Welcome to Edition 73 of Boardroom Brief.
This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
KEY BOARDROOM BRIEF
Practical Law reports on ASX IPO trends for January to June 2018. On 17 July 2018, Practical Law published a report highlighting trends in IPOs on the ASX from January to June 2018. 24 ASX IPO transactions completed (only three of which were underwritten), down from 58 ASX listings in the same period for 2017. The IPO with the largest listing by market capitalisation upon admission to trading was an investment fund which raised $1.3 billion. All companies listing on the ASX were incorporated in Australia except for one, and typically listed as the holding company for overseas subsidiaries. IPOs of companies in the materials sector accounted for more than one third of all listings (37%), all of which were relatively small and generally sought to raise no more than $20 million. The three listings in the financial sector (13%) sought to raise up to $211 million in total. There were three listings in the information technology sector and five IPOs, all of investment funds, were not assigned an industry sector upon listing.
Treasury consults on extending definition of “significant global entity”. Directors of multinational groups (including local subsidiaries) should ensure they keep abreast of recent legislative changes as part of the Commonwealth Government’s integrity measures affecting such groups. Most recently (on 20 July 2018), Treasury released exposure draft legislation and explanatory material to extend the definition of a “significant global entity” (SGE) by including members of large multinational groups headed by proprietary companies, trusts, partnerships and investment entities. At present, an SGE only encompasses groups headed by listed companies and private companies. The aim of the extension is to ensure that multinational tax avoidance rules apply to all relevant entities. An SGE would be an entity that has annual global income of A$1 billion or more, or one that is a member of a group of entities that are consolidated for accounting purposes as a single group and the global parent entity of the group has annual global income of A$1 billion or more. Submissions can be made until 17 August 2018. See also the Treasury website and the Treasurer, the Hon. Scott Morrison’s media release.
ASIC releases report on fees and costs disclosures. On 24 July 2018, ASIC released an external report on Regulatory Guide 97 Fees and costs disclosures. The Report recommends changes to the fees and costs disclosure regime, relating to not only what information is disclosed to consumers but also the way in which information is presented to consumers. The Report suggests ASIC considers the feasibility of implementing a consumer-focussed, publicly available facility which includes fee and cost information taken from product disclosure statements and/or data about average costs for specific investment option types that can be used as a reference. See also ASIC’s media release. ASIC plans to release a consultation paper setting out its proposed response to the issues raised in the Report within the next six months.
THE WEEK AHEAD
Super Saturday. Expect to see both sides of politics putting a positive spin on the results of the “Super Saturday” by-elections last weekend. What does seem clear is that Bill Shorten’s leadership is secure in the short term, and we might expect that to lead to a strengthening of the rhetoric around the Government’s proposed tax cuts. Tax reform generally looms as the single biggest election issue and Directors would do well to consider the potential implications of each party’s policy for their business.
Earnings season. With full-year earnings reports looming, we expect to see the usual “confessions” in the form of earnings guidance to the ASX. Directors should be aware that ASIC is continuing to closely monitor ASX announcements for evidence of “soft downgrades” – effectively indirect guidance towards lower earnings results – and may require clarifying announcements in some cases. It is therefore important to ensure that continuous disclosure policies have appropriate approval mechanisms both for “formal” earnings guidance releases and also “soft” guidance of this kind.
Quarterly reports for mining and commitments test entities are due tomorrow. Under the ASX’s new “get tough” approach, failure to lodge periodic reports on time will result in an automatic suspension of the entity’s securities.