Ironbark Capital : Half-Year Report to 31 December 2021

For personal use only

ABN 89 008 108 227

IRONBARK CAPITAL LIMITED

APPENDIX 4D

FOR THE HALF-YEAR ENDED

31 DECEMBER 2021

Contents

	Page
Results for Announcement to the Market	2
Chairman's Commentary	3
Investment Manager Report	5
Financial Report	9
Independent Auditor's Review	22

The documents comprise the information required under Listing Rule 4.2A and should be read in conjunction with the Annual Report as at 30 June 2021.

For personal use only

IRONBARK CAPITAL LIMITED

HALF-YEAR ENDED 31 DECEMBER 2021

_________________________________________________________________

Appendix 4D - Half Year Report

Results for Announcement to the Market

The previous corresponding period is the half-year ended 31 December 2020. The Half-Year Financial Report has been subject to review by the Company's auditors.

• Net profit after tax for the half-year was $2.04 million, down 43.6% from the $3.62 million profit in the previous corresponding period.
• Investment revenue from ordinary activities, which includes net realised gains and net unrealised losses was $2.85 million, 42.6% down from the $4.95 million in the previous corresponding period. This includes dividends, distributions and interest which was up 34.1% on the previous corresponding period.
• NTA per share before provision for tax on unrealised gains was $0.559, up 5.3% compared to $0.531 from the previous period. The NTA is after payment of fully franked dividends of 2.25 cents per share since the previous corresponding period.
• NTA per share after provision for tax on unrealised gains was $0.549, up 4.0% compared to $0.528 from the previous period. The NTA is after payment of fully franked dividends of 2.25 cents per share since the previous corresponding period.
• The final fully franked dividend for the 2021 financial year was 1.25 cents per share which was paid on 29 September 2021.
• The interim dividend payable in this financial year is 1 cent per share, fully franked. This has been declared since the period end for ordinary shareholders on the register as at 4 March 2022. This is payable on 31 March 2022.
• The interim dividend for the corresponding period was 1 cent per share fully franked and was paid in March 2021.
• The Dividend Reinvestment Plan remains suspended.

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For personal use only

Ironbark Capital Limited

ABN 89 008 108 227

Chairman's Commentary on the Results

For the half-year ended 31 December 2021

Chairman's Commentary

The December half year did not see a repeat of the very high unrealised gains of the previous corresponding period when share prices recovered to near pre-Covid levels. This is reflected in the Company's results which although down from the prior year was still a very positive result both financially and in performance.

Investment Performance

For the half year to 31 December 2021, the portfolio returned 5.6% inclusive of franking credits, outperforming the Benchmark (1 year swap + 6%p.a.) by 2.5%. This was a very satisfactory result with performance achieved with a portfolio that has a lower volatility than the market. The performance over 1 year of 13.1% and 3 years of 9.4% inclusive of franking credits, exceeds their benchmark returns by 7.0% and 2.9% respectively, and has been achieved in times of economic uncertainty arising from the Covid - 19 pandemic.

The Investment Manager's report by Kaplan Funds Management (KFM) which follows the Chairman's Report, sets out in detail the investment experience in this FY22 half year.

Results for the Half Year

The profit after tax of $2.04 million was down from the high of $3.62 million achieved in the previous corresponding year. Realised gains contributed $1.77 million to the result mainly from takeover and sales in the infrastructure and property trust sector. Dividend income increased by 82.2% reflecting the improvement in dividend payouts particularly from the banks and BHP as the economy recovered from the pandemic downturn.

A performance fee of $228,000 is accrued for the period based on the outperformance of the absolute return benchmark.

NTA per share before provision for tax on unrealised gains was $0.559, up 5.3% compared to $0.531 from the previous period.

Since the end of the half-year, the Directors have declared a fully franked dividend of 1 cent per share to be paid on 31 March 2022.

Capital Management

Following approval at the Company's 2020 and 2021 Annual General Meetings, Ironbark implemented the on-marketbuy-back for a period of one month ending on 23 November 2021 for up to 30% of the shares on issue. The Buy-Back achieved its aim of narrowing the discount, as the share price rallied closer to the commencement date. This allowed shareholders to partially or fully exit their holdings at a share price nearer to NTA. Approximately 3.5% of shareholders representing 10.6% of issued capital (13 million shares) participated in the buy-back.

Board Changes

Mr Ross Finley retired as a Director of the Board of the Company on 15 December 2021. The Board wishes to record its thanks to Ross for his valued service and significant contribution to the Company over 30 years. As part of the Board renewal process, we welcome Sam Kaplan to the Board with his extensive wealth of experience.

3

For personal use only

Ironbark Capital Limited

ABN 89 008 108 227

Chairman's Commentary on the Results

For the half-year ended 31 December 2021

Dividend Outlook

The substantial profits and the improvement in fully franked dividends from underlying investments allowed the Company to pay a final fully franked dividend for the 2021 financial year in September 2021. We expect to see this continue in FY22 with strong corporate earnings supporting dividend payouts.

As companies and government navigate the continuing disruptions and uncertainties from the COVID-19 pandemic, and inflationary pressures result in higher interest rates coming off an extremely low base, corporate earnings may be variable.

Michael J Cole AM

Chairman

4

For personal use only

Ironbark Capital Limited

ABN 89 008 108 227

Investment Manager Report

For the half-year ended 31 December 2021

Investment Manager Report -half year to 31 December 2021

The manager's focus is to deliver consistent returns and a high fully franked dividend yield from the portfolio. IBC's performance benchmark is the 1-year swap rate plus 6% per annum.

Performance measurement includes franking credits and option premium income. Franking credits are a significant source of return from IBC's hybrid investments and for shareholders. Option premium income is generated from buy & write activity and varies with market conditions. Over the half year period, realised option premium income was $0.846m (1.4% of the portfolio). The calculation of the portfolio's current running yield of 5.2% excludes option income because realised option premiums are highly variable from year to year.

IBC recorded a good portfolio return of 5.6% over the half year outperforming its benchmark return of 3.1% and the equities market return of 4.0%. Since inception, over 19 years including two crisis periods (GFC & Covid-19) the portfolio achieved a return of 9.1%pa with risk measured in terms of volatility approximately 54% of equity market risk.

																									IBC Performance
	20																				since inception to 31 December 2021
	18
	16
																																																						13.1
return%	14
																																									6.5		6.2		6.1		5.6
8
	1012		9.19.5		8.2			7.67.6		7.37.3		8.2			7.77.0		8.1			9.4
	6					7.8				7.2			6.9									7.1
																																																												3.1
	4
	2
	0
				19yrs			10yrs				9yrs				7yrs			6yrs				5yrs				4yrs				3yrs				2yrs				1 yr			FYTD %
				%pa			%pa				%pa				%pa			%pa				%pa				%pa				%pa				%pa				%pa
							IBC portfolio+franking		BENCHMARK (1 yr swap+6%pa)				ASX300 Accum

IBC's focus on income generation and capital preservation from a balanced portfolio structure has delivered very good risk adjusted returns compared to the equities market over the longer term. Corporate activity in regulated utilities and investors shifting towards value stocks supported the very good half year return.

IBC Portfolio Volatility vs ASX Index Volatility

6 month rolling period (risk measurement)

50%

40%

30%

20%

10%

0%

Mar‐06

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Mar‐09

Dec‐09 Sep‐10 Jun‐11 Mar‐12 Dec‐12 Sep‐13

Jun‐14

Mar‐15 Dec‐15 Sep‐16 Jun‐17

Mar‐18

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Dec‐21

Sep‐04

Jun‐05

ASX Index Volatility

IBC Volatility

5