30 August 2019
APPENDIX 4E
For the year ended 30 June 2019
Reporting Period
The reporting period is for the year ended 30 June 2019 with the corresponding reporting period being
for the year ended 30 June 2018.
Results for announcement to the market
30 June 2019
A$'000
Revenue from continuing operations
(Loss)/profit for the year
down
down
(Loss)/profit after tax attributable to members
down
-27%
-366%
-366%
to
to
to
15,253
(5,906)
(5,906)
Net tangible assets per share (cents)
19.44
28.00
30 June 2019
30 June 2018
Dividends
There is no proposal to pay dividends for the year ended 30 June 2019.
Audit
This report is based on financial statements which have been audited.
Commentary on results for the period
Commentary on the results for the period is contained within the Annual Report and ASX announcement
accompanying the report.
Annual Meeting
The annual meeting is expected to be held as follows:
Date: Thursday 14 November 2019
-ENDS-
CONTACTS
Todd Alder
CEO & Managing Director
Tel: +61 8 9441 2311
Email: contact@orbitalcorp.com.au
Ian Donabie
Communications Manager
Tel: +61 8 9441 2165
Email: idonabie@orbitalcorp.com.au
About Orbital UAV
Orbital UAV provides integrated propulsion systems and flight critical components for tactical unmanned aerial vehicles (UAVs).
Our design thinking and patented technology enable us to meet the long endurance and high reliability requirements of the UAV
market. We have offices in Australia and the United States to serve our prestigious client base.
Forward-looking statements
This release includes forward-looking statements that involve risks and uncertainties. These forward-looking statements are
based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily
subject to risks, uncertainties and other factors, many of which are outside the control of the Company that could cause actual
results to differ materially from such statements. Actual results and events may differ significantly from those projected in the
forward-looking statements as a result of a number of factors including, but not limited to, those detailed from time to time in the
Company’s Annual Reports. The Company makes no undertaking to subsequently update or revise the forward-looking
statements made in this release to reflect events or circumstances after the date of this release.
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CORPORATE
PROFILE
Orbital UAV provides integrated
propulsion systems and flight critical
components for tactical unmanned
aerial vehicles (UAVs). Our design
thinking and patented technology
enable us to meet the long endurance
and high reliability requirements of
the UAV market. We have offices in
Australia and the United States to
serve our prestigious client base.
CONTENTS
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
Shareholding details
Corporate information
1
17
18
19
20
21
22
23
53
54
60
BC
DIRECTORS’ REPORT
for the year ended 30 June 2019
The Directors present their report together with the financial report of Orbital Corporation Limited (the Company or Orbital) and of the Group,
being the Company and its subsidiaries for the year ended 30 June 2019 and the auditor's report thereon.
Reference
Contents of Directors’ Report
Page
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Operating and Financial Review
Directors
Company Secretary
Directors’ Meetings
Principal Activities
Dividends
Events Subsequent to Balance Sheet Date
Proceedings on Behalf of Company
Likely Developments and Expected Results
Environmental Regulation and Performance
Directors’ Interests
Share Options
Auditor Independence and Non-Audit Services
Indemnification
Corporate Governance Statement
Rounding Off
Remuneration Report
2
3
5
5
5
5
5
5
5
5
6
6
6
6
6
6
7
1
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
1. OPERATING AND FINANCIAL REVIEW
John Welborn
Chairman
Non-Executive Director
Todd Alder
Managing Director and Chief Executive Officer
Dear Shareholders,
On behalf of the Board of Directors (“the Board”), we are pleased to present the annual report of Orbital Corporation (“Orbital” or “the
Company”) and its subsidiaries (“the Group”) for the year ended 30 June 2019.
Overview
FY19 milestones
•
•
•
•
•
Official opening of a world class production facility in Hood River, Oregon, USA;
Launch of the revolutionary Orbital Modular Propulsion Solution (“MPS”);
Expansion of the Company’s Long Term Agreement (“LTA”) with Boeing subsidiary Insitu Inc.;
Start of production of the first propulsion system identified under the Insitu LTA; and
Delivery of $15 million revenue target.
These achievements demonstrate Orbital’s progress against its unmanned aerial vehicle (“UAV”) focused strategy.
FY19 preparation for sustainable growth
FY19 represents the first year Orbital has operated under the expanded LTA with Insitu Inc., a wholly owned subsidiary of The Boeing
Company. During this period, Orbital designed, developed and commenced production of its first MPS propulsion system for Insitu. In
addition, the Company has invested in the pre-production of the first Insitu designed engine identified under the LTA – scheduled to
commence production in H1 FY20.
Financial results
The Company reported financial results for the year ended 30 June 2019 with revenue from continuing operations of $15,253,000 (2018:
$21,000,000) and net loss after tax of $5,906,000 (2018: profit of $2,218,000).
Net loss after tax was driven by a combination of factors. An adjustment to the Company’s production schedule in February 2019 (see ASX
Announcement 7 February 2019) and a delay in production ramp-up due to near term volume constraints with a small number of suppliers in
May 2019 (see ASX Announcement 16 May 2019), resulted in revenue guidance being revised from $24 million to $15 million. These
adjustments did not impact customer delivery requirements.
Operating costs to achieve the required internal capacity expansion at Orbital’s Hood River production facility, and the impairment of
receivables from the divestment of non-core asset Remsafe were also contributing factors to the Company’s loss.
The Company reports a strong balance sheet with cash and receivables of $15,127,000 (2018: $24,178,000) and net current assets of
$13,453,000 (2018: $21,054,000). During FY19, the Company funded the development of its proprietary Modular Propulsion Solution and
invested capital to facilitate production capacity expansion in the USA. Further investment in capability improvements and working capital
were made to enable full production ramp-up in support of the LTA deliverables.
Shareholder returns
Closing share price ($)1
Market capitalisation ($m)
2019
0.30
23.2
Basic EPS (cents) from operations
(7.63)
1 as at 30 June
2
2018
0.36
27.9
2.87
2017
0.50
38.6
(15.55)
2016
0.69
52.4
2.73
2015
0.49
24.0
(9.83)
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019
DIRECTORS’ REPORT
for the year ended 30 June 2019
Management and Board transition
There were no changes to key management personnel or Board members during the financial year ending 30 June 2019.
During the reporting period, the Board re-established the Audit and Risk Committee. As at 30 June 2019, the Committee comprised of Mr
Steve Gallagher and Mr Kyle Abbott, who are Independent Non-Executive Directors.
The Committee is chaired by Mr Gallagher, who is not the Chairman of the Board. Due to the size of the full Board, the Board is satisfied the
Audit and Risk Committee is of sufficient size and independence to verify and safeguard the integrity of the Company’s corporate reporting.
Change in operations
Officially opened in September 2018, Orbital’s state-of-the-art manufacturing facility in Hood River, Oregon, USA is key to the delivery of the
Company’s production commitments.
Located in close proximity to the headquarters of key customer Insitu, Hood River will be the primary manufacturing site for the second
engine produced under the Long Term Agreement with Insitu, as well as providing ongoing support and overhaul services to the Company’s
North American customer base.
In July 2019, Orbital announced Keith Hirschman as Vice President of U.S. Operations to oversee all business activities in the region. His
appointment will strengthen the Company’s relationships with key UAV customers and drive Orbital’s growth strategy in the USA.
Outlook
The expansion of Orbital’s Long Term Agreement (“LTA”) with key customer Insitu Inc. – announced in October 2018 – demonstrates
progress in the Company’s growth strategy and provides the foundation for additional revenue opportunities. The expanded LTA has a
potential value between A$120 million (US$90 million) and A$350 million (US$262 million) over a period of five years.
The LTA covers the delivery of multiple propulsion systems and services to be applied across Insitu’s entire fleet of UAV platforms.
The scope of the LTA includes:
•
•
The assembly, supply and overhaul of three highly configurable propulsion systems, forming Orbital’s Modular Propulsion Solution.
The assembly, supply and overhaul of two Insitu designed engines.
Orbital’s revolutionary Modular Propulsion Solution addresses a growing need within the tactical UAV market for aircraft to have the flexibility
and versatility to adapt to varying end customer requirements and for the rapid deployment of those aircraft. Orbital’s response to these
challenges provides tactical UAV manufacturers with a modular range of propulsion systems, capable of being integrated across multiple
UAV platforms with varying payloads and capability.
Orbital begins FY20 in production of the first propulsion system identified under its LTA with Insitu. The second propulsion system under the
LTA – an Insitu designed engine – is due to begin production in H1 FY20, as planned.
With multiple engines due to enter production, volumes are expected to increase significantly in FY20 and FY21, in line with the scope of the
LTA.
The Chairman and Managing Director would like to thank the ongoing commitment of the Company’s shareholders and staff.
2. DIRECTORS
The Directors of the Company at any time during or since the end of the financial year are:
Mr John Welborn, BCom, FCA, FAIM, MAICD, MAusIMM, JP
Chairman
Joined the Board in June 2014 and appointed as Chairman in March 2015. Mr Welborn is the Managing Director and Chief Executive Officer
of Resolute Mining Limited, an ASX (ASX: RSG) and LSE (LSE: RSG.L) listed gold producer with two operating gold mines in Africa and
Australia.
Mr Welborn is a Chartered Accountant with a Bachelor of Commerce degree from the University of Western Australia and holds
memberships of the Institute of Chartered Accountants in Australia (ICAA), the Financial Services Institute of Australasia (FINSIA) and the
Australian Institute of Company Directors (AICD).
Mr Welborn is a former international rugby union player with extensive experience in the resources sector as a senior executive and in
corporate management, finance and investment banking. He has served on the Boards of a number of charitable organisations and is a
former Commissioner of Tourism Western Australia.
Mr Welborn also serves as a director of Resolute Mining Limited (appointed February 2015) and Equatorial Resources Limited (appointed
August 2010).
3
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
Mr Todd Alder, BEc (Acc), CPA, ACIS
Managing Director and Chief Executive Officer
Joined Orbital as Chief Financial Officer and Company Secretary in December 2016 and appointed as Managing Director and Chief
Executive Officer in August 2017. Mr Alder’s experience includes successful start-ups, acquisitions and the implementation of lean concept
business transformations. Mr Alder is an accomplished leader focused on financial discipline, strategy alignment and operational efficiency.
His previous role was Chief Financial Officer and Company Secretary at Toro Energy Limited, where he was responsible for financial and
management accounting, company secretarial functions, investor relations and information technology. Mr Alder has also worked with
Capgemini Consulting (previously Ernst & Young) and Origin Energy Limited.
Mr Terry Stinson, B.Bus Admin (magna cum laude)
Non-Executive Director
Mr Stinson has over 30 years of executive leadership experience with innovation companies globally. He was formerly CEO and Managing
Director of Orbital Corporation Ltd before transitioning to the position of Non-Executive Director in August 2017.
Mr Stinson was previously also a Vice President and General Manager at Siemens AG, responsible for overseeing an international business
across multiple sites, over 1,200 staff and delivering sales in excess of US$300 million p.a. He was also previously CEO and MD at
Synerject, VP Manufacturing OMC, Director Advanced R&D Product and Process Mercury Marine, division of Brunswick Corp, Project
Engineer LT-5 Corvette engine, and USA SME 1990 Young Engineer of the Year.
He has also held executive lead positions at various international ventures of Yamaha, Honda, Chrysler, Penske and others. Mr Stinson also
currently serves as Non-Executive Chairman of Carnegie Clean Energy and Non-Executive Chairman of Talga Resources Ltd.
Mr Steve Gallagher, B.E (Hons), B.Com, MAICD
Non-Executive Director
Joined the Board in April 2017. Mr Gallagher is Principal of Agere Pty Ltd, an advisory and investment company drawing on his capability
and professional networks established over 30 years as a CEO and director of global businesses.
Mr Gallagher has operated in various business sectors including industrial automation, building technology and power systems, having spent
15 years living and working in Asia (China, Hong Kong and Singapore) and Europe (Switzerland).
Mr Gallagher is currently a Non-Executive Director with Optal Ltd (an innovative global payment solutions company), Vix Technology Ltd
(an industry leader in transport ticketing, fare collection/payments), Ventura Bus Lines Pty Ltd (a leading public transport and charter bus
service provider in Australia), Transact1 Pty Ltd (a financial services provider for cash management optimisation and Littlepay Pty Ltd
(transit payment processing service provider).
Mr Gallagher is also the chairman of the Company’s Audit and Risk Committee.
Mr Kyle Abbott, B.Com (Hons 1st), CA
Non-Executive Director
Joined the Board in May 2018. Mr Abbott is an experienced aerospace and defense industry executive. Mr Abbott was Managing Director of
Western Australian Specialty Alloys (WASA) from 1996 to 2015. During this period WASA grew from a Western Australian specialised alloy
manufacturer to become a major supplier to the global aerospace industry, with key customers in the United States, the United Kingdom and
Japan. In 2000, Mr Abbott managed the successful sale of WASA to United States-based Precision Castparts Corporation (PCC), an S&P
500 company. PCC was subsequently acquired by Berkshire Hathaway in 2015.
Mr Abbott is also a member of the Company’s Audit and Risk Committee.
4
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
3. COMPANY SECRETARY
Ms Roulé Jones, B Com, BA, CA, PGDA
Joined Orbital as Financial Controller in February 2013 and appointed as Chief Financial Officer and Company Secretary in August 2017.
Ms Jones is a qualified Chartered Accountant with over 15 years’ experience across senior financial management, strategic planning, risk
management, audit and governance. Prior to joining Orbital, Ms Jones held senior financial management roles with Credit Suisse and Ernst
& Young in the United Kingdom and South Africa.
4. DIRECTORS’ MEETINGS
The number of Directors’ meetings and the number of meetings attended by each of the Directors of the Company during the financial year
are shown below.
Director
J Welborn
T Alder
T Stinson
S Gallagher
K Abbott
Directors Meetings
Audit and Risk Committee Meetings
No. of meetings
attended
No. of meetings held1
No. of meetings
attended
No. of meetings held2
6
6
6
6
6
6
6
6
6
6
-
-
-
1
1
-
-
-
1
1
1 Number of meetings held during the time the Director held office during the year.
2 The Audit and Risk Committee was established in March 2019.
5. PRINCIPAL ACTIVITIES
Orbital’s focus is on the revolutionary design, proven manufacturing processes and rigorous testing to deliver superiority in UAV propulsion
systems and flight critical components.
The Company drives its UAV-focused strategy from its dedicated production facilities in WA, Australia and Oregon, USA. Our intellectual
property, know-how and industry experience, enable us to meet the long endurance and high reliability requirements of the rapidly evolving
UAV market.
Working with our international customers and supply chain, we continue to design, develop and manufacture world-leading propulsion
system solutions and associated technologies to meet the changing demands and increasing mission parameters of tactical UAVs.
6. DIVIDENDS
No dividend has been paid or proposed in respect of the current financial year.
7. EVENTS SUBSEQUENT TO BALANCE SHEET DATE
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a
material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future years.
8. PROCEEDINGS ON BEHALF OF THE COMPANY
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations
Act 01.
9. LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Information as to the likely developments in the operations of the Group is set out in the operating and financial review above.
10. ENVIRONMENTAL REGULATION AND PERFORMANCE
The Directors do not believe that the Group has significant environmental obligations. The Group’s policy is to comply with any applicable
environmental regulations that are in force during the reporting period.
5
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
11. DIRECTORS’ INTERESTS
The relevant interest of each Director in the share capital of the Company shown in the Register of Directors’ Shareholdings as at the date of
this report is as follows: -
Director
J Welborn
T Alder
T Stinson
S Gallagher
K Abbott
Total
Ordinary
Shares
850,000
372,333
1,672,621
100,000
30,000
3,024,954
Performance
Rights
-
1,242,250
300,000
-
-
1,742,250
12. SHARE OPTIONS
The Company has no unissued shares under option at the date of this report.
13. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Company and/or the Group are important. For the year ended June 2019, the Group engaged with
PricewaterhouseCoopers in non-audit services that included Tax & Research and Development Government grants. The Board of Directors
has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit
services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
14. INDEMIFICATION
Indemnification and insurance of officers
To the extent permitted by law, the Company indemnifies every officer of the Company against any liability incurred by that person:
(a)
(b)
in his or her capacity as an officer of the Company; and
to a person other than the Company or a related body corporate of the Company
unless the liability arises out of conduct on the part of the officer which involves a lack of good faith.
During the year, the Company paid a premium in respect of a contract insuring all Directors, Officers and employees of the Company (and/or
any subsidiary companies of which it holds greater than 50% of the voting shares) against liabilities that may arise from their positions within
the Company and its controlled entities, except where the liabilities arise out of conduct involving a lack of good faith. The Directors have not
included details of the nature of the liabilities covered or the amount of the premium paid in respect of the insurance contract as disclosure is
prohibited under the terms of the contract.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, PricewaterhouseCoopers, as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to
indemnify PricewaterhouseCoopers during or since the financial year.
15. CORPORATE GOVERNANCE STATEMENT
The Board of Orbital Corporation Limited is responsible for corporate governance. The Board has prepared the Corporate Governance
Statement in accordance with the third edition of the ASX Corporate Governance Council’s Principles and Recommendations, which is
available on the Company’s website at www.orbitaluav.com under the About Us/Corporate Governance section.
16. ROUNDING OFF
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March
2016, and in accordance with that Instrument, amounts in the financial report and Directors’ Report have been rounded off to the nearest
thousand dollars unless otherwise indicated.
6
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
REMUNERATION REPORT
The Remuneration Report has been audited.
KEY MANAGEMENT PERSONNEL AND SUMMARY OF ORBITAL’S FIVE-YEAR PERFORMANCE
Key management personnel (“KMP”)
This Remuneration Report outlines the remuneration in place and outcomes achieved for KMPs during the year ended 30 June 2019.
KMPs are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the
Group, directly or indirectly, including any Director, whether executive or otherwise, of the parent company.
The names and positions of the individuals who were KMP during 2019 are set out in Table 1.
Table 1 – KMP
Executive
Executive Director
Todd Alder (Chief Executive Officer and Managing Director)
Senior Executives
Geoff Cathcart (Chief Technical Officer)
Roulé Jones (Chief Financial Officer & Company Secretary)
Non-Executive Directors
John Welborn (Chairman)
Terry Stinson
Steve Gallagher (Chairman of the Audit & Risk Committee)
Kyle Abbott (Member of the Audit & Risk Committee)
Table 2 – Five-year performance
The table below outlines Orbital’s performance over the last five years against key metrics.
Closing share price ($)
Market capitalisation ($m)
Basic EPS (cents) from operations
2019
0.30
23.2
(7.63)
2018
0.36
27.9
2.87
2017
0.50
38.6
(15.55)
2016
0.69
52.4
2.73
2015
0.49
24.0
(9.83)
REMUNERATION OVERVIEW
The Group’s remuneration strategy is designed to attract, motivate and retain employees in a globally competitive market. The Board
structures remuneration so that it rewards those who perform, is valued by executives, and is strongly aligned to the Company’s strategic
direction and the creation of returns to shareholders.
Total Fixed Remuneration (“TFR”) is determined by the scope of the executive’s role and their level of knowledge, skills and experience.
Executive members of the KMP may receive a short-term incentive (“STI”) approved by the Board as reward for exceptional performance in
a specific matter of importance. STI amounts of $Nil were paid during the year ended 30 June 2019 (2018: $133,431).
Long-term incentives (“LTI”) consisting of performance rights that vest based on attainment of pre-determined performance goals are
awarded to selected executives. During 2018 the financial year, the Group introduced new performance milestones under the Performance
Rights Plan as part of its long-term incentive arrangements for the Managing Director and CEO, which were approved by shareholders on
27 October 2017 and 23 May 2018. During the 2019 financial year, no rights have vested under the Performance Rights Plan (2018: Nil).
The remuneration of Non-Executive Directors of the Company consists only of Directors’ fees. Director fees were not reviewed or adjusted
during the 2019 financial year.
Remuneration Report at 2018 AGM
The 2018 Remuneration Report received positive shareholder support at the 2018 AGM with a vote of 99 per cent of votes cast in favour.
Remuneration strategy
The Group’s remuneration strategy is designed to attract, motivate and retain employees and Non-Executive Directors by identifying and
rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Group.
7
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
To this end, key objectives of the Company’s reward framework are to ensure that remuneration practices:
• Are aligned to the Group’s business strategy;
• Offer competitive remuneration, benchmarked against the external market;
• Provide strong linkage between individual and Group performance and rewards; and
• Align the interests of executives with shareholders through measuring the Company’s market capitalisation or share price.
Key changes to remuneration structure in 2019
There were no changes to the remuneration structure of executives or Directors during the 2019 financial year.
REMUNERATION GOVERNANCE
Board of Directors
The Board reviews and approves remuneration packages and policies applicable to Directors, the Company Secretary and the senior
executives of the Group.
Data is obtained from independent surveys to ensure that compensation throughout the Group is set at market rates having regard to
experience and performance. In this regard, formal performance appraisals are conducted at least annually for all employees. Compensation
packages may include a mix of fixed compensation, performance-based compensation and equity-based compensation.
Remuneration approval process
The Board approves the remuneration arrangements of the CEO and executives and all awards made under the LTI plan. The Board
also sets the aggregate remuneration of Non-Executive Directors which is then subject to shareholder approval.
The Board approves, having regard to the recommendations made by the CEO, the STI bonus plan and any discretionary bonus payments.
Remuneration structure
In accordance with best practice corporate governance, the structure of Non-Executive Directors and executive remuneration is
separate and distinct.
Services from remuneration consultants
From 1 July 2011, all proposed remuneration consultancy contracts (within the meaning of section 206K of the Corporations Act 2001) are
subject to prior approval by the Board or Human Resources.
During the year ended 30 June 2018, the Group engaged CJ Ryan Holdings, an external remuneration consultant, to provide remuneration
recommendations regarding the remuneration payable to Todd Alder as part of his appointment to Managing Director and Chief Executive
Officer on 11 August 2017.
The Board is satisfied that the advice received by CJ Ryan Holdings is free from undue influence from Todd Alder to whom the remuneration
recommendations apply.
The remuneration recommendations were provided to the Board as an input into decision making only. The Board considered these
recommendations, along with other factors, in making its remuneration decisions.
The fees paid to CJ Ryan Holdings for the remuneration recommendations were $2,800. No other remuneration recommendations or other
advisory services were provided by CJ Ryan Holdings for the year ended 30 June 2019.
CHIEF EXECUTIVE OFFICER AND EXECUTIVE KMP REMUNERATION
Objective
The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the
Group and aligned with market practice. The Group undertakes an annual remuneration review to determine the total remuneration
positioning against the market.
Structure
Orbital Corporation’s remuneration structure for the CEO and executive KMP is comprised of one component that is fixed, being Total Fixed
Remuneration (TFR), and two components that are variable, being short-term incentives (STI) and long-term incentives (LTI).
The STI is an annual “at risk” component of remuneration for executives. It is payable based on performance against key performance
indicators (KPIs) set at the beginning of the financial year. STIs are structured to remunerate executives for achieving annual Company
targets and their own individual performance targets. The net amount of any STI after allowing for applicable taxation, is payable in cash.
8
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
LTI targets are set as a percentage of fixed remuneration, converted to performance rights with vesting conditions subject to the Company’s
share price performance. Vesting of performance rights is subject to share price targets with the overall value exposed to the upside or
downside of the share price movement, therefore closely aligning with shareholder interests.
The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) established for each
executive is approved by the Board and for the year ended 30 June 2019 was as follows:
CEO
Other executives
Fixed Remuneration (50%)
Target STI (20%)
Target LTI (30%)
Fixed Remuneration (69%)
Target STI (14%)
Target LTI (17%)
Fixed Remuneration
Variable Remuneration
The remuneration structure for the 2019 financial year is explained below:
Summary of executive KMP remuneration for the 2019 financial year
Total Fixed Remuneration (“TFR”)
TFR consists of base compensation, which is calculated on a total cost basis and includes any fringe benefits tax charges related to
employee benefits including motor vehicles, as well as employer contributions to superannuation funds.
Executive contracts of employment do not include any guaranteed base pay increases. TFR is reviewed annually by the Board. The process
consists of a review of Company, business division and individual performance, relevant comparative remuneration internally and externally
and, where appropriate, external advice independent of management.
The fixed component of executives’ remuneration is detailed in the Statutory Table on page 14.
Variable Annual Reward - Short-term incentive (“STI”)
Under the STI, all executives have the opportunity to earn an annual incentive award which is delivered in cash. The STI recognises and
rewards annual performance.
How is performance measured?
The STI performance measures were chosen as they reflect the core drivers of short-term performance and provide a framework for
delivering sustainable value to the Group, its shareholders and customers.
Key performance indicators (“KPIs”) are measured covering financial and non-financial measures of performance. For each KPI, a target
and stretch objective is set. A summary of the measures and weightings are set out below:
CEO
Other Executives
Financial
Revenue
70%
75%
Non-financial
Group KPIs
30%
25%
Revenue is the measure against which management and the Board assess the short-term performance of the Group. Non-financial
performance measures which enter into the calculation of the STI are:
•
•
Individual performance rating in respect of the quality of work performed in all essential areas of responsibility;
Individual cultural rating in respect of the extent to which demonstrated behavior aligns with the Values of the Group.
How much can executives earn?
The maximum STI for the Chief Executive Officer is 40 per cent of fixed remuneration. The maximum STI for other executives is
20 per cent of fixed remuneration.
The minimum STI that may be awarded to the Chief Executive Officer and other executives is nil where the Company performance
factor is zero.
When is it paid?
The STI award is determined after the end of the financial year following a review of performance over the year against the STI performance
measures by the Executive Team. The Board approves the final STI award based on this assessment of performance.
9
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
Changes to the STI plan from 1 July 2018
A review of the Group’s incentive arrangements resulted in a change to the STI plan in 2018. The intention of the change to the STI Plan
was to support business objectives and to ensure that the STI is aligned with the creation of shareholder value.
Actual STI performance for the year ending 30 June 2019
The following table outlines the proportion of the maximum STI earned in relation to the 2019 financial year. Please refer to Table 1 on Page
14 for further details on the actual STI paid to KMPs for the year ended 30 June 2019.
Maximum STI opportunity
(Percentage of fixed remuneration)
Percentage of
maximum STI earned
Todd Alder
Geoff Cathcart
Roulé Jones
40%
20%
20%
0%
0%
0%
The proportion of the STI forfeited is derived by subtracting the actual percentage of the maximum received from the maximum STI
opportunity. The percentage of the STI forfeited was 100 per cent for the year ended 30 June 2019.
Long-term incentive (“LTI”)
Under the LTI, the grant of performance rights and share acquisition performance rights in 2018 were made to executives to align
remuneration with the creation of shareholder value over the long-term.
How is it paid?
Executives are eligible to receive performance rights and share acquisition performance rights; that is, being the right to receive a given
number of ordinary shares in the Group if a nominated performance milestone is achieved.
2018 Performance Rights Plan – Long-term incentives
The Company introduced a new Performance Rights Plan (“2018 LTI Plan”) which was approved by shareholders on 27 October 2017.
Performance rights were issued to the Managing Director and CEO (“CEO LTIs”) and other executives (“Executive LTIs”) under the 2018 LTI
Plan in two tranches, with each tranche subject to a separate performance milestone linked to the volume weighted average share price
(“VWAP”) of the Company and tested over a three-year period as follows:
Tranche
Performance
condition
Expiry
date
Grant date
(CEO LTIs)
Grant date
(Exec LTIs)
10 August
2020
27 October
2017
23 May
2018
Fair
value/right
(CEO LTIs)
Fair
value/right
(Exec LTIs)
36.5 cents
20.9 cents
Vesting
of rights
50 per
cent
10 August
2020
27 October
2017
23 May
2018
27.8 cents
13.8 cents
50 per
cent
1
2
The Company having a 60-day
VWAP of at least $0.90 per
share between 27 October
2017 and 10 August 2020.
The Company having a 60-day
VWAP of at least $1.20 per
share between 27 October
2017 and 10 August 2020.
The allocation of performance rights to executives was as follows:
Executive
Title
Mr T.Alder
Managing Director and CEO
Mr G.Cathcart
Chief Technical Officer
Ms R.Jones
Chief Financial Officer
Total
Performance
rights issued
Tranche 1
Performance
rights issued
Tranche 2
340,000
116,284
87,500
543,784
255,000
87,213
65,625
407,838
Total
595,000
203,497
153,125
951,622
10
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
Performance Rights Plan – 2018 Share Acquisition Performance Rights (“2018 SAPR Plan”)
On 11 August 2017, the Group announced the appointment of Mr T.Alder as Managing Director and Chief Executive Officer. The
announcement also set out the material terms of his employment which included the grant of two Share Acquisition Performance Rights
(“SAPRs”) for each share acquired by Mr Alder during the period 11 August 2017 to 31 December 2017.
During the relevant period Mr T.Alder acquired 372,333 shares in the Group resulting in a maximum entitlement of 647,250 SAPRs. The
grant of the performance rights was approved by shareholders at an extraordinary general meeting held on 23 May 2018. The performance
rights were issued under the terms of the Performance Rights Plan.
The SAPRs are subject to a share price performance milestone of $0.62 tested over a three-year period and 100 per cent of the SAPRs will
vest if this performance milestone is achieved. Any SAPRs that do not vest will lapse and are not restated.
Performance condition
Expiry date
Grant date
Fair value/right
Total number of
rights granted
The Company having a 30-day VWAP equal
to or greater than $0.62 per share between
11 August 2017 and 10 August 2020.
Total
When is performance measured?
10 August 2020
23 May 2018
31.6 cents
647,250
647,250
Performance rights may vest at any time during the three year period to 10 August 2020, subject to the abovementioned performance
milestones. Performance rights lapse if the employment of the executive is terminated with cause, or by resignation, prior to vesting.
Performance rights may vest prior to the satisfaction of the vesting conditions upon a change of control event, or if the Board allows early
exercise on cessation of employment or in light of specific circumstances.
No performance rights vested for the year ended 30 June 2019 (2018: nil).
How is performance measured?
Awards are subject to the market capitalisation of the Group. The performance rights link the rewards payable to KMPs to the creation of
shareholder value by increasing the share price of the Company. The Company’s share price at the date of calling the AGM to approve the
CEO LTIs was $0.52 per share. The Company’s share price at the date of calling the EGM to approve the 2018 SAPR was $0.39 per share.
The vesting of performance rights will only occur where the Company’s share price increases to $0.62, $0.90 and $1.20 per share as set out
in the abovementioned tables.
Actual LTI performance for the year ending 30 June 2019
During the financial year, no rights vested under the 2018 LTI Plan, the SAPR Plan or for any earlier plans issued in previous financial years
(2018:nil).
Performance Rights Plans approved in prior years
Mr T.Stinson, the previous Managing Director and CEO of the Group, was issued 500,000 performance rights based on market capitalisation
and share price milestones to be met over a three-year period which was approved by shareholders on 8 November 2016.
Under this long-term incentive plan, performance rights only vest if the terms and conditions detailed below are satisfied.
Tranche
Performance condition
Expiry
The Company having a market capitalisation of $125 million and
share price of $1.50 per share for a period of 30 consecutive days.
7 November
2018
Fair value
per right
Performance
rights issued
50.0 cents
200,000
The Company having a market capitalisation of $200 million and a
share price of $2.00 per share for a period of 30 consecutive days.
7 November
2019
42.0 cents
300,000
500,000
1*
2
Total
*During the year ended 30 June 2019, the performance conditions related to Tranche 1 were not met, resulting in 200,000 performance
rights expiring on 7 November 2018.
11
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
OTHER EQUITY PLANS
Orbital has a history of providing employees with the opportunity to participate in ownership of shares in the Company using equity to
support a competitive base remuneration position.
Employee Share Plan
Eligible employees are offered shares in the Company, at no cost to the employees, to the value of $1,000 per annum under the terms of the
Company’s Employee Share Plan. There are no performance conditions, because the plan is designed to align the interests of participating
employees with those of shareholders. No Directors or KMPs participated in the share plan in 2019 (2018: Nil).
CONTRACTS FOR KMP
All KMP have a contract for employment. The table below contains a summary of the key contractual provisions of the contracts of
employment for the executive KMP.
Fixed Remuneration
Contract Duration
Termination notice
period (Company)1, 2
Termination notice
period (Executive)
T Alder
G Cathcart
R Jones3
$340,000
$322,283
$250,531
Unlimited
Unlimited
Unlimited
3 months
3 months
3 months
3 months
3 months
3 months
1. Termination provisions – Orbital may choose to terminate the contract immediately by making a payment in lieu of notice equal to the fixed remuneration
the executive would have received during the ‘Company Notice Period’. In the event of termination for serious misconduct or other nominated
circumstances, executives are not entitled to this termination payment. Any payments made in the event of a termination of an executive contract will be
consistent with the Corporations Act 2001 (Cth).
2. On termination of employment, executives will be entitled to the payment of any fixed remuneration calculated up to the termination date and any leave
entitlement accrued up to the termination date.w Unvested LTI awards are forfeited upon termination for serious misconduct or employee initiated
termination and at Board discretion if termination is initiated by the Company.
3. In the event of the Group terminating the employment of Ms R.Jones (Chief Financial Officer), other than by reason of serious misconduct or material
breach of service agreement, an equivalent of three months salaries is payable, in addition to:
• two weeks’ salaries for each completed year of service to ten years of service
• one half of a week of salaries for each year of service beyond ten years of service
As at 30 June 2019, Ms Jones has completed six years’ service for the Company.
NON-EXECUTIVE DIRECTORS REMUNERATION
Objective
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain Directors of the
highest calibre, whilst incurring a cost that is acceptable to shareholders.
Structure
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed against fees paid to Non-
Executive Directors of comparable companies. The Board considers advice from external consultants when undertaking the review process.
The Company’s constitution and the ASX listing rules specify that the Non-Executive Directors’ fee pool shall be determined from time to
time by a general meeting. The latest determination was at the 2001 Annual General Meeting (AGM) held on 25 October 2001 when
shareholders approved an aggregate fee pool of $400,000 per year. The Board will not seek any increase for the Non-Executive Director
pool at the 2019 AGM.
Fees
Non-Executive Directors do not receive retirement benefits, nor do they participate in any incentive programs.
The Chairman of the Board receives a fee of $120,000 (2018: $120,000) and the Non-Executive Directors receive a base fee of $60,000
(2018: $60,000).
The remuneration of Non-Executive Directors for the year ended 30 June 2019 and 30 June 2018 is detailed in Table 1 of this report on
page 14.
The maximum annual aggregate fee pool limit is $300,000 and was approved by shareholders.
12
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 DIRECTORS’ REPORT
for the year ended 30 June 2019
OTHER TRANSACTIONS WITH KMP AND THEIR RELATED PARTIES
There were no other transactions with KMPs and their related parties, such as purchases, sales and investments, for the year ended 30
June 2019.
REPORTING NOTES
Reporting in Australian dollars
In this report, the remuneration and benefits reported are in Australian dollars. This is consistent with the functional and presentational
currency of the Company.
13
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 Statutory tables
Table 1 - Compensation of Non-Executive Directors and executive KMP's for the year ended 30 June 2019 and 2018
Short Term Benefits
Post-
Employment
Long-term
Benefits
Share Based Payments
Total
s
e
e
F
s
'
r
o
t
c
e
r
i
D
&
y
r
a
a
S
l
Non-executive Directors
J Welborn
Chairman and Director (Non-executive)
T Stinson (1)
Director (Non-executive)
S Gallagher (2)
Director (Non-executive)
K Abbott (3)
Director (Non-executive)
Total Consolidated, all non-executive directors
Executive Director
T Alder (5)
Managing Director and Chief Executive Officer
T Stinson (1)
Managing Director and Chief Executive Officer
Executive Key Management Personnel
G Cathcart
Chief Technical Officer
R Jones (6)
Chief Financial Officer
T Alder (5)
Chief Financial Officer
T Stinson (1)
Corporate Advisor
M Lane (7)
Chairman - REMSAFE
Total Consolidated, Executive Key Management
Personnel
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
$
109,589
109,589
54,795
48,489
60,000
60,000
60,000
10,000
284,383
228,078
318,679
283,135
-
39,219
299,662
261,540
229,128
167,086
-
29,749
-
155,098
-
63,713
847,469
1,000,115
s
e
s
u
n
o
B
h
s
a
C
$
-
-
-
-
-
-
-
-
-
-
-
102,000
-
-
-
20,931
-
10,500
-
-
-
-
-
-
-
133,431
y
r
a
t
e
n
o
m
-
n
o
N
$
-
-
-
-
-
-
-
-
-
-
-
-
-
3,336
15,101
-
-
-
-
-
-
-
-
l
a
t
o
T
$
109,589
109,589
54,795
48,489
60,000
60,000
60,000
10,000
284,383
228,078
318,679
385,135
-
42,556
314,763
282,471
229,128
177,586
-
29,749
-
155,098
-
70,059
862,570
9,683 1,143,228
6,346
15,101
s
n
o
i
t
u
b
i
r
t
n
o
C
l
r
e
y
o
p
m
E
n
o
i
t
a
u
n
n
a
r
e
p
u
S
$
s
t
i
f
e
n
e
B
n
o
i
t
i
a
n
m
r
e
T
10,411
10,411
5,205
4,606
-
-
-
-
15,616
15,017
21,321
17,742
-
3,726
22,621
30,009
21,403
15,873
-
2,826
-
14,734
-
6,053
65,345
90,389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
s
t
n
e
m
e
l
t
i
t
n
E
e
v
a
e
L
$
-
-
-
-
-
-
-
-
-
-
9,626
12,696
-
86,493
35,876
9,632
22,771
11,988
-
-
-
-
-
-
68,273
120,809
s
n
a
P
l
e
r
a
h
S
e
e
y
o
p
m
E
l
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n
a
P
l
s
t
i
h
g
R
e
c
n
a
m
r
o
f
r
e
P
$
-
-
-
-
-
-
-
-
-
133,174
117,850
59,838
92,030
16,375
1,705
12,322
1,283
-
-
-
-
-
-
221,708
212,867
n
o
i
t
a
r
e
n
u
m
e
R
l
a
t
o
T
$
120,000
120,000
60,000
53,096
60,000
60,000
60,000
10,000
300,000
243,096
482,800
533,422
59,838
224,804
389,634
323,817
285,624
206,730
-
32,575
-
169,832
-
76,112
1,217,897
1,567,294
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
r
d
e
t
l
a
e
r
e
c
n
a
m
r
o
f
r
e
p
%
-
-
-
-
-
-
-
-
-
-
28%
41%
100%
41%
4%
7%
4.3%
6%
-
-
-
-
-
-
18%
22%
1. Mr. Stinson changed roles form Managing Director and Chief Executive Officer to Corporate Advisor and Non-Executive Director on 11 August 2017
2. Refer to note F.3 for Mr. Stinson performance rights plan
3. Mr. Cathcart was seconded to the USA facility during the financial year ended June 2019. Non-monetary benefits arose from the secondment
4. Mr. Gallagher became a Director on 12 April 2017
5. Mr. Abbott became a Director on 1 May 2018
6. Mr. Alder became a KMP on 14 December 2016 and changed roles from Chief Financial Officer to Managing Director and Chief Executive Officer on 11 August 2017
7. Ms. Jones became a KMP on 16 August 2017
8. Mr. Lane ceased as a KMP on 6 October 2017
14
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019
Table 2 - Summary of CEO and executive KMP's allocated, vested or lapsed equity
T Stinson 2
Director (Non-executive)
T Alder
Director and Chief Executive Officer
G Cathcart
Chief Technical Officer
R Jones
Chief Financial Officer
Type of equity
Grant date
Expiry date
Equity rights
Equity rights
Equity rights
Equity rights
Equity rights
Equity rights
Equity rights
Equity rights
Equity rights
8 November 2016
7 November 2018
8 November 2016
23 May 2018
27 October 2017
27 October 2017
23 May 2018
23 May 2018
23 May 2018
23 May 2018
7 November 2019
10 August 2020
10 August 2020
10 August 2020
10 August 2020
10 August 2020
10 August 2020
10 August 2020
Awarded
but not
vested
-
300,000
647,250
340,000
255,000
116,284
87,213
87,500
65,625
Vested
% of total
vested
Lapsed
Fair value
of equity
($) 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
-
-
-
-
-
-
-
-
0.500
0.420
0.316
0.365
0.278
0.209
0.138
0.209
0.138
1. In accordance with AASB2 Share-based Payments, the fair value of variable pay rights as at the grant date has been determined by applying the Monte Carlo simulation model. For the assumptions used in
the valuation of the rights, please refer to note F.3. The amount included as remuneration is not related to or indicative of the benefit (if any) that individual executives may ultimately realise should these equity
instruments vest
2. Mr. Stinson was employed as Managing Director and CEO for part of the 2018 financial year, with Mr. Alder transitioning into this role on 11 August 2017
Table 3 - KMP share and equity holdings
Details of Shares and rights held by KMP including their personally related entities for the 2019 financial year are as follows:
Non-executive Directors
John P Welborn
Terry D Stinson (3)
Steve Gallagher
Kyle Abbott (4)
Executive Directors
Todd Alder (5)
Executives
Geoff P Cathcart
Roule Jones (6)
Michael C Lane (7)
Type of equity (1)
Opening
holding at
1 July 2018
Rights allocated in
2019
Rights vested in
2019
Net Changes
other
Closing
holding at
30 June 2019 (2)
Shares
Equity Rights
Shares
Shares
Shares
Equity Rights
Shares
Equity Rights
Shares
Equity Rights
Shares
Equity Rights
Shares
779,103
500,000
1,672,621
100,000
-
1,242,250
372,333
203,497
272,720
153,125
5,313
-
127,763
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,897
(200,000)
-
-
30,000
-
-
-
-
-
-
-
-
850,000
300,000
1,672,621
100,000
30,000
1,242,250
372,333
203,497
272,720
153,125
5,313
-
127,763
1. Opening holding represents amounts carried forward in respect of KMP
2. Closing equity rights holdings represent unvested rights held at the end of the reporting period. There were no rights vested but unexercised as at 30 June 2019
3. Mr. Stinson changed roles from Chief Executive Officer to Non-executive Director on 11 August 2017
4. Mr. Abbott became a Director on 1 May 2018
5. Mr. Alder changed roles from Chief Financial Officer to Managing Director and Chief Executive Officer on 11 August 2017
6. Ms. Jones became a KMP on 16 August 2017
7. Mr. Lane ceased as a KMP on 6 October 2017
End of Remuneration Report.
15
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019
DIRECTORS’ REPORT
for the year ended 30 June 2019
Signed in accordance with a resolution of the Directors:
J P Welborn
Chairman
T M Alder
Managing Director and Chief Executive Officer
Dated at Perth, Western Australia 30 August 2019
16
2019 ANNUAL REPORTDIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2019 AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Orbital Corporation Limited for the year ended 30 June 2019, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Orbital Corporation Limited and the entities it controlled during the
period.
Ben Gargett
Partner
PricewaterhouseCoopers
Perth
30 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
17
2019 ANNUAL REPORT FINANCIAL STATEMENTS
CONTENTS
CONTENTS
Financial statements
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
About these statements
A. Current year performance
A.1 Operating segments
A.2 Revenue
A.3 Other income
A.4 Expenses
A.5 Taxes
A.6 Earnings per share (EPS)
B. Growth assets
B.1 Plant and equipment
B.2 Intangible assets
C. Working capital management
C.1 Inventories
C.2 Trade and other receivables
C.3 Cash and cash equivalents
C.4 Other financial assets
C.5 Trade and other payables
C.6 Deferred revenue
D. Debt and capital
D.1 Borrowings
D.2 Share capital
D.3 Reserves
E. Other assets and liabilities
E.1 Provisions
E.2 Government grants
F. Other notes
F.1 Commitments
F.2 Related parties
F.3 Share based payments
F.4 Subsidiaries
F.5 Parent entity information
F.6 Discontinued operations
F.7 Auditor remuneration
F.8 Events after the end of the reporting period
F.9 Other accounting policies
F.10 Adopted accounting standards
F.11 New accounting standards
Directors' declaration
Independent auditor's report
Shareholding details
Corporate information
19
20
21
22
23
26
27
28
29
30
32
33
34
36
37
37
38
38
38
39
39
40
41
42
43
44
45
47
47
48
49
49
49
50
52
53
54
60
18
2019 ANNUAL REPORT CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended 30 June 2019
Continuing operations
Sale of goods
Engineering services income
Royalty and licence income
Interest revenue
Total revenue
Other income
Materials and consumables expenses
Employee benefits expenses
Depreciation expenses
Amortisation of intangibles
Engineering consumables and contractor expenses
Occupancy expenses
Travel and accommodation expenses
Communications and computing expenses
Patent expenses
Insurance expenses
Audit, compliance and listing expenses
Finance costs
Allowance for impairment of other receivables
Other expenses
(Loss)/profit before income tax from continuing operations
Income tax benefit/(expense)
(Loss)/profit for the year from continuing operations
Discontinued operations
(Loss)/profit after tax for the year from discontinued operations
(Loss)/profit for the year
Attributable to:
Equity holders of the parent
(Loss)/profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Total comprehensive (Loss)/profit for the year
Attributable to:
Equity holders of the parent
Total comprehensive (Loss)/profit for the year
Notes
A.3
A.4(d)
A.4(a)
B.1
B.2
A.4(b)
C.2
A.4(c)
A.5
F.6
2019
$'000
10,978
3,992
129
154
15,253
1,929
(4,383)
(9,220)
(690)
(45)
(1,659)
(1,486)
(532)
(809)
(269)
(785)
(392)
(615)
(1,379)
(861)
(5,943)
37
(5,906)
-
(5,906)
(5,906)
(5,906)
(42)
(5,948)
(5,948)
(5,948)
2018
$'000
17,535
2,635
623
207
21,000
1,826
(5,688)
(9,070)
(534)
-
(926)
(1,377)
(360)
(527)
(195)
(538)
(244)
(528)
-
(1,102)
1,737
(2)
1,735
483
2,218
2,218
2,218
9
2,227
2,227
2,227
Earnings per share
Basic (loss)/profit for the year attributable to ordinary equity holders of the parent (cents)
Earnings per share from continuing operations
Basic (loss)/profit for the year attributable to ordinary equity holders of the parent (cents)
The accompanying notes form part of the financial statements.
A.6
A.6
(7.63)
2.87
(7.63)
2.24
19
2019 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2019
Notes
C.3
C.4
C.2
C.1
B.2
A.5
B.1
C.5
C.6
D.1
E.2
E.1
C.5
D.1
E.2
E.1
D.2
D.3
2019
$'000
7,487
585
7,055
1,023
6,698
22,848
924
5,542
4,516
10,982
33,830
4,077
2,911
-
74
2,333
9,395
71
8,277
-
108
8,456
17,851
15,979
2018
$'000
9,926
585
13,667
548
2,154
26,880
-
5,505
2,216
7,721
34,601
1,535
943
1,032
225
2,090
5,826
173
6,738
74
128
7,113
12,939
21,663
31,178
2,171
(17,370)
15,979
31,144
1,216
(10,697)
21,663
ASSETS
Current assets
Cash and cash equivalents
Other financial assets
Trade and other receivables
Prepayments
Inventories
Total current assets
Non-current assets
Intangibles
Deferred taxation asset
Plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade payables and other liabilities
Deferred revenue
Borrowings
Government grants
Provisions
Total current liabilities
Non-current liabilities
Trade payables and other liabilities
Borrowings
Government grants
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
The accompanying notes form part of the financial statements.
20
2019 ANNUAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2019
)
s
e
s
s
o
l
l
d
e
t
a
u
m
u
c
c
A
(
$'000
e
v
r
e
s
e
r
s
t
i
f
e
n
e
b
y
t
i
u
q
e
e
e
y
o
p
m
E
l
D.3
$'000
l
a
t
i
p
a
c
e
r
a
h
S
D.2
$'000
31,144
(10,697)
1,974
-
-
-
-
34
(5,906)
(767)
-
(5,906)
-
31,178
(17,370)
-
-
-
-
229
2,203
31,106
(12,915)
1,759
-
-
-
38
2,218
-
2,218
-
31,144
(10,697)
-
-
-
215
1,974
n
o
i
t
a
r
e
d
s
n
o
c
i
t
n
e
g
n
i
t
n
o
C
e
v
r
e
s
e
r
n
o
i
t
a
d
i
l
o
s
n
o
C
D.3
$'000
D.3
$'000
3,440
(4,455)
-
-
e
v
r
e
s
e
r
e
t
o
n
l
e
b
i
t
r
e
v
n
o
C
D.3
$'000
248
-
(3,440)
4,455
(248)
-
-
-
-
-
-
-
-
-
-
-
-
3,440
(4,455)
248
-
-
-
-
-
-
-
-
-
-
-
-
y
t
i
u
q
e
l
a
t
o
T
$'000
21,663
(5,906)
-
(42)
(5,948)
263
15,979
19,183
2,218
9
2,227
253
3,440
(4,455)
248
21,663
e
v
r
e
s
e
r
l
n
o
i
t
a
s
n
a
r
t
y
c
n
e
r
r
u
c
i
n
g
e
r
o
F
D.3
$'000
9
-
-
(42)
(42)
(32)
-
-
9
9
-
9
Notes
At 1 July 2018
Loss for the year
Transfer to accumulated losses
Foreign currency translation
Total comprehensive loss for the year
Share based payments
At 30 June 2019
At 1 July 2017
Profit for the year
Foreign currency translation
Total comprehensive profit for the year
Share based payments
At 30 June 2018
The accompanying notes form part of the financial statements.
21
2019 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2019
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Interest received
Interest paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Proceeds from sale of financial instruments
Proceeds from sale of plant and equipment
Proceeds from sale of subsidiary
Purchase of plant and equipment
Redemption of short term deposit
Payments for intangible asset
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Fee for standby facility
Repayment of borrowings
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate fluctuations on the balances of cash held in foreign currencies
Cash and cash equivalents at 30 June
The accompanying notes form part of the financial statements.
Notes
C.3
F.6
A.4(b)
D.1
C.3
2019
$'000
22,776
(21,147)
154
-
1,783
-
-
100
(2,990)
-
(2,390)
(5,280)
(108)
-
(108)
(3,605)
9,926
1,166
7,487
2018
$'000
13,380
(22,333)
207
(32)
(8,778)
2,029
29
720
(1,303)
152
-
1,627
-
(860)
(860)
(8,011)
17,131
806
9,926
22
2019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2019
The exchange differences arising on translation for consolidation
are recognised in OCI. On disposal of a foreign operation, the
component of OCI relating to that particular foreign operation is
reclassified to profit or loss.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191,
dated 24 March 2016, and in accordance with that Instrument,
amounts in the financial report and Directors’ Report have been
rounded off to the nearest thousand dollars unless otherwise
indicated.
Basis of preparation
The consolidated financial statements have been prepared on
the historical cost basis.
The financial statements comprise the financial results of the
Group and its subsidiaries as at 30 June each year. Subsidiaries
are fully consolidated from the date of which control is obtained
by the Group and cease to be consolidated from the date at
which the Group ceases to have control.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. All intercompany balances and transactions,
including unrealised profits and losses arising from intra-group
transactions, have been eliminated in full.
Profit or loss and other comprehensive income are attributed to
the equity holders of the parent of the Group, and to the non-
controlling interests, even if this results in the non-controlling
interests having a deficit balance.
Comparative information has been reclassified where required
for consistency with the current year's presentation.
Other accounting policies
Significant and other accounting policies that summarise the
measurement basis used and are relevant to understanding the
financial statements are provided throughout the notes to the
financial statements.
About these statements
Orbital Corporation Ltd ("Orbital" or the "Group") is a for-profit
company limited by shares, incorporated and domiciled in
Australia. Its shares are publicly traded on the Australian
Stock Exchange ("ASX"). The registered office is 4 Whipple
Street, Balcatta, Western Australia.
The nature of the operations and principal activities of the
Group are described in the Directors Report and in the
segment information in Note A.1.
The financial statements were authorised for issue in
accordance with a resolution of the Directors on 30 August
2019.The Directors have the power to amend and reissue the
financial report.
Statement of compliance
The financial statements are general purpose financial
statements, which have been prepared in accordance with
the requirements of the Corporations Act 2001 (Cth),
Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards
Board. The financial statements comply with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
The Group applied for the first time new and amended
Accounting Standards and Interpretations which are effective
for annual periods beginning on or after 1 July 2018. The
Group has not early adopted any standards, interpretations
or amendments that have been issued but not yet effective.
The adoption of these standards, interpretations or
amendments has not significantly affected the Group's
accounting policies, financial position or performance.
Currency
The financial statements are presented in Australian dollars,
which is the functional currency of the Company.
Transactions are recorded in the functional currency of the
transacting entity using the spot rate. Monetary assets and
liabilities denominated in foreign currencies are translated at
the functional currency spot rate of exchange at the reporting
date. Differences arising on settlement or translation of
monetary items are recognised in profit or loss. Non-
monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates
at the dates of the initial transactions.
On consolidation, the assets and liabilities of foreign
operations are translated into Australian dollars at the rate of
exchange prevailing at the reporting date and their
statements of profit or loss are translated at exchange rates
prevailing at the dates of the transactions.
23
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2019
Financial and capital risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management strategy, policy
and key risk parameters. The Board of Directors have oversight of the Group's internal control system and risk management process.
The Group's management of financial and capital risks is aimed at ensuring that available capital, funding and cash flows are sufficient
to meet the Group's financial commitments as and when they fall due and maintain the capacity to fund its committed project
developments. During 2019 the Group's strategy remained unchanged from 2018, the gearing ratio at 30 June 2019 was 52% (2018:
36%). Gearing ratio's are calculated by dividing net debt (as per note D.1) divided by total equity.
The below risks arise in the normal course of the Group's business. Risk information can be found in the following sections:
Section A Foreign currency risk
Page 25
Section C Liquidity risk
Page 35
Section C Interest Rate risk
Page 36
Section C Credit risk
Page 36
Section D Capital risk management Page 39
Key estimates and judgements
In applying the Group's accounting policies, management continually evaluates judgements, estimates and assumptions based on
experiences and other factors, including expectations of future events that may have an impact on the Group. Significant judgements,
estimates and assumptions made by management in the preparation of these financial statements are found in the following notes:
Note Key estimate/ judgement
A.5
B.1
Recoverability of deferred tax assets
Impairment of non-current assets
Page
31
33
24
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
In this section
This section addresses financial performance of the Group for the reporting period including, where applicable, the accounting policies
applied and the key estimates and judgements made. The section also includes the tax position of the Group for and at the end of the
reporting period.
A. Current Year Performance
Operating segments
A.1
Revenue
A.2
Other income
A.3
Expenses
A.4
Taxes
A.5
Earnings per share
A.6
Page 26
Page 27
Page 28
Page 29
Page 30
Page 32
Financial risks in this section
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate as a result of changes in foreign
exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates to the Group’s operating activities, in
which sales and purchases are denominated in foreign currencies.
The Group manages its exposure to foreign currency risk by regularly monitoring and performing sensitivity analysis on the Group's
financial position and performance as a result of movements in foreign exchange rates. The Group holds bank accounts in foreign
denominated currencies which are converted to Australian dollars through rate orders for targeted exchange rates. The Group has
foreign currency hedging facilities available as part of its bank facilities. Currently the Group does not directly hedge against its foreign
currency exchange risk to a material extent.
Exposure
The Group’s exposure to USD at the reporting date for the years ended 30 June 2019 and 2018 are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
2019
USD
A$'000
2,121
3,937
2018
USD
A$'000
9,660
11,190
943
99
For the year ended 30 June 2019, revenue from external customers denominated in USD was A$9,324,000 (2018: A$18,035,000).
Sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held
constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. There is no
impact on changes in foreign currencies on other comprehensive income. The Group’s exposure to foreign currency changes for all
other currencies is not material.
The Group has used the observed range of actual historical rates for the preceding five year period, with a heavier weighting placed on
recently observed market data, in determining reasonably possible exchange movements as part of their sensitivity analysis. Past
movements in exchange rates are not necessarily indicative of future movements.
Change in
AUD/USD
rate
+10%
-10%
+10%
-10%
Increase /
(Reduction)
on profit
before taxes
(465)
568
(1,886)
2,306
2019
2018
25
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019A. CURRENT YEAR PERFORMANCE2019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.1 Operating segments
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management
team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.
Segment performance is evaluated based on Revenue and Earnings Before Interest and Tax ("EBIT") which is allocated to the
reportable segments according to the geographic location in which the item arose or relates to.
The geographical location of the segment assets is based on the physical location of the assets.
Change in segmentation
In the prior period the business of REMSAFE Pty Ltd was classified as a discontinued operation. Refer to Note F.6 for further details.
Australia
2019
$'000
14,742
(2,942)
(615)
(3,557)
Australia
2019
2018
$'000
21,000
2,542
(528)
2,014
2018
$'000
33,403
11,666
21,737
US
Consolidated
2019
$'000
511
(2,386)
-
(2,386)
2018
$'000
-
(276)
-
(276)
2019
$'000
15,253
(5,328)
(615)
(5,943)
2018
$'000
21,000
2,265
(528)
1,737
US
Consolidated
2019
$'000
6,581
8,379
(1,798)
2018
$'000
1,198
1,272
(74)
2019
$'000
33,831
17,851
15,980
2018
$'000
34,601
12,938
21,663
Segment information
Year ended 30 June 2019
Segment revenue
EBIT
Finance expenses
(Loss)/Profit before income tax
Assets
Liabilities
Net assets/(liabilities)
$'000
27,250
9,472
17,778
26
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019A. CURRENT YEAR PERFORMANCE2019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.2 Revenue
Revenue
Total external revenue
Timing of revenue recognition
At a point in time
Over time
Australia
2019
$'000
14,742
14,742
2018
$'000
21,000
21,000
11,250
3,492
14,742
18,365
2,635
21,000
US
Consolidated
2019
$'000
511
511
11
499
511
2018
$'000
-
-
-
-
-
2019
$'000
15,253
15,253
2018
$'000
21,000
21,000
11,261
3,992
18,365
2,635
15,253
21,000
Revenues of approximately $11,761,000 (2018: $17,148,000) are derived from a single external customer.
Recognition and measurement
Revenue is recognised in accordance with the core principle by applying the following steps:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
The specific recognition criteria described below must also be met before revenue is recognised:
· Revenue from rendering of services
The Group's general terms and conditions with customers specify a right to payment for work completed, therefore performance
obligations are satisfied over time. Using the output method for revenue recognition, the Group recognises revenue based on an
appraisal of results achieved or percentage complete.
· Sale of goods
Revenue from the sale of goods is recognised on a per-unit basis as the goods are delivered to the customer premise which is deemed
to be the time when the performance obligation is performed. A receivable is recognised when the goods are delivered as this is the
point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
27
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019A. CURRENT YEAR PERFORMANCE2019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.2 Revenue (continued)
· License and royalties
Revenue earned under licencing and royalty arrangements is recognised on an accruals basis upon the delivery of an engine meeting
specified performance targets and using the patented technologies of the Group.
Under the terms of the licence and royalty agreements, licensees are not specifically obliged to commence production and sale of
engines using technology patented by the Group. Licensees may terminate the agreements upon notice to the Group. If a licensee were
to terminate its agreement with the Group, the licensee would forfeit the licence and any technical disclosure fees paid through to the
date of termination.
· Interest revenue
Interest revenue is recorded using the effective interest rate method ("EIR"). The EIR is the rate that exactly discounts the estimated
cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the
financial asset.
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers:
Contract Assets
Accrued revenue
Contract Liabilities
Deferred revenue
Refer to Note C.6 deferred revenue for a breakdown of deferred revenue recognised in the current year.
A.3 Other income
Revenue
Grant income
Rental income
Research and development grant
Net foreign exchange gain
Gain on sale of quoted equity shares
Other
Recognition and measurement
2019
$'000
2018
$'000
500
296
2,911
943
2019
$'000
2018
$'000
225
458
130
1,099
-
17
1,929
225
428
28
998
132
15
1,826
· Grant income, including research and development tax incentives
In accordance with research and development tax legislation the Group is entitled to a refundable R&D tax offset accounted for as
research and development grant. Government grants are recognised when it is probable that the grant will be received and all attached
conditions will be complied with. When the grant relates to an asset, it is recognised as a reduction in the related asset. When the grant
relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is
intended to compensate, are expensed.
· Rental income
Rental income arising from operating leases on sub-leased properties is accounted for on a straight-line basis across the lease term.
28
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.4 Expenses
(a)
Employee benefits expense
(d) Materials and consumable expenses
Raw materials and consumables
Change in inventories
Recognition and measurement
2019
$'000
8,927
(4,544)
4,383
2018
$'000
4,562
1,126
5,688
· Defined contribution plans
Obligations for contributions to defined contribution
superannuation funds are recognised as an expense as
incurred.
The Group contributes to defined contribution plans for the
provision of benefits to Australian employees on retirement,
death or disability. Employee and employer contributions are
calculated on percentages of gross salaries and wages. Apart
from contributions required under law, there is no legally
enforceable right for the Group to contribute to a
superannuation plan.
Salaries and wages
Defined contribution plans
Share based payments (Note F.3)
Annual and long service leave (Note E.1)
Other personnel costs
sts
(b)
Finance costs
Interest expense (Note D.1)
Standby facility fee (Note F.2)
2019
$'000
7,089
759
263
307
802
2018
$'000
7,302
632
250
115
771
9,220
9,070
2019
$'000
507
108
615
2018
$'000
528
-
528
The Group has agreed an unsecured Standby working capital
facility with UIL Limited, in which a 2.5% fee was paid on
establishment. Refer note F.2 for further detail.
(c)
Other expenses
Administration
Marketing and investor relations
Warranties (Note E.1)
Corporate advisory expenses
Other
2019
$'000
402
41
253
-
165
861
2018
$'000
388
86
449
89
90
1,102
29
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.5 Taxes
The major components of the income tax benefit/(expense) for
the years ended 30 June 2019 and 2018 are:
Deferred tax balances comprise of the following deferred tax
assets/(deferred tax liabilities):
Current income tax
Deferred income tax
Total income tax benefit/(expense)
2019
$'000
-
37
37
2018
$'000
-
(2)
(2)
The reconciliation of the income tax benefits/(expenses) and
accounting profit multiplied by the Australian domestic tax rate
for the years ended 30 June 2019 and 2018 are:
Accounting (loss)/profit before tax from
continuing operations
Accounting (loss)/profit before tax from
discontinued operations
Accounting (loss)/profit
before income tax
At Australia's statutory income tax rate of
27.5% (2018: 27.5%)
Adjustments in respect of the change in
statutory income tax rate
Difference in overseas tax rates
Non assessable income
Recognition of previously unrecognised
tax losses
Deferred tax asset not recognised
Other
Non-deductible expenses
Income tax benefit/(expense)
Income tax benefit/(expense) reported in
the statement of profit or loss
2019
$'000
(5,943)
2018
$'000
1,737
-
483
(5,943)
1,634
2,220
(611)
-
(459)
(247)
36
-
(791)
3
(598)
37
-
798
459
(116)
-
(73)
(1,070)
37
(2)
Inventory
Revenue received in advance
Plant and equipment
Provisions and accruals
Intangible asset
Other
Tax losses
Net deferred tax asset
2019
$'000
82
-
(170)
701
(218)
-
5,147
5,542
2018
$'000
62
259
66
614
-
(26)
4,530
5,505
The Group has unused tax losses that arose in Australia, for
which no deferred tax assets have been recognised of
$61,691,000 (2018: $60,629,000) and are available indefinitely
for offsetting against future taxable profits of the Group and its
controlled entities in which those losses arose.
Under the tax laws of the United States of America, unused tax
losses that cannot be fully utilised for tax purposes during the
current period may be carried forward into future periods,
subject to statutory limitations. At 30 June 2019, the Group
had unused tax losses for which no deferred tax assets have
been recognised of $12,461,000 (2018: $10,083,000) which
expire between 2020 and 2023.
Recognition and measurement
· Current income tax
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the
amount are those that are enacted at the reporting date in the
countries where the Group operates and generates taxable
income.
· Deferred tax
Deferred tax is provided for using the full liability method on
temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes at the reporting date.
30
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
A.5 Taxes (continued)
· Deferred tax
Deferred tax liabilities are recognised for all taxable temporary
differences, except:
• When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss
• In respect of taxable temporary differences associated with
investments in subsidiaries, when the timing of the reversal of
the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences to the extent that it is probable that taxable profit
will be available against which the deductible temporary
differences and carry forward of unused tax credits and
unused tax losses may be utilised, except:
• When the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
accounting profit or loss
• In respect of deductible temporary differences associated
with investments in subsidiaries, deferred tax assets are
recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the
temporary differences may be utilised.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available or
allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it is
probable that future taxable profits will allow the deferred tax
asset to be recovered. Deferred tax assets and liabilities are
measured at the tax rates that are expected to apply in the
year when the asset is realised or the liability is settled, based
on tax rates and tax laws that have been enacted or
substantively enacted at the reporting date.
Key estimate: Recoverability of deferred tax assets
At 30 June 2019, the Group recognised $5,542,000 (2018:
$5,505,000) of deferred tax assets after assessing the
likelihood of offsetting unused tax losses against future taxable
profits. The unused tax losses for which a deferred tax asset is
recognised relate to operations in Australia and the United
States of America.
The Board assessed that the deferred tax asset was
recoverable based on forecast taxable income included in the
Business Plan. Forecasted income included in Orbital’s
Business Plan is founded on existing supply contracts plus
maturing contract negotiations on expanded revenue
opportunities.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset only if there is a
legally enforceable right to offset current tax assets and
liabilities and when they relate to income taxes levied by the
same taxation authority on either the same taxable entity or
different taxable entities that the Group intends to settle its
current tax assets and liabilities on a net basis.
Tax consolidation
Orbital Corporation Limited and its 100 per cent owned
Australian resident subsidiaries formed a tax consolidated
group with effect from 1 July 2002. Orbital Corporation Limited
is the head entity of the tax consolidated group. Members of
the tax consolidated group have entered into a tax sharing
agreement that provides for the allocation of income tax
liabilities between the entities should the head entity default on
its tax payment obligations. No amounts were recognised in
the financial statements in respect of this agreement on the
basis that the probability of default was assessed as remote.
Orbital Corporation Limited and its controlled entities continue
to account for their own current and deferred tax amounts. The
Group has applied the 'separate taxpayer within Group'
approach by reference to the carrying amount in the separate
financial statements of each entity and the tax values applying
under tax consolidation. In addition to its own current and
deferred tax amounts, Orbital Corporation Limited also
recognised current tax liabilities (or assets) and deferred tax
assets arising from unused tax losses assumed from its
controlled entities in the tax consolidated group.
31
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS A. CURRENT YEAR PERFORMANCE
A. CURRENT YEAR PERFORMANCE
for the year ended 30 June 2019
There have been no transactions involving ordinary shares or
potential ordinary shares between the reporting date and the
date of authorisation of the financial statements.
The number of potential ordinary shares not considered
dilutive and contingently issuable are as follows:
Performance rights (Note F.3)
Contingent consideration (Note D.3)
Total
2019
Number
2,010,654
3,440,000
5,450,654
To calculate the EPS for discontinued operations, the
weighted average number of ordinary shares for both basic
and diluted EPS is as per the table in this note. Refer to Note
F.6 for further details.
A.6 Earnings per share (EPS)
Basic EPS is calculated by dividing the profit for the year
attributable to ordinary equity holders of Orbital Corporation
Limited (“the Parent”) by the weighted average number of
ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to
ordinary equity holders of the Parent by the weighted average
number of ordinary shares outstanding during the year, plus
the weighted average number of ordinary shares that would
be issued on conversion of all dilutive potential ordinary
shares into ordinary shares.
The following table reflects the income and share data used in
the basic and diluted EPS computations:
(Loss)/profit attributable to ordinary equity
holders of the Parent:
Continuing operations
Discontinued operations
(Loss)/profit attributable to
equity holders of the Parent for
basic earnings
2019
$'000
2018
$'000
(5,906)
-
1,735
483
(5,906)
2,218
Performance rights granted to key management personnel
and contingent consideration arising from the acquisition of
the remaining 38.50 per cent interest in REMSAFE Pty Ltd
were deemed potential ordinary shares. Refer to Notes F.3
and D.3 for further details.
Weighted average number of ordinary
shares for basic EPS
Weighted average number of ordinary
shares adjusted for the effect of
dilution
2019
Number
77,403,115
2018
Number
77,337,066
77,403,115
77,337,066
Earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Cents
(7.63)
(7.63)
Earnings per share from continuing operations
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Cents
(7.63)
(7.63)
Cents
2.87
2.87
Cents
2.24
2.24
32
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS B. GROWTH ASSETS
B. GROWTH ASSETS
for the year ended 30 June 2019
In this section
This section addresses the strategic growth and assets position of the Group at the end of the reporting period including, where applicable,
the accounting policies applied and the key estimates and judgements made.
B.1 Plant and equipment
Gross carrying amount at cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Additions
Disposals
At 30 June 2019
Depreciation and impairment
At 1 July 2017
Depreciation charge for the year
Disposals
At 30 June 2018
Depreciation charge for the year
Disposals
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
Plant and
equipment
Leasehold
improvements
Total
$’000
$’000
$’000
17,885
274
(74)
18,085
1,873
(1,564)
18,393
(16,617)
(503)
45
(17,075)
(592)
1,564
(16,102)
404
1,029
-
1,433
1,117
-
2,550
18,289
1,303
(74)
19,517
2,990
(1,564)
20,942
(175)
(52)
-
(227)
(98)
-
(325)
(16,792)
(555)
45
(17,301)
(690)
1,564
(16,428)
2,291
1,010
2,225
1,206
4,516
2,216
Plant and equipment was pledged as security under the
Acknowledgement of Debt entered into with the Department of
Jobs, tourism, Science and Innovation and is subject to floating
charges. Refer to Note D.1 for further details.
Recognition and measurement
Plant and equipment is stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Such costs
include the cost of replacing part of the plant and equipment. When
significant parts of plant and equipment are required to be replaced
at intervals, the Group depreciates those parts separately based on
their specific useful lives. Likewise, when a major inspection is
performed, its cost is recognised in the carrying amount of the plant
and equipment as a replacement if the recognition criteria are
satisfied. All other repairs and maintenance costs are expensed as
incurred to occupancy expenses in the statement of profit or loss
and other comprehensive income. An item of plant and equipment
is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising on
the de-recognition of the asset, calculated as the difference
between the net disposal proceeds and the carrying amount of the
assets, is included in other income or other expenses in the
statement of profit or loss and other comprehensive income when
the asset is derecognised.
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is
an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is
required, the Group estimates the recoverable amount of the
asset or cash generating unit (“CGU”). The recoverable
amount of the asset or the CGU is the higher of its fair value
less costs of disposal and its value in use. The recoverable
amount is determined for an individual asset, unless the asset
does not generate cash flows that are largely independent of
those from other assets or groups of assets. When the
carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down
to its recoverable amount.
Impairment losses of continuing operations are recognised in
the statement of profit or loss in expense categories
consistent with the function of the impaired asset.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset. In determining fair
value less costs of disposals, recent market transactions are
taken into account. If no such transactions can be identified,
an appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share prices
for publicly traded companies or other available fair value
indicators.
Key estimate - Impairment of non-current assets
The Group bases its impairment calculation on detailed
budgets and forecast calculations, which are prepared
separately for each of the Group’s CGUs to which the
individual assets are allocated. The budgets and forecast
calculations cover a period of three years, or the contract
period.
Depreciation
Depreciation is calculated on a straight-line basis over the
estimated useful life as follows:
Plant and equipment: 3 to 15 years
Leasehold improvements: 3 to 15 years
The residual values, useful lives and methods of depreciation
of plant and equipment are reviewed at each financial year-
end and adjusted prospectively, as appropriate.
33
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS B. GROWTH ASSETS
B. GROWTH ASSETS
for the year ended 30 June 2019
B.2 Intangible assets
Consolidated
Year ended 30 June 2019
Cost
Accumulated amortisation
R&D tax offset recognised
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Amortisation for the year
R&D tax offset recognised
Net carrying amount at the end of the year
Year ended 30 June 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Amortisation for the year
Net carrying amount at the end of the year
Internally
generated
intangible
2,390
(45)
(1,421)
924
-
2,390
(45)
(1,421)
924
-
-
-
-
-
-
-
Total
2,390
(45)
(1,421)
924
-
2,390
(45)
(1,421)
924
-
-
-
-
-
-
-
The intangible asset comprises of capitalised development costs for the advancement of the modular propulsion systems. The intangible
asset will be amortised using the straight-line method over a finite period of five years.
Recognition and measurement
Intangible assets are measured on initial recognition at cost. Following initial recognition; intangible assets are carried at cost less
amortisation, any impairment losses and research and development tax grants received. Intangible assets with finite useful lives are
amortised on a straight-line basis over their useful lives and tested for impairment whenever there is an indication that they may be
impaired. The amortisation period and method is reviewed at each financial year end.
Intangible asset
Internally generated intangible
Useful life
Finite (up to five years)
Research and development
Research costs are expensed as incurred. Development expenditures on individual projects are recognised as an intangible asset when
the Group can demonstrate:
• the technical feasibility of completing the intangible asset so that the asset will be available for use or sale
• its intention to complete and its ability and intention to use or sell the asset
• how the asset will generate future economic developments
• the availability of resources to complete the asset
• the ability to measure reliably the expenditure incurred during the development of the asset
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of the asset begins when the development is complete and the asset is available for use. It
is amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
34
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS C. WORKING CAPITAL MANAGEMENT
for the year ended 30 June 2019
C. WORKING CAPITAL MANAGEMENT
In this section
This section addresses inventories, trade and other receivables, cash, other financial assets and trade and other payables of the Group
at the end of the reporting period including, where applicable, the accounting policies applied and the key estimates and judgements
made.
C. Working Capital Management
C.1 Inventories
C.2 Trade and other receivables
C.3 Cash and cash equivalents
C.4 Other financial assets
C.5 Trade and other payables
C.6 Deferred revenue
Page 36
Page 37
Page 37
Page 38
Page 38
Page 38
Financial and capital risks in this section
Liquidity risk management
Liquidity risk arises from the financial liabilities of the Group and the Group's subsequent ability to meet its obligations to repay financial
liabilities as and when they fall due. The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet
its financial commitments in a timely and cost effective manner.
The Group's liquidity position is managed by the Board of Directors who regularly review cash-flow forecasts prepared by management,
which includes the Group's short and long-term obligations, cash position and forecast liability position to maintain appropriate liquidity
levels. At 30 June 2019, the Group has a total of $7,487,000 of cash at its disposal (2018: $9,926,000) and a net current asset position
$13,453,000 (2018: $21,054,000). The remaining contractual maturities of the Group's financial liabilities are:
On demand
$'000
Less than 3
months
$'000
$'000
3-12 months
1-5 years
Over 5 years
At 30 June 2019
Borrowings
Trade payables and other
liabilities
At 30 June 2018
Borrowings
Trade payables and other
liabilities
-
-
-
-
-
3,919
3,919
86
86
-
-
-
1,032
1,304
58
-
1,304
1,090
$'000
8,933
72
9,005
6,647
173
6,820
$'000
1,053
-
1,053
2,307
-
2,307
Total
$'000
9,986
4,077
14,064
9,986
1,535
11,521
35
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS C. WORKING CAPITAL MANAGEMENT
for the year ended 30 June 2019
C. WORKING CAPITAL MANAGEMENT
Interest rate risk management
Interest rate risk is the risk that the Group's financial position will fluctuate due to changes in the market interest rates.
The Group's exposure to market interest rates relates primarily to the Group's cash and term deposits with financial institutions. The
primary goal of the Group is to maximise returns on surplus cash, using deposits with maturities of 90 days or less. Management
continually monitors the returns on funds invested. The exposure to interest rate risk as at 30 June 2019 is as follows:
Cash and cash equivalents (Note C.3)
Short-term deposits (Note C.4)
2019
$'000
7,487
585
8,072
2018
$'000
9,926
585
10,511
A reasonable possible change in the interest rate (+0.5%/-0.5%) (2018: +0.5%/-0.5%)), with all variables held constant, would have
resulted in a change in post tax profit/(loss) of $37,000/($37,000) (2018: $51,000)/($51,000)) and no impact to other comprehensive
income.
Credit risk management
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a
financial loss. The Group is exposed to credit risk from its operating and investing activities, including trade receivables and short-term
deposits with financial institutions. Maximum exposure to credit risk equals to the carrying amount of these financial assets (as outlined
in each applicable note). The significant concentration of credit risk within the Group relate to receivable balances from the Group's
major customer.
The maximum exposure to credit risk for the components of the statement of financial position at 30 June 2019 and 2018 is the carrying
amounts as illustrated in Note C.2.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an
assessment of their independent credit rating, financial position, past experience and industry reputation. Key individual customer
receivable balances are monitored on an ongoing basis. The significant concentrations of credit risk within the Group relate to
receivable balances from the Group's major customer and cash held with investment grade financial institutions.
The investment of surplus cash in short-term deposits is only invested with a major financial institution to minimise the risk of default of
counterparties.
C.1 Inventories
Raw materials
Provision for obsolescence
Work in progress
Finished goods
2019
$'000
4,741
(298)
2,255
-
6,698
2018
$'000
1,841
(226)
489
50
2,154
Recognition and measurement
Inventories are carried at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location
and condition are accounted for as follows:
• Raw materials: weighted average cost
• Finished goods and work in progress: weighted average cost of direct materials and direct manufacturing labour and a proportion
of manufacturing overhead costs
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling
expenses.
36
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS C. WORKING CAPITAL MANAGEMENT
for the year ended 30 June 2019
C. WORKING CAPITAL MANAGEMENT
C.2 Trade and other receivables
C.3 Cash and cash equivalents
Trade receivables
Accrued royalties
Other receivables (b)
Allowance for Impairment of other receivables (a)
2019
$'000
4,093
-
4,341
(1,379)
7,055
2018
$'000
12,097
64
1,506
-
13,667
(a) At 30 June 2019, the Group recognised $1,350,000
(2018:$nil) as an allowance for impaired receivables. This
amount covers $1,350,000 receivable from Avidsys Pty Ltd as
consideration for the disposal of REMSAFE Pty Ltd on 18
December 2017. The Group has commenced legal action to
recover the outstanding receivable. Refer to Note F.6 for further
details.
(b) At 30 June 2019, the Group recognised a receivable for
$1,533,000 in accordance with research and development tax
legislation in which the Group is entitled to a refundable R&D tax
offset. Refer note A.3 for further detail.
See the "Credit risk management" section on credit risk of trade
receivables, which explains how the Group manages and
measures the quality of trade receivables that are neither past
due nor impaired.
The Group's payment terms on trade receivables range from 30 -
35 days. The credit risk of trade receivables neither past due nor
impaired was assessed as remote as historical default rates with
associated customers are negligible.
Recognition and measurement
Trade and other receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an
active market.
Trade and other receivables are recognised on initial recognition
at fair value. Subsequent to initial recognition, trade receivables
are measured at amortised cost using the effective interest rate
method, less an allowance for uncollectible amounts.
Impairment
Trade receivables and contract assets are subject to the
expected credit loss model. The Group applies the AASB 9
simplified approach to measuring expected credit losses which
uses the lifetime expected loss allowance for all trade receivable
and contract assets. The identified impairment loss was
immaterial. While cash and cash equivalents are also subject to
the impairment requirements of AASB 9, the identified
impairment loss was immaterial.
Fair value
The carrying amount of trade and other receivables
approximates their fair value.
Cash at bank
Short-term deposits
2019
$'000
7,487
-
7,487
2018
$'000
9,926
-
9,926
The reconciliation of net (loss)/profit after tax to net cash flows from
operations for the years ended 30 June 2019 and 2018 is as follows:
(Loss)/profit after income tax from continuing
operations
(Loss)/profit after income tax from discontinued
operations
(Loss)/profit after income tax
Depreciation & amortisation
R&D tax offset (Note B.2)
Government grants (Note E.2)
Interest expense (Note D.1)
Surplus lease space (Note E.1)
Warranties (Note E.1)
Employee benefits (Note E.1)
(Gain)/loss on sale of quoted equity shares
Provision for doubtful debt (Note C.2)
Share based payment expense (Note F.3)
Net foreign exchange gain
Net cash (used in)/from operating activities
before changes in assets and liabilities
Changes in assets and liabilities during the year:
Decrease/(increase) in receivables and
prepayments
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax assets
Increase/(decrease) in payables
2019
$'000
(5,906)
2018
$'000
1,735
-
483
(5,906)
735
1,421
(225)
507
(53)
(31)
307
-
1,379
263
(1,200)
2,218
555
-
(225)
528
(52)
350
(286)
(132)
-
253
(999)
(2,804)
2,774
6,950
(8,464)
(4,546)
(37)
2,218
4,587
1,127
2
(3,654)
(10,989)
Net cash generated from/(used in) operating
activities
1,783
(8,215)
Recognition and measurement
Cash and cash equivalents in the statement of financial
position comprise cash at bank and short-term deposits with
an original maturity of three months or less, which are subject
to an insignificant risk as to change in value.
Fair value
The carrying amount of short-term deposits approximates
their fair value.
37
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS C. WORKING CAPITAL MANAGEMENT
for the year ended 30 June 2019
C. WORKING CAPITAL MANAGEMENT
C.4 Other financial assets
C.6 Deferred revenue
Deferred revenue includes revenue allocated to unsatisfied
performance obligations in engineering services contracts
with customers, unsatisfied performance obligations on sale
of goods to customers and long-term advances received from
customers.
A reconciliation of deferred revenue for the years ended 30
June 2019 and 2018 is as follows:
At 1 July
Deferred during the year
Released to the statement of profit or loss
At 30 June
2019
$'000
943
4,426
(2,458)
2,911
2018
$'000
5,144
522
(4,722)
943
Recognition and measurement
Deferred revenue is recognised as a liability when
consideration is received prior to performance obligations
being satisfied with a customer. The deferred revenue is
recognised as income over the periods that the performance
obligations are met.
Short term deposits
2019
$'000
585
585
2018
$'000
585
585
The Group has pledged short term deposits of $585,000 (2018:
$585,000) as collateral for financing facilities and pledged nil
short-term deposits (2018: Nil) as collateral for performance
guarantees under contractual arrangements related to customer
agreements. Refer to Note D.1 for details on long-term
borrowings.
Short-term deposits
Recognition and measurement
Short-term deposits represent term deposits with financial
institutions for periods greater than 90 days and less than 365
days earning interest at the respective interest rate at time of
lodgement. Short-term deposits are stated at amortised cost.
Fair value
The carrying amount of short-term deposits approximates their
fair value.
C.5 Trade and other payables
Trade payables
Lease liabilities
Taxes payable
Other payables
2019
$'000
3,871
173
10
94
4,148
2018
$'000
1,080
246
45
337
1,708
Recognition and measurement
Trade and other payables are financial liabilities recognised
when goods and services are received prior to the end of the
reporting period, irrespective of whether or not billed to the
Group. Trade and other payables are recognised on initial
recognition at fair value. Subsequent to initial recognition, trade
and other payables are measured at amortised cost.
Fair value
The carrying amount of trade and other payables approximates
their fair value.
38
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS D. DEBT AND CAPITAL
D. DEBT AND CAPITAL
for the year ended 30 June 2019
In this section
This section addresses the debt and capital position of the Group at the end of the reporting period including, where applicable, the
accounting policies applies and the key estimates and judgements made.
D.
D.1
D.2
D.3
Debt and capital
Borrowings
Share capital
Reserves
Page 39
Page 39
Page 40
Financial and capital risks in this section
Capital risk management
For the purposes of the Group's capital management, capital includes contributed shareholder equity. When managing capital,
management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and
benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital, provides a
strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. In order to
maintain or adjust the capital structure, the Group may issue new shares or debt.
D.1 Borrowings
Current
Non-current
2019
$'000
-
8,277
8,277
2018
$'000
1,032
6,738
7,770
Changes in borrowings arising from financing activities are as
follows:
At 1 July
$'000
Cash flows
$'000
7,770
8,102
-
(860)
Finance
costs
$'000
507
528
At 30 June
$'000
8,277
7,770
2019
2018
On 25 January 2010, the Department of Jobs, Tourism, Science
and Innovation provided the Group with an interest-free loan of
$14,346,000 under the terms of a Deed (Acknowledgment of
Debt) (“the Deed”). The terms and conditions attached to the
Deed are as follows:
• The term of the loan was 25 January 2010 to 30 May 2025
• Repayments commenced on 25 May 2010 at $200,000 per
annum
• A deed of variation was confirmed during the year ending 30
June 2019 to defer 2019 and 2020 repayments to 30 May 2021
•Accelerated repayments then occur across the life of the loan
then increase to a maximum repayment of $2,100,000 due on
30 May 2025
The interest-free loan was secured by way of a first ranking
floating debenture over the whole of the assets and
undertakings of the Group.
Fair value
The fair value of the Group's secured loan at 30 June 2019 was
$6,868,000 (2018: $6,516,000). The fair value measurement is
classified as Level 3 on the fair value hierarchy. The fair value of
the secured loan was calculated by discounting future cash
flows at the prevailing market interest rate at 30 June 2019 of
12.00% (2018: 12.00%).
Recognition and measurement
The interest-free loan was initially recognised at fair value and
subsequently stated at amortised cost using the effective interest rate
(“EIR”) method. The EIR is the rate that exactly discounts the
estimated future cash payments over the expected life of the loan or a
shorter period, where appropriate, to the net carrying amount of the
financial liability. The effective interest rate was 6.52 per cent.
D.2 Share capital
Ordinary shares issued and fully paid
Movement in ordinary shares
At 1 July 2017
Employee Share plan number 1
At 30 June 2018
At 1 July 2018
Employee Share plan number 1
At 30 June 2019
2019
$'000
31,178
2018
$'000
31,144
Number
77,295,882
73,328
77,369,210
$000's
31,106
38
31,144
77,369,210
83,716
77,452,926
31,144
34
31,178
Recognition and measurement
Share capital is recognised at the fair value of the consideration
received. The cost of issuing shares is shown in the share capital as a
deduction, net of tax, from the proceeds. Own equity instruments that
are re-acquired are recognised at cost and deducted from equity. No
gain or loss is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Group’s own equity instruments.
Holders of ordinary shares are entitled to receive dividends as
declared from time to time and are entitled to one vote per share at
shareholders’ meetings. In the event of winding up of the Company,
ordinary shareholders rank after creditors and are fully entitled to any
proceeds of liquidation.
39
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS D. DEBT AND CAPITAL
D. DEBT AND CAPITAL
for the year ended 30 June 2019
D.3 Reserves
At 1 July 2017
Foreign currency translation
Rights issued pursuant to performance rights plan
At 30 June 2018
At 1 July 2018
Foreign currency translation
Rights issued pursuant to performance rights plan
Transferred to accumulated losses
At 30 June 2019
Nature and purpose of reserves
Employee
benefits
reserve
$000's
1,759
-
215
1,974
Foreign currency
translation
reserve
$000's
-
9
-
9
Contingent
consideration
$000's
3,440
-
-
3,440
Consolidation
reserve
$000's
(4,455)
-
-
(4,455)
Convertible notes
reserve
$000's
248
-
-
248
1,974
-
229
-
2,203
9
(42)
-
-
(33)
3,440
-
-
(3,440)
-
(4,455)
-
-
4,455
-
248
-
-
(248)
-
Total
$000's
992
9
215
1,216
1,216
(42)
229
767
2,171
Employee benefits reserve
The employee benefits reserve records the share-based payments provided to key management personnel as part of their long-term
incentive remuneration. Refer to Note F.3 for further details.
Contingent consideration
On 13 October 2016, the Group acquired the remaining 38.5 per cent minority interest in REMSAFE Pty Ltd from the Lane Trust in
consideration for the issue of ordinary shares in the Group. The terms of the sale provided for an incentive to achieve performance targets
linked to future accumulated annual sales with consideration payable as follows:
• 2,000,000 ordinary shares in the Group if REMSAFE achieves $25,000,000 accumulated annual sales for any 12 month period; and,
• 2,000,000 ordinary shares in the Group if REMSAFE achieves $40,000,000 accumulated annual sales for any 12 month period.
Contingent consideration was measured with reference to the Group’s share price on 13 October 2016 and considered the probability that
the accumulated annual sales targets would be met, which was assessed as 100 per cent.
The fair value measurement of the contingent consideration was classified as Level 2 on the fair value hierarchy.
On 18 December 2017, the Group publicly announced the divestment of its 100 per cent interest in REMSAFE Pty Ltd to Avidsys Pty Ltd
(“Avidsys”) in support of the Group’s strategy to strengthen its position in the UAV market. Should the REMSAFE business satisfy one or
more of the abovementioned accumulated annual sales targets pertaining to the contingent consideration arrangement, Avidsys is obliged
to reimburse the Group for the value of the consideration transferred under the arrangement up to a maximum amount of $2,200,000. At 30
June 2019, the Group re-assessed the probability that the abovementioned accumulated annual sales targets would be met as nil. As a
result, no financial asset for contingent consideration receivable from Avidsys was recognised in these financial statements.
Consolidation reserve
The consolidation reserve records the difference between the amount paid to acquire a non-controlling interest and the change in the
proportionate interest in net assets held by the non-controlling interest.
Convertible note reserve
The convertible note reserve records the equity component of the convertible notes issued in the 2016 financial year. The convertible notes
were extinguished in prior periods.
40
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS E. OTHER ASSETS AND LIABILITIES
for the year ended 30 June 2019
E. OTHER ASSETS AND LIABILITIES
In this section
This section addresses the other assets and liabilities position of the Group at the end of the reporting period including, where
applicable, the accounting policies applies and the key estimates and judgements made.
Provision for warranties
The Group provides for a provision for warranties for
general repairs for two years after its propulsion system
assemblies ("PSA") are sold. The provision for warranties
represents the liability for potential warranty claims against
the Group and is recognised at the point in time when a
PSA is sold. The valuation of the provision for warranties is
based on the product of the estimated defect rate, the cost
of the PSA and the volume of PSAs sold. Estimates of the
provision for warranties are revised annually.
Employee benefits
The Group does not expect its long-service or annual leave
benefits to be settled wholly within twelve months of each
reporting date. These liabilities are measured at the
present value of the estimated future cash outflow to be
made to the employees using the projected unit credit
method. Expected future payments are discounted using
market yields at the reporting date on high quality
corporate bonds with terms to maturity and currencies that
match, as closely as possible, estimated future cash flows.
Other employee benefits expected to be wholly settled
within one year after the end of the period in which the
employees render the related services are classified as
short-term benefits and are measured at the amount due to
be paid.
E.
E.1
E.2
Other assets and liabilities
Provisions
Government grants
Page 41
Page 42
E.1 Provisions
At 1 July 2018
Arising during the year
Utilised
At 30 June 2019
Current
Non-current
At 1 July 2017
Arising during the year
Utilised
At 30 June 2018
Current
Non-current
Surplus
lease
space Warranties
$000's
$000's
Employee
benefits
$000's
141
33
(86)
88
57
31
88
193
34
(86)
141
57
84
141
770
253
(285)
738
738
-
738
420
449
(99)
770
770
-
770
1,307
491
(183)
1,615
1,537
77
1,614
1,593
115
(401)
1,307
1,263
44
1,307
Total
$000's
2,218
777
(554)
2,441
2,333
108
2,441
2,206
598
(586)
2,218
2,090
128
2,218
Recognition and measurement
Provisions are recognised when the Group has a present
obligation, legal or construction, as a result of a past event, it is
probable that an outflow of resources embodying benefits will
be required to settle an obligation and a reliable estimate can
be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are discounted using a pre-tax discount rate that reflects, where
appropriate, the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time
is recognised as a finance cost.
Provision for surplus lease space
The Group recognised a provision for surplus lease space for
unused office space under an operating lease, expiring 16
February 2021. In addition, the Group entered into a sublease
agreement for the unused office space. In February 2019 the
sublease was extended five years, commencing March 2019.
Refer to Note F.1 for further details. The provision for surplus
lease space is calculated as the present value of the net cost of
fulfilling the lease arrangement.
41
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS E. OTHER ASSETS AND LIABILITIES
for the year ended 30 June 2019
E. OTHER ASSETS AND LIABILITIES
E.2 Government grants
At 1 July
Released to the statement of profit and loss
At 30 June
Current
Non-current
2019
$'000
299
(225)
74
74
-
2018
$'000
524
(225)
299
225
74
In June 2008, the Group received a $2,760,000 grant from the Commonwealth of Australia through the Alternative Fuels
Conversion Program administered by the Department of the Environment, Water, Heritage and the Arts towards the construction
of a heavy duty engine test facility. There are no unfulfilled conditions or contingencies attached to the grants.
Recognition and measurement
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. Government grants are recognised in other income in the statement of profit or loss and other
comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate,
on a systematic basis. When a government grant relates to compensation for expenses or losses already incurred, or for the
purposes of giving immediate financial support to the entity with no future related costs, government grants are recognised as
income in the period in which it becomes receivable. When the grant relates to an asset, it is recognised as deferred revenue in
the statement of financial position and income is recognised in equal amounts over the expected useful life of the related asset.
42
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
In this section
This section addresses information on other items which require disclosure to comply with Australian Accounting Standards and the
Corporations Act 2001 (Cth). This section includes Group structure information and other disclosures.
Other items
F.
F.1 Commitments
F.2 Related parties
F.3 Share based payments
F.4 Subsidiaries
F.5 Parent entity information
F.6 Discontinued operations
F.7 Auditor remuneration
F.8 Events after the end of the reporting period
F.9 Other accounting policies
F.10 Adopted accounting standards
F.11 New accounting standards
43
44
45
47
47
48
49
49
49
50
52
F.1 Commitments
Operating leases - Group as lessee
The Group has entered into operating leases for properties
as follows:
• A lease arrangement for the Balcatta, Australia, premises
for ten years ending 17 February 2021. The lease includes
two options to extend the lease term for two further periods
of five years each on 17 February 2021 and 17 February
2026, respectively. The lease arrangement contains an
escalation clause that allows for an increase in rent of 3.00
per cent per annum across the term of the lease
arrangement.
• A lease agreement for the Oregon, United States of
America premises for the five years ending 7 December
2022. The lease includes two options to extend the lease
term for two further periods of five years each on 7
December 2022 and 7 December 2027 respectively. The
lease arrangement contains an escalation clause that allows
for an increase in rent of 3.00 per cent per annum across
the term of the lease arrangement.
Other than already described, no operating lease
arrangements include contingent rentals, purchase options
or escalation clauses.
For the year ended 30 June 2019, $1,070,000 (2018: $921,000)
was recognised as an expense in occupancy expenses in the
statement of profit or loss and other comprehensive income.
Future minimum rentals payable under non-cancellable operating
leases at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
2019
$'000
1,176
1,197
-
2,372
2018
$'000
1,110
2,366
1,012
4,488
Recognition and measurement
The determination of whether an arrangement is or contains a
lease is based on the substance of the arrangement at the
inception of the lease. The arrangement is or contains a lease if
the fulfilment of the arrangement is contingent on the use of a
specific asset or assets and the arrangement conveys a right to
use the asset or assets, even if that asset is or those assets are
not explicitly specified in the arrangement.
An operating lease is a lease other than a finance lease.
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term.
Operating leases – Group as lessor
The Group has entered into a sublease related to surplus
capacity at its Balcatta property for a period of five years. It
includes a clause to enable the upward revision of the rental
charge based on an annual base according to prevailing market
conditions.
For the year ended 30 June 2019, $458,000 (2018: $428,000)
was recognised as other income in the statement of profit or loss
and other comprehensive income. Future minimum rentals
receivable under non-cancellable operating leases at 30 June
are, as follows.
Within one year
After one year but not more than five years
More than five years
2019
$'000
359
1,315
-
1,673
2018
$'000
202
-
-
202
43
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.1 Commitments (continued)
Recognition and measurement
Operating lease rentals are recognised as other income on a straight-line basis over the lease term.
Commitments
At 30 June 2019, the Group had commitments of Nil (2018: $694,000) related to the fit-out of the Oregon, United States of America,
leased premises.
F.2 Related parties
Group structure
Note F.4 provides information about the Group’s structure, including details of subsidiaries.
Transactions with key management personnel
Agere Pty Ltd, a company of which Mr. Steve Gallagher is a director, received $60,000 (2018: $60,000) in director's fees for his
service to the Group. At 30 June 2019, a total of $5,000 remains due and payable (2018: $5,000). Payment terms are 7 days.
No other director or key management personnel entered into a material contract with the Group from the end of the previous financial
year.
Compensation of key management personnel of the Group
Short term employee benefits
Post-employment benefits
Long-term employee benefits
Share based payments
2019
$
1,146,953
80,962
68,273
221,708
2018
$
1,355,701
121,012
120,809
212,867
1,517,897
1,810,390
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel. The compensation of key management personnel is included in the employee benefits expense in the
statement of profit or loss and other comprehensive income.
Refer to table 2 and table 3 of the Remuneration report for KMP share and equity holdings, including performance rights.
Loans from related parties
The Group has agreed an unsecured US$3 million (A$4 million) standby working capital facility with UIL Limited. UIL Limited is the
Group's largest shareholder, currently holding 30% of the Group's shares. The establishment of the standby facility secures an
additional source of working capital should the Group decide to accelerate further investments in product development. The Group
paid a 2.5% facility fee $108,000 (refer to note A.4 for further detail). Interest on any funds drawn down will be incurred at an interest
rate of Libor plus 6% .The facility is available from 11 March 2019 to 10 September 2020.
44
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.3 Share based payments
Equity-settled share based payment
transactions
2019
$'000
263
263
2018
$'000
250
250
There were no cancellations or modifications to awards in
the 2019 or 2018 financial years. Share-based payment
plans are explained below:
Employee Share Plan No. 1
The Group provides benefits to its employees in the form of
share based payments in which employees render services
for ordinary shares in the Group. Under the plan, each
eligible employee is offered fully paid ordinary shares to a
maximum value of $1,000 per annum.
For the year ended 30 June 2019, 83,716 ordinary shares
(2018: 73,328 ordinary shares) were issued on 23 January
2019 at a market value on the date of issue of $34,000
(2018: $38,000 ).
CEO Share Acquisition Performance Rights
On 11 August 2017, the Group announced the appointment
of Mr. Alder as the Managing Director and Chief Executive
Officer of the Group. The announcement set out the
material terms of his employment, which include the grant of
two performance rights for each share acquired by Mr. Alder
during the period from 11 August 2017 to 31 December
2017.
During the year ended 30 June 2018, Mr. Alder acquired
372,333 ordinary shares in the Group, resulting in a
maximum entitlement of 647,250 share acquisition
performance rights ("SAPR's"). The grant of the
performance rights was approved by the shareholders at an
extraordinary general meeting on 23 May 2018.
The terms of the performance rights issued to Mr. Alder are
subject to a vesting condition of a 30-day volume weighted
average share price of $0.62 per ordinary share.
During the year ended 30 June 2019, no performance rights
issued under the plan vested. The share based payment
expense recognised for the year ended 30 June 2019 was
$68,000 (2018: $60,000).
2018 Executive LTI Plan and 2018 CEO LTI Plan
On 27 October 2017 and 23 May 2018, the Group issued
951,622 performance rights to key management personnel
as part of their long-term incentive plan. The terms of the
performance rights are set out on pages 10-11 of the
Directors' Report. During the year ended 30 June 2019, no
performance rights issued under the plan vested. The share
based payment expense recognised for the year ended 30
June 2019 was $101,000 (2018: $63,000).
2017 CEO LTI Plan
The 2017 performance rights plan related to Mr. Terry Stinson
(the previous Managing Director and CEO) and was approved by
shareholders on 7 November 2016. Pages 11-12 of the Directors'
Report details the terms of the performance rights. During the
year no rights under the plan vested. The total expense
recognised during the period is $59,000 (2018: $92,000).
Movements during the year
The following table illustrates the number of performance rights
during the year:
Outstanding at 1 July
Granted during the year
Lapsed during the year
Outstanding at 30 June
2019
Number
2,354,373
-
(343,719)
2,010,654
2018
Number
500,000
1,854,373
-
2,354,373
The weighted average remaining contractual life of performance
rights outstanding at 30 June 2019 was 1 year (2018: 2 years).
The following tables list the inputs into the models used for the
four plans for the years ended June 30, 2017 and 2018,
respectively:
Grant date
Expiry date
Share price at grant
Fair value ($/right) -
Tranche 1
Fair value ($/right) -
Tranche 2
Expected volatility
Risk-free interest rate
Remaining
contractual life
Model used
2017
CEO LTI
Plan
2018
Executive
LTI Plan
CEO
SAPR's
7/11/2016 23/05/2018 27/10/2017 23/05/2018
2018 CEO
LTI Plan
7/09/2019 10/08/2020 10/08/2020 10/08/2020
$ 0.93 $ 0.44 $ 0.54 $ 0.44
0.500
0.209
0.365
0.316
0.420
70%
1.68%
0.138
59%
1.98%
0.278
60%
1.95%
-
59%
1.98%
1.19 years
2.12 years
2.12 years
2.12 years
Monte
Carlo
Monte
Carlo
Monte
Carlo
Monte
Carlo
45
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.3 Share based payments (continued)
The expected life of the performance rights is based on historical data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility of performance rights reflects the assumption that the historical volatility over
a period similar to the life of the performance rights is indicative of future trends, which may not necessarily be the actual outcome.
Recognition and measurement
Employees, including key management personnel, of the Group receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments; that is, equity-settled transactions.
The cost of equity-settled transactions is determined using the fair value of the equity instrument at the date when the grant is made
using an appropriate valuation model.
The cost arising from share-based payments is recognised as an employee benefits expense, together with a corresponding increase
in equity over the period in which the service and, where applicable, the performance conditions, are fulfilled; that is, the vesting
period. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately
vest. The expense or credit in the statement of profit or loss and other comprehensive income represents the movement in the
cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of the awards,
but the likelihood of the condition being met is assessed as part of the Group’s best estimate of the number of shares that will vest.
Market performance conditions are reflected within the grant date fair value.
46
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.4 Subsidiaries
The ultimate parent company of the Group is Orbital Corporation Limited. The consolidated financial statements of the Group include:
Class of
shares
Country of
incorporation
Principal activities
2019
2018
% equity interest
Ordinary
Australia
Production &
Development
Entity
Orbital Australia Pty Ltd
Orbital Australia Manufacturing Pty Ltd
OEC Pty Ltd
S T Management Pty Ltd
OFT Australia Pty Ltd
Investment Development Funding Pty Ltd
Power Investment Funding Pty Ltd
Kala Technologies Pty Ltd
Orbital Share Plan Pty Ltd
Note
(c)
(d)
(a)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Orbital Holdings (USA) Inc.
Orbital Fluid Technologies Inc.
Ordinary
Ordinary
United States
United States
Orbital UAV USA, LLC
Ordinary
United States
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Production &
Development
(a) Orbital Share Plan Pty Ltd was established on 22 September 2008 and acts as the trustee for Executive Long Incentive Performance Rights Plans.
(b) The Production segment is focussed on the manufacture, assembly and delivery of engines and propulsion systems for unmanned aerial vehicles, and the continuous
improvement of propulsion system and component part costs; product quality; and timing of product delivery.
(c) The Production Development segment specialises in the development of new UAV propulsion systems and flight critical components, including unmanned aerial
vehicle engineering studies, engine mapping, maintenance certification and engineering technical support across the Group.
F.5 Parent entity information
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Issued capital
Accumulated losses
Employee benefits reserve
Total equity
Loss of the parent
Total comprehensive loss of the parent entity
2019
$'000
2
22,848
-
8,277
14,573
31,178
(18,842)
2,237
14,573
(4,835)
(4,835)
2018
$'000
1,451
25,430
1,032
6,738
19,111
31,144
(14,007)
1,974
19,111
(1,834)
(1,834)
47
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.6 Discontinued operations
On 18 December 2017, the Group publicly announced the divestment of its 100 per cent interest in REMSAFE Pty Ltd to Avidsys Pty
Ltd (“Avidsys”) in support of the Group's strategy to strengthen its position in the UAV market.
Cash consideration of $2,200,000 received or receivable from Avidsys across three tranches was as follows:
• The first tranche payment of $720,000 has been received.
• Of the second tranche payment, $100,000 has been received with $650,000 remaining receivable as at 30 June 2018.
• The third tranche payment of $700,000 was receivable on 18 June 2019.
• For the year ended 30 June 2019, the group assessed the recoverability of the outstanding amounts on tranche two and three. This
lead to the outcome of raising a provision of $1,350,000 due to unfulfilled payment terms.
The business of REMSAFE Pty Ltd was classified as a discontinued operation. Refer to Note A.1 for further details.
The result of REMSAFE Pty Ltd for the 2018 year is presented below:
2019
$'000
-
-
-
-
-
-
-
-
-
2018
$'000
517
(1,140)
(623)
1,106
483
-
483
0.62
0.62
2018
$'000
(448)
181
-
(267)
The net cash flows incurred by REMSAFE Pty Ltd were as follows:
Operating
Investing
Financing
Net cash outflow
2019
$'000
-
-
-
-
Recognition and measurement
A disposal group qualifies as a discontinued operation if it is a
component of an entity that either has been disposed of and:
• represents a separate major line of business or geographical
area of operations
• is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical are of operations; or
• is a subsidiary acquired exclusively with a view to resale
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount in
the consolidated statement of profit or loss and other
comprehensive income. All other disclosures in the financial
statements include amounts for continuing operations, unless
otherwise indicated.
Revenue
Expenses
Operating loss
Gain on disposal of discontinued operation
Profit before tax from discontinued operation
Income tax expense
Profit for the year from discontinued operation
Earnings per share (in cents)
Basic earnings/(loss) for the year from discontinued operations
Diluted earnings/(loss) for the year from discontinued operations
The major classes of assets and liabilities of REMSAFE Pty
Ltd disposed of on 18 December 2017 were as follows:
Assets
Trade and other receivables
Plant and equipment
Total assets
Net assets directly associated with
REMSAFE Pty Ltd
2018
$'000
754
29
783
783
The gain on sale of REMSAFE was calculated as follows:
Cash consideration
Less: Transaction costs
Less: Bad debts written off
Less: Net assets transferred to Avidsys
Gain on disposal of discontinued
operation
2018
$'000
2,200
(100)
(211)
(783)
1,106
48
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
Fair value measurement
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
► Level 1 — Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
► Level 2 — Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly or
indirectly observable
► Level 3 — Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognised in the financial
statements at fair value on a recurring basis, the Group
determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
F.7 Auditor remuneration
During the year the Group changed auditor from Ernst &
Young Australia ("EY") to PricewaterhouseCoopers ("PwC")
2019
$
2018
$
Amounts received or due and receivable for:
Audit and review of the consolidated
financial statements
Tax compliance services
127,500 127,000
73,011 117,362
200,511 244,362
F.8 Events after the end of the reporting period
There has not arisen in the interval between the end of the
financial year and the date of this report any item,
transaction or event of a material and unusual nature likely,
in the opinion of the Directors of the Group, to affect
significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future
years.
F.9 Other accounting policies
Goods and services tax
Revenue, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the taxation authority. In these
circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amounts of
GST included. The net amount of GST recoverable from, or
payable to, the Australian Taxation Office (“ATO”) is
included as a current asset or liability in the consolidated
statement of financial position.
Cash flows are included in the statement of cash flows on a
gross basis. The GST components of cash flows arising
from investing and financing activities which are recoverable
from, or payable to, the ATO are classified as operating
cash flows.
Intangible assets
Patents
Patents, licences and technology development and
maintenance costs, not qualifying for capitalisation, are
expensed as incurred.
49
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.10 Adopted accounting standards
Adopted standards and interpretations
A number of adopted standards and interpretations have been issued as at the financial reporting date.
The Group has reviewed these standards and interpretations and with the exception of the items listed below, none of the new and
amended accounting standards and interpretations will significantly affect the Group's accounting policies, financial position or
performance.
Title
Application of new
standard
Summary
Adopted 1 July 2018
AASB 15
Revenue
from
contracts
with
customers
("AASB 15")
AASB 15 replaces all existing revenue requirements in Australian Accounting Standards
(AASB 118 Revenue and AASB 111 Construction Contracts) and applies to all revenue
arising from contracts with customers, unless the contracts are in the scope of other
standards, such as AASB 117 (or AASB 16 Leases, once applied). The core principle of
AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which an entity expects
to be entitled in exchange for those goods or services.
An entity recognises revenue in accordance with the core principle by applying the following
steps:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The Group has implemented the modified approach as its transition method for the adoption
of AASB 15.
The Group has reviewed the terms and conditions of its contracts with customers and
determined that the adoption of AASB 15 will not have a material impact on the business. As
at 30 June 2019 the reported sales of goods represent component sales to customers where
revenue is only recognised once control passes to the customer, which is at a point in time.
In relation to engineering services contracts, the services rendered under each stage are
highly interrelated and therefore treated as a single performance obligation. Orbital is entitled
to payment for work completed in the event an engineering services contract is discontinued,
and therefore, performance obligations are satisfied over time with reference to the stage of
completion under the output method for revenue recognition. As at 30 June 2019, the group
has 5 engineering services contracts.
The group has confirmed:
• Contracts commenced and completed in the same financial year will not be adjusted for
the impact of AASB 15.
• Licence and royalty revenue will continue to be recognised as and when customer sales of
patented technologies are made.
The Group has assessed there is no financing impact under AASB 15 from customer
payments received in advance of goods delivered or services rendered.
50
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.10 Adopted accounting standards
Title
Application of new
standard
Summary
Periods beginning on or
after 1 January 2018
AASB 9
Financial
Instruments
("AASB 9")
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. Except for
certain trade receivables, an entity initially measures a financial asset at its fair value plus, in
the case of a financial asset not at fair value through profit or loss, transaction costs. Debt
instruments are subsequently measured at fair value through profit or loss (FVTPL),
amortised cost, or fair value through other comprehensive income (FVOCI), based on their
contractual cash flows and the business model under which the debt instruments are held.
There is a fair value option (FVO) that allows financial assets on initial recognition to be
designated as FVTPL if that eliminates or significantly reduces an accounting mismatch.
Equity instruments are generally measured at FVTPL. However, entities have an irrevocable
option on an instrument-by-instrument basis to present changes in the fair value of non-
trading instruments in other comprehensive income (OCI) without subsequent reclassification
to profit or loss.
For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair
value of such financial liabilities that is attributable to changes in credit risk must be presented
in OCI. The remainder of the change in fair value is presented in profit or loss, unless
presentation in OCI of the fair value change in respect of the liability’s credit risk would create
or enlarge an accounting mismatch in profit or loss.
All other AASB 139 classification and measurement requirements for financial liabilities have
been carried forward into AASB 9, including the embedded derivative separation rules and the
criteria for using the FVO. The incurred credit loss model in AASB 139 has been replaced
with an expected credit loss model in AASB 9. The Group applies the AASB 9 simplified
approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables and contract assets. There has been no material impact for this
change on the financial statements.
The requirements for hedge accounting have been amended to more closely align hedge
accounting with risk management, establish a more principle-based approach to hedge
accounting and address inconsistencies in the hedge accounting model in AASB 139.
The Group does not have any hedging relationships and therefore will not be impacted by
AASB 9 hedge accounting. The Group assessed no significant impact on its statement of
financial position or equity on applying the classification and measurement requirements of
AASB 9.
51
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS F. OTHER NOTES
F. OTHER ITEMS
for the year ended 30 June 2019
F.11 New accounting standards
New standards and interpretations
The Group has reviewed new standards and interpretations and with the exception of the items listed below, none of the new and
amended accounting standards and interpretations will significantly affect the Group's accounting policies, financial position or
performance.
Title
Application of new
standard
Summary
AASB 16
Leases
("AASB 16")
Periods beginning on 1
July 2019
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in
a similar way to finance leases under AASB 117 Leases. The standard includes two
recognition exemptions for lessees – leases of ’low-value’ assets (e.g. personal computers)
and short-term leases (i.e. leases with a lease term of 12 months or less). At the
commencement date of a lease, a lessee will recognise a liability to make lease payments
(i.e. the lease liability) and an asset representing the right to use the underlying asset during
the lease term (i.e. the right-of-use asset). Lessees will be required to separately recognise
the interest expense on the lease liability and the depreciation expense on the right-of-use
asset.
Lessees will be required to re-measure the lease liability upon the occurrence of certain
events (e.g. a change in the lease term, a change in future lease payments resulting from a
change in an index or rate used to determine those payments). The lessee will generally
recognise the amount of the remeasurement of the lease liability as an adjustment to the right
of-use asset.
Lessor accounting is substantially unchanged from today’s accounting under AASB 117.
Lessors will continue to classify all leases using the same classification principle as in AASB
117 and distinguish between two types of leases: operating and finance leases.
The Group's current operating leases comprise only of real estate. Upon adoption of AASB
16, the Group's balance sheet is expected to include a right of use asset and liability related
to these operating lease arrangements.
Transition to AASB 16:
The Group has evaluated the impact of current lease arrangements for the lease of office
buildings, storage facilities, equipment and other assets. The approximate impact on the
balance sheet at 30 June 2019 was an increase in leased related assets of $1,710,000 and
an increase in lease liabilities of $2,215,000. Furthermore the sublease will give rise to a
finance lease receivable of approximately $505,000.
52
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192019 ANNUAL REPORT DIRECTORS’ DECLARATION
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of Orbital Corporation Limited, I state that:
1.
In the opinion of the Directors:
(a)
The financial statements and notes and the additional disclosures included in the Directors’ Report designated
as audited, of the Group are in accordance with the Corporations Act 2001, including:
(i)
(ii)
Giving a true and fair view of the financial position of the Group as at 30 June 2019 and of their
performance, as represented by the results of their operations and their cash flows, for the year ended
on that date; and
Complying with Accounting Standards in Australia and the Corporations Act 2001.
(b)
(c)
The financial statements and notes also comply with International Financial reporting Standards as disclosed in
note 2(a).
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance
with Section 295A of the Corporations Act 2001, from the Chief Executive Officer and Chief Financial Officer for the
financial year 30 June 2019.
On behalf of the Board,
JP Welborn
Chairman
TM Alder
Managing Director & Chief Executive Officer
Dated at Perth, Western Australia 30 August 2019.
53
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Independent auditor’s report
To the members of Orbital Corporation Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Orbital Corporation Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2019 and of its
financial performance for the year then ended, and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
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 Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
54
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group specialises in designing and manufacturing unmanned aerial vehicle propulsion systems
for its customers. The Group has manufacturing operations in Australia and in the United States of
America. The accounting processes are structured around a Group finance function at its corporate
head office in Perth.
Materiality
•
For the purpose of our audit we used overall Group materiality of $350,000, which represents
approximately 1% of the Group’s total assets.
• We applied this threshold, together with qualitative considerations, to determine the scope of our
audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
• We chose total assets as the benchmark as, in our view, it is the benchmark against which the
performance of the Group is most commonly measured whilst it is in the production ramp-up
phase.
• We utilised a 1% threshold based on our professional judgement, noting it is within the range of
commonly acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective judgements; for example, significant
accounting estimates involving assumptions and inherently uncertain future events.
• Our audit procedures were predominantly performed in Perth where many of the corporate and
Group operations functions are centralised. We also visited the Hood River operations in Oregon,
USA during the year
55
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
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 for the current period. The key audit 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. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
Basis of preparation of financial report
As described in the financial report, the financial
statements have been prepared by the Group on a
going concern basis, which contemplates that the
Group will continue to meet its commitments, realise
its assets and settle its liabilities in the normal course
of business.
The Group has invested in the construction of a new
manufacturing facility in Oregon, USA and is still to
achieve steady state production under the expanded
agreement with its largest customer.
Assessing the appropriateness of the Group’s basis of
preparation for the financial report was a key audit
matter due to its importance to the financial report as
a whole and the level of judgement involved in
assessing the operational status, future funding and
cash flows from sales in particular with respect to the
Group forecasting future cash flows for a period of at
least 12 months from the date of the financial report
(cash flow forecasts).
How our audit addressed the key audit
matter
In assessing the appropriateness of the Group’s going
concern basis of preparation for the financial report, we
performed the following procedures amongst others:
● evaluated the appropriateness of the Group's
assessment of their ability to continue as a going
concern, including whether the level of analysis is
appropriate given the nature of the Group, the period
covered is at least 12 months from the date of our
auditor’s report and relevant information of which
we are aware as a result of the audit has been
included
● enquired of management and the directors as to their
knowledge of events or conditions that may cast
significant doubt on the Group's ability to continue
as a going concern
● evaluated the Group’s plans for future actions,
including the establishment of a standby working
capital facility with a related party
● evaluated selected data and assumptions in the
Group’s cash flow forecasts for at least 12 months
from the date of signing the auditor’s report,
including comparing selected elements, such as
purchase orders from customers, in the cash flow
forecasts to existing contracts and agreements
● requested written representations from management
and the board of directors regarding their plans for
future action and the feasibility of these plans
● evaluated whether, in view of the requirements of
Australian Accounting Standards, the financial
report provide adequate disclosures about these
events and conditions.
56
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Key audit matter
Recognition and measurement of deferred
tax assets
(Refer to note A.5) $5.5 million
At 30 June 2019, the Group recognised $5.5 million
of net deferred tax assets, which includes $5.1 million
for the anticipated benefit of utilising carry forward
tax losses to reduce future tax payable in both
Australia and the USA.
In determining the quantum of tax losses that are
probable of utilisation, the Group made a number of
judgements, including assessing whether it has access
to the carry forward tax losses and its forecast taxable
income in both Australia and the USA over the period
for which the carry forward tax losses are available.
Assessing the appropriateness of recognising these
deferred tax assets was a key audit matter due to the
level of judgement applied by the Group in
forecasting future taxable income and the probability
of the carry forward tax losses being utilised.
How our audit addressed the key audit
matter
In assessing the appropriateness of the Group’s
recognition and measurement of deferred tax assets in
the financial report, we performed the following
procedures amongst others:
● evaluated the accuracy Group’s reconciliation of the
available carry forward tax losses at 30 June 2019 by
agreeing the opening balance of carry forward losses
to losses recorded in previous years and agreeing the
losses for the current year to the current year
calculations
● obtained and read the advice that the Group received
with respect to the availability of these losses under
current Australian and USA income tax legislation
● together with PwC tax experts, we evaluated the
Group’s ability to access the carry forward losses
under Australian and USA income tax legislation
● evaluated the Group’s calculation for the recognition
and measurement of the temporary differences to be
recognised as deferred tax assets and liabilities in
light of the requirements of Australian Accounting
Standards
● obtained the calculation of forecast taxable income for
the operations of the Group to evaluate the Group’s
conclusion that sufficient taxable income would likely
be earned in the future to utilise the tax losses for
which deferred tax assets have been recognised. We
evaluated selected data and assumptions in the
Group’s cash flow forecasts, including comparing
selected elements, such as customer purchase orders,
in the cash flow forecasts to existing contracts and
agreements
● evaluated the adequacy of the disclosures made in
Note A.5 in light of the requirements of Australian
Accounting Standards.
57
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon.
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 on the other information that we obtained prior to the date of
this auditor’s report, 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.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
58
2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 7 to 15 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the remuneration report of Orbital Corporation Limited for the year ended 30 June
2019 complies with section 300A of the Corporations Act 2001.
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.
PricewaterhouseCoopers
Ben Gargett
Partner
Perth
30 August 2019
59
2019 ANNUAL REPORT SHAREHOLDING DETAILS
SHAREHOLDING DETAILS
Class of Shares and Voting Rights
As at 15 August 2019 there were 4,042 shareholders of the ordinary shares of the Company. The voting rights attaching to the ordinary
shares, set out in Article 8 of the Company’s Constitution, subject to any rights or restrictions for the time being attached to any class or
classes of shares, are:
a)
b)
at meetings of members or class of members, each member entitled to vote may vote in person or by proxy or representative; and
on a show of hands every person present who is a member has one vote, and on a poll every person present in person or by proxy
or representative has one vote for each ordinary share held.
Substantial Shareholders and Holdings as at 15 August 2019
UIL Limited
(as notified 13 April 2017)
Mitsubishi UFJ Financial Group, Inc.
Comprising voting power of over 20% in Morgan Stanley; and
voting power of 100% in Carol Australia Holdings Pty Limited
(as notified 2 August 2019)
Distribution of Shareholdings as at 15 August 2019
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Number of shareholders
Total Shares on Issue
Number of unmarketable parcels
Top 20 Shareholders as at 15 August 2019
NAME
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
ANNAPURNA PTY LTD
MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED
SWEET AS DEVELOPMENTS PTY LTD
DEBUSCEY PTY LTD
BIRKETU PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MR TERRY STINSON
MR MICHAEL WILLIAM FORD & MRS NINA BETTE FORD
MR JOSHUA LEIGH SWEETMAN & MRS CAROLINE SWEETMAN
MR JOHN PAUL WELBORN & MS CAROLINE ANNE WELBORN
NATIONAL NOMINEES LIMITED
MR CHRISTOPHER IAN WALLIN & MS FIONA KAY MCLOUGHLIN & MRS SYLVIA FAY
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR CRAIG GRAEME CHAPMAN
BOND STREET CUSTODIANS LIMITED
RACT SUPER PTY LTD
NALLAC NOMINEES PTY LTD
DR STUART JAMES MACKAY & MR STEPHEN MACKAY
MR TODD MATHEW ALDER
MR JOHN AYRES
23,227,904
30.05%
10,540,218
2,570,760
7,969,458
13.61%
2,524
889
238
309
64
4,024
77,452,926
1,158,829
NUMBER OF
SHARES HELD
24,067,349
9,008,813
2,600,000
2,570,760
2,491,944
1,850,000
1,600,000
1,589,830
1,172,621
1,000,122
990,662
850,000
820,379
689,200
632,865
500,000
500,000
500,000
425,000
406,455
372,333
356,667
% OF
SHARES
31.47
11.78
3.40
3.36
3.26
2.42
2.09
2.08
1.53
1.31
1.30
1.10
1.07
0.90
0.83
0.65
0.65
0.65
0.56
0.53
0.49
0.47
Top 20 Shareholders Total
54,995,000
71.89
The 20 largest shareholders hold 71.89% of the ordinary shares of the Company (2018: 71.85%).
On-market share buy-back
There is no current on-market buy-back.
60
2019 ANNUAL REPORT
| @OrbitalCorpASX
| OrbitalUAV
CORPORATE
INFORMATION
ABN 32 009 344 058
REGISTERED AND PRINCIPAL OFFICE
4 Whipple Street
Balcatta, Western Australia 6021
Australia
CONTACT DETAILS
Australia
Telephone: 61 (08) 9441 2311
Facsimile: 61 (08) 9441 2111
USA
Address: 210 Wasco Loop, Hood River, OR 97031, USA
Telephone: +1 541.716.5930
INTERNET ADDRESS
http://www.orbitaluav.com
Email: contact@orbitalcorp.com.au
DIRECTORS
J.P. Welborn, Chairman
T.M. Alder, Managing Director and Chief Executive Officer
S.B. Gallagher
T.D. Stinson
F.K. Abbott
COMPANY SECRETARY
R. Jones
SHARE REGISTRY
Link Market Services Limited
Level 4 Central Park
152 St Georges Terrace
Perth, Western Australia 6000
Telephone: 61 (08) 9211 6670
SHARE TRADING FACILITIES
Australian Stock Exchange Limited (Code “OEC”)
AUDITORS
PricewaterhouseCoopers
125 St Georges Terrace
Perth, Western Australia 6000
ORBITAL CORPORATION LIMITED ASX:OEC | ABN 32 009 344 058
A: 4 Whipple Street, Balcatta, Western Australia, 6021 | PO Box 901, Balcatta, Western Australia, 6914
P : +61 (08) 9441 2311 | F : +61 (08) 9441 2345 | E : contact@orbitalcorp.com.au | ORBITALUAV.COM