EXCELSIOR CAPITAL LTD - Annual Report 2020

2020 ANNUAL REPORT

2020 ANNUAL REPORT EXCELSIOR CAPITAL LIMITED

EXCELSIOR CAPITAL LIMITED

MESSAGE FROM THE CHAIRMAN

DIRECTORS’ REPORT

REMUNERATION REPORT

22 FINANCIAL STATEMENTS

2020 ANNUAL REPORT

STATEMENT OF PROFIT OR LOSS

23

STATEMENT OF COMPREHENSIVE INCOME

24

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CHANGES IN EQUITY

26

STATEMENT OF CASH FLOWS

27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 61 DIRECTORS’ DECLARATION

INDEPENDENT AUDITOR’S REPORT

ASX ADDITIONAL INFORMATION

68 CORPORATE INFORMATION

EXCELSIOR CAPITAL LIMITED

Message from the Chairman

Dear Shareholders,

I am pleased to present Excelsior Capital Limited’s annual report for the financial year ended 30 June 2020 ( FY20 ).

The Group performed consistently throughout FY20 despite the economic conditions experienced due to COVID-19.

The Investment portfolio performed resiliently during the difficult and uncertain conditions in the market throughout the last half FY20.

Electrical Cable sales were strong throughout the year contributing to an increase in revenue over FY19. Infrastructure projects with long tenures have provided the electrical business with a continued project pipeline for FY21.

Minto export sales were disrupted throughout the year due to domestic government related issues in Mongolia and Indonesia. Minto sales have commenced the FY21 year positively and we anticipate continued revenue growth for the export market.

FY20 FINANCIAL RESULTS

The Group is pleased to report a total annual revenue of $60 million FY20, (FY19, $59.3M), and a Net Profit after Tax (NPAT) of $3.6 million along with a fully franked final dividend of 2.0 cents per share.

The Company conducted a restructure and cost reduction throughout FY20 for both head office and the operational business.

2020 ANNUAL REPORT

FY21 REVIEW

The Board has been actively engaged in an internal review of the company investments since the third quarter of FY20, including the appointment of external advisors for both divestment and growth opportunities.

The Company will update the market with any material outcomes as a result of the review in accordance with its continuous disclosure obligations.

AGM This year our AGM will be held on Thursday, 15 October 2020. In light of the uncertainty and potential health risks associated with the COVID-19 pandemic, we will hold a virtual AGM. Shareholders will have the ability to participate remotely via an online platform or by lodging a directed proxy or direct vote in advance of the meeting.

On behalf of the Board, I would like to thank ECL shareholders for their continued support and the Company management for their

FY21 OUTLOOK dedication throughout the year.

The Electrical Operations will be launching Yours faithfully, an upgraded Minto plug range, specifically designed to diversify the existing product range into broader markets including open cut surface mining, infrastructure tunnelling and industrial operations. The Cables sales outlook remains positive and in particular and we anticipate strong growth domestically on the Eastern seaboard and in Western Australia. Danny Herceg Non-Executive Chairman

EXCELSIOR CAPITAL LIMITED

Directors’ report

Your directors submit their report for the year ended 30 June 2020.

Directors

The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated.

NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES

D. Herceg, LL.B (Non-executive Chair)

Appointed 4 October 2019

Danny re-joined the Board in October 2019 having previously served as a Director of the company from 2007 to 2014.

Danny is a senior corporate and commercial lawyer. Danny’s practice is focused on initial public offerings, secondary market capital raisings, capital market divestments, public and private M&A, strategic divestments and restructures, demergers / spin-offs, takeover defences and commercial negotiations. He has been advising Australian and international enterprises for over 19 years.

Danny has been a partner in several major Australian law firms, as well as working as a foreign lawyer in the head office of an international law firm in Chicago, gaining experience in US capital markets. He now leads his own boutique firm. Danny has been on the board of several ASX listed companies.

L.J. Catelan (Executive Director)

Ms Catelan is a member of the Australian Institute of Company Directors. She is an experienced company director with exposure to both listed and private companies. Ms Catelan is also a director of Excelsior Asset Management Pty Ltd and Catelan Securities Pty Ltd.

Ms Catelan has experience in property development and mezzanine debt financing. She has been involved in asset sales, corporate restructuring and a range of activities within private and public companies.

O. Schweizer (Non-executive Director)

Appointed 13 January 2020

Mr Schweizer joined the Board in January 2020 as non-executive director. Mr Schweizer has over 20 years’ experience in the corporate advisory and investment industry and has held senior positions at a number of large advisory and investment firms.

Mr Schweizer has an economics degree from the University of California, Irvine. Oliver is a Chartered Financial Analyst.

M.X. Glennon, B.Com (previously Non-executive Chair) – resigned 4 October 2019

C.D. Green, LL.B (Non-executive Director) – resigned 21 September 2019

M.J. Copeland (Non-executive Director) – appointed 23 September 2019, resigned 3 January 2020

Company Secretary

B. Hofman, B.Com, B. LLB, CA

Appointed 13 March 2020

B. Hofman has been the Company Secretary since 12 March 2020. He has been a Chartered Accountant for over 17 years.

D.M. Cohen – resigned 12 March 2020

Interests in the shares and options of the Company and related bodies corporate

As at the date of this report, the interests of the directors in the shares and options of Excelsior Capital Limited were:

		Number
		of options
	Number of ordinary	over ordinary
	shares	shares
D. Herceg L.J. Catelan	60,702 14,561,102	Nil Nil
O. Schweizer	Nil	Nil
M.X. Glennon	Nil	Nil
C.D. Green	25,000	Nil
M.J. Copeland	Nil	Nil

Principal activities

The principal activities during the year of entities within the consolidated group were:

Manufacture and distribution of electrical cables and associated components for industrial, mining, infrastructure, commercial, petrochemical and information technology applications throughout South East Asia and Oceania; and
Management of a substantial investment portfolio.

2020 ANNUAL REPORT

There have been no significant changes in the nature of these activities during the year.

OPERATING AND FINANCIAL REVIEW

The purpose of this section is to:

Provide an overview of our business model;
Discuss our strategy (including the risks associated with our strategy);
Outline the significant changes in the state of affairs; and
Provide a review of our financial condition.

EXCELSIOR CAPITAL LIMITED – EXPERTISE AND PRECISION IS OUR PURPOSE

CMI Operations Pty Limited, a subsidiary of Excelsior Capital Limited has a long and proud history of providing innovative electrical cables and components. From our beginnings in 1991, as a local manufacturer of electrical cable serving the Queensland market, we have expanded to supply a range of innovative electrical products to customers around the globe. Today, we have operations in four states and employ 60 people, supplying the industrial, mining, infrastructure, commercial, petrochemical and information technology sectors with electrical solutions.

High value coupler and receptacle products are exported to the mining sectors in Indonesia, Papua New Guinea, and China. Operations are conducted from several manufacturing and distribution facilities in Australia. The division’s primary manufacturing plant is located at Meadowbank in Sydney. This plant operates to international quality standards ISO9001 and ISO14001, AS/NZS 4801.

The CMI Operations business is divided into two key areas:

1) Electrical cables

Leading cable brands dedicated to the requirements of all segments of the electrical industry including:

XLPE Cables: supplying power in low and high voltage applications such as commercial and industrial sub-mains, factories, utility infrastructure, and variable speed drive (VSD) motors and control systems.
Hartland Cables: synonymous in Australia since 1954 for its leading range of Audio, Coaxial, Control, Data, Instrumentation, UL Approved Connecting Wire, Copper Braid, Screened and Unscreened Multicore and Multipair cables.
Aflex Cables: offering flexible cables for use in applications where tight or difficult access is restrictive or where movement occurs. These cables are generally supplied for switchboards, generators, sound & lighting, batteries, VSD motors, submersible pumps and low voltage control systems.
The Group’s customised cable division also manufactured locally flexible cords and cable assemblies to cover a comprehensive range of types for applications such as medical, technology, lighting & entertainment as well as traditional original manufacture equipment (OEM) markets. This includes combining wiring and connectors such as basic cable assemblies and complex wiring harnesses to customised requirements.

2) Minto Industrial Products

Minto Industrial Products is synonymous with the mining industry in particular with its class leading couplers and receptacle products. When power and safety are required in a complex and hazardous environment Minto is the class leader in most applications. The reputation of Minto is now global with the exports to mining installations in Indonesia, Mongolia, Papua New Guinea, and China.

The Company also plans to launch its upgraded Minto plug range, specifically targeting sectors such as open cut surface mining, infrastructure tunnelling and other industrial operations. The new range of plugs are expected to open up new customer growth opportunities in both the Australian domestic and Export markets from overseas customers.

MARKET DRIVERS

Technological change: drives demand for new and improved technology and creates the possibility for lower cost mass market electrical solutions. There is the potential for disruptive market entrants from the technology sector.

Increased safety expectations: new regulatory requirements in domestic and overseas markets drive demand for mass market solutions. Requirement for mining and infrastructure to maintain best practice solutions drive demand for innovative tailored products. This also means that existing solutions become obsolete more quickly and innovation and speed to market are now necessities, while price pressures continue to grow.

Globalisation: allows access to new, high growth markets. There is the potential for competition from new market entrants from developing countries, with lower cost base.

STRATEGIC PILLARS

Innovation

We need to stay at the forefront of technology if we are to find new ways of staying ahead of the competition, and to meet emerging risks in the mining and construction industry. To help us meet this challenge, we have a substantial research and development (R&D) program that creates innovative solutions to electrical issues.

EXCELSIOR CAPITAL LIMITED

Directors’ report

For the value of that innovation to be realised for our customers and our shareholders, solutions need to be developed and brought to market as quickly as possible. Our business is focused on building a pipeline of solutions from our leading edge, tailored offerings to affordable, mass market products.

Client focus

Excelsior Capital Limited has a proud history of collaboration with our clients in mining and infrastructure to create cutting-edge solutions. Through our involvement in industry sector associations, including our support of the Mine Electrical Safety Association (MESA), we continue to build strong relationships across these sectors backed by our own client relationship program.

EFFICIENCY

To meet the challenges of a rapidly changing market, last year the Board announced the investment of $500,000 to develop a new mining plug. We have implemented a set of initiatives focusing our business on continuous improvement and enabling us to adapt to the changing needs of our customers for new, lower cost products. Key initiatives are:

Engagement with external consultants to develop more effective management of our working capital; and
Improving our product development processes to increase our speed to market for new mass market products.

ENABLERS

People

Our people, their experience, enthusiasm and dedication, are the foundation of our business.

Technology

We ensure our people have the tools they need to deliver value.

Relationships

Strong relationships with suppliers and business partners help us to deliver on our promise of expertise and precision.

THE MARKET OPPORTUNITY

Electrical components continue to be a growing market globally, driven by rapidly changing technology, increasingly stringent regulation, and continuing expectation from our clients and their stakeholders that they will be provided with expertise and precision in each product we design and manufacture. In particular, we see great opportunities in emerging markets as consumption of our products increase in line with economic growth.

At the same time, electrical componentry is a highly competitive business. We now compete on a global basis

with manufacturers from emerging markets such as China and India. We also face the potential of disruptive market entrants from the technology sector, building on their existing customer base and technology platforms to deliver electrical products.

OUR STRATEGY

Operational

In order to respond to these challenges, we are focusing our business on the development of our Minto Industrial product. We are building our future product pipeline through a combination of strategic acquisitions and a strong R&D) program.

We consider our strategy to be sufficiently agile to deal with the increasing demand for sophisticated electrical products. Our R&D programs are set to deliver customised and mass market products to our customers on a timely basis.

As we begin to recognise revenue from products developed in previous years, we are confident that our ongoing investment in R&D will continue to deliver sustainable returns in the future.

Risks relating to Electrical and divested operations:

Exposure to the domestic resource industry impacting revenues and margin;
Key third party suppliers interrupting the supply chain;
Failure of the product designs to meet a specified level of quality or conformance; and
Warranties and indemnities given relating to the TJM divestment in 2015

Investment portfolio

The Group’s primary investment strategy is to achieve long term dividend returns and capital appreciation, whilst managing risk through a portfolio approach to investing. The Group invests in a diversified portfolio of businesses where the Group may provide capital and strategic advice to those businesses to gain long term investment returns and capital appreciation. The capital is allocated to both listed and unlisted businesses, in the form of equity, debt or a combination of the two.

Risks relating to the investment portfolio:

Termination of Management Agreement or SubManagement Agreement;
Loss of Australian financial service licence by the Sub-Manager;
Manager and Sub-Manager performance;
The market risk of investments declining in value because of economic developments or other events that affect the share market;

2020 ANNUAL REPORT

The liquidity risk of being unable to sell investments at a fair price at times the Group requires cash; and
Share price volatility caused by lack of diversity within the portfolio.

The Group manages risk by identifying risks and mitigating them through a combination of internal controls and management of a diversified portfolio.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There was no significant changes in the state of affairs during the year.

REVIEW OF FINANCIAL CONDITION

Profit from continuing operations

The Group reported a profit before tax of $4.5 million for the year ended 30 June 2020, a decrease of 28% from the prior year. The decrease in profit before tax was mostly a result of write-downs in the Investment Fund after the fund moved predominately to cash. Net profit before tax from the Electrical Components division was $6.5 million. The Group also adopted AASB16 Accounting for Leases which had a negative impact to the profit before tax of $0.16 million.

Liquidity and capital resources

The consolidated cash flow statement illustrates that there was an increase in cash and cash equivalents in the year ended 30 June 2020 of $14.5 million (2019: $2 million decrease). Operating activities generated $8.1 million (2019: $10.5 million) of net cash flows.

The increase in cash inflow in comparison with the prior year is largely due to change is investment strategy and a move to cash during a period of market uncertainty and the improved working capital management strategies implemented by the Board. It is also consistent with the current phase of Excelsior Capital’s capital cycle, with revenues resulting from the development of products in previous years now beginning to be realised. This primarily includes revenues from the sale of Minto Industrial products.

Cash inflow from investing activities of $9.3 million (2019: $7.4 million outflow). This reflects the repositioning of the investment portfolio and liquidation of hybrid securities.

There was also a $2.80 million cash outflow (2019: $5.1 million cash outflow) from financing activities, during the current period.

BUSINESS DIVISIONS

Electrical

The Group continues to be assertive player in the electrical components market over the last 12 months. Revenue in the electrical component segment was $60 million for the year compared to $59.3 million in the previous year and segment profit before tax of $6.5 million. (2019: $7.7 million) after also taking into account the impact of adoption of AASB 16 during the year.

Investment portfolio

The investment portfolio produced a pre-tax loss of $0.8 on a total revenue of $0.3 million, as well as comprehensive loss after tax of $0.7 million.

REVIEW OF INVESTMENTS

As announced to the Australian Stock Exchange (ASX) on 19 August 2020, the Company advised shareholders that it is currently undertaking a review of its investments within the group. As part of that review it has appointed external advisors to assist with both potential divestment and or acquisition growth opportunities.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The Group holds licences issued by the relevant environmental protection authorities in Australia. These licences specify the conditions imposed by the licence or regulation. The Group has an Environmental Management System at the Meadowbank operations and is certified to AS-NZS ISO 14001:2004.

There have been no known breaches of the consolidated entity’s licence conditions or any environmental regulations to which it is subject.

SHARE OPTIONS

There were no options granted to or exercised by executives or employees during the year.

INDEMNIFICATION OF AUDITORS

To the extent permitted by law, the Company has agreed to indemnify its auditors, Hall Chadwick, 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 Hall Chadwick during or since the financial year.

EXCELSIOR CAPITAL LIMITED

Directors’ report

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During or since the financial year, the Company has paid premiums in respect of a contract insuring all the directors of Excelsior Capital Limited against legal costs incurred in defending proceedings for conduct other than:

(a) A wilful breach of duty; or
(b) A contravention of sections 182 or 183 of the Corporations Act 2001, as permitted by section 199B of the Corporations Act 2001.
(c) To the extent permitted by law, the Group has agreed to indemnify its Directors against a liability incurred as such a director to the extent permitted by the Corporations Act 2001 (Cth).

No payment has been made in relation to that indemnity during or since the financial year.

The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

Final dividend declared

On 28 August 2020, the directors of Excelsior Capital Limited declared a final dividend on ordinary shares in respect of the 2020 financial year. The total amount of the dividend is $579,889 which represents a fully franked dividend of 2.0 cents per share. The dividend has not been provided for in the 30 June 2020 financial statements.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Information on the strategy, prospects and risks of the Group is included in the Operating and Financial review.

ROUNDING OFF OF AMOUNTS

The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($000) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.

DIRECTORS’ MEETINGS

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows:

	Meetings	of committees	of committees
	Directors’		Remunera-
	meetings	Audit	tion
Number of meetings held:	12	2	2
Number of meetings attended:
M.X. Glennon	3	1	1
D. Herceg	9	1	-
O. Schweizer	6	1	-
M. Copeland	4	1	1
L.J. Catelan	12	2	2
C.D. Green	3	1	1

All directors attended meetings set by the Company where they were eligible to attend.

2020 ANNUAL REPORT

COMMITTEE MEMBERSHIP

As at the date of this report, the Company had an:

audit committee, and
a remuneration committee of the board of directors.

Members acting on the committees of the board during the year were:

Audit	Remuneration
O. Schweizer(c)	O. Schweizer(c)
C.D. Green(c)	C.D. Green(c)
M.X. Glennon	M.X. Glennon
L.J. Catelan	L.J. Catelan

Notes

DIVIDENDS

	Cents	$’000
Final dividend recommended:
Ordinary shares	2.00	580
Dividends paid in the year:
Interim for the year
• on ordinary shares	2.00	580
Final for 2019 shown as recommended in the 2019 financial report
• on ordinary shares	3.00	870

EXCELSIOR CAPITAL LIMITED

Directors’ report

AUDITOR’S INDEPENDENCE DECLARATION AND NON-AUDIT SERVICES

The directors received the following declaration from the auditor of Excelsior Capital Limited.

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NON-AUDIT SERVICES

The following non-audit services were provided by the entity’s auditors. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Auditors received or are due to receive the following amounts for the provision of non-audit services:

	$
Tax compliance services – Ernst & Young	7,500
Tax consulting – Ernst & Young	17,560
Tax compliance services – Hall Chadwick	6,000
	31,060

2020 ANNUAL REPORT

Remuneration report

Section	Details	Page
1	Remuneration report overview	11
2	Overview of executive remuneration	12
3	Performance and executive remuneration outcomes in FY2020	14
4	How remuneration is governed	15
5	Overview of non-executive director remuneration	16
6	Statutory reporting	17

1. Remuneration report overview

The Directors of Excelsior Capital Limited (Excelsior) present the Remuneration Report (the Report) for the Company and its controlled entities (the Group) for the year ended 30 June 2020. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A of the Corporations Act 2001. The Report details the remuneration arrangements for Excelsior Capital Limited’s key management personnel (KMP):

Non-executive directors (NEDs); and
Executive directors and senior executives (collectively the executives).

KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the major activities of the Company and Group.

The table below outlines the KMP of the Group and their movements during FY20:

Name	Position	Term as KMP
Non-executive directors
M.X. Glennon	Non-Executive Chair	Ceased 4 October 2019
C.D. Green	Non-Executive Director	Ceased 21 September 2019
D. Herceg	Non-Executive Director	Appointed 4 October 2019
M. Copeland	Non-Executive Director	Ceased 3 January 2020
O. Schweizer	Non-Executive Director	Appointed 13 January 2020
Executive director
L.J. Catelan	Executive Director	Full fnancial year
Senior executives
J.E. Johnson	General Manager – Electrical	Full fnancial year
B. Hofman	Company Secretary	Appointed 13 March 2020

EXCELSIOR CAPITAL LIMITED

Remuneration report

2. Overview of executive remuneration

2A. HOW WE DETERMINE EXECUTIVE REMUNERATION POLICIES AND STRUCTURES

Four principles guide our decisions about executive remuneration at Excelsior Capital:

Fairness: provide a fair level of reward to all employees;
Transparency: build a culture of achievement by transparent links between reward and performance; and
Alignment: promote mutually beneficial outcomes by aligning employee, customer and shareholder interests
The Excelsior Capital Culture: drive leadership performance and behaviours that create a culture that promotes safety, diversity and employee satisfaction.

2B. OUR EXECUTIVE REMUNERATION POLICIES AND STRUCTURES

We reward executives with a level and mix of remuneration appropriate to their position, responsibilities and performance, in a way that aligns with the business strategy.

Executives receive fixed remuneration and variable remuneration consisting of short term incentive opportunities. Executive remuneration levels are reviewed annually by the Remuneration Committee with reference to the remuneration guiding principles and market movements.

2C. ELEMENTS OF REMUNERATION

Fixed remuneration

Fixed remuneration consists of base salary, superannuation and other non-monetary benefits and is designed to reward for:

The scope of the executive’s role;
The executive’s skills, experience and qualifications; and
Individual performance.

It is set with reference to comparable roles in similar companies.

2020 ANNUAL REPORT

Short-term incentive (STI)

Under the STI, the General Manager – Electrical has the opportunity to earn an annual incentive award which is delivered in cash. The STI recognises and rewards annual performance.

How is it paid?	100% of any STI award is paid in cash after the assessment of annual performance.
How much can the	A maximum STI opportunity of 20% of fxed remuneration.
executive earn?	Target STI is awarded for achieving the challenging objectives set prior to the beginning of
	each year.
How is performance	The STI performance measures were chosen as they refect the core drivers of short-
measured?	term performance and also provide a framework for delivering sustainable value to the
	Group, its shareholders and customers.
	We measure four key performance indicators (KPIs) covering fnancial and non-
	fnancial, Group and business unit measures of performance. For each KPI, a target and
	stretch objective is set. A summary of the measures and weightings are set out in the
	table below:

			NON- FINANCIAL
	Business		Business unit
	Unit PBT	Growth1	KPIs
Business unit leader	50%	25%	25%

Net revenue and gross margin

Business unit profit before tax (PBT) are the measures against which management and the Board assess the short-term financial performance of the General Manager – Electrical.

The non-financial measures in the STI plan are:

Safety
Implementation of key growth and diversification initiatives
Merger and acquisition opportunities

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 Board. The Board approves the final STI award based on this assessment of performance and 100% is paid in cash three months after the end of the performance period. What happens if the If an executive resigns or is terminated for cause before the end of the financial year, no executive leaves? STI is awarded for that year.

If an executive ceases employment during the performance period by reason of redundancy, ill health, death, or other circumstances approved by the Board, the executive will be entitled to a pro-rata cash payment based on assessment of performance up to the date of ceasing employment for that year (subject to Board discretion).

What happens if there In the event of a change of control, a pro-rata cash payment will be made based on is a change of control? assessment of performance up to the date of the change of control.

EXCELSIOR CAPITAL LIMITED

Remuneration report

Long-term incentives (LTI)

The LTI is an equity arrangement of either options or performance shares and an allocation is considered each year. The aim of the LTI is both:

Retention; and
To align to long term company performance.

No LTI was provided with respect to the full year ended 30 June 2020 (2019: nil).

2E. CHANGES FOR FY20

The Board does not anticipate any changes to the STI and LTI Plans for FY20.

Further details will be provided in the FY20 remuneration report.

3. Performance and executive remuneration outcomes in FY20

3A. ACTUAL REMUNERATION EARNED BY EXECUTIVES IN FY20

The actual remuneration earned by executives in FY20 is set out in section 6 of this Remuneration report. This provides shareholders with a view of the remuneration actually paid to executives for performance in FY20.

3B. PERFORMANCE AGAINST STI MEASURES

A combination of financial and non-financial measures is used to measure performance for STI awards.

Business unit performance against those measures is as follows for FY20:

	FINANCIAL		NON-	FINANCIAL
	Business Unit
	PBT	Growth	Safety	Discretionary
Electrical Business	▴	▴	▴	▴

Below threshold hurdle
At target	◦
Between threshold and target	▬
Between target and stretch	▴

3C. OVERVIEW OF COMPANY PERFORMANCE

The table below sets out information about Excelsior Capital’s earnings and movements in shareholder wealth for the past five years up to and including the current financial year.

	2020	2019	2018	2017	2016
NPAT ($’000)	3,629	4,132	4,245	2,754	3,446
Share price at year end ($)	1.18	1.21	1.36	1.03	0.90
Basic EPS (cents)	12.69	14.21	13.53	8.27	9.90
Total dividends
(cents per share)	5.00	6.00	6.00	6.00	6.00

2020 ANNUAL REPORT

4. How remuneration is governed

4A. REMUNERATION DECISION MAKING

The following diagram represents the Group’s remuneration decision making framework:

Board

Review and approval



Remuneration Committee

Company-wide remuneration framework and policy Executive & NED remuneration outcomes



Executive Director

Recommendations on remuneration outcomes for executive team Management Implementing remuneration policies

The composition of the Remuneration Committee is set out on page 8 of this Remuneration report. Further information on the Remuneration Committee’s role, responsibilities and membership can be seen at www.cmilimited.com.au

4B. USE OF REMUNERATION ADVISORS

The Remuneration Committee may engage external advisers to provide remuneration recommendations regarding the remuneration mix and quantum for executives.

Any remuneration recommendations are provided to the Committee as an input into decision making only. The Remuneration Committee considers the recommendations, along with other factors, in making its remuneration decisions.

There were no fees paid during the year to remuneration advisers (2019: $nil).

4C. CLAWBACK OF REMUNERATION

In the event of serious misconduct or a material misstatement in the Group’s financial statements, the Board has the discretion to reduce, cancel or clawback any unvested STI.

4D. SHARE TRADING POLICY

The Group securities trading policy applies to all NEDs and executives. The policy prohibits employees from dealing in Excelsior Capital Limited securities while in possession of material non-public information relevant to the Group.

The Group would consider a breach of this policy as gross misconduct, which may lead to disciplinary action and potentially dismissal.

4E. EXECUTIVE EMPLOYMENT AGREEMENTS

Remuneration arrangements for executives are formalised in employment agreements. The following outlines the details of contracts with executives:

General Manager – Electrical Business

The General Manager is employed on an individual open ended employment contract which can be terminated with notice by either the Group.

EXCELSIOR CAPITAL LIMITED

Remuneration report

Under the terms of the present contract:

Receives fixed remuneration of $300,665 per annum; and
Maximum STI opportunity is 20% of fixed remuneration.

Termination provisions

			Termina-
			tion in case
			of death,
			disablement,
			redundancy
			or notice
		Termination	without	Termination
	Resignation	for cause	cause	payment
GM	3 months	None	6 months	3 months

Termination payments

The following arrangements applied to outgoing executives in office during FY20:

5. Overview of non-executive director remuneration

Excelsior Capital’s NED fee policy is designed to attract and retain high calibre directors who can discharge the roles and responsibilities required in terms of good governance, strong oversight, independence and objectivity. NEDs receive fees only and do not participate in any performance-related incentive awards. NED fees reflect the demands and responsibilities of the directors.

The Remuneration Committee reviews NED remuneration annually against comparable companies. The Board also considers advice from external advisors when undertaking the review process.

NED fees consist of base fees and committee fees. The chair of the Board attends all committee meetings but does not receive any additional committee fees in addition to base fees.

The table below summarises Board and Committee fees payable to NEDs for FY20 (inclusive of superannuation):

Board fees	2020	2019
Chair1	124,704	98,550
NED	139,163	76,650

Committee fees
Audit2	Chair N/A	N/A
	Member N/A	N/A
Remuneration2	Chair N/A	N/A
	Member N/A	N/A

1 Chairman fees reduced from $158,778 to $98,550 when M.X. Glennon moved from Executive Chairman to Non- Executive Chairman in May 2019.
2 NEDs do not receive additional fees for participation in the Audit or the Remuneration Committee

NEDs may be reimbursed for expenses reasonably incurred in attending to the Group’s affairs.

The Board has confirmed there will be no increases in Board or committee fees for FY20.

2020 ANNUAL REPORT

Maximum aggregate NED fee pool

NED fees are determined within an aggregate NED fee pool limit, which is periodically approved by shareholders. The maximum aggregate amount that may be paid to NEDs for their services is $390,000 during any financial year, as approved by shareholders at a general meeting.

The Board will not seek an increase to the aggregate NED fee pool limit at the 2020 AGM.

6. Statutory reporting

6A. EXECUTIVE KMP REMUNERATION FOR THE YEARS ENDED 30 JUNE 2020 AND 30 JUNE 2019

					LONG-
				POST-	TERM
	SHORT-TERM BENEFITS			EMPLOYMENT	BENEFITS
		Short-			Employee	Termi-	Total	Perfor-
	Salary &	term		Super-	entitle-	nation	remuner-	mance
	fees	incentive	Other	annuation	ment	payments	ation	related
	($)	($)	($)	($)	($)	($)	($)	(%)
M. Copeland3
2020	23,885	-	-	2,269	-	-	26,154	-
2019	74,783	-	-	7,104	-	-	81,887	-
O. Schweizer
2020	-	-	-	-	-	-	-	-
2019	-	-	-	-	-	-	-	-
D. Herceg
2020	-	-	-	-	-	-	-	-
2019	-	-	-	-	-	-	-	-
M.X. Glennon1
2020	-	-	-	-	-	-	-	-
2019	120,833	-	-	11,479	-	-	132,312	-
L.J. Catelan
2020	70,000	-	-	6,650	-	-	76,650	-
2019	70,000	-	-	6,650	-	-	76,650	-
J.E. Johnson
2020	252,408	49,491	25,000	28,680	4,416	-	359,995	14%
2019	252,767	49,491	25,000	28,210	4,148	-	359,616	14%
D.M. Cohen2
2020	-	-	-	-	-	-	-	-
2019	118,560	-	-	10,726	-	19,230	148,516	-

EXCELSIOR CAPITAL LIMITED

Remuneration report

					LONG-
				POST-	TERM
	SHORT-TERM BENEFITS			EMPLOYMENT	BENEFITS
		Short-			Employ-	Termi-
		term		Super-	ee	nation	Total	Perfor-
	Salary &	incen-		annua-	entitle-	pay-	remu-	mance
	fees	tive	Other	tion	ment	ments	neration	related
	($)	($)	($)	($)	($)	($)	($)	(%)
B. Hofman
2020	70,313	-	-	6,680	-	-	76,993	-
2019	-	-	-	-	-	-	-	-
Total
2020	416,606	49,491	25,000	44,279	4,416	-	539,792
2019	636,943	49,491	25,000	64,169	4,148	19,230	798,981

M.X. Glennon moved from Executive Chairman to Non-executive Chairman on 8 April 2019 and ceased employment on 4 October 2019
D.M. Cohen ceased employment on 13 December 2018
M Copeland ceased employment on 3 January 20

The following table outlines the proportion of maximum STI earned in relation to the FY20 financial year.

	Maximum STI
	opportunity (% of fxed re-	% of maximum
	muneration)	earned
J.E. Johnson	20%	100%

2020 ANNUAL REPORT

6B. NED REMUNERATION FOR THE YEARS ENDED 30 JUNE 2020 AND 30 JUNE 2019

	SHORT-TERM	POST-
	BENEFITS	EMPLOYMENT
	Board and
	committee	Super-
	fees	annuation	Total
	$	$	$
O. Schweizer
2020	33,205	3,155	36,360
2019	-	-	-
D. Herceg
2020	90,000	8,550	98,550
2019	-	-	-
M.X. Glennon1
2020	23,885	2,269	26,154
2019	15,000	1,425	16,425
C.D. Green
2020	17,500	1,663	19,163
2019	70,000	6,650	76,650
Total
2020	164,590	15,637	180,227
2019	85,000	8,075	93,075

M.X. Glennon moved from Executive Chairman to Non-Executive Chairman on 8 April 2019 and ceased employment on 4 October 2019

6C. OPTIONS AWARDED, VESTED AND LAPSED DURING THE YEAR

No options were awarded or vested during the year.

EXCELSIOR CAPITAL LIMITED

Remuneration report

6D. OPTION HOLDINGS OF KMP

There are no option holdings of any KMP.6E. Shareholdings of KMP[ 1] .

Shares held in Excelsior Capital Limited (number) at 30 June 2020:

			Held
			nominally
	Balance at	Net change	30 June
	1 July 2019	other2	2020
NEDs
M.X. Glennon	122,076	(122,076)	-
C.D. Green3	25,000	-	25,000
D. Herceg	60,702	-	60,702
Executive director
L.J. Catelan	13,829,800	731,302	14,561,102
Senior executives
J.E. Johnson	-	-	-
D.M. Cohen	1,794	-	1,794
Total	14,039,372	609,226	14,648,598

Includes share and options held directly, indirectly and beneficially by KMP.
All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
Mr Green held 25,000 shares in Excelsior at 21 September 2019 when he ceased to be a KMP.

6F. LOANS FROM KMP AND THEIR RELATED PARTIES

(i) Details of aggregate of loans from KMP and their related parties:

		Interest
		charged		Highest bal-
	Balance at	during the	Balance at	ance during
	1 July 2019	year	end of period	period
Name	$	$	$	$
M.X Glennon	20,000	-	87,000	87,000

(i) Terms and conditions of other transactions with KMP and their related parties:

During the year, a short-term trading cash flow facility of $87,000 was provided from Glennon Capital Pty Ltd, a company controlled by M.X. Glennon to Excelsior Asset Management Pty Ltd, a subsidiary of Excelsior Capital Limited. No amount was repaid during the year. Refer to Note 23.2 .

2020 ANNUAL REPORT

6G. OTHER TRANSACTIONS AND BALANCES WITH KMP AND THEIR RELATED PARTIES

(i) Details and terms and conditions of other transactions with KMP and their related parties:

Purchases

During the year, management and performance fees totalling $516,646 (excluding GST) were pre-paid to Glennon Capital Pty Ltd. The amounts were paid under a Management Agreement entered into in December 2016 which is to run for 5 years to December 2021. $433,316 was pre-paid by Excelsior Capital Limited which includes $133,328 relating to the year ended 2020, $199,992 for the year ended 2021 and a final amount of $99,996 for year ended 2022. Excelsior Asset Management Pty Ltd also paid $83,330, to Glennon Capital Pty Ltd for the period July 2019 to October 2019, of which M.X. Glennon was a director and controlling shareholder.

Signed in accordance with a resolution of the directors

==> picture [100 x 70] intentionally omitted <==

D. Herceg Chairman

Sydney 28 August 2020

EXCELSIOR CAPITAL LIMITED

Consolidated statement of profit or loss

For The Year Ended 30 June

		2020	2019
	Note	$’000	$’000
Revenue from contracts with customers	1	59,952	59,273
Changes in inventories of fnished goods and costs
to fulfl a contract		671	2,271
Raw materials and consumables used		(43,245)	(43,549)
Gross proft		17,378	17,995
Other income	2	(391)	505
Employee benefts expense	3	(6,417)	(6,455)
Repairs, maintenance and consumables expense		(215)	(267)
Occupancy expense	3	(708)	(2,037)
Travel and communication expense		(295)	(279)
Freight and cartage expense		(1,333)	(1,182)
Depreciation and amortisation expense	3	(2,052)	(386)
Finance costs		(123)	-
Investment portfolio management and
administration expenses		(123)	(417)
Other expenses	3	(1,216)	(1,198)
Proft before tax		4,505	6,279
Income tax expense	4	(876)	(2,147)
PROFIT FOR THE YEAR		3,629	4,132
Attributable to:
• Equity holders of the parent		3,679	4,253
• Non-controlling interests		(50)	(121)
		3,629	4,132

The accompanying notes form part of these financial statements.

2020 ANNUAL REPORT

Consolidated statement of comprehensive income

For The Year Ended 30 June

		2020	2019
	Note	$’000	$’000
PROFIT FOR THE YEAR		3,629	4,132
Other comprehensive income
Other comprehensive income that will not be reclassified to
profit or loss in subsequent periods (net of tax):
Net loss on non-current equity investments designated at fair
value, net of tax		(709)	(457)
Other comprehensive income, net of tax		(709)	(457)
TOTAL COMPREHENSIVE INCOME, NET OF TAX		2,920	3,675
Attributable to:
• Equity holders of the parent		2,970	3,796
• Non-controlling interests		(50)	(121)
		2,920	3,675
Earnings per share
Basic and diluted earnings per share attributable to ordinary
equity holders of the parent	16	$0.13	$0.14

The accompanying notes form part of these financial statements.

EXCELSIOR CAPITAL LIMITED

Consolidated statement of financial position

As at 30 June

		2020	2019
	Note	$’000	$’000
ASSETS
Current assets
Cash and cash equivalents	5	19,233	4,751
Trade and other receivables	6	11,827	13,329
Inventories	7	16,333	15,830
Current tax assets		251	39
Financial assets	18	-	2,358
		47,644	36,307
Non-current assets
Financial assets	18	867	11,297
Plant and equipment	8	1,930	258
Goodwill	9	6,850	6,850
Intangible assets	9	1,536	1,751
Deferred tax assets	4	248	-
		11,431	20,156
TOTAL ASSETS		59,075	56,463
LIABILITIES
Current liabilities
Trade and other payables	10	6,987	7,560
Lease liabilities	11	1,332	-
Provisions	12	893	695
		9,212	8,255
Non-current liabilities
Provisions	12	32	76
Lease Liabilities	11	527	-
Deferred tax liabilities	4	-	298
		559	374
TOTAL LIABILITIES		9,771	8,629
NET ASSETS		49,304	47,834
EQUITY
Issued capital	15	28,270	28,270
Retained earnings		21,287	19,692
Reserves		(245)	(170)
Equity attributable to equity holders of the parent		49,312	47,792
Non-controlling interests	15	(8)	42
TOTAL EQUITY		49,304	47,834

The accompanying notes form part of these financial statements.

2020 ANNUAL REPORT

Consolidated statement of changes in equity

For The Year Ended 30 June

				ATTRIBUTABLE	NON-
	ISSUED	RETAINED		TO OWNERS OF	CONTROLLING
	CAPITAL	EARNINGS	RESERVES	THE PARENT	INTERESTS	TOTAL
	$'000	$'000	$'000	$'000	$’000	$'000
As at 1 July 2019	31,687	17,248	287	49,222	13	49,235
Proft after tax	-	4,253	-	4,253	(121)	4,132
Other comprehensive income	-	-	(457)	(457)	-	(457)
Total comprehensive income	-	4,253	(457)	3,796	(121)	3,675
Payment for share-buy back	(3,417)	-	-	(3,417)	-	(3,417)
Dividends paid	-	(1,811)	-	(1,811)	-	(1,811)
Issue of convertible note (equity component)	-		-	-	150	150
At 30 June 2019	28,270	19,692	(170)	47,792	42	47,834
As at 1 July 2019	28,270	19,692	(170)	47,792	42	47,834
Proft for the period	-	3,679	-	3,679	(50)	3,629
Other comprehensive income	-	(634)	(75)	(709)	-	(709)
Total comprehensive income	-	3,045	(75)	2,970	(50)	2,920
Dividends paid	-	(1,450)	-	(1,450)	-	(1,450)
At 30 June 2020	28,270	21,287	(245)	49,312	(8)	49,304

The accompanying notes form part of these financial statements.

EXCELSIOR CAPITAL LIMITED

Consolidated statement of cash flows

For the year ended 30 June

		2020	2019
	Note	$’000	$’000
Operating activities
Receipts from customers		61,534	56,105
Payments to suppliers		(53,870)	(54,399)
Interest received		246	124
Dividends received		86	403
Purchase of debt fnancial instruments		(8,105)	(480)
Proceeds from sale of debt fnancial instruments		9,660	10,972
Income tax paid		(1,529)	(2,268)
Net cash from operating activities	5	8,022	10,457
Investing activities
Payment for plant and equipment		(48)	(35)
Purchase of equity fnancial instruments		(1,080)	(25,425)
Proceeds from sale of equity fnancial instruments		10,696	18,385
Development expenditures	9	(312)	(322)
Net cash from / (used in) investing activities		9,256	(7,399)
Financing activities
Payment for share buy-back	15	-	(3,417)
Proceeds from issue of convertible note		-	150
Lease payments		(1,413)	-
Loan from related parties		67	20
Dividends paid to equity holders of the parent	14	(1,450)	(1,811)
Net cash used in fnancing activities		(2,796)	(5,058)
Net increase / (decrease) in cash and cash equivalents		14,482	(2,000)
Cash and cash equivalents at 1 July		4,751	6,751
Cash and cash equivalents at 30 June	5	19,233	4,751

The accompanying notes form part of these financial statements.

2020 ANNUAL REPORT

Notes the consolidated financial statements

For the year ended 30 June 2020

1. Corporate information

The consolidated financial statements of Excelsior Capital Limited and its subsidiaries (collectively, the Group) for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the directors on 21 August 2020.

Excelsior Capital Limited (the Company or the parent) is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange (ASX).

The Group is principally engaged in the design and distribution of electrical components and cables for resource infrastructure applications and the management of an investment portfolio (see segment information note).

The registered office is located at Level 29, Chifley Tower, 2 Chifley Square, Sydney, NSW, Australia.

Further information on the nature of the operations and principal activities of the Group is provided in the directors’ report. Information on the Group’s structure is provided in Note 19. Information on other related party relationships of the Group is provided in Note 23.

2. Basis of preparation

The financial report is a general purpose financial report which:

Has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board;
Has been prepared on a historical cost basis, except for debt and equity financial instruments which have been measured at fair value;
Is presented in Australian dollars and all values are rounded to the nearest thousand ($000), except when otherwise indicated under the option available to the company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies and

COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Group’s exposure to risks and uncertainties includes:

Financial instruments risk management and policies (Note 18.5)
Sensitivity analyses disclosures (Note 18.5)

JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Group’s accounting policies, management has made judgements, estimates and assumptions which have the most significant effect on the amounts recognised in the consolidated financial statements.

ESTIMATES AND ASSUMPTIONS

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described in the disclosures below.

Impairment of non-financial assets (Note 9)
Provision for expected credit losses of trade receivables and contract assets (Note 18)
Taxes (Note 4)
Fair value measurement of financial instruments (Note 17.4)
Development costs (Note 9)

The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement(s) with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of OCI 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. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, noncontrolling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

CURRENT VERSUS NON-CURRENT CLASSIFICATION

The Group presents assets and liabilities in the statement of financial position based on current/noncurrent classification. An asset is current when it is:

Expected to be realised or intended to be sold or consumed in the normal operating cycle;
Held primarily for the purpose of trading;
Expected to be realised within twelve months after the reporting period; or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

It is expected to be settled in the normal operating cycle;
It is held primarily for the purpose of trading;
It is due to be settled within twelve months after the reporting period; or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

GOODS AND SERVICES TAX (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the costs of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

2020 ANNUAL REPORT

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

OTHER ACCOUNTING POLICIES

Significant and other accounting policies that summarise the measurement basis used are relevant to an understanding of the financial statements and are provided throughout the notes to the financial statements.

THE NOTES TO THE FINANCIAL STATEMENTS

The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the Group. Information is considered material and relevant if, for example:

the amount in question is significant because of its size or nature;

Other disclosures: provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements however, are not considered critical in understanding the financial performance or position of the Group.

For management purposes, the Group is organised into business units based on its products and services and has two reportable segments, as follows:

The electronics segment, which is a supplier of electronic equipment for defence, aviation, electrical safety markets and consumer electronic equipment for home use. It offers products and services in the areas of electronics, safety, thermal and electrical architecture; and
The investment portfolio segment, which invests in listed and unlisted equity instruments and quoted debt instruments.

No operating segments have been aggregated to form the above reportable operating segments.

The Group’s reportable segments under AASB 114 are therefore as follows:

ELECTRICAL COMPONENTS

it is important for understanding the results of the Group;
it helps to explain the impact of significant changes in the Group’s business – for example, acquisitions and impairment write-downs; or
it relates to an aspect of the Group’s operations that is important to its future performance.

The notes are organised into the following sections:

Key numbers: provides a breakdown of individual line items in the financial statements that the Directors consider most relevant and summarises the accounting policies, judgements and estimates relevant to understanding these line items;

Capital: provides information about the capital management practices of the Group and shareholder returns for the year;

Risk: discusses the Group’s exposure to various financial risks, explains how these affect the Group’s financial position and performance and what the Group does to manage these risks;

Group structure: explains aspects of the Group structure and how changes have affected the financial position and performance of the Group;

Unrecognised items: provides information about items that are not recognised in the financial statements but could potentially have an impact on the Group’s financial position and performance; and

Represents the design and distribution of electrical components and cables. The business is divided into two key areas:

1) Electrical cables

This is currently captured under the following primary brands:

XLPE Cables;
Hartland Cables; and
Aflex Cables.

2) Minto Industrial Products

This specialises in couplers and receptacle products in the mining industry.

INVESTMENT PORTFOLIO

Represents investing in listed and unlisted equity instruments and quoted debt instruments to achieve long term dividend returns and capital appreciation.

Investments are acquired for long term holding for dividends and short term holding for revenue generation.

The Board of Directors is the Chief Operating Decision Maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

The following table presents revenue and results information for the Group’s operating segments at 30 June 2020 and 30 June 2019, respectively:

	ADJUSTMENTS
ELECTRICAL	INVESTMENT AND
COMPONENTS	PORTFOLIO ELIMINATIONS CONSOLIDATED
2020 2019	2020 2019 2020 2019 2020	2019
Year ended 30 June: $’000 $’000	$’000 $’000 $’000 $’000 $’000	$’000
Revenue
External customers 59,952 59,273	- - - - 59,952	59,273
Other income 80 134	(471) 332 - 39 (391)	(505)
Total revenue and other income 60,031 59,407	(471) 332 - 39 59,561	59,778
Results
Segment proft before tax 6,508 7,721	(1,931) (1,141) (72) (301) 4,505	6,279

The following table presents assets and liabilities information for the Group’s operating segments at 30 June 2020 and 30 June 2019, respectively:

30 June 2019, respectively:
	2020 2019 2020 2019 2020 2019 2020	2019
	$’000 $’000 $’000 $’000 $’000 $’000 $’000	$’000
Total assets	38,252 38,090 18,705 15,983 2,118 2,390 59,075	56,463
Total liabilities	(16,511) (20,917) (76) (76) 6,816 12,364 (9,771)	(8,629)

ADJUSTMENTS AND ELIMINATIONS

Finance costs, certain employee benefits and operating expenses are not allocated to individual segments as these are managed on an overall group basis.

2020 ANNUAL REPORT

1. Revenue from contracts with customers

DISAGGREGATED REVENUE INFORMATION

Set out below is the disaggregation of the Group’s revenue from contracts with customers:

SEGMENTS:	ELECTRICAL	COMPONENTS
	2020	2019
	$’000	$’000
Type of goods or service
Sale of electrical components and cables	59,952	59,273
Total revenue from contracts with customers	59,952	59,273
Geographical markets
New South Wales	14,600	15,763
Victoria	9,337	7,301
Queensland	22,028	20,590
Western Australia	13,987	15,619
Total revenue from contracts with customers	59,952	59,273
Timing of revenue recognition
Goods transferred at point in time	59,952	59,273
Total revenue from contracts with customers	59,952	59,273

2. Other income

2. Other income
2020	2019
$’000	$’000
Fair value gain on hybrid securities at fair value through proft or loss -	126
Loss on sale of debt and equity instruments (803)	(282)
Interest received 246	124
Dividend income from equity instruments 86	370
Sale of scrap (operations) 80	134
Other -	33
(391)	505

RECOGNITION AND MEASUREMENT

Interest received

Interest received is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

DIVIDENDS INCOME FROM EQUITY INSTRUMENTS

Dividend income is recorded when the Group’s right to receive the dividend is established.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

(LOSS)/GAIN ON SALE OF DEBT AND EQUITY INSTRUMENTS

Net gain/ (loss) on financial assets held at fair value through profit and loss are calculated as the difference between the fair value at the end of the reporting period and the fair value at the previous valuation point. Net gains/(losses) do not include interest or dividend / distribution income.

3. Expenses

not include interest or dividend / distribution income. 3. Expenses
		2020	2019
	Note	$’000	$’000
Employee benefts
Wages and salaries		5,946	5,978
Pension costs		471	458
Termination benefts		-	19
		6,417	6,455
Occupancy expense
Short-term and low value asset leases expense		170	-
Variable lease payment expense		538	-
Minimum lease payments as an operating lease expense		-	1,582
Other		-	455
		708	2,037
Depreciation and amortisation
Depreciation of plant and equipment	8	1,525	76
Amortisation of intangible assets	9	527	310
		2,052	386
Other
Legal expenses		22	20
Insurances, professional services and IT		723	917
Other administrative expenses		471	261
		1,216	1,198

RECOGNITION AND MEASUREMENT

Employee benefits

Employee benefits expenses includes wages and salaries including bonuses, annual and long service leave and associated on-costs as incurred, pensions costs, and termination benefits.

OCCUPANCY EXPENSE

Occupancy expenses premises operating leases and other occupancy expenses (e.g.: utilities, cleaning and security which are expensed as incurred.

OTHER ADMINISTRATIVE EXPENSES

This mainly comprises:

bank fees;
licence fees and permits;
ASX and share registry expenses; and
general administration expenses.

These items are expensed when incurred.

2020 ANNUAL REPORT

4. Income tax

The major components of income tax expense for the years ended 30 June 2020 and 2019 are:

The major components of income tax expense for the years ended 30 June 2020 and 2019 are:
2020	2019
Consolidated proft or loss $’000	$’000
Current income tax:
Current income tax charge 1,482	1,861
Adjustments in respect of current income tax of previous year (75)	(19)
Franking credit from investments (17)	(173)
Deferred tax:
Relating to origination and reversal of temporary differences (138)	478
Adjustments in respect of deferred tax of previous year (376)	-
Income tax expense reported in the statement of proft or loss 876	2,147
Consolidated statement of other comprehensive income
Deferred tax related to items recognised in OCI during the year 32	(196)
32	(196)
Reconciliation of tax expense and the accounting proft multiplied by Australia’s domestic tax rate for 2020 and 2019:
Accounting proft before tax 4,505	6,279
At Australia’s statutory income tax rate of 30% (2019: 30%) 1,351	1,884
Adjustments in respect of current income tax and deferred tax of previous year (481)	(19)
Other items 6	(282)
Income tax expense reported in the statement of proft or loss 876	2,147

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

4. Income tax (continuation)

DEFERRED TAX

Deferred tax relates to the following:

		CURRENT
		YEAR
		RECOGNISED
	OPENING	IN PROFIT OR	CHARGED TO	CLOSING
	BALANCE	LOSS	OCI	BALANCE
2020	$’000	$’000	$’000	$’000
DTA in relation to:
Receivables	(10)	7	-	(3)
Plant and equipment	65	9	-	74
Provisions	364	26	-	390
Accrued expenses	(2)	30	-	28
Other	73	15	-	88
	490	87	-	577
DTL in relation to:
Unrealised gains	(290)	363	32	105
Intangible assets	(498)	64	-	(434)
	(788)	427	32	(329)

Net deferred tax balances assets (liabilities)	(298)	514	32	248

		CURRENT
		YEAR
		RECOGNISED
	OPENING	IN PROFIT OR	CHARGED	CLOSING
	BALANCE	LOSS	TO OCI	BALANCE
2019	$’000	$’000	$’000	$’000
DTA in relation to:
Receivables	(13)	3	-	(10)
Inventories	-	-	-	-
Plant and equipment	44	21	-	65
Provisions	435	(71)	-	364
Accrued expenses	6	(8)	-	(2)
Other	108	(36)	-	73
	580	(90)	-	490
DTL in relation to:
Unrealised gains	(101)	(385)	(196)	(290)
Intangible assets	(494)	(4)	-	(498)
	(595)	(389)	(196)	(788)
Net deferred tax balances assets (liabilities)	(15)	(479)	(196)	(298)

2020 ANNUAL REPORT

Reflected in the statement of financial position as follows:

Refected in the statement of fnancial position as follows:
	2020	2019
	$’000	$’000
Deferred tax assets	577	490
Deferred tax liabilities	(329)	(788)
Deferred tax assets liabilities (net)	248	(298)

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 or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the 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.

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; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, 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 all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can 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 the accounting profit nor taxable profit or loss; and
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, 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 can 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 to 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 has become 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.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change.

The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it reflects new information obtained about facts and circumstances that exist at the acquisition date that, if known, would have affected the amount recognised at that date where recognised during the measurement period.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

TAX CONSOLIDATION

(i) Members of the tax consolidated group and the tax sharing arrangement

Excelsior Capital Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from 1 July 2002. Excelsior Capital 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 have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.

(ii) Tax effect accounting by members of the tax consolidated group

Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting

The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below.

NATURE OF THE TAX FUNDING AGREEMENT

Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement, the funding of tax within the Group is based on accounting profit. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount charged under the tax funding agreement and the allocation under AASB Interpretation 1052, the head entity accounts for these as equity transactions with the subsidiaries.

The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments.

KEY ESTIMATES AND ASSUMPTIONS

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

The Group has $33.0 million (2019: $32.4 million) of capital losses carried forward. These losses relate to subsidiaries that have a history of losses, do not expire, and may not be used to offset taxable income elsewhere in the Group. The subsidiaries neither have any taxable temporary difference nor any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets. On this basis, the Group has determined that it cannot recognise deferred tax assets on the tax losses carried forward.

In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

2020 ANNUAL REPORT

5. Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:

	2020	2019
	$’000	$’000
Cash at bank and on hand	4,645	2,534
Investment trading account	14,588	2,217
	19,233	4,751

Cash at banks earn interest at floating rates based on daily bank deposit rates.

At 30 June 2020, the Group had available $3,535,000 (FY19: $3,562,000) of undrawn committed borrowing facilities.

	Note
Cash fow reconciliation
Reconciliation of proft after tax to net cash fows from
operations
Proft after tax	3,629 4,132
Adjustments to reconcile profit after tax to net cash flows
Depreciation of plant and equipment	3 1,525 76
Amortisation of intangible assets	3 527 310
Finance costs	123 -
Changes in assets and liabilities:
• Financial assets	2,358 10,367
• Deferred tax assets and liabilities	(441) 286
• Current tax assets and liabilities	(212) (18)
• Provisions	154 129
Working capital adjustments:
• Trade and other receivables and prepayments	1,502 (3,520)
• Inventories	(503) (4,316)
• Trade and other payables	(640) 3,011
Net cash fows from operating activities	8,022 10,457

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

6. Trade and other receivables

6. Trade and other receivables
2020	2019
$’000	$’000
Current
Trade receivables 11,370	13,213
Allowance for expected credit losses (25)	(21)
11,345	13,192
Prepayments 482	137
11,827	13,329

RECOGNITION AND MEASUREMENT

A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in Note 18 Financial instruments – initial recognition and subsequent measurement.

TERMS AND CONDITIONS RELATING TO THE ABOVE

As at 30 June 2020, the Group has trade receivables of $11,345,000 (2019: $13,192,000) which is net of an allowance for expected credit losses of $25,000 (2019: $21,000).

Set out below is the movement in the allowance for expected credit losses of trade receivables:

	2020	2019
	$’000	$’000
As at 1 July	21	24
Provision for expected credit losses	4	-
Utilisation of provision	-	(3)
As at 30 June	25	21

The significant changes in the balances of trade receivables are disclosed in Note 18.1 while the information about the credit exposures are disclosed in Note 18.5.

Past due but not impaired

There was a past due balance greater than 90 days at 30 June 2020, however this has been assessed as not being impaired. This balance is expected to be fully recoverable ($17,000).

2020 ANNUAL REPORT

7. Inventories

7. Inventories
	2020	2019
	$’000	$’000
Raw materials	980	1,609
Work in progress	138	290
Finished goods	15,215	13,931
Total inventories at the lower of cost and net realisable value	16,333	15,830

RECOGNITION AND MEASUREMENT

Inventories are valued 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: purchase cost on a first-in/first-out basis; and
Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the costs necessary to make the sale.

There was no write down of net realisable value during the year.

8. Plant and equipment

There was no write down of net realisable value during the year. 8. Plant and equipment
	Plant and	Right-of-use
	equipment	assets	Total
	$’000	$’000	$’000
Cost
At 1 July 2018	2,851		2,851
Additions	35		35
At 30 June 2019	2,886	-	2,886
At 1 July 2019*	2,886	3,149	6,035
Additions	48	-	48
At 30 June 2020	2,934	3,149	6,083
Depreciation and impairment
At 1 July 2018	2,552	-	2,552
Depreciation charge for the year	76	-	76
At 30 June 2019	2,628	-	2,628
At 1 July 2019*	2,628	-	2,628
Depreciation charge for the year	75	1,450	1,525
At 30 June 2020	2,703	1,450	4,153
Net book value
At 30 June 2020	231	1,699	1,930
At 1 July 2019*	258	3,149	3,407
At 30 June 2019	258	-	258

Refer to Note 25.1 for adjustment recognised on adoption of AASB 16 on 1 July 2019.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

RECOGNITION AND MEASUREMENT

Plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

Plant and machinery 3-20 years

An item of plant and equipment is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognised.

The residual values, useful lives and methods of depreciation of plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date, as well as any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset, or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset.

9. Intangible assets

	Development
	costs	Goodwill	Total
	$’000	$’000	$’000
Carrying value
At 1 July 2018	3,251	8,660	11,911
Additions – internally developed	322	-	322
At 30 June 2019	3,573	8,660	12,233
Additions – internally developed	312	-	312
At 30 June 2020	3,885	8,660	12,545
Amortisation and impairment
At 1 July 2018	1,512	1,810	3,322
Amortisation	310	-	310
At 30 June 2019	1,822	1,810	3,632
Amortisation	527	-	527
At 30 June 2020	2,349	1,810	4,159
Net book value
At 30 June 2020	1,536	6,850	8,386
At 30 June 2019	1,751	6,850	8,601

2020 ANNUAL REPORT

RECOGNITION AND MEASUREMENT

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

THE USEFUL LIVES OF INTANGIBLE ASSETS ARE ASSESSED AS EITHER FINITE OR INDEFINITE

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.

Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

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 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.

There are two design and development projects:

Cable coupling devices; and
Components for mining.

KEY ESTIMATES AND ASSUMPTIONS – DEVELOPMENT COSTS

The Group capitalises costs for product development projects. Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model.

At 30 June 2020, the carrying amount of capitalised development costs was $1,536,000 (2019: $1,751,000).

The remaining amortisation period is:

Within one year – $252,000

After one year but not more than five years – $704,000 Under development not completed – $580,000

GOODWILL

For impairment testing, goodwill acquired through business combinations are allocated to the electronics components CGU, which is also an operating and reportable segment.

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 benefits;
The availability of resources to complete the asset; and
The ability to measure reliably the expenditure during development.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

CARRYING AMOUNT OF GOODWILL ALLOCATED TO THE CGU:

	ELECTRICAL	COMPONENTS
	2020	2019
	$’000	$’000
Goodwill	6,850	6,850

The Group performed its annual impairment test in June 2019. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment.

ELECTRICAL COMPONENTS CGU

The recoverable amount of the electrical components CGU, as at 30 June 2020, has been determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period.

The pre-tax discount rate applied to cash flow projections is 18.4% (2019: 15.9%) and cash flows beyond the five-year period are extrapolated using a 2.5% growth rate (2019: 2.5%) that is the same as the long-term average growth rate for the electrical components industry.

It was concluded that the book value of the CGU did not exceed the value in use. As a result of this analysis, management determined that there is no impairment charge in the current year against goodwill with a carrying amount of $6,850,000 as at 30 June 2020.

KEY ASSUMPTIONS USED IN VALUE IN USE CALCULATIONS AND SENSITIVITY TO CHANGES IN ASSUMPTIONS

The calculation of value in use for the electrical components unit is most sensitive to the following assumptions:

Discount rates; and
Growth rate estimates used to extrapolate cash flows beyond the forecast period.

Discount rates – Discount rates represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segment and is derived from the cost of equity. The cost of equity is derived from the expected return on investment by the Group’s investors.

The cost of debt is nil as the Group has no debt.

Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate.

A rise in the pre-tax discount rate to 22.4% (i.e. +4.0%) in the electrical components unit would result in nil headroom for impairment.

Growth rate estimates – Rates are based on published industry research. These have been updated for the current economic outlook.

Management recognises that the speed of technological change and the possibility of new entrants can have a significant impact on growth rate assumptions. The effect of new entrants is not expected to have an adverse impact on the forecasts, but could yield a reasonably possible alternative to the estimated long-term growth rate of 2.5% for the electrical components unit.

A reduction by 27% in the long-term growth rate in the electrical components unit from +2.5% to -24.5% would result in nil headroom for impairment.

KEY ESTIMATES AND ASSUMPTIONS – IMPAIRMENT OF NON-FINANCIAL ASSETS

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model.

The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested.

The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognised by the Group. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and explained above.

2020 ANNUAL REPORT

10. Trade and other payables

		2020	2019
	Note	$’000	$’000
Trade payables		5,983	4,877
Creditors and accruals		917	2,663
Related parties	23	87	20
	18	6,987	7,560
Current		6,987	7,560

RECOGNITION AND MEASUREMENT

Trade and other payables and other accounts payable are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and services.

TERMS AND CONDITIONS OF THE ABOVE FINANCIAL LIABILITIES:

Trade payables are non-interest bearing and are normally settled on 30-60 day terms;
For terms and conditions with related parties, refer to Note 23; and
For explanations on the Group’s liquidity risk management processes, refer to Note 18.5.

11. Lease liabilities

• For explanations on the Group’s liquidity risk management processes, refer to Note 18.5. 11. Lease liabilities
	2020
	$’000

Current	1,332
Non-current	527
	1,859

RECOGNITION AND MEASUREMENT

At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts that are classified as shortterm leases (ie a lease with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease.

Initially, the lease liability is measured at the present value of the lease payments still to be paid at commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate.

Lease payments included in the measurement of the lease liability are as follows:

fixed lease payments less any lease incentives;
variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
lease payments under extension options, if lessee is reasonably certain to exercise the options; and
payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

12. Provisions

	Annual and
	long service
	leave
	$’000
At 1 July 2019	771
Arising during the year	501
Utilised	(347)
At 30 June 2020	925
Current	893
Non-current	32
At 1 July 2018	641
Arising during the year	396
Utilised	(266)
At 30 June 2019	771
Current	695
Non-current	76

RECOGNITION AND MEASUREMENT

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

Long service leave and annual leave

The Group recognises a liability for long service leave and annual leave measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.

Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service.

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, the estimated future cash outflows.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when 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.

2020 ANNUAL REPORT

13. Capital management

THE GROUP’S CAPITAL MANAGEMENT OBJECTIVES

For the purpose of the Group’s capital management, capital includes issued capital, and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to maximise the shareholder value.

The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants.

To maintain or adjust the capital structure, the Group may adjust:

the dividend payment to shareholders;
return capital to shareholders; or
issue new shares.

The Group is not subject to any externally imposed capital requirements.

The Board is responsible for monitoring and approving the capital management framework within which management operates. The purpose of the framework is to prudently manage capital whilst optimising the debt and equity structure.

	2020	2019
	$’000	$’000
Bank guarantees	265	238
Net debt	265	238
Equity	49,312	47,792
Total capital	49,312	47,792
Capital and net debt	49,577	48,030

In order to achieve this overall objective, the Group’s capital management, among other things, aims to ensure that it meets financial covenants that define capital structure requirements. There have been no breaches of the financial covenants in the current period.

No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2020 and 2019.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

14. Dividends

14. Dividends
2020	2019
$’000	$’000
Cash dividends on ordinary shares declared and paid:
Final dividend for 2019: 3.0 cents per share (2018: 3.0 cents per share) 870	941
Interim dividend for 2020: 2.0 cents per share (2019: 3.0 cents per share) 580	870
1,450	1,811
Proposed dividends on ordinary shares
Final cash dividend for 2020: 2.0 cents per share (2019: 3.0 cents per share) 580	870
Franking credit balance
The amount of franking credits available for the subsequent fnancial year are:
• Franking account balance as at the end of the fnancial year at 30% (2019: 30%) 25,910	24,778
• Franking debits that will arise from the payment of dividends as at the end of the fnancial year 249	373

15. Issued capital, reserves and non-controlling interest

15.1 ISSUED SHARES

15.1 ISSUED SHARES
	2020	2019
	Thousands
Ordinary shares	28,994	28,994
	28,994	28,994

	Thousands	$’000
At 1 July 2018	31,367	31,687
Share buy-back on 23 November 2018	(2,373)	(3,417)
At 30 June 2019 and 30 June 2020	28,994	28,270

In prior year, the issued capital was decreased by $3,417,000 by the off-market buy back of 2,372,902 shares.

2020 ANNUAL REPORT

15.2 RESERVES AND NON-CONTROLLING INTEREST

The disaggregation of changes of OCI by each type of reserve in equity and non-controlling interest is shown below:

	FAIR VALUE
	RESERVE OF
	FINANCIAL	NON-
	ASSETS AT	CONTROLLING
	FVOCI	INTEREST
Year ended 30 June 2019	$’000	$’000

As at 1 July 2018	287	13
Loss for the period	-	(121)
Other comprehensive income	(457)	-
Issue of convertible note (equity component)	-	150
At 30 June 2019 and 1 July 2019	(170)	42
Loss for the year	-	(50)
Other comprehensive income	(75)	-
At 30 June 2020	(245)	(8)

16. Earnings per share (EPS)

Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of 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 the dilutive potential ordinary shares into ordinary shares.

The following table reflects the income and share data used in the basic and diluted EPS calculations:

The following table refects the income and share data used in the basic and diluted EPS calculations:
2020	2019
$’000	$’000
Proft attributable to ordinary equity holders of the parent 3,679	4,253
Proft attributable to ordinary equity holders of the parent for basic earnings 3,679	4,253
Proft attributable to ordinary equity holders of the parent adjusted for the effect of dilution 3,679	4,253

2020	2019
Thousands	Thousands
Weighted average number of ordinary shares for basic EPS 28,994	29,937
Weighted average number of ordinary shares adjusted for the effect of dilution 28,994	29,937

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

17. Fair value measurement

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

17.1 FAIR VALUE MEASUREMENT HIERARCHY FOR ASSETS AS AT 30 JUNE 2020:

			FAIR VALUE	MEASUREMENT USING	MEASUREMENT USING
			Quoted
			prices	Signifcant Signifcant
			in active	observable unobserv-
			markets	inputs able inputs
	Date of	Total	(Level 1)	(Level 2) (Level		3)
	valuation	$’000	$’000	$’000	$’000
Assets measured at fair value
Quoted equity shares (Note 18)	30 June 2020	587	587	-		-
Unquoted equity shares (Note 18)	30 June 2020	280	-	280		-
Quoted hybrid securities (Note 18)	30 June 2020	-	-	-		-

There was no transfer from Level 1 to Level 2 during the year 2020:

Axsesstoday Limited entered voluntary administration in April 2019 resulting in a write down of its investment; and
Agentfinder Limited (unlisted) completed a capital raising in May 2020 at 0.20 cents per share resulting in a revaluation of the investment to ($280,000).

There were no transfers between Level 1 and 2 to or from Level 3 during 2020.

17.2 FAIR VALUE MEASUREMENT HIERARCHY FOR ASSETS AS AT 30 JUNE 2019:

			FAIR VALUE	MEASUREMENT USING	MEASUREMENT USING
			Quoted
			prices	Signifcant	Signifcant
			in active	observable	unobserv-
			markets	inputs	able inputs
	Date of	Total	(Level 1)	(Level 2)	(Level 3)
	valuation	$’000	$’000	$’000	$’000
Assets measured at fair value
Quoted equity shares (Note 18)	30 June 2019	10,597	10,439	158	-
Unquoted equity shares (Note 18)	30 June 2019	700	-	-	700
Quoted hybrid securities (Note 18)	30 June 2019	2,358	1,878	480	-

There was a transfer of the following from Level 1 to Level 2 during 2019:

Axsesstoday Limited entered voluntary administration in April 2019; and
GO2 People Limited was suspended from trading on the 10 April 2019 pending the release of announcement regarding an acquisition and a capital raising. It is expected the company will recommence trading on the ASX on the 14 August 2019 ($158,000).

There were no transfers between Level 1, 2 or 3 during 2019.

2020 ANNUAL REPORT

17.3 FAIR VALUE MEASUREMENT HIERARCHY FOR LIABILITIES AS AT 30 JUNE 2020 AND 30 JUNE 2019

There is no liabilities in the Group that are subject to fair value measurement for 30 June 2020 and 2019.

17.4 FAIR VALUE MEASUREMENT

The Group measures financial instruments such as investments, at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

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.

The Board determines the policies and procedures for both recurring fair value measurement, such as unquoted financial assets.

At each reporting date, the Board analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group’s accounting policies. For this analysis, the Board verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Board also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.

The Manager of the Group’s investment portfolio presents the valuation results to the Audit Committee and the Group’s independent auditors. This includes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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; and
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

18. Financial assets and financial liabilities

18.1 FINANCIAL ASSETS

18.1 FINANCIAL ASSETS
	2020	2019
	Note $’000	$’000
Financial assets at fair value through proft or loss
Quoted hybrid securities	17 -	2,358
Financial assets at fair value through OCI
Quoted equity shares	17 587	10,597
Unquoted equity shares	17 280	700
	867	11,297
Financial assets at amortised cost
Cash and cash equivalents	5 19,233	4,751
Trade receivables	6 11,827	13,329
Total fnancial assets	31,927	31,735
Total current	31,060	20,438
Total non-current	867	11,297

Recognition and measurement

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), or fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group 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. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under AASB 15.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in three categories:

Financial assets at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments);
Financial assets at fair value through profit or loss (quoted hybrid securities); and
Trade receivables at amortised cost.

2020 ANNUAL REPORT

Financial assets measured at fair value through OCI (equity instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss.

Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established.

Equity instruments designated at fair value through OCI are not subject to impairment assessment.

The Group elected to classify irrevocably its quoted and unquoted equity investments under this category as the Group considers these investments to be strategic in nature.

Financial assets at fair value through profit or loss (quoted hybrid securities)

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value.

Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes quoted hybrid debt securities which the Group had irrevocably elected to classify at fair value through profit or loss.

Interest received on quoted hybrid securities is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Fair values of the quoted hybrid securities are determined by reference to published price quotations in an active market.

DERECOGNITION

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

The rights to receive cash flows from the asset have expired; or
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

IMPAIRMENT OF FINANCIAL ASSETS

Further disclosures relating to impairment of financial assets are also provided in the following notes:

Trade receivables (Note 6)

Trade receivables

For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. This was based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

18.2 FINANCIAL LIABILITIES

18.2 FINANCIAL LIABILITIES
		2020	2019
	Note	$’000	$’000
Financial liabilities at amortised cost
Trade and other payables	10	6,987	7,560
Lease liabilities	11	1,859	-
Total fnancial liabilities		8,846	7,560
Total current		8,319	7,560
Total non-current		527	-

Recognition and measurement

Initial recognition and measurement

The Group’s financial liabilities include trade and other payables only. These are classified, at initial recognition as payables, net of directly attributable transaction costs as appropriate.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

18.3 FAIR VALUES

Set out below is a comparison, by class, of the carrying amounts and fair values of the Group’s financial instruments:

	2020	2020	2019
	Carrying	Fair	Carrying	Fair
	amount	value	amount	value
	$’000	$’000	$’000	$’000
Financial assets
Unquoted equity shares	280	280	700	700
Quoted equity shares	587	587	10,597	10,597
Quoted hybrid securities	-	-	2,358	2,358
	867	867	13,655	13,655

2020 ANNUAL REPORT

18.4 FAIR VALUES MEASUREMENTS AND VALUATION PROCESSES

Management assessed that the fair values of:

cash deposits;
trade receivables; and
trade payables

approximate their carrying amounts largely due to the short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair values:

The fair values of the quoted hybrid securities are based on price quotations at the reporting date.
In addition to being sensitive to a change in the forecast cash flows or the discount rate, the fair value of the unquoted equity instruments is also sensitive to a reasonably possible change in the growth rates. The valuation requires management to use unobservable inputs in the model. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
There is an active market for the Group’s quoted equity shares and quoted hybrid securities.

18.5 FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial liabilities, comprise trade and other payables only. The Group’s principal financial assets include trade receivables, and cash that derive directly from its operations. The Group also holds investments in hybrid debt and equity instruments.

The Group is exposed to:

market risk,
interest rate risk;
currency risk; and
other price risk, such as equity price risk.

Financial instruments affected by market risk include deposits and debt and equity investments.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a foreign currency).

The Group does not have a defined policy on foreign currency derivatives, however the Board assesses the risk of individual transactions as they arise for the requirement to use currency derivative instruments.

Equity price risk

The Group’s listed and non-listed equity investments are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group’s Board of Directors on a regular basis. The Group’s Board of Directors reviews and approves all equity and hybrid investment decisions.

At the reporting date, the exposure to non-listed equity investments at fair value was $280,000 (2019: $700,000).

credit risk; and
liquidity risk.

The Board of Directors oversees the management of these risks. The Board of Directors advises on financial risks and the appropriate financial risk governance framework for the Group. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

At the reporting date, the exposure to equity and hybrid investments at fair value listed on the ASX was $587,000 (2019: $12,955,000). Given that the changes in fair values of the equity investments held are strongly positively correlated with changes to the ASX market index, the Group has determined that an increase/(decrease) of 10% on the ASX market index could have an impact of approximately $41,000 (2019: $907,000) increase/ (decrease) on the income and equity attributable to the Group.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

Credit risk

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 activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables and contract assets are regularly monitored and any shipments to major customers are generally covered by letters of credit.

At 30 June 2020, the Group had 22 customers (2019: 28) that owed the Group more than $100,000 each and accounted for approximately 81% (2019: 78%) of all the receivables outstanding. There were 6 customers (2019: 8 customers) with balances greater than $500,000 accounting for just over 48% (2019: 42%) of the total amounts of trade receivables.

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e., by geographical region, product type, customer type and rating, and coverage by letters of credit or other forms of credit insurance). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written-off if past due for more than one year and are not subject to enforcement activity. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 6. The Group does not hold collateral as security. The letters of credit are considered integral part of trade receivables and considered in the calculation of impairment.

The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:

			DAYS PAST DUE	DAYS PAST DUE
		<30	30-60	61-90
	Current	days	days	days	Total
	$’000	$’000	$’000	$’000	$’000
30 June 2020
Expected credit loss rate	0.11%	0.16%	0.23%	9%
Estimated total gross carrying amount
at default	5,459	4,510	1,298	103	11,370
Expected credit loss	6	7	3	9	25
30 June 2019
Expected credit loss rate	0.10%	0.15%	0.20%	5%
Estimated total gross carrying amount
at default	6,043	5,794	1,280	96	13,213
Expected credit loss	6	9	2	4	21

2020 ANNUAL REPORT

Financial instruments

The Group invests only in quoted hybrid securities with very low credit risk. The Group’s debt instruments at fair value through profit or loss comprised solely of quoted hybrid securities that are graded in the top investment category (Very Good and Good) credit rating agencies and, therefore, are considered to be low credit risk investments.

Liquidity risk

The Group monitors its risk of a shortage of funds using a liquidity planning tool.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of a bank guarantee and finance lease facility. The Group has access to a sufficient variety of sources of funding within 12 months can be rolled over with existing lenders.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:

		On	< 3	3-12	1-5	>5
		demand	months	months	years	years	Total
Financial liabilities		$’000	$’000	$’000	$’000	$’000	$’000
2020
Non-derivatives
Trade	and other payables	6,987	-	-	-	-	6,987
Lease liabilities		-	750	582	527		1,859
		6,987	750	582	527	-	8,846
2019
Non-derivatives
Trade	and other payables	7,560	-	-	-	-	7,560
		7,560	-	-	-	-	7,560

Financing facilities						2020	2019
						$’000	$’000
Finance lease facility which may be extended by mutual agreement annually
•	Amount unused					2,000	2,000
						2,000	2,000
Bank	guarantee facility which may be extended by mutual			agreement annually
•	Amount used					265	238
•	Amount unused					1,535	1,562
						1,800	1,800

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

19. Group information

19.1 INFORMATION ABOUT SUBSIDIARIES

The consolidated financial statements of the Group include:

			% EQUITY INTEREST
		Country of
	Principal	incorpora-	2020	2019
Name	activities	tion	%	%

Parent
Excelsior Capital Limited		Australia

Subsidiaries
CMI Operations Pty Ltd	Electrical components	Australia	100	100
Excelsior Asset Management Pty Ltd1	Asset manager	Australia	50	50

This company was established on 17 November 2017 by Excelsior Capital Limited and Glennon Capital Pty Ltd, the Manager of the Investment Portfolio. While the Group has a 50% equity interest in Excelsior and the Group represents 50% representation of Excelsior’s board of directors, the chair of the board is appointed by the Group. The Group has a casting vote on certain matters. The Group has control of the company and as such is classified as a subsidiary of the Group for reporting purposes under Australian Accounting Standards.

20. Commitments and contingencies

20.1 COMMITMENTS

At 30 June 2020, the Group had no commitments (2019: Nil).

20.2 GUARANTEES

The Group has provided the following guarantee at 30 June 2020:

Leases over several of its premises of $265,000 (2019: $238,000)

20.3 CONTINGENT LIABILITIES

The Company has issued the following guarantees in relation to the debts of its subsidiaries:

Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, Excelsior Capital Limited has entered into a deed of cross guarantee. The effect of the deed is that Excelsior Capital Limited has guaranteed to pay any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.
The controlled entities have also given a similar guarantee in the event that Excelsior Capital Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.

Guarantees on lease of premises

The company has a contingent liability whereby arising as a result of guarantees made directly for lease of premises. The amount disclosed represents the aggregate amount of such guarantees. The extent to which an outflow of funds will be required is dependent on the satisfaction of the obligations under the terms of the leases.

2020 ANNUAL REPORT

21. Events after the reporting period

21.1 FINAL DIVIDEND DECLARED

22. Auditor’s remuneration

The auditor of Excelsior Capital Limited is Hall Chadwick (2019: Ernst & Young Australia).

2020	2019
$	$
Amounts received or due and receivable by Hall Chadwick for:
An audit of the fnancial report of the entity and any other entity in the
consolidated group 50,000	-
Other services in relation to the entity and any other entity in the
consolidated group:
• Tax compliance 6,000	-
56,000	-

Amounts received or due and receivable by Ernst & Young Australia for:
An audit or review of the fnancial report of the entity and any other entity in the
consolidated group 67,778	200,000
Other services in relation to the entity and any other entity in the
consolidated group:
• Tax compliance 7,500	15,952
• Tax consulting 17,560	56,537
• Other -	738
92,838	273,227
Total paid to auditors 148,838	273,427

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

23. Related party disclosures

Note 19 provides information about the Group’s structure, including details of the subsidiaries and the holding company. The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year.

			Purchases	Amounts
		Sales to re-	from related	owed to re-
		lated parties	parties	lated parties
		$	$	$
Key management personnel of the Group:
Other directors’ interests	2020	-	516,646	-
	2019	-	295,671	36,666

23.1 TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 30 June 2020, the Group has not recognised any provision for expected credit losses relating to amounts owed by related parties (2019: $Nil).

23.2 OTHER DIRECTORS’ INTERESTS

Purchases

During the year, management and performance fees totalling $516,646 (excluding GST) were paid from Excelsior Capital Limited, $433,316 and Excelsior Asset Management Pty Ltd, $83,330, to Glennon Capital Pty Ltd, of which M.X. Glennon is a director and controlling shareholder.

Amounts owed to related parties

23.3 COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE GROUP

	2020	2019
	$	$
Short-term employee benefts	655,687	771,434
Post-employment benefts	64,332	161,392
Termination benefts	-	19,230
Total compensation paid to key management personnel	720,019	892,056

Reconciliation to Remuneration report
Executives	539,792	798,981
NED’s	180,227	93,075
Total compensation paid to key management personnel	720,019	892,056

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

2020 ANNUAL REPORT

24. Information relating to Excelsior Capital Limited (the Parent)

The table represents the legal parent entity, which is Excelsior Capital Limited.

The table represents the legal parent entity, which is Excelsior Capital Limited.
2020	2019
$	$
Current assets 20,119	19,626
Total assets 27,761	29,867
Current liabilities 99	182
Total liabilities 136	587
Issued capital 28,270	28,270
Retained earnings (400)	1,377
Reserves (245)	(367)
27,625	29,280
Loss after tax (946)	(1,053)
Total comprehensive income (604)	(457)

Refer to Note 20 for guarantees that the Parent has issued in relation to the debts of its subsidiaries.

25. Changes in accounting policies and disclosures

25.1 NEW AND AMENDED STANDARDS AND INTERPRETATIONS

Initial application of AASB 16

AASB 16 was issued in January 2016 and it replaces AASB 117 Leases, AASB Interpretation 4 Determining whether an Arrangement contains Lease, AASB Interpretation-115 Operating Lease-Incentives and AASB Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117.

The standard includes two recognition exemptions for lessees – lease of ‘low-value’ assets (e.g., personal computers) and short term 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 sue the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to be separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees are also required to remeasure 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.

AASB 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees to make more extensive disclosure than under AASB 117.

The Group has adopted AASB 16 using the first variation of the modified retrospective approach, where the rightof-use asset at the date of initial application (1 July 2019) is measured at an amount equal to the lease liability, using an incremental borrowing rate (IBR). Comparative figures are not restated.

The Group has elected to apply the standard to contracts that were previously identified as leases applying AASB 117 and AASB Interpretation 4.

The Group has elected to use the exemptions proposed by the standard on lease contracts for which:

the lease terms ends within 12 months as of the date of initial application; and
lease contracts for which the underlying asset is of low value. The Group has leases of certain office equipment (i.e. personal computers, printing and photocopying machines) that are considered of low value of less than $10,000.

EXCELSIOR CAPITAL LIMITED

Notes the consolidated financial statements

For the year ended 30 June 2020

Adjustments recognised in the balance sheet on 1 July 2019

The following summary indicates the adjustments and reclassifications of financial statement line item in the balance sheet due to the implementation of AASB 16.

		Carrying		Carrying
		amount un-		amount un-
		der AASB 117	Adjustments	der AASB 16
	Note	$’000	$’000	$’000
Plant and equipment	8	258	3,149	3,407
Lease liabilities	11	-	(3,149)	(3,149)

Measurement of lease liabilities

The following table represents a reconciliation between the lease commitments as of 30 June 2019 and the lease liability as of 1 July 2019.

The following table represents a reconciliation between the lease commitments as of 30 June 2019 and the lease liability as of 1 July 2019.
$’000
Operating lease commitments disclosed as at 30 June 2019 3,658
Discounted using the lessee’s incremental borrowing rate at the date of initial application (477)
Short-term and low value asset leases (32)
Lease liabilities recognised as at 1 July 2019 3,149
Current 1,413
Non-current 1,736

2020 ANNUAL REPORT

Directors’ declaration

In accordance with a resolution of the directors of Excelsior Capital Limited, I state that:

In the opinion of the directors:
(a) the financial statements and notes of Excelsior Capital Limited for the financial year ended 30 June 2020 are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the year ended on that date; and
- (ii) complying with Accounting Standards and the Corporations Regulations 2001.
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed on page 22; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
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 for the financial year ended 30 June 2020.

On behalf of the board

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D. Herceg Chairman

28 August 2020

EXCELSIOR CAPITAL LIMITED

Independent auditor’s report

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2020 ANNUAL REPORT

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EXCELSIOR CAPITAL LIMITED

Independent auditor’s report

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2020 ANNUAL REPORT

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EXCELSIOR CAPITAL LIMITED

ASX additional information

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 01 September 2020.

(A) DISTRIBUTION OF EQUITY SECURITIES

(i) Ordinary share capital
28,994,469 fully paid ordinary shares are held by 574 individual shareholders
All issued ordinary shares carry one vote per share and carry the rights to dividends.
(ii) Unquoted securities
Nil
(iii) Options

Nil

The number of shareholders, by size of holding, in each class are:

	Fully paid ordinary shares
1 – 1,000	144
1,001 – 5,000	216
5,001 – 10,000	84
10,001 – 100,000	106
100,001 and over	24
	574

Holding less than a marketable parcel	67

(B) SUBSTANTIAL SHAREHOLDERS

	FULLY	PAID
Ordinary shareholders	Number	Percentage
L.J. Catelan	14,561,102	50.22
P.E.J. Murray	1,847,096	6.37
	16,408,198	56.59

2020 ANNUAL REPORT

(C) TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES

		FULLY	PAID
	Ordinary shareholders	Number	Percentage
1.	Catelan Securities Pty Ltd	12,420,484	42.84
2.	Leanne Catelan Superannuation Fund Pty Ltd	2,140,618	7.38
3.	BNP Paribas Nominees Pty Ltd	1,984,843	6.85
4.	National Nominees (Australia) Limited	1,417,033	4.89
5.	HSBC Custody Nominees (Australia) Limited	1,207,083	4.16
6.	Mr Philip Gordon Greenham	650,000	2.24
7.	Mr Warwick Sauer	487,888	1.68
8.	London City Equities Limited	408,514	1.41
9.	Leropela Pty Ltd	400,000	1.38
10.	HSBC Custody Nominees (Australia) Limited	376,377	1.30
11.	BNP Paribas Noms Pty Ltd	374,767	1.29
12.	Kalabric Family Super Pty Ltd	310,000	1.07
13.	Mast Financial Pty Ltd	300,000	1.03
14.	London City Equities Limited	263,245	0.91
15.	My Peter Edward John Murray	260,166	0.90
16.	Imperial Pacifc Limited	213,000	0.73
17.	Imperial Pacifc Fund Managers Pty Limited	209,607	0.72
18.	Mr Kim Bee Tan & Mrs Verna Suat Wah Tan	200,000	0.69
19.	Mr Benjamin Youngman Graham & Mrs Katerina Graham	180,000	0.62
20.	Capel Court Corporation Pty Limited	176,240	0.61
		23,979,865	82.70

EXCELSIOR CAPITAL LIMITED

Corporate information

ABN 98 050 542 553

DIRECTORS

D. Herceg, Non-Executive Chairman L.J. Catelan, Executive Director O. Schweizer, Non-Executive Director

COMPANY SECRETARY

SOLICITORS

Thompson Geer Level 28 Waterfront Place 1 Eagle Street Brisbane, QLD, 4000 Australia

B. Hofman

BANKERS

REGISTERED OFFICE

Level 29, Chifley Tower 2 Chifley Square Sydney, NSW, 2000

National Australia Bank Level 20 100 Creek Street Brisbane, QLD, 4000 Australia

PRINCIPAL PLACE OF BUSINESS

18-20 Railway Road Meadowbank Australia Phone: 61 2 9807 6155

SHARE REGISTER

AUDITORS

Hall Chadwick (NSW) Level 40 Citi Bank Building 2 Park Street Sydney, NSW, 2000 Australia

Link Market Services Limited Locked Bag A14 Sydney South Australia Phone: 61 2 8280 7454

Excelsior Capital Limited shares are listed on the Australian Stock Exchange (ASX:ECL)

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EXCELSIOR CAPITAL LTD — Annual Report 2020

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Message from the Chairman

Dear Shareholders,

FY20 FINANCIAL RESULTS

FY21 REVIEW

Directors’ report

Directors

NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES

D. Herceg, LL.B (Non-executive Chair)

Appointed 4 October 2019

L.J. Catelan (Executive Director)

O. Schweizer (Non-executive Director)

Appointed 13 January 2020

Company Secretary

Appointed 13 March 2020

Interests in the shares and options of the Company and related bodies corporate

Principal activities

OPERATING AND FINANCIAL REVIEW

EXCELSIOR CAPITAL LIMITED – EXPERTISE AND PRECISION IS OUR PURPOSE

1) Electrical cables

2) Minto Industrial Products

MARKET DRIVERS

STRATEGIC PILLARS

Innovation

Directors’ report

Client focus

EFFICIENCY

ENABLERS

People

Technology

Relationships

THE MARKET OPPORTUNITY

OUR STRATEGY

Operational

Investment portfolio

Risks relating to the investment portfolio:

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

REVIEW OF FINANCIAL CONDITION

Profit from continuing operations

Liquidity and capital resources

BUSINESS DIVISIONS

Electrical

Investment portfolio

REVIEW OF INVESTMENTS

ENVIRONMENTAL REGULATION AND PERFORMANCE

SHARE OPTIONS

INDEMNIFICATION OF AUDITORS

Directors’ report

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

Final dividend declared

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

ROUNDING OFF OF AMOUNTS

DIRECTORS’ MEETINGS

COMMITTEE MEMBERSHIP

DIVIDENDS

Directors’ report

AUDITOR’S INDEPENDENCE DECLARATION AND NON-AUDIT SERVICES

NON-AUDIT SERVICES

Remuneration report

Contents

1. Remuneration report overview

Remuneration report

2. Overview of executive remuneration

2A. HOW WE DETERMINE EXECUTIVE REMUNERATION POLICIES AND STRUCTURES

2B. OUR EXECUTIVE REMUNERATION POLICIES AND STRUCTURES

2C. ELEMENTS OF REMUNERATION

Fixed remuneration

Short-term incentive (STI)

Remuneration report

Long-term incentives (LTI)

2E. CHANGES FOR FY20

3. Performance and executive remuneration outcomes in FY20

3A. ACTUAL REMUNERATION EARNED BY EXECUTIVES IN FY20

3B. PERFORMANCE AGAINST STI MEASURES

EXCELSIOR CAPITAL LTD Annual Report 2020