dividends from trading securities are brought to account on the dates the securities trade ex-dividend.
25
Milton Corporation Limited
Notes to the consolidated financial statements: Key Numbers
for the year ended 30 June 2018
2.
Tax
This note provides analysis of Milton’s income tax expense, shows amounts that are recognised directly
in equity and how the tax expense is affected by non-assessable and non-deductible items. The note
also details the deferred tax assets and liability balances and their movements.
2018
$’000
2017
$’000
a.
Reconciliation of Income Tax Expense to prima facie tax
payable
Profit before income tax
134,328
126,664
Prima facie income tax expense calculated at 30% on the profit
before income tax expense
40,298
37,999
Increase (decrease) in income tax expense due to:
Tax offset for franked dividends
(Over) provision in prior year
Other differences
Income tax expense on profit
b. Tax expense composition
Current tax on profits for the year
(Over) provision in prior year
Decrease in deferred tax assets (note 2c)
(Decrease) Increase in deferred tax liabilities (note 2d)
c.
Deferred tax assets
The balance comprises temporary differences attributable to :
Provisions
Share issue expenses
Other
Total deferred tax assets
Movements:
Balance at 1 July
(Charged) to the income statement
Credited to equity
Balance at 30 June
To be recovered within 12 months
To be recovered after more than 12 months
26
(35,527)
(33,601)
(553)
103
4,321
4,735
(553)
36
103
4,321
338
12
10
360
388
(36)
8
360
108
252
360
(101)
(10)
4,287
4,374
(101)
24
(10)
4,287
357
28
3
388
405
(24)
7
388
54
334
388
Milton Corporation Limited
Notes to the consolidated financial statements: Key Numbers
for the year ended 30 June 2018
d.
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised directly in equity:
Revaluation of investments
Realised capital losses
Amounts recognised in profit:
Gains on scrip for scrip rollovers
Income receivable which is not assessable for tax until receipt
Movements:
Balance at 1 July
(Credited) to income statement
Charged (Credited) to other comprehensive income
Balance at 30 June
To be settled beyond 12 months
2018
$’000
2017
$’000
392,620
(30,156)
348,680
(29,813)
16,043
262
16,043
238
378,769
335,148
335,148
280,099
103
43,518
378,769
378,769
(10)
55,059
335,148
335,148
The income tax expense for the period is the tax payable on the current year’s taxable income based
on the current income tax rate applicable for the year adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and any unused tax losses.
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 recognised for temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are settled, based on those tax rates which are
enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the deferred tax asset or liability.
Milton Corporation Limited (the parent entity) and its wholly-owned subsidiaries have formed an income
tax consolidated group. Each entity in the group recognises its own current and deferred tax, except for
any deferred tax assets arising from unused tax losses from subsidiaries, which are immediately
assumed by the parent entity. The current tax liability of each group entity is subsequently assumed by
the parent entity. There is no tax funding agreement between Milton Corporation Limited and its
subsidiaries.
Deferred tax balances attributable to revaluation amounts are recognised directly in equity through the
asset revaluation reserve.
27
Milton Corporation Limited
Notes to the consolidated financial statements: Key Numbers
for the year ended 30 June 2018
e.
Offsetting deferred tax balances:
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets and liabilities.
Deferred tax assets from realised capital losses are offset against deferred tax liabilities from unrealised
capital gains.
Deferred tax liabilities have been recognised for capital gains tax on the unrealised gains in the
investment portfolio at current tax rates.As Milton does not intend to dispose of the investment portfolio
this tax may not be payable at the amount disclosed in Note 2d above. Any tax liability that may arise
on disposal of investments is subject to tax legislation relating to the treatment of capital gains and the
applicable tax rate at the time of disposal.
Deferred tax assets relating to carried forward capital losses have been recognised based on current
tax rates. Utilisation of the tax losses requires the realisation of capital gains in subsequent years and
the ability to satisfy certain tests at the time the losses are recouped. The deferred tax assets related
to carried forward capital losses have been offset against the related deferred tax liabilities as disclosed
in Note 2d.
3.
Earnings Per Share
Basic earnings per share
Profit attributable to shareholders of the parent entity
2018
Cents
2017
Cents
19.80
18.79
$’000
$’000
130,007
122,377
No.
No.
Weighted average number of ordinary shares used in the
calculation of basic earnings per share
656,714,660
651,132,774
Diluted earnings per share and basic earnings per share are the same because there are no potential
dilutive ordinary shares.
4.
a.
Dividends Paid
Recognised in the current year
An ordinary final dividend of 10 cents per share in respect of the
2017 year paid on 5 September 2017 (2017: an ordinary final
dividend in respect of the 2016 year of 9.9 cents per share paid
on 2 September 2016)
An ordinary interim dividend of 8.8 cents per share paid on
1 March 2018 (2017: 8.7 cents per share paid on 2 March 2017)
Dividends paid in cash
Dividends reinvested in shares
28
2018
$’000
2017
$’000
65,196
64,342
57,833
123,029
113,590
9,439
123,029
56,638
120,980
112,187
8,793
120,980
Milton Corporation Limited
Notes to the consolidated financial statements: Key Numbers
for the year ended 30 June 2018
b.
Not recognised in the current year
Since the end of the financial year, the directors declared an
ordinary final dividend in respect of the 2018 year of 10.2 cents
per share payable on 4 September 2018 (2017: ordinary final
dividend of 10 cents per share per share paid on 5 September
2017)
5.
Dividend Franking Account
The amount of franking credits available to shareholders for the
subsequent financial year, adjusted for franking credits that will
arise from the payment of the current tax liability
Subsequent to year end, the franking account will be reduced by
the proposed final dividend to be paid on 4 September 2018
(2017: final dividend paid on 5 September 2017)
2018
$’000
2017
$’000
67,133
65,196
125,101
122,616
(28,771)
96,330
(27,941)
94,675
The franking account balance would allow Milton to frank additional dividend payments up to an amount
of $224,770,224 (2017: $220,908,122) which represents 34 cents per share (2017: 34 cents per share).
6.
Listed Investment Company capital gains account
Balance of the Listed Investment Company (LIC) capital gain
account available to shareholders for the subsequent financial
year
1,352
1,282
Distributed LIC capital gains may entitle certain shareholders to a special deduction in their income tax
return. LIC capital gains available for distribution are dependent upon the disposal of investment
portfolio holdings which qualify for LIC capital gains and the receipt of LIC capital gain distributions.
29
Milton Corporation Limited
Notes to the consolidated financial statements: Assets
for the year ended 30 June 2018
7.
Investment in equity instruments
Milton is predominantly a long term investor in companies and trusts listed on the Australian Securities
Exchange.
Investments – non-current
Quoted investments - at fair value
Unquoted investments - at fair value
a.
Included in quoted investments are:
Shares in other corporations
Stapled securities in other corporations
Units in trusts
b.
Included in unquoted investments are:
2018
$’000
2017
$’000
2,931,539
2,763,696
350
284
2,931,879
2,763,980
2,763,344
2,611,319
146,096
22,089
129,806
22,571
2,931,529
2,763,696
Units in trusts
350
284
Investments are recognised initially at cost and Milton has elected to present subsequent changes in
fair value of equity instruments in other comprehensive income through the asset revaluation reserve
after deducting a provision for the potential deferred capital gains tax liability as these investments are
long term holdings of equity instruments.
Listed investments are valued continuously at fair value, which is determined by the unadjusted last-
sale price quoted on the Australian Securities Exchange at the measurement date. Use of unadjusted
last sale price in an active market such as the Australian Securities Exchange falls within the Level 1
fair value hierarchy of measuring fair value under AASB 13.
c.
Investments disposed of during the year
The disposals occurred in the normal course of Milton’s operations as a listed investment company or
as a result of takeovers or mergers.
Fair value at disposal date
Equity investments
(Loss) on disposal after tax
Equity investments
59,719
44,052
(7,894)
(8,691)
When an investment is disposed, the cumulative gain or loss, net of tax thereon, is transferred from the
asset revaluation reserve to the capital profits reserve as disclosed in note 13.
30
Milton Corporation Limited
Notes to the consolidated financial statements: Assets
for the year ended 30 June 2018
8.
Investment in joint venture entities
Milton has a long history of investing in property development joint ventures. Wholly owned subsidiaries
of Milton have investments in separate joint venture entities that have non-controlling interests in three
property development joint venture partnerships.
a.
Contribution from joint venture entities
Milton has interests in the following joint venture entities:
33.33% interest in the Ellenbrook Syndicate Joint Venture
contribution to operating profit before tax (2017:33.33%)
23.33% interest in The Mews Joint Venture
contribution to operating profit before tax (2017:23.33%)
50% interest in the LWP Huntlee Syndicate No 2 Joint
Venture (2017: 50%)
Share of net profits of joint ventures
b.
Consolidated interest in the assets and liabilities of the joint
venture entities
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Provision for diminution in value
Net assets
2018
$’000
2017
$’000
808
113
(533)
388
16,984
17,055
(2,906)
(9,201)
21,932
(543)
21,389
1,647
137
(580)
1,204
22,075
16,237
(5,923)
(8,945)
23,444
(543)
22,901
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint
operations or joint ventures based on rights and obligations arising from the joint arrangement rather than
the legal structure of the joint arrangement.
Each joint venture partnership agreement provides that partners have rights to the net assets of the
partnership. Accordingly, Milton has assessed the nature of its joint arrangements and determined that
all current interests are joint ventures and thus accounted for using the ‘Equity Method’.
Under the ‘Equity Method’, Milton’s investments in joint ventures are valued initially at cost and
periodically adjusted for changes in value due to Milton’s share in the joint ventures’ income or losses,
distributions and any call payments.
c.
Contingencies and capital commitments
Guarantee entered into by the parent company
Milton agreed to provide a financial guarantee facility totalling $11 million to support prepayments
received by a joint venture in which LWP Huntlee Syndicate No 2 has a 23.75% interest. This facility,
which is on commercial terms, is secured by a second ranking mortgage over the real property of the
joint venture as well as guarantees provided by other related entities of the joint venture. At 30 June
2018, total facility of $11m had been utilised (2017: $11M).
Other than the above, the directors are not aware of any material contingent liabilities, contingent assets
or capital commitments as at 30 June 2018.
31
Milton Corporation Limited
Notes to the consolidated financial statements: Assets
for the year ended 30 June 2018
9.
Cash
Cash at bank
Deposits at call
Term deposits
2018
$’000
6,092
21,723
104,000
131,815
2017
$’000
4,614
30,762
83,000
118,376
The weighted average interest rate for cash and deposits at call as at 30 June 2018 is 1.7% p.a. (2017:
1.7% p.a.). Term deposits have an average maturity date of August 2018 (2017: August 2017) and an
average interest rate of [2.6%] (2017: 2.6% pa).
10. Receivables
a.
Receivables – current
Dividends receivable
Interest receivable
Senior staff share plan loans (refer note 19b)
Sundry debtors
24,729
525
2,557
18
23,803
526
-
7
27,829
24,336
b.
Receivables – non-current
Senior staff share plan loans (refer note 19b)
2,605
4,786
c.
Terms and conditions
Sundry debtors are due within 30 days and no interest is charged.
11. Other financial assets
Other liquid securities include listed securities such as reset preference shares which are classified as
equity instruments and may be realised within 12 months.
Other liquid securities at fair value
Prepaid expenses
-
144
144
6,209
127
6,336
Other liquid securities are recognised initially at cost and Milton has elected to present subsequent
changes in fair value in other comprehensive income through the asset revaluation reserve after
deducting a provision for the potential deferred capital gains tax liability.
On disposal, the cumulative gain or loss, net of tax thereon, is transferred from the asset revaluation
reserve to the capital profits reserve. All hybrid securities were redeemed during the year at face value.
32
Milton Corporation Limited
Notes to the consolidated financial statements: Capital Management
for the year ended 30 June 2018
Milton offers its shareholders the opportunity to increase their holdings by participation in the Share Purchase
Plan and in the Dividend Reinvestment Plan. Milton may also increase its capital through renounceable rights
issues and acquisition of investment companies with the consideration being the issue of Milton shares.
12. Share capital
All capital consists of fully paid ordinary shares which are listed on the ASX and carry one vote per share
and the right to receive dividends.
Movement in share capital
No. of
shares
2018
$’000
No of
shares
2017
$’000
Opening balance
651,963,627
1,553,896
649,922,937
1,545,122
Acquisition of unlisted
investment company
4,114,776
19,117
-
-
Dividend Reinvestment Plan(1)
2,092,412
9,437
2,040,690
8,791
Less: Transaction costs
(net of tax)
-
(19)
-
(17)
Closing balance
658,170,815
1,582,431
651,963,627
1,553,896
(1)Milton’s Dividend Reinvestment Plan (DRP) offers shareholders the option to reinvest all or part of
their dividend in new ordinary shares. In the 2018 financial year, Milton issued 1,113,757 new shares
in September 2017 and 978,655 new shares in March 2018 under the DRP (2017: 1,086,782 issued in
September 2016 and 953,908 issued in March 2017).
13. Reserves
Nature and purpose of reserves
Changes in fair value of investments are presented in other comprehensive income through the asset
revaluation reserve as referred to in note 7b. Upon disposal of investments, the net gain or loss is
transferred from the asset revaluation reserve to the capital profits reserve.
2018
$’000
794,453
95,764
7,894
898,111
59,545
(7,894)
51,651
2017
$’000
658,011
127,751
8,691
794,453
68,236
(8,691)
59,545
a.
Asset revaluation reserve
Opening balance
Revaluation of investments net of provision for tax
Net realised losses
b. Capital profits reserve
Opening balance
Net realised (losses)
33
Milton Corporation Limited
Notes to the consolidated financial statements: Risk
for the year ended 30 June 2018
This section of the notes discusses Milton’s exposure to various risks and shows how these could affect Milton’s
financial position and performance.
14. Critical accounting estimates, judgements and assumptions
Judgements, estimates and assumptions are required to prepare financial statements.
Apart from the items mentioned below, there are no key assumptions or sources of estimation uncertainty
that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year.
i) Deferred tax liabilities from unrealised capital gains are offset against deferred tax assets
from realised capital losses as disclosed in Note 2e.
ii) Classification of joint arrangements as joint ventures as disclosed in Note 8.
15. Management of financial risk
The risks associated with the financial instruments, such as investments and cash, include credit, market
and liquidity risks which could affect Milton’s future financial performance.
The Audit & Risk Committee has approved policies and procedures to manage these risks. The
effectiveness of these policies and procedures is continually reviewed by management and annually by
the Audit & Risk Committee.
a. Credit risk exposures
Milton’s principal credit risk exposures arise from the investment in liquid assets, such as cash, bank
term deposits and income receivable.
The risk that financial loss will occur because a counterparty to a financial instrument fails to discharge
an obligation is known as credit risk. The credit risk on Milton’s financial assets, excluding investments,
is the carrying amount of those assets.
Individual bank limits have been approved by the board for the investment of cash.
Income receivable comprises accrued interest and dividends and distributions which were brought to
account on the date the shares or units traded ex-dividend.
There are no financial instruments overdue.
All financial assets and their recoverability are continuously monitored by management and reviewed
by the board on a quarterly basis.
34
Milton Corporation Limited
Notes to the consolidated financial statements: Risk
for the year ended 30 June 2018
b.
Market risk
Market risk is the risk that changes in market prices will affect the fair value of the financial instrument.
The fair value is determined by the unadjusted last sale price quoted on the Australian Securities
Exchange at the measurement date.
Milton is exposed to market risk through the movement of the security prices of the companies and trusts
in which it is invested.
The market value of individual companies fluctuates daily and the fair value of the portfolio changes
continuously, with this change in the fair value recognised through the asset revaluation reserve.
Investments represent 94% (2017: 94%) of total assets. A 5% movement in the market value of
investments in each of the companies and trusts within the portfolio would result in a 4.7%
(2017: 4.7%) movement in the net assets before provision for tax on unrealised capital gains at
30 June 2018. The net asset backing before provision for tax on unrealised capital gains would move by
22 cents per share at 30 June 2018 (2017: 21 cents at 30 June 2017).
Milton’s management regularly monitors the performance of the companies within its portfolio and makes
portfolio recommendations which are considered by the Investment Committee. The Milton board reviews
the portfolio on a quarterly basis.
Milton is not exposed to foreign currency risk as all its investments are quoted in Australian dollars.
The fair value of Milton’s other financial instruments is unlikely to be materially affected by a movement
in interest rates as they generally have short dated maturities and variable interest rates.
c.
Liquidity risk
Liquidity risk is the risk that Milton is unable to meet its financial obligations as they fall due.
Milton manages liquidity risk by monitoring forecast and actual cashflows.
16. Capital risk management
The parent entity invests its equity in a diversified portfolio of assets that generates a growing income
stream for distribution to shareholders in the form of fully franked dividends.
The capital base is managed to ensure there are funds available for investment as opportunities arise.
Capital may be increased through the issue of shares under the Share Purchase Plan and the Dividend
Reinvestment Plan. Shares may also be issued through renounceable rights issues and as consideration
for acquisition of unlisted companies.
35
Milton Corporation Limited
Notes to the consolidated financial statements: Group Structure
for the year ended 30 June 2018
17. Subsidiaries
Investments in subsidiaries are carried at net asset value which approximates fair value of the controlled
entities.
Income from dividends is brought to account when they are declared.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity,
using consistent accounting policies.
a.
Basis of Consolidation
The consolidated financial statements include the financial statements of Milton, being the parent entity
and its subsidiaries. The balances and effects of transactions between subsidiaries included in the
consolidated financial statements have been eliminated in full.
Where entities have come under the control of the parent entity during the year, their operating results
have been included in the group from the date control was obtained. Entities cease to be consolidated
from the date on which control is transferred out of the group and the consolidated financial statements
include the result for the part of the reporting period during which the parent entity had control.
b.
Milton Corporation Limited’s subsidiaries
The following subsidiaries have been included in the consolidated accounts. The parent entity and all
subsidiaries are incorporated in Australia:
Percentage of Interest held
85 Spring Street Properties Pty Ltd
Chatham Investment Co. Pty Limited
Incorporated Nominees Pty Limited
Milhunt Pty Limited
2018
%
100
100
100
100
2017
%
100
100
100
100
c.
Acquisition and disposal of subsidiaries
During the year ended 30 June 2018, Milton acquired 100% of the shares of an unlisted investment
company for a consideration of 4,114,776 new Milton shares with a fair value of $19,117,239 (2017:
None).
This unlisted investment company was placed into voluntary liquidation in May 2018 (2017: None).
d. Business Combinations
The acquisition method of accounting has been used to account for all business combinations. The
business combinations have been accounted from the date Milton attained control of the subsidiaries.
The considerations transferred for the acquisitions comprise the fair values of the identifiable assets
transferred and the liabilities assumed.
Costs related to the acquisitions, other than those associated with the issue of equity securities, are
expensed to the consolidated income statement as incurred.
36
Milton Corporation Limited
Notes to the consolidated financial statements: Other Information
for the year ended 30 June 2018
18. Related party transactions
a.
Directors and Key Management Personnel compensation
Short-term benefits
Other long-term benefits
Post-employment benefits
Share-based payments
2018
$’000
1,526
112
110
164
1,912
2017
$’000
1,184
17
103
160
1,464
Information regarding individual directors’ and executives’ compensation and equity instruments
disclosures, as permitted by Corporations Regulations 2M.3.03, are provided in the Remuneration
Report section of the Directors’ Report on pages 14 to 17.
b.
Shareholdings of non-executive directors and their related parties – number of shares held
Non-executive directors and their related parties held 6% (2017:11.5%) of the voting power of Milton as
at year end. All shares acquired by non-executive directors and their related parties during the year
were purchased on an arm’s length basis. Movements in the number of shares held are given below.
There were no amounts outstanding from or due to any non-executive director or their related parties
as at 30 June 2018.
Number of shares at beginning of the year
Acquired during the year
Disposed during the year
Retiring director holdings
Number of shares held at end of year
No of
shares
No of
shares
75,090,508
78,927,571
12,000
459,431
(5,192,116)
(4,296,494)
(29,522,813)
-
40,387,579
75,090,508
c.
Loans to key management personnel and their related parties
Details regarding loans outstanding at the reporting date to key management are as shown below. No
loans were granted to related parties of any key management personnel.
Balance at beginning of the year
Loans advanced
Loans repaid
Balance at end of the year
$
$
2,901,110
2,677,206
376,779
(158,326)
363,112
(139,208)
3,119,563
2,901,110
Notional interest
164,039
160,346
Notional interest is based on the applicable FBT benchmark interest rate for the year which averaged
5.23% (2017: 5.52%).
The loans are advanced to key management personnel in accordance with the Senior Staff Share Plan
(SSSP) as disclosed in Note 19 b. Loans to individual key management personnel are disclosed on the
remuneration report on page 17.
37
Milton Corporation Limited
Notes to the consolidated financial statements: Other Information
for the year ended 30 June 2018
d.
Other related party transactions
All directors have entered into the Deed of Indemnity, Insurance and Access that was approved at the
Annual General Meeting held on 10 October 2000. Milton has a Remuneration and Retirement Benefits
Deed with Mr. R.D. Millner and Dr. I.A. Pollard. During the 30 June 2004 year, Milton and the directors
varied the Remuneration and Retirement Benefits Deed, whereby the maximum retirement benefit
payable to a non-executive director on retirement will be the provision for the director as at 30 June
2003. Apart from the details disclosed in this note no director has entered into a material contract with
the parent entity or Milton since the end of the previous financial year and there were no material
contracts involving directors’ interests subsisting at the end of the year.
e.
Transactions with subsidiaries
Dividends paid to parent
f.
Loans to and from subsidiaries
2018
$
282,758
282,758
2017
$
-
-
Loans have been made between the parent entity and wholly owned subsidiaries for capital
transactions. The loans between the parent and its subsidiaries have no fixed date of repayment and
are non-interest bearing.
Amounts owed by subsidiaries at beginning of the year
Loans advanced from subsidiaries
Loan advanced to subsidiaries
Amounts owed by subsidiaries at end of the year
28,312,165
(3,263,224)
1,985,098
27,034,039
26,658,200
(1,912,197)
3,566,162
28,312,165
g.
Other arrangement with non-executive director
Mr J.F. Church, who was a non-executive director till October 2017, rented office space from Milton at
commercial rates from 1 July 2017 to 31 December 2017 and rental income received by Milton during
the financial year was $6,786 (2017: $13,377).
19. Share based payments
Under the Employee Share Plan, shares are acquired for employees as part of their remuneration and
the cost of the shares is recorded under employment costs.
Under the Senior Staff Share Plan, shares are acquired for eligible employees as part of their
remuneration and held on their behalf by the trustee of the Plan. The purchase of the Plan Shares is
financed by a loan from Milton.
a.
Employee Share Plan
The Employee Share Plan ("ESP") is available to all eligible employees to acquire ordinary shares in
Milton in lieu of a cash bonus of up to $1,000 per year as part of the employee’s remuneration. The
transaction and administration costs of acquiring the shares and administering the plan are paid by Milton.
During the year, 216 shares (2017:454 shares) were acquired by Milton on behalf of eligible employees
under the ESP at a cost of $1,039 (2017: $2,086) with a total market value at 30 June 2018 of $996. Any
shares acquired cannot be disposed of or transferred until the earlier of 3 years from the date of issue or
acquisition or on the date that the employee's employment ceases with Milton.
38
Milton Corporation Limited
Notes to the consolidated financial statements: Other Information
for the year ended 30 June 2018
b.
Senior Staff Share Plan
The Senior Staff Share Plan ("SSSP") was approved by shareholders at Milton's Annual General Meeting
on 9 October 2001. Eligible employees are given the opportunity to apply for Plan Shares in Milton which
are subscribed for or acquired and held on their behalf by the trustee of the plan. The purchase of these
Plan Shares is financed by an interest-free limited recourse loan from Milton with recourse only to Plan
Shares. The loan will be repaid partially from any dividends received. Milton administers the SSSP and
meets the transactional and administration costs.
During the year,160,000 shares (2017: 160,000 shares) were acquired by the trustee of the plan on
behalf of eligible employees under the SSSP at a cost of $708,232 (2017: $683,505). The loans to eligible
employees are as disclosed in note 10b.The shares acquired by the trustee during the year had a market
value of $737,600 at $4.61 per share as at 30 June 2018.
Any shares acquired are held in the name of the trustee and classified as Restricted Shares which
cannot become Unrestricted Shares until the earlier of 3 years from the date of issue to the trustee or
acquisition by the trustee or on the date that the employee’s employment ceases with Milton. The
trustee may transfer Unrestricted Shares to the participant provided that any outstanding loan has been
repaid in full.
20. Auditors Remuneration
Auditors of the company
Audit and review services
Related practice of the auditor
Agreed upon procedures
21. Parent entity disclosures
2018
$’000
2017
$’000
113
15
128
113
-
113
In accordance with the Corporations Amendment (Corporate Reporting Reform) Act 2010 and the
Corporations Act 2001 the following summarised parent entity information is set out below.
As at, and throughout, the financial year ended 30 June 2018 the parent entity is Milton Corporation
Limited.
Profit of the parent entity
Profit for the year
Total comprehensive income for the year
129,734
225,770
121,406
250,129
39
Milton Corporation Limited
Notes to the consolidated financial statements: Other Information
for the year ended 30 June 2018
Financial position of the parent entity as at 30 June
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of
Issued capital
Capital profits reserves
Asset revaluation reserve
Retained profits
2018
$’000
2017
$’000
186,802
3,119,111
(1,616)
(383,781)
177,437
2,944,074
(1,269)
(340,021)
2,735,330
2,604,053
1,582,431
1,553,896
60,229
952,001
140,669
68,123
848,071
133,963
Total equity attributable to shareholders of the parent entity
2,735,330
2,604,053
22. Summary of other accounting policies
a.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards, Australian accounting interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board, the Corporations Act 2001 and complies with International
Financial Reporting Standards (IFRS).
Accounting policies adopted in the preparation of these financial statements have been consistently
applied to all the years presented, unless otherwise stated. The financial statements include the
consolidated entity (“Milton”) consisting of Milton Corporation Limited and its subsidiaries. Milton is a ‘for-
profit’ entity.
These financial statements have been prepared on an accruals basis and are based on the historical
cost basis except as modified by the revaluation of certain financial assets and liabilities measured at fair
value.
New and amended standards adopted:
AASB-9 Financial Instruments Standard which applies to annual reporting periods commencing on or
after 1 January 2018 was early adopted by Milton since the 2010 financial year.
New and amended standards not adopted:
AASB 15 Revenue from Contracts with Customers is applicable to annual reporting periods beginning
on or after 1 January 2018 and does not have any material impact on Milton’s financial statements.
AASB 16 Leases is applicable to annual reporting periods beginning on or after 1 January 2019 replaces
AASB 117 'Leases' for lessees will eliminate the classifications of operating leases and finance leases.
Milton does not expect this standard to have any material impact on Milton’s financial statements.
No other new accounting standards and interpretations that are available for early adoption but not yet
adopted at 30 June 2018, will result in any material change in relation to the financial statements of
Milton.
40
Milton Corporation Limited
Notes to the consolidated financial statements: Other Information
for the year ended 30 June 2018
b. Rounding of amounts
Unless otherwise stated under the option available in ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191, the financial statements are presented in Australian dollars and
all values are rounded to the nearest thousand dollars ($'000).
c. Operating segments
The consolidation entity operates in Australia and engages in investment as its principal activity. As
such Milton considers the business to have a single operating segment.
2018
$’000
2017
$’000
23. Cash flow information
a.
Reconciliation of net profit to net cash provided by operating
activities
Net profit
130,007
122,377
Share of net profits of joint ventures – equity accounted
Distributions received from joint venture entities
Acquisition related costs of subsidiaries
Depreciation of non-current assets
(Increase) in receivables
Decrease in payables and provisions
Increase in income taxes payable
(388)
3,086
90
34
(925)
(111)
1,468
(1,204)
1,683
-
28
(1,296)
30
482
Net cash provided by operating activities
133,261
122,100
b. Non-cash financing and investing activities
As described in Note 17c, Milton acquired an unlisted investment company through the issue of
4,114,776 new Milton shares with a fair value of $19,117,239 (2017:None). Milton did not engage in any
other material non-cash investing or financing transactions.
24. Contingent liabilities
Apart from the contingent liability relating to the Huntlee joint venture disclosed in Note 8c, the directors
are not aware of any other material contingent liabilities
25. Events subsequent to reporting date
Since the end of the financial year, the directors declared a fully franked ordinary final dividend of
10.2 cents per share payable on 4 September 2018.
Milton entered into an agreement to acquire all of the shares of an unlisted investment company with
total assets of approximately $27M. Consideration for the acquisition will comprise Milton shares which
are expected to be issued ex-dividend basis on or about the 17 August 2018.
This financial report was authorised for issue in accordance with a resolution of directors on 2 August
2018. The directors have the power to amend and reissue the financial statements.
41
26.
Holdings at Fair Value through Other Comprehensive Income at 30 June 2018
The following holdings are valued at fair value through Other Comprehensive Income.
2018
Market value
$’000
2017
Market value
$’000
Investments in equity instruments
Adelaide Brighton Limited
AGL Energy Limited
ALS Limited
Amcor Limited
AMP Limited
A.P. Eagers Limited
APA Group
ARB Corporation Limited
Argo Investments Limited
ASX Limited
AUB Group Limited
Australia & New Zealand Banking Group Limited
- ordinary shares
- capital notes 2
Australian Foundation Investment Company Limited
Auswide Bank Limited
Automotive Holdings Group Limited
Aveo Group
Bank of Queensland Limited
Bendigo & Adelaide Bank Limited
BHP Billiton Limited
BKI Investment Company Limited
Blackmores Limited
Boral Limited
Brambles Limited
Brickworks Limited
BWP Trust
Caltex Australia Limited
Carlton Investments Limited
Carsales.Com Limited
Challenger Limited
Charter Hall Group
Charter Hall Long WALE REIT
CIMIC Group Limited
Coca-Cola Amatil Limited
Cochlear Limited
Commonwealth Bank of Australia
CSL Limited
DuluxGroup Limited
EQT Holdings Limited
Event Hospitality & Entertainment Limited
Finbar Group Limited
Fletcher Building Limited
Flight Centre Travel Group Limited
Goodman Group
GrainCorp Limited
Gresham Private Equity Co-Investment Fund
Growthpoint Properties Australia
Insurance Australia Group Limited
Incitec Pivot Limited
InvoCare Limited
IOOF Holdings Limited
Janus Henderson Group PLC
42
20,486
68,789
45,839
19,043
-
49,756
19,757
20,800
14,422
35,348
14,247
96,255
201
4,695
2,441
9,879
-
74,449
61,893
123,803
1,866
52,299
13,643
12,716
50,589
-
12,821
11,802
15,044
6,436
11,417
8,215
33,469
9,305
6,766
227,231
114,069
12,662
10,414
13,536
3,497
-
5,111
14,193
2,782
18
1,455
49,877
5,847
26,806
18,062
9,057
15,966
68,796
45,292
21,422
11,009
48,765
18,393
14,313
7,561
29,430
13,572
96,776
203
-
2,229
11,311
2,386
83,655
63,264
84,668
1,983
35,175
14,190
13,953
44,605
4,720
10,431
11,238
11,462
5,069
6,859
3,853
30,732
13,535
5,254
257,535
81,741
11,487
8,867
13,516
2,226
6,113
3,075
10,163
3,431
18
1,265
39,645
5,492
28,678
16,821
4,839
26.
Holdings at Fair Value through Other Comprehensive Income at 30 June 2018
The following holdings are valued at fair value through Other Comprehensive Income.
2018
Market value
$’000
19,207
4,880
81,608
10,601
2,229
132,157
3,857
3,355
-
3,907
10,372
51,250
9,965
18,987
14,446
12,161
14,775
6,088
48,697
-
11,719
914
-
556
7,274
16,176
14,252
48,355
21,084
332
-
5,823
39,471
18,255
45,460
20,765
4,658
15,976
189,823
139,962
307,381
-
43,364
88,629
-
2,931,879
2017
Market value
$’000
11,697
4,816
57,790
8,436
2,158
140,786
1,974
3,916
4,817
3,130
7,495
68,831
7,479
30,920
15,239
13,968
8,993
6,194
36,925
5,101
7,288
483
793
525
6,867
15,123
13,819
49,117
18,502
266
4,846
-
64,376
23,193
41,629
15,714
-
16,585
152,941
113,762
318,869
6,914
27,804
74,167
2,750
2,763,980
Lendlease Group
Lindsay Australia Limited
Macquarie Group Limited
McMillan Shakespeare Limited
MyState Limited
National Australia Bank Limited
New Hope Corporation Limited
Orica Limited
Origin Energy Limited
Orora Limited
Pendal Group Limited
Perpetual Limited
Premier Investments Limited
QBE Insurance Group Limited
Qube Holdings Limited
Ramsay Health Care Limited
Reece Limited
Regis Healthcare Limited
Rio Tinto Limited
Santos Limited
Scentre Group
Schaffer Corporation Limited
Select Harvests Limited
Seven Group Holdings Limited
- TELYS4 preference shares
Sims Metal Management Limited
Sonic Healthcare Limited
Stockland Group
Suncorp Group Limited
Sydney Airport
Tank Stream Ventures
Tatts Group Limited
Technology One Limited
Telstra Corporation Limited
TPG Telecom Limited
Transurban Group
Treasury Wine Estates Limited
Unibail-Rodamco
Vicinity Centres
Washington H. Soul Pattinson & Company Limited
Wesfarmers Limited
Westpac Banking Corporation
Westfield Corporation
Woodside Petroleum Limited
Woolworths Limited
WorleyParsons Limited
43
DIRECTORS’ DECLARATION
1. In the opinion of the directors of Milton Corporation Limited:
(a) the consolidated financial statements and notes that are set out on pages 19 to 43 and the Remuneration
report, that is set out on pages 14 to 17 in the Directors’ report are in accordance with the Corporations
Act 2001, including:
(i) giving a true view of the consolidated entity’s financial position as at 30 June 2018 and of its
performance for the financial year ended on that date;
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001;
(iii) complying with International Accounting Standards as issued by the International Accounting
Standards Board as described in Note 22a to the financial statements; and
(b) there are reasonable grounds to believe that Milton Corporation Limited will be able to pay its debts as
and when they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the financial year ended 30 June 2018.
Signed in accordance with a resolution of the directors.
R. D. MILLNER
Chairman
Sydney, 2 August 2018
44
TO THE MEMBERS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Milton Corporation Limited the Company and its
, which comprises the consolidated statement of financial position as
at 30 June 2018, the consolidated statement of comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies, and the
In our opinion,
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
i.
ii.
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
30 June 2018 and of its
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the
ibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Eth
Code of Ethics for Professional
that are relevant to our audit of the financial report in Australia. We have
Accountants
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
An independent New South Wales Partnership. ABN 17 795 780 962.
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Liability limited by a scheme approved under Professional Standards Legislation
45
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
TO THE MEMBERS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
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.
Key audit matter
How our audit addressed the matter
Ownership and accurate recording of investments in equity instruments and related
movement in reserves
Refer to Note 2(d): Deferred tax liabilities, Note 7 Investments in equity instruments and
Note 13 Reserves
At 30 June 2018, the Group balance sheet
includes investments in equity instruments
of $2,931,879,000, an asset revaluation
reserve of $898,111,000 and a deferred tax
liability recognised in relation thereto of
$392,620,000.
Listed investments are valued continuously
at fair value, which is determined by the
unadjusted last-sale price quoted on the
Australian Securities Exchange. Changes in
fair value of equity instruments are
recognised in other comprehensive income
through the asset revaluation reserve after
deducting a provision for the potential
deferred capital gains tax liability, as
investments are long term holdings of
equity instruments.
Given the significance of the balances, the
key audit matter for us was whether the
Group has accurately recorded the above
balances and the movement in the past 12
months and has ownership of the
investments at year end.
Our procedures included, amongst others:
Documenting our understanding of
relevant
controls.
Testing relevant controls to ensure that
review and analysis by management is
performed regularly.
Confirming the recording and ownership
of a sample of investments and
transactions during the year by agreeing
the SRN/HIN numbers to share registry
holding statements online and to the
books and records of the Group.
Analysing and testing the movement in
investments.
Testing
revaluation of investments and the
corresponding deferred income tax
effect.
46
TO THE MEMBERS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
Other Information
The directors are responsible for the other information. The other information comprises the
30 June 2018, but does not
Our opinion on the financial report does not cover the other information and accordingly 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 this
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 Group
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 Group or to
cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
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.
47
TO THE MEMBERS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
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
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
C
and, based on the audit evidence obtained, whether a material uncertainty exists related to
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in ou
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
may cause the Group 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 Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
conditions
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 are therefore the key audit
matters. We desc
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
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 17 of the dir
year ended 30 June 2018. In our opinion, the Remuneration Report of Milton Corporation Limited,
for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001.
48
TO THE MEMBERS OF MILTON CORPORATION LIMITED
ABN 18 000 041 421
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 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.
M A ALEXANDER
Partner
2 August 2018
PITCHER PARTNERS
Sydney
49
DIRECTORY
DIRECTORS
MANAGEMENT
R. D. MILLNER - Chairman
F.G. GOOCH - Managing director
G.L. CRAMPTON
K.J. ELEY
F. G. GOOCH - Managing director
J.E. JARVINEN
I. A. POLLARD
B.J. O’DEA - Deputy CEO
D.N. SENEVIRATNE - CFO, Secretary
REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS
LEVEL 4, 50 PITT STREET
SYDNEY NSW 2000
PHONE: (02) 8006 5357
FAX: (02) 9251 7033
EMAIL: general@milton.com.au
WEBSITE: www.milton.com.au
AUDITORS
PITCHER PARTNERS
LEVEL 22, MLC CENTRE
19 MARTIN PLACE
SYDNEY NSW 2000
WEBSITE: www.pitcher.com.au
SHARE REGISTRY
LINK MARKET SERVICES LIMITED
LOCKED BAG A14
SYDNEY SOUTH NSW 1235
PHONE: (02) 8280 7111
FAX: (02) 9261 8489
TOLL FREE: 1800 641 024
EMAIL: milton@linkmarketservices.com.au
WEBSITE: www.linkmarketservices.com.au
50
ASX INFORMATION
TOP 20 SHAREHOLDERS AS AT 30 JUNE 2018
NAME
Washington H Soul Pattinson & Company Limited
Higlett Pty Ltd
Argo Investments Limited
Australian Foundation Investment Company Limited
Griffinna Pty Ltd
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