AMA Group Limited
Annual Report 2015

Plain-text annual report

For personal use onlyOn 12 December 2014 the Company registered two entities in readiness to acquire the business and assets of Shipstone Accident Repair Specialists along with BMB Prestige Collision Repairs and Browns Motors. Those entities are Shipstone Holdings Pty Ltd (A.C.N. 49 603 350 787) and BMB Collision Repairs Pty Ltd (A.C.N. 35 603 350 223). 5. Details of entities over which control has been lost during the period Previously discontinued operations that were not trading, Diesel Test Pty Ltd (A.C.N. 077 044 083) and Emission Services Pty Ltd (A.C.N. 104 778 798) were both de-registered on 23/07/2014 at the request of the directors of the company. 6. Details of individual and total dividends A dividend, fully franked at 30%, of 1.6 cent per security was declared on 29 August 2014 with a payment date of 3 December 2014. 2014 Dividend Declared $5,348,015 The Directors are very pleased to announce that upon finalising the 2015 financials, they have decided to declare a dividend, fully franked at 30%, of 1.7 cents per security with a payment date of 30 October 2015. 2015 Dividend Declared $6,957,266 7. Dividend reinvestment plan Not applicable. 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Not applicable. 10. Audit qualification or review This report is based on the consolidated financial statements which have been audited by Shine Wing Australia. The audit report is attached as part of the Annual Report. 11. Attachments Annual Report for the year ended 30 June 2015 for AMA Group Limited is attached. 12. Signed Ray Malone Executive Chairman AMA Group Limited Dated: This 31st Day of August 2015 AMA GROUP LIMITED APPENDIX 4E (ii) For personal use only AMA GROUP LIMITED ABN: 50 113 883 560 ANNUAL REPORT 2015 For personal use only CONTENTS _______________________________________________________________________________________ __________________________________________________________ AMA Group Limited Annual report for the year ended 30 June 2015 __________________________________________________________ Corporate Governance Statement Directors’ Report Auditor’s Independence Declaration Financial Statements Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 3 9 23 25 27 28 29 30 31 69 71 75 79 This document contains some statements which are by their very nature forward looking or predictive. Such forward looking statements are by necessity at least partly based on assumptions about the results of future operations which are planned by the Company and other factors affecting the industry in which the Company conducts its business and markets generally. Such forward looking statements are not facts but rather represent only expectations, estimates and/or forecasts about the future and thereby need to be read bearing in mind the risks and uncertainties concerning future events generally. There are no guarantees about the subjects dealt with in forward looking statements. Indeed, actual outcomes may differ substantially from that predicted due to a range of variable factors. AMA GROUP LIMITED ANNUAL REPORT 2015 2 For personal use only CORPORATE GOVERNANCE STATEMENT 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 3 For personal use only CORPORATE GOVERNANCE STATEMENT ______________________________________________________________________________________ A review of the Company's Corporate Governance Framework was undertaken during the 2014/15 year and a new framework was adopted which is appropriate for the size, complexity and operations of the Company and its subsidiaries. Unless otherwise stated all Policies and Charters meet the ASX Corporate Governance Council's Best Practice Recommendations. All Charters and Policies are available from the Company or on its website at www.amagroupltd.com Principle 1: Lay solid foundations for management and oversight. Role of the Board and Management The Board's role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties. The Board's responsibilities are detailed in its Board Charter. Board Appointments The Company undertakes comprehensive reference checks prior to appointing a director, or putting that person forward as a candidate to ensure that person is competent, experienced, and would not be impaired in any way from undertaking the duties of director. The Company provides relevant information to shareholders for their consideration about the attributes of candidates together with whether the Board supports the appointment or re- election. The terms of the appointment of a non-executive director, executive directors and senior executives are agreed upon and set out in writing at the time of appointment. The Company Secretary The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board, including agendas, Board papers and minutes, advising the Board and its Committees (as applicable) on governance matters, monitoring that the Board and Committee policies and procedures are followed, communication with regulatory bodies and the ASX and statutory and other filings. Diversity The Company is committed to increasing diversity amongst its employees, not just gender diversity. Our workforce is employed based on the right person for the right job regardless of their gender, age, nationality, race, religious beliefs, cultural background, sexuality or physical ability. Executive and board positions are filled by the best candidates available without discrimination. The Company is committed to increasing gender diversity within these positions when appropriate appointments become available. It is also committed to identifying suitable persons within the organisation and where appropriate opportunities exist, advance diversity and to support promotion of talented employees into management positions. The Company has not set any gender specific diversity objectives as it believes that all categories of diversity are equally as important within its organisation. The following table demonstrates the Company’s gender diversity amongst employees and contractors as at 30 June 2015. Women (Qty.) 2015 Women (Qty.) 2014 Board 0 0 Executive Team 1 1 Employees 50 28 AMA GROUP LIMITED ANNUAL REPORT 2015 4 For personal use only CORPORATE GOVERNANCE STATEMENT ______________________________________________________________________________________ Encourage Enhanced Performance The performance of the Board, individual Directors and Executive Officers of the Company is monitored and evaluated by the Board. The Board is responsible for conducting evaluations on a regular basis in line with these policy guidelines. A formal performance evaluation was conducted by the Board during the year. The evaluation has provided the board with valuable feedback for future development. During the year, all Directors have full access to all Company records and receive Financial and Operational Reports at each Board Meeting. Independent Advice Directors collectively or individually have the right to seek independent professional advice at the Company's expense, up to specified limits, to assist them to carry out their responsibilities. All advice obtained is made available to the full Board. Principle 2: Structure the Board to add value. Structure and Composition of the Board The Board has been formed so that it has an effective mix of personnel who are committed to discharging their responsibilities and duties and being of value to the Company. The names of the Directors, their independence, qualifications and experience are stated on pages 13 to 15 along with the term of office held by each. The Board believes that the interests of all Shareholders are best served by: * Directors having the appropriate skills and experience; * * Some major Shareholders being represented on the Board. A number of the Directors being independent as defined in the ASX Corporate Governance Guidelines; and Where any Director has a material personal interest in a matter, the Director will not be permitted to be present during discussion or to vote on the matter. The enforcement of this requirement is in accordance with the Corporations Act and aims to ensure that the interests of Shareholders, as a whole, are pursued and that their interest or the Director's Independence is not jeopardised. The Board consists of four Directors of whom two Directors, Simon Doyle and Hugh Robertson, are considered to be independent. The Board believes the existence of two independent directors on the Board provides sufficient independent judgement to the Board at this time. Until the resignation of Duncan Fisher in March 2015, the Company’s Chairman was an independent Director. The Board is now Chaired by Ray Malone who is also the Company’s CEO. The Board believes that although Mr Malone is not considered independent, he is the appropriate person to lead the Company. The Board has delegated certain responsibilities from the Chairman to independent directors to minimize any conflict that may arise from the Chairman and CEO roles being exercised by the same individual. The Company currently has no Nomination Committee as it believes that due to the size of the Board and the Company and the nature of the Company’s current activities, this function is best served by the full Board. The Board is responsible for considering board succession issues and reviewing Board composition to assist in ensuring the Board has the appropriate balance of skills, knowledge, experience and independence to enable it to discharge its duties and responsibilities effectively. The Board has a skills matrix covering the competencies and experience of each member. When the need for a new director is identified, the required experience and competencies of the new director are defined in the context of this matrix and any gaps that may exist. AMA GROUP LIMITED ANNUAL REPORT 2015 5 For personal use only CORPORATE GOVERNANCE STATEMENT ______________________________________________________________________________________ Board Skills Matrix Industry knowledge Experience with financial… Strategic expertise 10 8 6 4 2 0 Accounting and finance Legal Managing risk Rating Induction of New Directors and Ongoing Development Any new Directors will be issued with a formal Letter of Appointment that sets out the key terms and conditions of their appointment, including Director's duties, rights and responsibilities, the time commitment envisaged, and the Board's expectations regarding involvement with any Committee work. A new director induction program is in place and Directors are encouraged to engage in professional development activities to develop and maintain the skills and knowledge needed to perform their role as Directors effectively. Principle 3: Act ethically and responsibly Ethical and Responsible Decision-Making As part of its commitment to recognising the legitimate interests of stakeholders, the Company has adopted a Code of Conduct to guide compliance with legal and other obligations to legitimate stakeholders. The Company has a share trading policy that regulates the dealings by Directors, Officers and Employees, in shares, options and other securities issued by the Company. The policy has been formulated to ensure that Directors, Officers, Employees and Consultants who work on a regular basis for the Company are aware of the legal restrictions on trading in Company securities while in possession of unpublished price-sensitive information. As a good Corporate Citizen, the Company encourages compliance with and commitment to appropriate corporate practices that are fair and ethical, via its Code of Conduct. Principle 4: Safeguard integrity in corporate reporting. Audit Committee The Company has a duly constituted Audit Committee currently consisting of two Non-Executive Directors, with the Committee Chairman being an Independent Non-Executive Director. The current members of the Committee, as at the date of this report, and their qualifications are detailed in the Directors' Profiles on page 13 and 14. The ASX Corporate Governance Council’s Best Practice Recommendations are that an Audit Committee consists of at least 3 members. The Company cannot comply with this due to the small number of Board members. The Committee holds a minimum of two meetings a year. Details of attendance of the members of the Audit Committee are contained on page 14. The Company's external auditor attends each annual general meeting and is available to answer any questions with regard to the conduct of the audit and their report. AMA GROUP LIMITED ANNUAL REPORT 2015 6 For personal use only CORPORATE GOVERNANCE STATEMENT ______________________________________________________________________________________ CEO and CFO Declarations The CEO and Group Accountant have provided the Board with a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Principle 5: Making timely and balanced disclosure. The Company has procedures in place to ensure that the Company’s Continuous Disclosure obligations under ASX Listing Rules and Corporations Act are met and that the market is properly informed of matters which may have a material impact on the price at which securities are traded. The Board has designated the Company Secretaries as the person responsible for overseeing and co-ordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with ASX Listing Rules, the Company immediately notifies the ASX of information concerning the Company: 1 That a reasonable person would or may expect to have a material effect on the price or value of the Company's securities; and That would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company's securities. 2 Principle 6: Respect the rights of shareholders. The Company is committed to providing current and relevant information to its shareholders. The Company respects the rights of its Shareholders, and to facilitate the effective exercise of the rights, the Company is committed to: 1 Communicating effectively with Shareholders through ongoing releases to the market via ASX information and General Meetings of the Company; 2 Giving Shareholders ready access to balanced and understandable information about the Company and Corporate Proposals; 3 Making it easy for Shareholders to participate in General Meetings of the Company; and 4 Requesting the External Auditor to attend the Annual General Meeting and be available to answer Shareholder's questions about the conduct of the audit, and the preparation and content of the Auditor's Report. Any Shareholder wishing to make inquiries of the Company is advised to contact the registered office. All public announcements made by the Company can be obtained from the ASX's website www.asx.com.au Shareholders may elect to, and are encouraged to, receive communications from the Company and its securities registry electronically. The Company maintains information in relation to its corporate governance documents, Directors and senior executives, Board and committee charters and annual reports on the Company’s website. Principle 7: Recognise and managing risk. The Board is committed to the identification, assessment and management of risk throughout the Company’s business activities. The Audit Committee operates pursuant to a charter which provides for risk oversight and management within the Company. This is periodically reviewed and updated. Management reports risks identified to the Committee on a periodic basis. The Company’s Risk Management Policy recognises that risk management is an essential element of good corporate governance and fundamental in achieving its strategic and operational objectives. Risk management improves decision making, defines opportunities and mitigates material events that may impact security holder value. The Board reviews the entity’s risk management framework at least annually to satisfy itself that it continues to be sound. A review of the Company’s risk management framework was conducted during the 2015 financial year. AMA GROUP LIMITED ANNUAL REPORT 2015 7 For personal use only CORPORATE GOVERNANCE STATEMENT ______________________________________________________________________________________ Management reports risks identified to the Board through regular operations reports, and via direct and timely communication to the Board where and when applicable. During the reporting period, management has reported to the Board as to the effectiveness of the Company’s management of its material business risks. The Company does not have an internal audit function. The Company faces risks inherent to its business, including economic risks, which may materially impact the Company’s ability to create or preserve value for security holders over the short, medium or long term. The Company has in place policies and procedures, including a risk management framework (as described in the Company’s Risk Management Policy), which is developed and updated to help manage these risks. The Board does not consider that the Company currently has any material exposure to environmental or social sustainability risks. The Chief Executive Officer and Group Accountant have given a statement to the Board that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and controls based on the Company's Risk Management policies. Principle 8: Remunerate fairly and responsibly Profiles of the members and details of meetings of the Remuneration Committee are detailed on pages 13 to 15 within the Director's Report. The Committee’s responsibilities are detailed in the Remuneration Committee Charter. The Company is committed to remunerating its Senior Executives in a manner that is market-competitive and consistent with “Best Practice” as well as supporting the interests of Shareholders. Senior Executives may receive a remuneration package based on fixed and variable components, determined by their position and experience. Shares and/or Options may also be granted based on an individual's performance, with those granted to Directors subject to Shareholder approval. Non-Executive Directors are paid their fees out of the maximum aggregate amount approved by Shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance based bonuses and do not participate in Equity Schemes of the Company without prior Shareholder approval. Current remuneration is disclosed in the Remuneration Report and in Note 21: Key Management Personnel Disclosures. Key Management Personnel or closely related parties of Key Management Personnel are prohibited from entering into hedge arrangements that would have the effect of limiting the risk exposure relating to their remuneration. In accordance with the Company’s share trading policy, participants in any equity based incentive scheme are prohibited from entering into any transaction that would have the effect of hedging or otherwise transferring the risk of any fluctuation in the value of any unvested entitlement in the Company’s securities to any other person. AMA GROUP LIMITED ANNUAL REPORT 2015 8 For personal use only DIRECTORS’ REPORT 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 9 For personal use only DIRECTORS’ REPORT Your directors present their report on the consolidated entity (referred to hereafter as the ‘Company’, 'consolidated entity' or ‘Group’) consisting of AMA Group Limited and the entities it controlled for the year ended 30 June 2015. Directors The following persons were directors of AMA Group Limited during the financial year and up to the date of this report unless otherwise stated: Chief Executive Officer and Executive Chairman Ray Malone Simon Doyle Non-Executive Director Ray Smith-Roberts Chief Operating Officer and Executive Director Hugh Robertson Duncan Fischer Non-Executive Director (Appointed 2 June 2015) Non-Executive Chairman (Retired 11 March 2015) Corporate Structure AMA Group Limited is a company limited by shares that is incorporated and domiciled in Australia. Principal Activities The consolidated entity’s principal activity and purpose is the operation and development of complementary businesses in the automotive aftercare market sector. It focuses on vehicle protection products and accessories, vehicle panel repair, automotive electrical and cable accessories and automotive component re-manufacturing. During the financial year the Company focused on building existing businesses. It also identified and acquired earnings accretive companies and businesses operating in the vehicle panel repairs segment. It investigated various other opportunities for growth through acquisition and, late in the year, was able to reach agreement to acquire Woods Accident Repair Centres operating in the vehicle panel repair segment which it took on the management on 1 July 2014. The Company continues to focus on excellence in customer service, identifying and maximising growth opportunities and developing shareholder wealth. Dividends – AMA Group Limited A dividend, fully franked at 30%, of 1.6 cent per security (2014: 1.6 cent per security 95% franked) was declared on 29 August 2014 with a payment date of 3 December 2014. 2014 Dividend Declared $5,348,015 The directors are very pleased to announce the declaration of a 1.7c per security (fully franked at 30%) dividend for the year ended 30 June 2015. 2015 Dividend Declared $6,957,266 The payment schedule for this dividend will be:- Declared date: Ex/Dividend date: Record date: Payment date: 31/08/2015 11/09/2015 15/09/2015 30/10/2015 Financial Results The table on the following page highlights the significant improvement in the results which have been achieved through the contribution of the earnings accretive acquisitions that we have made since November 2013 backed by the continued strong performance of our six “foundation” businesses. AMA GROUP LIMITED ANNUAL REPORT 2015 10 For personal use only DIRECTORS’ REPORT 30 Jun 2015 % Var. to 30 Jun 2014 30 Jun 2014 $'000 $'000 Revenue from Continuing Operations 95,774 +49.0% 64,259 EBITDA from Continuing Operations 14,410 +54.7% EBITA from Continuing Operations 13,441 +51.8% EBIT from Continuing Operations 13,096 +48.2% Profit before tax from Continuing Operations 12,652 +45.3% 9,317 8,855 8,838 8,706 Net Profit After Tax 9,090 +60.8% 5,655 Normalised Net Operating Cash Flows 9,102 +50.9% 6,033 Net Operating Cash Flows Earnings per Security 7,820 +29.6% 6,033 Cents Cents 2.72 +60.4% 1.70 While the reported EBITDA level result is very pleasing, underlying earnings, excluding one-off acquisition, restructuring and integration costs, were approximately $500,000 higher than reported at the EBITDA level. Given the nature of our rapidly expanding divisions and the high level of recent and anticipated acquisition activity we consider it appropriate to focus on the group’s EBITDA result going forward and for greater transparency we intend to report underlying earnings from this point. The IAG contracts in the panel repair division have been valued and amortised, resulting in a non-cash expense and balance sheet adjustment of approximately $316,350 which is reflected in the reported EBIT. Our net operating cash flows were impacted by the acquisition of working capital deficiency in excess of $1m as part of the BMB & Browns acquisition consideration reductions. Normalised operating cash flows are much more in line with the 54.7% movement in EBITDA. The net profit and earnings per share growth of 60.8% and 60.4% respectively are very pleasing results. Review of Operations, Likely Developments & Expected Results of Operations Key Achievements AMA has achieved a number of transformative milestones during the year. The entire AMA team has worked extremely hard and we are delighted with what we have achieved. The integration of the acquired businesses has delivered strong additional revenue and increased margins. Organic growth across the group has also been strong. This is a credit to all of our people and shows that we have made good acquisitions and are delivering for our shareholders in a space that we know very well. Vehicle Panel Repair – Revenues achieved $42.5m (2014: $14.5m) The panel division has grown substantially over the year increasing from 3 workshops to 29 workshops (with the addition of Woods coming online Oct 2015). Revenue in panel has increased from $14.5 million to more than $85 million, including Woods on an annualised basis, and the integration of our acquired businesses is going very well. One key acquisition, RMA, has performed exceptionally well and has finished the year approximately 15% ahead of budget. The acquisitions have expanded our foot print and relationships with vehicle manufacturers, becoming an authorised repairer for Audi, Mercedes, Porsche, Bentley, Jaguar, Landrover, VW, Toyota amongst others, in addition to our existing BMW arrangements. Our Insurer and Fleet endorsements have seen a similar expansion. The purchase of the Woods group, (settlement October 2015), gives us an exceptional geographical footprint across Melbourne as well as two mechanical divisions. Further vertical integration is occurring as our scale permits. The size of the total motor vehicle body, paint and panel repair market in Australia is approximately $7 billion and we have positioned ourselves very well strategically to participate in the consolidation taking place in this market. AMA GROUP LIMITED ANNUAL REPORT 2015 11 For personal use only DIRECTORS’ REPORT As we continue to grow the panel business the barriers to entry will continue to increase and we have worked to diversify our business through expanding into differing geographical areas and all sectors of the panel space. The recently completed capital raising of $45 million puts us in a strong position and we currently have significant acquisitions on the table. Vehicle Protection Products & Accessories – Revenues achieved $27.7m (2014: $24.7m) The vehicle protection division achieved revenue growth of 12% ($3m) which was in line with our expectations and was a strong result given the relevant segments of the new vehicle market declined slightly. Gross margin continued to improve albeit many of the initial synergy benefits between ECB and Custom Alloy have already been realised. An increased focus on expense management improved the contribution to overall EBITDA. Investments in new tooling and equipment were made in FY15 and further cost saving initiatives are planned to provide earnings growth in FY16. Automotive Electrical and Cable Accessories – Revenues achieved $16.9m (2014: $17.8m) A very tough market environment saw revenues from the electrical and cable accessories business decline by $0.9m, with the falling Australian dollar also impacting margins. Nonetheless a number of new innovative products contributed to performance and strengthened our market position. Whilst the results do not show growth, we believe the segment is now stable. We have implemented a number of new management strategies, new channels to market and product innovations that provide a solid base to work forward from and improve margins whilst this segment remains in a tough market cycle. Automotive Component Remanufacturing – Revenues achieved $9.4m (2014: $7.8m) FluidDrive has continued to outperform and is a standout across our group. Revenue from the automotive component remanufacturing division grew by 20% (1.6m) which exceeded our expectations. This very pleasing growth has been achieved through taking advantage of key market opportunities. A range of management strategies have also resulted in significant gross margin improvements being achieved (FY15:40% vs FY14:34%) which is particularly pleasing. This is a very solid result from this division, and whilst we do not necessarily expect the same growth for the FY16 year we see a range of further organic and acquisitive growth opportunities in this division in the future. Significant Changes in the State of Affairs On 1 July 2014 the Company acquired 100% of the shares of Repair Management Australia Pty Ltd (A.C.N. 158 201 444), Repair Management Australia Bayswater Pty Ltd (A.C.N. 162 337 724), Repair Australia Dandenong Pty Ltd (A.C.N. 162 337 715) and Phil Munday’s Panel Works Pty Ltd (A.C.N. 062 535 951). Collectively, these four entities are referred to as “RMA”. Management On 23 December 2014 after negotiation with Westpac Bank, the Company further extended its bank facility to allow the Company to draw-down up to $12m (an extension of $2m) on normal commercial terms and this funding continues to be available to help fund earnings accretive acquisitions or other working capital needs. On 1 January 2015 the Company acquired the business assets of Shipstone Accident Repair Specialists from Bambank Pty Ltd and commenced operating the business under newly formed entity Shipstone Holdings Pty Ltd (A.C.N. 603 350 787). On 1 February 2015 the Company acquired the business assets of BMB Prestige Collision Repairs from Bencar Nominees Pty Ltd and acquired the business assets of Browns Motors from Bencar Consultants Pty Ltd. These assets commenced operating under newly formed entity BMB Collision Repairs Pty Ltd (A.C.N. 603 350 223). On 13 May 2015 the Company announced that it had secured an option over Woods Accident Repair Centres, involving management control that, if successful, would see the purchase of Woods by AMA. Following a successful period of management of the Woods operations, we anticipate that the option will be exercised on or about the 1st October 2015 with AMA paying the previously agreed purchase price and taking full ownership of the business. There have been no other significant changes in the state of affairs during the financial year. Outlook Management accounts for the group for July and August show we have started the 2016 year strongly. As our recently acquired panel operations are integrating, we are actively pursuing a number of compelling acquisition opportunities. The Directors believe Shareholders can expect another very strong result from this division. Vehicle protection products has started the new financial year strongly. Key market segments are now growing again, and opportunities in new segments are providing for a positive outlook for the FY16 year. AMA GROUP LIMITED ANNUAL REPORT 2015 12 For personal use only DIRECTORS’ REPORT The automotive electrical division continues to operate in a challenging market environment, but steps continue to be taken to improve our competitive position. Automotive component remanufacturing remains our smallest division but continues to perform well. Matters Subsequent to the End of the Financial Year Subsequent to the balance date AMA raised $45 million (before costs) by way of a share placement of 75 million shares at $0.60. This additional capital puts AMA in a very strong position to continue to make valuable acquisitions in FY16. On 6 July 2015 the Bank Bills facility was paid off in full, following the receipt of the funds from the capital raising. On 31 August 2015 the Directors declared a dividend, fully franked at 1.7 cents per security which is to be paid 30 October 2015. We are currently in negotiations to determine an appropriately sized banking facility to assist with working capital requirements and potential acquisitions. No other matters or circumstances have arisen since 30 June 2015 that have significantly affected, or may significantly affect the consolidated entity's operations in future financial years, the results of those operations in future financial years, or the consolidated entity's state of affairs in future financial years. Environmental Regulation Management continues to work with local regulatory authorities to achieve, where practical, best practice environmental management so as to minimise risk to the environment, reduce waste and ensure compliance with regulatory requirements. The consolidated entity had no adverse environmental issues during the year. Information on Directors Ray Malone — Executive Chairman and Chief Executive Officer Appointed to the Board Experience and expertise — — 23 January 2009. Appointed executive chairman 19 March 2015 Mr Malone has over 30 years work experience in the automotive panel repair industry, progressing his career from a spray painter through to business ownership and senior executive positions. He has developed many strong relationships with key customers focussing on excellent customer service. He has developed extensive business skills which he has consistently applied to AMA’s development since 2009. Interest in Shares and Options* — 80,417,619 shares and Nil options Directorships held in other listed entities Special responsibilities — — Nil Nil Simon Doyle — Non-Executive Director Appointed to the Board — 14 October 2009 Qualifications — BA, LLB Experience and expertise — Mr Doyle has many years of experience in Australia and overseas in commercial law, company executive roles and non-executive director roles with an emphasis on strategic direction, governance and compliance. Previous executive roles functions, compliance, corporate affairs, human resources and company secretarial as well as specific leadership roles in mergers, acquisitions, corporate restructures, due diligence and initial public offering. include responsibility legal for AMA GROUP LIMITED ANNUAL REPORT 2015 13 For personal use only DIRECTORS’ REPORT Previous non-executive roles include board positions in start-ups, mature businesses, businesses in transition and Board member and Chairman in the not for profit sector. Interest in Shares and Options* — 4,161,470 shares and Nil options Directorships held in other listed entities Special responsibilities — — Nil Chairman of the Audit Committee and Chairman of the Remuneration Committee Ray Smith-Roberts — Chief Operating Officer and Executive Director Appointed to the Board Experience and expertise — — 28 February 2014 Mr Smith-Roberts has over 25 years work experience in the automotive industry. He joined ECB many years ago progressing to general manager and then became managing director when the Company became part of AMA and played the lead role in making the business a significantly stronger business. Over the years he has attained valuable operational knowledge and experience having been the Group COO since 2009. He is well positioned to assist the board in developing strategy for the next phase of the Company’s growth and development. Interest in Shares and Options* — 8,167,746 shares and Nil options Directorships held in other listed entities Special responsibilities — — Nil Nil Hugh Robertson — Non-Executive Director Appointed to the Board Experience and expertise — — 2 June 2015 Mr Robertson has worked in stockbroking for over 30 years with a variety of firms including Bell Potter, Investor First and more latterly Wilson HTM. Among his areas of interest is a concentration on small cap industrial stocks and he currently sits on the boards of Hub 24 Ltd and Oncard International Ltd. Interest in Shares and Options* — 230,000 shares and Nil options Directorships held in other listed entities — Mr Robertson currently sits on the boards of Hub 24 Ltd and Oncard International Ltd. Special responsibilities — Member of the Audit Committee and the Remuneration Committee Duncan Fischer — Non-Executive Chairman Appointed to the Board Retired from the Board Qualifications Experience and expertise — — — — 14 October 2009 14 March 2015 FCA, FAICD Mr Fischer has many years professional, business and board experience in Australia and overseas. He practiced as a Chartered Accountant in Australia from 1977 to 1992 retiring from the profession and joining Tattersall’s where he went on to become Managing Director and Chief Executive Officer, a position he retired from in 2006. His experience covers all aspects of management, strategy, mergers, new business start-ups and leading a major listing and IPO process and has held a number of board positions. He is a past member of the Australia Day Committee (Victoria) and has held a number of AMA GROUP LIMITED ANNUAL REPORT 2015 14 For personal use only DIRECTORS’ REPORT committee and not for profit board roles, including Committee for Melbourne and the Arts Angels Council. Interest in Shares and Options as at the date of retirement only* — 9,133,334 shares and Nil options Directorships held in other listed entities Special responsibilities — — Nil Member of the Audit Committee and Member of the Remuneration Committee *The relevant interest of each Director in the shares or options over shares issued by the companies within the economic entity and other related body corporate as notified by the Directors to the Australian Securities Exchange in accordance with s 205G(1) of the Corporations Act 2001, as at the date of this report. Company Secretarial The name and details of the Company Secretaries in office during the financial year and until the date of this report are as follows. Secretaries were in office for the entire period unless otherwise stated. Phillip Hains — Joint Company Secretary Appointed Experience — — 9 December 2009 Mr Hains is a Chartered Accountant and specialist in the public company environment. He has served the needs of a number of public company boards of directors and related committees. He has over 23 years’ experience in providing accounting, administration, compliance and general management services. He holds a Masters of Business Administration from RMIT and a Public Practice Certificate from the Institute of Chartered Accountants. Terri Bakos — Joint Company Secretary Appointed Experience — — 2 March 2010 Ms Bakos is a Chartered Secretary and holds a B. Bus (Accounting) from RMIT University. She has over 20 years’ experience providing accounting and compliance services to listed and unlisted public companies. Meetings of Directors The number of meetings of the Company's board of directors and of each board committee held during the year ended 30 June 2015, and the numbers of meetings attended by each director were: Board Meetings Committee Meetings Audit Committee Remuneration Committee Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended 7 7 7 2 5 7 7 7 2 5 NA 3 NA 1 2 NA 3 NA 1 2 NA 1 NA NA NA NA 1 NA NA NA Ray Malone Simon Doyle Ray Smith-Roberts Hugh Robertson Duncan Fischer Remuneration Report The remuneration report is set out under the following main headings: A B C D Principles used to determine the nature and amount of remuneration Details of remuneration Share-based compensation Service agreements AMA GROUP LIMITED ANNUAL REPORT 2015 15 For personal use only DIRECTORS’ REPORT This remuneration report has been prepared by the Directors of AMA Group Limited to comply with the Corporations Act 2001 and the Key Management Personnel (KMP) disclosures required under AASB 124 Related Party Disclosures. A Principles used to determine the nature and amount of remuneration Key Management Personnel The following were Key Management Personnel of the entity at any time during the reporting period and unless otherwise indicated were Key Management Personnel for the entire period: Directors • • • • • - Chief Executive Officer and Executive Chairman - Non-executive Director - Chief Operating Officer and Executive Director - Non-Executive Director (Appointed 2 June 2015) - Chairman and Non-Executive Director (Retired 11 March 2015) Ray Malone Simon Doyle Ray Smith-Roberts Hugh Robertson Duncan Fischer Remuneration policies The Board is responsible for reviewing the remuneration policies and practices of the Company, including the compensation arrangements of Executive Directors, Non-Executive Directors and Senior Executives. The objective of these policies is to: • • • • • Make AMA Group Limited and its subsidiaries an employer of choice. Attract and retain the highest calibre personnel. Encourage a culture of reward for effort and contribution. Set incentives that reward short and medium term performance for the Company as a whole. Encourage professional and personal development. In the case of senior executives, any recommendation for compensation review will be made by the Chief Executive Officer to the Remuneration Committee. There is no direct link between remuneration of Executive Directors and other Key Management Personnel and the share price movement. Remuneration is based on management key performance indicators, targets and other benchmarks as determined by the Board or the Chief Executive Officer. Non-executive Directors The Board determines the Non-executive Directors’ remuneration based on independent market data for comparative companies. The remuneration payable from time to time to Non-executive Directors shall be in an amount not exceeding in aggregate a maximum sum that is from time to time approved by resolution of the Company, currently $400,000 per annum. Non-executive Directors’ retirement payments are limited to compulsory employer superannuation. Executive Directors and Senior Management remuneration The Company’s remuneration policy directs that the remuneration packages appropriately reflect the executives’ duties and responsibilities and that remuneration levels attract and retain high calibre executives with the skills necessary to successfully manage the Company’s operations and achieve its strategic and financial objectives. The total remuneration packages of Executive Directors and Senior Management is comprised of a base salary and may include short term and long term incentives. The Company has a policy of rewarding extraordinary contribution to the growth of the Company with the grant of an annual discretionary cash bonus, shares or options under the Company’s Employee Share Option Plan. Executives are also entitled to be reimbursed for their reasonable travel, accommodation and other expenses incurred in the execution of their duties. Remuneration packages for Executive Directors and Senior Executives can generally consist of three components: • • • Fixed remuneration which is made up of cash salary, salary sacrifice components and superannuation Short term incentives which include the issue of shares or options or a cash bonus; and Long term incentives which include issuing options. Fixed remuneration Senior Executives who possess a high level of skill and experience are offered a competitive base salary. The performance of each executive will be reviewed annually. Following the review, the Board may in its sole discretion AMA GROUP LIMITED ANNUAL REPORT 2015 16 For personal use only DIRECTORS’ REPORT increase the salary based on that executive’s performance, productivity and such other matters as it considers relevant. Superannuation contributions by the Company are limited to the statutory level of 9.50% (FY2014: 9.25%) of wages and salaries. Short-term incentives The remuneration of AMA Group Ltd Senior Executives includes short-term incentive bonuses, payable as cash or equity, as part of their employment conditions based on achieving specific measured objectives. The Board may however approve discretionary bonuses to executives in relation to certain milestones being achieved. Long-term incentives The Company has adopted a Share Option Plan for the benefit of Directors, full-time and part-time staff members employed by the Company. There are currently no options on issue. Performance based remuneration Performance based remuneration is issued to reward individual performance in line with Group objectives. Consequently, performance based remuneration is paid to an individual where the individual’s performance clearly contributes to a successful outcome for the Group. This is regularly measured in respect of performance against key performance indicators (KPI’s) and incentive bonuses are paid monthly, quarterly and yearly to reflect this. KPI’s used to measure performance include, but are not limited to: • Completion of set milestones. • EBIT target achievements. • Sales target achievements. KPI’s are set in advance in conjunction with Group targets and in consultation with Executives & employees. The KPI’s chosen reflect the Group’s goals for the year and endeavour to increase shareholder wealth. Assessment of KPI’s is undertaken by the Board and Management based on management accounts and year end audited financial results. All Executives and employees are eligible to receive incentives whether through employment contracts or by recommendation of the Chief Executive Officer or Board. Performance based incentive payments are based on a set monetary value or number of shares or options. There is no fixed portion between incentive and base remuneration. Remuneration policy versus Group Performance The Group’s remuneration policy is based on industry practice. Executive performance based remuneration issued during the 2015 financial year has been measured against the KPI’s set at the start of the year by the Board and/or management to reflect the Group’s objectives for the year. The Board believes that the performance based remuneration issued to executives during the year reflects the contribution that they have made to the Group’s performance over the past 12 months. Service agreements The Group has entered into service agreements with Key Management Personnel. No Executive during the term of their employment agreement shall perform work for any other person, corporation or business without the prior written consent of the Company. Termination of other Executives Generally, the Company or the executive may terminate employment at any time by giving the other party appropriate contractual notice in writing. If either the Company or the Executive gives notice of termination, the Company may, at its discretion, choose to terminate the Executive’s employment immediately or at any time during the notice period and pay the executive an amount equal to the salary due for the residual period of notice at the time of termination. The employment of each executive may be terminated immediately without notice or payment in lieu in the event of any serious or persistent breach of the agreement, any serious misconduct or wilful neglect of duties, in the event of bankruptcy or any arrangement or compensation being made with creditors, on conviction of a criminal offence, permanent incapacity of the executive or a consistent failure to carry out duties in a manner satisfactory to the Company. AMA GROUP LIMITED ANNUAL REPORT 2015 17 For personal use only DIRECTORS’ REPORT B Details of remuneration Details of the remuneration of the Directors, the Key Management Personnel of the consolidated entity (as defined in AASB 124 Related Party Disclosures) are set out in the tables below: 2015 Short-term employee benefits Salary $ Bonus $ Other $ Long-term employee benefits Long service leave 1 $ Post- employment benefits Equity Settled Share based payments Superannuation $ Shares 2 $ Total $ Non-Executive Directors Duncan Fischer* Simon Doyle Hugh Robertson** 83,692 100,000 5,000 - - - - - - - - - 7,951 9,500 - - - - 91,643 109,500 5,000 Executive Directors Ray Malone Ray Smith-Roberts 731,500 144,122 - 410,874 - 20,956 13,079 1,738 35,000 30,000 116,000 20,000 895,579 627,330 1,064,314 410,874 20,956 14,817 82,451 136,000 1,729,052 1 Represents movement in the provision for long service leave for amounts accrued and not paid 2 Includes sign-on bonuses vested in current period – refer to section C and D (below & page 18) * Retired 11 March 2015 ** Appointed 2 June 2015 2014 Short-term employee benefits Salary $ Bonus $ Other $ Long-term employee benefits Long service leave 1 $ Post- employment benefits Equity Settled Share based payments Superannuation $ Shares 2 $ Total $ Non-Executive Directors Duncan Fischer Simon Doyle 131,100 100,000 - - - - - - - 9,250 - - 131,100 109,250 Executive Directors Ray Malone Ray Smith-Roberts* 739,746 110,421 - 341,261 - 20,956 13,401 3,470 25,000 25,000 116,000 20,000 894,147 521,108 1,081,267 341,261 20,956 16,871 59,250 136,000 1,655,605 1 Represents movement in the provision for long service leave for amounts accrued and not paid 2 Includes sign-on bonuses vested in current period – refer to section C and D (below & page 18) * Appointed 28 February 2014 C Share-based compensation Ordinary shares Ray Malone, one of AMA’s Key Management Personnel, was issued 2,000,000 ordinary shares as consideration for him committing to an amendment and extension of his employment contract. As these shares are conditional to him remaining employed and are being expensed over the 5 year term, the value of $116,000 has been included in the 2014 and 2015 remuneration tables and a further $116,000 will be shown in each of the remuneration tables for 2016-2017. These shares were issued in December 2012. Ray Smith-Roberts, one of AMA’s Key Management Personnel, was issued 507,614 ordinary shares as consideration for him committing to an extension of his employment contract. As these shares are conditional to him remaining employed and are being expensed over the 5 year term, the value of $20,000 has been included in the 2014 and 2015 remuneration tables and a further $20,000 will be shown in each of the remuneration tables for 2016-2017. These shares were issued in September 2012. Options There were no options issued to Key Management Personnel during the year or the previous year as part of their compensation. D Service agreements The following Key Management Personnel have formalised service agreements in place as at 30th June 2015: AMA GROUP LIMITED ANNUAL REPORT 2015 18 For personal use only DIRECTORS’ REPORT Name: Title: Ray Malone Executive Chairman and Chief Executive Officer Agreement commenced: 4 July 2010 Agreement extended: 1 July 2012 Term of original agreement:5 Years Term of extension: 5 Years to 30 June 2017 Termination period and payout: Other terms: Mr Malone agreed not to resign within the first 2 years of the term. After 4 July 2012 Mr Malone may terminate the agreement with 6 months’ notice. Where the Company terminates the agreement prior to the expiration of the term on grounds other than serious misconduct, it must give notice of the balance of the term or make payment in lieu of notice equal to the total fixed remuneration plus superannuation and existing bonus that accrues over that period. As part of the employment agreement variation, the clause in Mr Malone’s employment agreement, dated 4 July 2010, allowing him the option from 4 July 2012 to transition to the role of Strategic Executive Director with a base remuneration of not less than 50% of his remuneration at the date of transition, has been deleted. As part of Mr Malone’s contract extension, he was granted 2,000,000 shares that were issued following shareholder approval at the AGM held on 27 November 2012. There is a claw-back clause in relation to these shares, which reads… “In the event that the Employee resigns from his employment prior to the end of the Extended Term (which does not include where the Employee dies or becomes incapacitated) or the Company terminates this Agreement because of breach on the part of the Employee prior to the end of the Extended Term, the Employee shall (at his election) either: (i) Consent to the redemption or cancellation of the following number of shares (in the event only that the Share Issue has taken place) : Number of full years remaining in the Extended Term at the Termination Date / 5 x 2,000,000; or (ii) Pay to the Company the following amount in cash : Share Issue Value x number of full years remaining in the Extended Term at the Termination Date / 5.” Name: Title: Ray Smith-Roberts Chief Operations Officer Agreement commenced: 1 September 2010 Agreement extended: 1 July 2012 Term of original agreement:No fixed term Term of extension: 5 Years Termination Period: 6 months’ notice period Termination payout: 6 months’ base salary Other terms: As part of Mr Smith-Roberts’ contract extension, he was granted $100,000 in shares that were issued in September 2012 and this issue was subsequently ratified by the shareholders at the AGM held on 27 November 2012. There is a claw-back clause in relation to these shares, which reads… “In the event that the Employee resigns from his employment prior to the end of the Extended Term (which does not include where the Employee dies or becomes incapacitated) or the Company terminates this Agreement because of breach on the part of the Employee prior to the end of the Extended Term, the Employee shall (at his election) either: (i) Consent to the redemption or cancellation of the following number of shares : Number of full years remaining in the Extended Term at the Termination Date / 5 x no of shares issued pursuant to the Share Issue; or (ii) Pay to the Company the $100,000 x number of full years remaining in the Extended Term at the Termination Date / 5.” AMA GROUP LIMITED ANNUAL REPORT 2015 19 For personal use only DIRECTORS’ REPORT Name: Title: Simon Doyle Non-Executive Director Agreement commenced: 14 October 2009 Term of agreement: Ongoing Termination period: None Termination payment: Nil Other terms: None Name: Title: Hugh Robertson Non-Executive Director Agreement commenced: 2 June 2015 Term of agreement: Ongoing Termination period: None Termination payment: Nil Other terms: None Shares Under Option There were no unissued ordinary shares of AMA Group Limited under option at the date of this report. Shares Issued on the Exercise of Options No shares were issued on the exercise of options in the financial year ended 30 June 2015 or 30 June 2014. Insurance of Officers During the financial year, the Company paid a premium in respect of a contract to insure the directors of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of coverage and the amount of the premium. Proceedings on Behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility, on behalf of the Company, for all or part of those proceedings. Non-Audit Services No non-audit services were provided by Shine Wing Australia. Rounding of Amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding-off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditors' Independence Declaration A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24. Auditor Moore Stephens Melbourne became Shine Wing Australia and as such continues in office in accordance with section 327 of the Corporations Act 2001. AMA GROUP LIMITED ANNUAL REPORT 2015 20 For personal use only DIRECTORS’ REPORT This report is made in accordance with a resolution of the board of directors. For And On Behalf Of The Board Ray Malone Executive Chairman AMA Group Limited Dated this 31st day of August 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 21 For personal use only This page is intentionally left blank AMA GROUP LIMITED ANNUAL REPORT 2015 22 For personal use only AUDITOR’S INDEPENDENCE DECLARATION 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 23 For personal use only AUDITOR’S INDEPENDENCE DECLARATION ______________________________________________________________________________________ Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to the directors of AMA Group Limited I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit, and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. SHINE WING AUSTRALIA Chartered Accountants Rami Eltchelebi Partner Melbourne, 31 August 2015 ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world. AMA GROUP LIMITED ANNUAL REPORT 2015 24 For personal use only FINANCIAL STATEMENTS 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 25 For personal use only FINANCIAL REPORT for the year ended 30 June 2015 _______________________________________________________________________________________________________ Contents Financial Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statement Directors’ Declaration and Independent Auditor’s Report Directors' Declaration Independent Auditor's Report to the Members of AMA Group Limited General Information 25 26 27 28 29 67 69 These financial statements cover the consolidated entity consisting of AMA Group Limited and its controlled entities. The financial statements are presented in Australian currency. AMA Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 1 1233 High Street Armadale VIC 3143 A description of the nature of the consolidated entity's operations and its principal activities is included in the Directors' Report, which is not part of the financial statements. The financial statements were authorised for issue by the Directors on 31 August 2015. AMA GROUP LIMITED ANNUAL REPORT 2015 26 For personal use only CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2015 _______________________________________________________________________________________________________ 30 June 2015 30 June 2014 Note $'000 $'000 Revenue from continuing operations 4 95,774 64,259 Raw materials and consumables used Employee benefits expense Occupancy expenses Travel and motor vehicle Advertising and marketing Professional services Insurance Research and development Communication expenses Bad and doubtful debts expense Other expenses (41,944) (28,602) (5,727) (1,106) (926) (1,102) (312) (274) (313) (12) (1,046) (29,441) (18,741) (3,279) (917) (709) (455) (318) (177) (159) (48) (698) Earnings before interest, tax and depreciation and amortisation (EBITDA) 14,410 9,317 Depreciation and amortisation expense Earnings before interest and tax (EBIT) Finance costs (1,314) 13,096 (253) Profit from continuing operations before fair value adjustments 12,843 Fair Value adjustments to financial liabilities Profit before tax from continuing operations (191) 12,652 (479) 8,838 (94) 8,744 (38) 8,706 Income tax expense 6 (3,562) (2,830) Profit after tax from continuing operations Loss after tax from discontinued operations 32(b) Profit after tax 9,090 - 9,090 5,876 (221) 5,655 Total comprehensive income for the Year 9,090 5,655 Profit attributable to members of AMA Group Limited 9,090 5,655 Total comprehensive income attributable to members of AMA Group Limited Earnings per share From continuing operations Basic earnings per share Diluted earnings per share From continuing and discontinued operations Basic earnings per share Diluted earnings per share The accompanying notes form part of these financial statements 9,090 5,655 Cents Cents 2.72 2.72 2.72 2.72 1.76 1.76 1.70 1.70 AMA GROUP LIMITED ANNUAL REPORT 2015 27 For personal use only CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2015 __________________________________________________________________________________ 30 June 2015 30 June 2014 Note $'000 $'000 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Property, plant and equipment Intangibles Deferred tax assets Other Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Income tax payable Provisions Total current liabilities Non-current liabilities Borrowings Deferred tax liabilities Provisions Other Total non-current liabilities Total liabilities Net assets Equity Contributed equity Accumulated losses Total equity The accompanying notes form part of these financial statements 7 8 9 10 11 12 13 10 14 15 6 16 15 17 16 14 2,197 11,683 7,952 1,048 2,098 8,572 6,595 1,121 22,880 18,386 8,098 48,571 1,682 1,957 2,777 31,013 1,363 2,509 60,308 37,662 83,188 56,048 10,702 8,330 949 3,781 6,506 5 1,830 2,482 23,762 10,823 11 862 251 9,931 11,056 16 346 235 - 597 34,818 11,420 48,370 44,628 18 74,904 (26,534) 74,904 (30,276) 48,370 44,628 AMA GROUP LIMITED ANNUAL REPORT 2015 28 For personal use only STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2015 __________________________________________________________________________________ Contributed Equity $'000 Accumulated Total Losses $'000 $'000 Balance at 1 July 2013 73,971 (30,615) 43,356 Shares issued net of costs Dividends recognised for the period Profit attributable to members of AMA Group Limited Balance at 30 June 2014 Dividends recognised for the period Profit attributable to members of AMA Group Limited 933 - - 74,904 - - - (5,316) 5,655 (30,276) (5,348) 9,090 933 (5,316) 5,655 44,628 (5,348) 9,090 Balance at 30 June 2015 74,904 (26,534) 48,370 The accompanying notes form part of these financial statements AMA GROUP LIMITED ANNUAL REPORT 2015 29 For personal use only CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2015 __________________________________________________________________________________ CASH FLOWS RELATED TO OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest and other costs of finance paid Income taxes paid 30 June 2015 30 June 2014 Note $'000 $'000 101,901 (89,634) 4 (253) (4,198) 72,531 (64,775) 164 (93) (1,794) NET OPERATING CASH FLOWS 28 7,820 6,033 CASH FLOWS RELATED TO INVESTING ACTIVITIES Proceeds from sales of plant and equipment Payment for purchases of plant and equipment Payment for businesses acquired, net of cash acquired Payments for intangible assets 74 (2,336) (8,344) (87) 30 (325) (6,356) (75) NET INVESTING CASH FLOWS (10,693) (6,726) CASH FLOWS RELATED TO FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Dividends paid 19 NET FINANCING CASH FLOWS 39,767 (31,447) (5,348) 8,032 (19,050) (5,316) 2,972 (16,334) NET INCREASE IN CASH AND CASH EQUIVALENTS 99 (17,027) Cash and cash equivalents at the beginning of the Financial year 2,098 19,125 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 7 2,197 2,098 The accompanying notes form part of these financial statements AMA GROUP LIMITED ANNUAL REPORT 2015 30 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Notes Index Significant accounting policies ..................................................................................... 32 Note 1. Critical accounting estimates and judgements ............................................................... 43 Note 2. Segment information ................................................................................................. 43 Note 3. Revenue ................................................................................................................... 46 Note 4. Expenses from continuing operations ........................................................................... 46 Note 5. Income tax expense .................................................................................................. 47 Note 6. Cash and cash equivalents .......................................................................................... 47 Note 7. Trade and other receivables ........................................................................................ 48 Note 8. Note 9. Inventories ............................................................................................................... 49 Note 10. Other assets ............................................................................................................. 49 Note 11. Property, plant and equipment .................................................................................... 49 Note 12. Intangible assets ....................................................................................................... 50 Note 13. Deferred tax asset ..................................................................................................... 52 Note 14. Trade and other payables ........................................................................................... 52 Note 15. Borrowings ............................................................................................................... 53 Note 16. Provisions ................................................................................................................. 54 Note 17. Deferred tax liability .................................................................................................. 54 Note 18. Equity - issued capital & to be issued ........................................................................... 55 Note 19. Equity - dividends ...................................................................................................... 55 Note 20. Financial instruments ................................................................................................. 55 Note 21. Key management personnel disclosures ....................................................................... 59 Note 22. Remuneration of auditors ........................................................................................... 60 Note 23. Contingent liabilities .................................................................................................. 60 Note 24. Commitments for expenditure ..................................................................................... 61 Note 25. Related party transactions .......................................................................................... 61 Note 26. Subsidiaries .............................................................................................................. 62 Note 27. Events occurring after the reporting period ................................................................... 65 Note 28. Reconciliation of profit after income tax to net operating cash flows ................................. 65 Note 29. Earnings per share..................................................................................................... 65 Note 30. Share-based payments .............................................................................................. 66 Note 31. Parent Information .................................................................................................... 66 Note 32. Discontinued Operations ............................................................................................. 66 Note 33. Class order disclosures ............................................................................................... 67 AMA GROUP LIMITED ANNUAL REPORT 2015 31 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of accounting These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements comply with International Financial Reporting Standards (IFRSs). Historical cost convention These financial statements have been prepared under the historical cost convention, as modified where applicable by the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss and certain classes of property, plant and equipment. Critical accounting estimates The preparation of these financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 2. New accounting standards for application in future periods Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: - AASB 9: Financial Instruments and associated amending standards (applicable for annual reporting periods commencing on or after 1 January 2018) AASB 9 will be applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, revised recognition and de-recognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes made to the Standard that may affect the Group on initial application include certain simplifications to the classification of financial assets. Although the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, including hedging activity, it is impracticable at this stage to provide a reasonable estimate of such impact. - - AASB 15: Revenue from Contracts with Customers (applicable for annual reporting periods commencing on or after 1st January 2017) This standard, when effective, will replace the current accounting requirements applicable to revenue with a single, principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers. The core principle of AASB 15 is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step model: • • • determine the transaction price; • allocate the transaction price to the performance obligations in the contract; and • recognise revenue when (or as) the performance obligation is satisfied. AASB 15 also requires enhanced disclosures regarding revenues. This standard will require retrospective restatement and is available for early adoption. Although the directors anticipate that the adoption of AASB 15 may have an impact on the Group’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impacts. identify the contract(s) with a customer; identify the performance obligations in the contract(s); AASB 2014-1: Amendments to Australian Accounting Standards (Parts D and E) Part D of this Standard makes amendments to AASB 1 First-time Adoption of Australian Accounting Standards, which arise from the issuance of AASB 14 Regulatory Deferral Accounts in June 2014. Part D is applicable for annual reporting periods beginning on or after 1 January 2016. Part E of this standard which is applicable from financial years beginning on or after 1 January 2015 inter-alia defers the application date of AASB 9: Financial Instruments (December 2010) to annual reporting periods beginning on or after 1st January 2018. This part also makes consequential amendments to hedge accounting AMA GROUP LIMITED ANNUAL REPORT 2015 32 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ disclosures set out in AASB 7 Financial Instruments: Disclosures and to AASB 132 Financial Instruments: Presentation to permit irrevocable designation of ‘own use contracts’ as measured at fair value through profit or loss if the designation eliminates or significantly reduces an Accounting mismatch. - - - - - - - AASB 2014-3: Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations (applicable for annual reporting periods commencing on or after 1 January 2016). AASB 2014-3 amends AASB 11: Joint Arrangements to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendments require the acquirer of an interest in a joint operation: • in which the activity constitutes a business, as defined in AASB 3 Business Combinations, to apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting Standards except for those principles that conflict with the guidance in AASB 11; and • disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations. Since this standard will apply only to acquisition of interests in Joint operations on or after 1st January 2016, the management believes it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 2014-4: Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation This Standard applies to annual reporting periods beginning on or after 1 January 2016 and is meant to clarify that a revenue-based method to calculate the depreciation or amortisation of an asset is not appropriate and that the expected pattern of consumption of the future economic benefits from the asset is a more appropriate basis. However, this could be a rebuttable presumption in limited circumstances. These amendments are to be prospectively applied on transition. This Standard is not expected to significantly impact the Group’s financial statements. AASB 2014-5: Amendments to Australian Accounting Standards arising from AASB 15 This Standard makes consequential amendments to Australian Accounting Standards (including Interpretations) arising from the issue of AASB 15. This Standard applies to annual reporting periods beginning on or after 1st January 2017, except that the amendments to AASB 9 (December 2009) and AASB 9 (December 2010) apply to annual reporting periods beginning on or after 1st January 2018. This Standard shall be applied when AASB 15 is applied. Earlier application is permitted. This Standard is not expected to significantly impact the Group’s financial statements. AASB 2014-7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) This Standard gives effect to the consequential amendments to Australian Accounting Standards (including Interpretations) arising from the issue of AASB 9 (December 2014). More significantly, additional disclosure requirements have been added to AASB 7 Financial Instruments: Disclosures that includes information on credit risk exposures of the entity. It also makes various editorial corrections to Australian Accounting Standards (including an Interpretation). This Standard applies to annual reporting periods beginning on or after 1st January 2018. This Standard will be applied when AASB 9 (December 2014) is applied. Earlier application is permitted. This Standard is not expected to significantly impact the Group’s financial statements. AASB 2014-8: Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) - Application of AASB 9 (December 2009) and AASB 9 (December 2010) This Standard makes amendments to the earlier versions of AASB 9 (December 2014), namely AASB 9 (December 2009) and AASB 9 (December 2010) such that for annual Reporting periods beginning on or after 1st January 2015, an entity may apply AASB 9 (December 2009) or AASB 9 (December 2010) if, and only if, the entity’s date of initial application (as described in the applicable Standard) is before 1 February 2015. This Standard is not expected to significantly impact the Group’s financial statements. AASB 2014-9: Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements This Standard amends AASB 127, and consequentially amends AASB 1 and AASB 128, to allow entities to use the equity method of accounting for investments in subsidiaries, joint ventures and associates in their separate financial statements. It is applicable from annual reporting periods beginning on or after 1st January 2016. Earlier application is permitted. These amendments are to be prospectively applied on transition. This Standard is not expected to significantly impact the Group’s Consolidated financial statements. AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture This Standard amends AASB 10 and AASB 128 and requires: (a) a full gain or loss to be recognised when a transaction involves assets that meet the definition of ‘business’ as per AASB 3 Business Combinations (whether it is housed in a subsidiary or not); and (b) a partial gain or loss to be recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. AMA GROUP LIMITED ANNUAL REPORT 2015 33 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ The above amendments are applicable only to transactions occurring in annual reporting periods beginning on or after 1st January 2016 with earlier application being permitted. This Standard is not expected to significantly impact the Group’s Consolidated financial statements. - - - AASB 2015-1: Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012–2014 Cycle This standard is applicable from annual reporting periods beginning on or after 1st January 2016 with earlier application being permitted. Significant amendments to this standard that are to be prospectively applied include the following: a. Clarifications in AASB 5 Non-current Assets Held for Sale and Discontinued Operations that a change of status from ‘Held for Sale’ to ‘Held for distribution to owners or vice versa does not mean discontinuation of the original plan of proposal. b. Additional guidance in AASB 7 on assessment of ‘continuing involvement’ (as provided in AASB 139 or AASB 9) in servicing contracts for the purpose of disclosure requirements. c. Amendments to AASB 119 Employee Benefits to allow references to government bonds to be made from a currency perspective rather than from a regional perspective. d. Permitting the disclosures pursuant to AASB 134.16A to be given by cross referencing from the interim financial statements to some other statement (such as management commentary or risk report). This Standard is not expected to significantly impact the Group’s financial statements. AASB 2015-2: Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 This standard is applicable from annual reporting periods beginning on or after 1st January 2016 with earlier application being permitted. The amendments therein focus on clarifying the presentation and disclosure requirements in AASB 101, such that entities are able to judge appropriately as to how and/or what information is to be disclosed in their financial statements. Further, this standard also includes other editorial/consequential amendments to other AASB standards. This Standard is not expected to significantly impact the Group’s financial statements. AASB 2015-3: Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality This Standard completes the AASB project regarding the withdrawal of AASB 1031 Materiality (July 2004), by amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031 (July 2004) and deletes references to AASB 1031 in the Australian Accounting Standards listed in the Appendix to this Standard. The standard is applicable from 1st July 2015 and until then, AASB 1031 (December 2013) (that was earlier re-issued in lieu of AASB 1031 (July 2004)) will continue to act as a reference standard directing financial statement preparers to apply the materiality requirements in AASB 101 and AASB 108. This Standard is not expected to significantly impact the Group’s financial statements. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of AMA Group Limited ('Company' or 'Parent Entity') as at 30 June 2015 and the results of all subsidiaries for the year then ended. AMA Group Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity' or ‘group’. A list of the subsidiaries is provided in note 26. The separate financial statements of the parent entity, AMA Group Limited, have not been presented within this financial report as permitted by amendments made to the Corporations Act 2001 effective as at 28 June 2011. Parent information has been disclosed in note 31 to the financial statements Subsidiaries are all those entities over which the consolidated entity has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de- consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between companies in the consolidated entity are eliminated in full. Investments in subsidiaries are accounted for at cost less impairment, in the separate financial statements of the parent entity. Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional and presentation currency. AMA GROUP LIMITED ANNUAL REPORT 2015 34 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non- monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income. Revenue recognition Sales revenue represents revenue earned from the sale of the consolidated entity’s products and services, net of returns, trade allowances and duties and taxes paid. In the majority of cases the simple process of delivery of goods or service to a customer, where the risks and rewards of ownership pass to the customer, give rise to the recognition of income. The revenue recognition policy follows AASB 118 and revenue is recognised when all of the following criteria are met: - - - - - the consolidated entity has transferred to the buyer the significant risks and rewards of ownership of the goods. the consolidated entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. the amount of revenue can be measured reliably. it is probable that the economic benefits associated with the transaction will flow to the consolidated entity. the costs incurred or to be incurred in respect of the transaction can be measured reliably. All revenues are stated net of goods and services taxes. Interest revenue is recognised using the effective interest method. It includes amortisation of any discount or premium. Other revenue is recognised when it is received or when the right to receive payment is established. Grants and subsidies are recognised as income over the period to which they relate. Income tax The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities/(assets) are therefore measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense/(income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. AMA GROUP LIMITED ANNUAL REPORT 2015 35 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation AMA Group Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities /(assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The Group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 1 September 2006. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Trade receivables All trade receivables are recognised at the amounts receivable as they are due for settlement by no more than 90 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is raised when some doubt as to collection exists. Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Investments and other financial assets Investments and other financial assets are stated at the lower of their carrying amount and fair value less costs to sell. The fair values of quoted investments are based on current bid prices. For unlisted investments, the consolidated entity establishes fair value by using valuation techniques. These include the use of recent arms- length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models. Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value less any accumulated depreciation. The carrying amount of plant and equipment is reviewed annually to ensure it is not in excess of the recoverable amount from these assets. Depreciation is calculated on either a straight line or diminishing value basis (class or asset must have either a straight line or diminishing value not both) as considered appropriate to write off the net cost or re-valued amount of each item of plant and equipment over its expected useful life to the consolidated entity. The expected useful lives are as follows:- AMA GROUP LIMITED ANNUAL REPORT 2015 36 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Leasehold improvements The cost of improvements to or on leasehold properties is amortised over the unexpired life of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. The diminishing value method of depreciation was used. Plant and equipment The expected useful life of purchased plant and equipment is two to fifteen years. Where items of plant and equipment have separately identifiable components which are subject to regular replacement, those components are assigned useful lives distinct from the item of plant and equipment to which they now relate. The diminishing value method of depreciation was used. Furniture and equipment The cost of furniture and equipment is carried at cost or fair value less any accumulated depreciation. The expected useful life of furniture and equipment is two to ten years. The diminishing value method of depreciation was used. Motor vehicles The cost of motor vehicles is carried at cost or fair value less any accumulated depreciation. The expected useful life of motor vehicles is four to eight years. The diminishing value method of depreciation was used. Leases A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs. The leased asset is depreciated on a straight line basis over the term of the lease, or where it is likely that the consolidated entity will obtain ownership of the asset, the life of the asset. Leased assets held at the reporting date are being amortised over periods ranging from three to five years. Other operating lease payments are charged to the statement of comprehensive income in the period in which they are incurred, as this represents the pattern of benefits derived from the leased assets. Intangible assets Goodwill Goodwill is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess of the sum of: (i) (ii) (iii) the consideration transferred; any non-controlling interest; and the acquisition date fair value of any previously held equity interest, over the acquisition date fair value of net identifiable assets acquired. The value of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the aforementioned non-controlling interest. The Group can elect to initially measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets (proportionate interest method). The Group determines which method to adopt for each acquisition based on the entitlement of non-controlling interest to a proportionate share of the subsidiary net assets. Under the full goodwill method, the fair values of the non-controlling interests are determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested for impairment annually and is allocated to the Group’s cash generating units or groups of cash generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold. AMA GROUP LIMITED ANNUAL REPORT 2015 37 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do not affect the carrying values of goodwill. Research and Development Expenditure on research activities, undertaken with the prospect of obtaining new or scientific or technical knowledge and understanding, is recognised in the Statement of Comprehensive Income as an expense when it is incurred. Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial product or use, is capitalised only when technical feasibility studies identify that the product or service will deliver future economic benefits and these benefits can be measured reliably. Expenditure on development activities have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful economic life of the product or service. Patents and trademarks Patents and trademarks are recognised at the cost of acquisition. Patents and trademarks have a finite life and are carried at cost less accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their estimated useful life of 5 years. Customer contracts Customer contracts are recognised at the fair value at acquisition. Customer contracts have a finite life and are carried at cost less accumulated amortisation and any impairment losses. Customer contracts are amortised over the lesser of the remainder of the contract or their estimated useful life relevant to each specific contract. Impairment of assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30-45 days of recognition. Other payables not due within a year are measured less cumulative amortisation calculated using the effective interest method. Onerous leases Represents contracts entered into in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The excess of the lease obligations over the expected economic benefits is expensed in the period that the contract becomes onerous. The liability represents the present value of the minimum lease payments and is held on the statement of financial position until it is extinguished. Borrowings Loans are carried at their principal amounts which represent the present value of future cash flows associated with servicing debt. Interest is accrued over the period it becomes due and unpaid interest is recorded as part of current payables. Interest free loans are recorded at their fair value. Discounted cash flow models are used to determine the fair values of the loans. Finance costs Finance costs are recognised as expenses in the period in which they are incurred. Finance costs include interest on: - - Short term and long term borrowings Finance leases AMA GROUP LIMITED ANNUAL REPORT 2015 38 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Provisions Provisions are recognised when the consolidated entity has a present obligation (legal or constructive) as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Employee benefits Wages and salaries and annual leave Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the end of the reporting period are recognised in other payables and provisions in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave is recognised in provisions and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date at present value. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Share-based payments Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black Scholes option pricing model. The expected value used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, other risk factors and behavioural considerations. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight- line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest. For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at the end of the reporting period. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the financial year but not distributed at the end of the reporting period. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent recognises, in the consolidated accounts, and subject to certain limited exceptions, the acquisition date fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured. The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree. AMA GROUP LIMITED ANNUAL REPORT 2015 39 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office (ATO). In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included in other receivables or other payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the ATO, are presented as operating cash flows. Financial instruments Recognition and initial measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. AMA GROUP LIMITED ANNUAL REPORT 2015 40 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Amortised cost is calculated as: the amount at which the financial asset or financial liability is measured at initial recognition; less principal repayments; a. b. c. plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and less any reduction for impairment. d. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. i. Financial assets at fair value through profit or loss Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. ii. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after reporting date. (All other loans and receivables are classified as non-current assets.) iii. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Held-to-maturity investments are included in non-current assets, except for those that are expected to mature within 12 months after reporting date, which are classified as current assets. If during the period the Group sold or reclassified more than an insignificant amount of the held-to-maturity investments before maturity, the entire held-to-maturity investments category would be tainted and reclassified as available-for-sale. iv. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. Available-for-sale financial assets are included in non-current assets, except for those that are expected to be disposed of within 12 months after reporting date, which are classified as current assets. v. Financial liabilities All non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost except for the interest free loan, which was designated as a financial liability at fair value through profit or loss. This is because the interest free loan: (a) contains an embedded derivative in the form of a put option; and (b) the embedded derivative has the potential to significantly modify the cash flows that otherwise would be required by the loan contract by permitting the entity to put the loan back to the lender at a significant discount to the original loan amount. AMA GROUP LIMITED ANNUAL REPORT 2015 41 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted financial instruments, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the statement of comprehensive income. Financial guarantees Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118. The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on: — the likelihood of the guaranteed party defaulting in a year period; — the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and — the maximum loss exposed if the guaranteed party were to default. De-recognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. When the Group applies an accounting policy retrospectively, makes a retrospective restatement or reclassifies items in its financial statements, a statement of financial position as at the beginning of the earliest comparative period will be disclosed. Non-current assets held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specially exempt from this requirement. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of de-recognition. AMA GROUP LIMITED ANNUAL REPORT 2015 42 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co- ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Comprehensive Income. Rounding of amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the 'rounding-off' of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. Note 2. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the consolidated entity and that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equate with the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Impairment of Goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the consolidated entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Refer to note 12 for details of key assumptions used to calculate the recoverable amount of goodwill. Critical judgements in applying the consolidated entity's accounting policies We have applied a discount factor on the vendor payables to determine the amortised cost. We have applied a discount factor and a probability factor on the earn-out components to determine the fair value. The interest expense and the fair value adjustment have been taken to the Statement of Comprehensive Income. The carrying value of the deferred vendor payables, including earn-outs incorporate a number of assumptions. Refer to note 15 for further details. Note 3. Segment information Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief Executive Officer (chief operating decision maker) in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis of product category and service offerings since the diversifications of the Group’s operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics with respect to the products sold and/or services provided by the segment. AMA GROUP LIMITED ANNUAL REPORT 2015 43 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Services Provided by Segments • Vehicle Protection Products & Accessories – Manufacture & distribution of motor vehicle protective bars. • Vehicle Panel Repair – Motor vehicle panel repairs. • Automotive Electrical & Cable Accessories – Distribution of motor vehicle electrical & cable accessories. • Automotive Component Remanufacturing – Motor vehicle component remanufacturing & repairs. Basis of accounting for purposes of reporting by operating segments Accounting policies adopted Unless stated otherwise, all amounts reported to the Chief Executive Officer as the chief decision maker with respect to operating segments are determined in accordance with the Group’s accounting policies. The gross margin of the panel repair segment, as presented to the Chief Executive Officer, does not include direct labour costs or an allocation of overheads. Inter-segment transactions All inter-segment transactions are eliminated on consolidation for the Group’s financial statements. Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. Segment liabilities Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. Unallocated items The following items of revenue, expense, assets and liabilities are not allocated to operating segments, other than for direct labour for panel segment, as they are not considered part of the core operations of any segment: • • • • • • • • • • derivatives; impairment of assets and other non-recurring items of revenue or expense; income tax expense; deferred tax assets and liabilities; other financial liabilities; fixed manufacturing & service costs and other cost of sales adjustments; finance costs; dividend payments; intangible assets; and discontinued operations. Business segments 30 June 2015 Revenue External Sales Other Income Total Sales & Other Income Unallocated Revenue Total Revenue Result Segment Gross Margin Unallocated Expenses Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 42,465 2 42,467 26,766 933 27,699 16,812 132 16,944 9,022 344 9,366 26,171 11,527 5,538 3,777 95,065 1,411 96,476 (702) 95,774 47,063 (34,220) 12,843 Profit from continuing operations before impairment and fair value adjustments (191) Fair value adjustments Profit from continuing operations before income tax expense 12,652 Note: Panel Repair Gross Margin does not include direct labour or an allocation for overheads. These costs are allocated to unallocated expenses. AMA GROUP LIMITED ANNUAL REPORT 2015 44 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ 30 June 2015 Other Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 Acquisition of Non-Current Segment Assets Unallocated 1,799 397 171 Depreciation and Amortisation of Segment Assets Unallocated 855 257 119 Other Non-Cash Segment Expenses - - - 58 83 - 2,425 1 2,426 1,314 - 1,314 - 30 June 2015 Assets Segment Assets Unallocated Assets Total Assets Liabilities Segment Liabilities Unallocated Liabilities Total Liabilities Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 13,795 13,542 6,497 2,912 7,587 2,922 1,642 1,496 36,746 46,442 83,188 13,647 21,171 34,818 Geographical segments: The group only operates within one geographical area, Australia. 30 June 2014 Revenue External Sales Other Income Total Sales & Other Income Unallocated Revenue Total Revenue Result Segment Gross Margin Unallocated Expenses Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 14,467 31 14,498 23,808 923 24,731 17,725 230 17,955 7,477 306 7,783 8,469 11,508 6,625 2,703 63,477 1,490 64,967 (708) 64,259 29,305 (20,561) 8,744 (38) 8,706 Profit from continuing operations before impairment and fair value adjustments Fair value adjustments Profit from continuing operations before income tax expense Note: Panel Repair Gross Margin does not include direct labour or an allocation for overheads. These costs are allocated to unallocated expenses. 30 June 2014 Other Acquisition of Non-Current Segment Assets Unallocated Depreciation and Amortisation of Segment Assets Unallocated Other Non-Cash Segment Expenses Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 6 16 203 175 89 - 184 116 87 - 400 - 400 476 3 479 - AMA GROUP LIMITED ANNUAL REPORT 2015 45 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ 30 June 2014 Assets Segment Assets Unallocated Assets Total Assets Liabilities Segment Liabilities Unallocated Liabilities Total Liabilities Vehicle Panel Repair $'000 Vehicle Protection Products & Accessories $'000 Automotive Electrical & Cable Accessories $'000 Automotive Component Remanufacturing Total $'000 $'000 2,937 14,833 6,236 2,413 2,084 3,220 1,637 1,122 26,419 29,629 56,048 8,063 3,357 11,420 Geographical segments: The group only operates within one geographical area, Australia. Major customers The Group has a number of customers to whom it provides both products and services. The Group supplies a single external customer in the vehicle panel repair segment who accounts for 20.8% of external revenue (2014: 11.1%). The next most significant client accounts for 4.5% (2014: 3.3%) of external revenue. Note 4. Revenue From Continuing Operations Sales Revenue Sale of goods Service and hire Other Revenue Interest Received Other Revenue Note 30 June 2015 $'000 30 June 2014 $'000 51,896 42,466 94,362 4 1,408 1,412 48,224 14,467 62,691 164 1,404 1,568 Revenue from Continuing Operations excluding fair value adjustments 95,774 64,259 Note 5. Expenses from continuing operations Profit before income tax includes the following specific expenses: Raw materials and consumables used 41,944 29,441 30 June 2015 $'000 30 June 2014 $'000 Finance costs Interest and finance charges paid/payable Rental expense relating to operating leases Minimum lease payments Defined contribution superannuation expense Bad debts expense Stock obsolescence expense Loss/(Profit) on disposal of assets 253 94 4,146 2,325 20 20 25 2,319 1,354 48 212 (14) AMA GROUP LIMITED ANNUAL REPORT 2015 46 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 6. Income tax expense 30 June 2015 30 June 2014 Note $'000 $'000 Income tax expense Deferred tax Current year tax instalments paid during the year Other (Over)/Under provision in respect of prior year Current tax payable Aggregate income tax expense Deferred income tax expense included in income tax expense comprises: 13 Decrease/(increase) in deferred tax assets 17 (Decrease)/increase in deferred tax liabilities Numerical reconciliation of income tax expense to prima facie tax payable: Profit before income tax (expense)/benefit Tax at the Australian tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Other non-deductible items Recoupment of capital losses not previously brought to account Adjustment to losses on debt forgiveness (Over)/Under provision in respect of prior year Income tax expense Income tax expense attributable to continuing operations Income tax expense attributable to discontinued operations Income tax expense 32c 389 2,218 24 (18) 949 3,562 (127) 516 389 12,652 3,796 182 (398) - (18) 3,562 3,562 - 3,562 245 932 11 (142) 1,830 2,876 2,337 (2,092) 245 8,531 2,559 94 11 354 (142) 2,876 2,830 46 2,876 The applicable weighted average effective tax rates are as follows: 28.2% 33.7% The consolidated entity is part of a tax consolidation group. See the income tax accounting policy in note 1. Note 7. Cash and cash equivalents Cash on hand Cash at bank 30 June 2015 $'000 30 June 2014 $'000 10 2,187 2,197 8 2,090 2,098 Cash at the end of the period as shown in the Statement of Cash Flows is reconciled to the Statement of Financial Position as follows: Balances as above Balance as per statement of cash flows 30 June 2015 $'000 30 June 2014 $'000 2,197 2,197 2,098 2,098 AMA GROUP LIMITED ANNUAL REPORT 2015 47 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 8. Trade and other receivables Current Trade receivables Less provision for impairment of receivables Other receivables 30 June 2015 $'000 30 June 2014 $'000 8,542 (50) 8,492 3,191 11,683 7,508 (93) 7,415 1,157 8,572 There were no non-current trade or other receivables in either reported year. Bad and doubtful trade receivables The consolidated entity has recognised a provision of $50,000 (2014: $93,000) in respect of bad and doubtful trade receivables during the year ended 30 June 2015. Impairment of receivables The ageing of the provision for impairment of trade receivables recognised above is as follows: 3 to 6 months Over 6 months 30 June 2015 $'000 30 June 2014 $'000 50 - 50 93 - 93 Movements in the provision for impairment of trade receivables are as follows: Opening balance Business acquisition Additional provisions recognised/(released) Receivables written off/(back-in) during the year as uncollectible Closing balance 30 June 2015 $'000 30 June 2014 $'000 93 22 (140) 74 50 53 - 32 8 93 Past due but not impaired Customers with balances past due but without provision for doubtful debts amount to $266,000 at 30 June 2015 (2014: $334,000). Management did not consider a credit risk on the aggregate balances after reviewing agency credit information and recognising a tacit extension to the recorded credit terms of customers based on recent collection practices. The balances of receivables that remain within initial trade terms (as detailed in table) are considered to be of high credit quality. The ageing of the past due but not impaired receivables shown below: 1 to 3 months 3 to 6 months Over 6 months Closing balance 30 June 2015 $'000 30 June 2014 $'000 266 - - 266 334 - - 334 AMA GROUP LIMITED ANNUAL REPORT 2015 48 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 9. Inventories Raw materials Work in progress Finished goods All amounts are shown at the lower of cost or net realisable value Note 10. Other assets Current Prepayments Non-Current Prepayments Note 11. Property, plant and equipment Leasehold improvements - at cost less accumulated amortisation Plant & equipment - at cost less accumulated depreciation Furniture & equipment - at cost less accumulated depreciation Motor vehicles - at cost less accumulated depreciation 30 June 2015 $'000 30 June 2014 $'000 873 1,062 6,017 7,952 672 402 5,521 6,595 30 June 2015 $'000 30 June 2014 $'000 1,048 1,048 1,957 1,957 1,121 1,121 2,509 2,509 30 June 2015 $'000 30 June 2014 $'000 1,983 (283) 1,700 9,053 (3,604) 5,449 1,156 (585) 571 868 (490) 378 8,098 639 (108) 531 4,300 (2,406) 1,894 849 (641) 208 453 (309) 144 2,777 Reconciliations Reconciliations of the fair values at the beginning and end of the current and previous financial year are set out below: Leasehold improvements Plant & Equipment Furniture & Equipment Motor vehicles Total $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2013 Additions Business acquisition Disposals Depreciation expense Balance at 30 June 2014 185 63 319 - (36) 531 1,137 238 872 (1) (352) 1,894 179 11 46 - (28) 208 60 13 133 (16) (46) 144 1,561 325 1,370 (17) (462) 2,777 AMA GROUP LIMITED ANNUAL REPORT 2015 49 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Leasehold improvements Plant & Equipment Furniture & Equipment Motor vehicles Total $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2014 Additions Business acquisitions Disposals Depreciation expense Balance at 30 June 2015 531 657 629 - (117) 1,700 1,894 1,425 2,881 (110) (641) 5,449 208 238 296 (26) (145) 571 144 84 293 (76) (67) 378 2,777 2,404 4,099 (212) (970) 8,098 Note 12. Intangible assets Goodwill - at cost Less impairment Patents & Trademarks Less amortisation Customer contracts Less amortisation 30 June 2015 $'000 30 June 2014 $'000 71,584 (23,828) 47,756 131 (48) 83 1,048 (316) 732 48,571 54,762 (23,828) 30,934 99 (20) 79 - - - 31,013 Reconciliations Reconciliations of the carrying amounts at the beginning and end of the current and previous financial year are set out below: Goodwill $'000 Patents & Trademarks $’000 Customer Contracts $’000 Total $,000 Balance at 1 July 2013 Additions Amortisation expense Balance at 30 June 2014 Additions and adjustment Acquired Amortisation expense Balance at 30 June 2015 27,250 3,684 - 30,934 16,822 - - 47,756 21 75 (17) 79 11 21 (28) 83 - - - - - 1,048 (316) 732 27,271 3,759 (17) 31,013 16,833 1,069 (344) 48,571 Goodwill is allocated to cash-generating units (CGU) which are based on the consolidated entity’s operating segments as per the table on the following page: Vehicle Protection Products & Accessories Vehicle Panel Repair Automotive Electrical & Cable Accessories Automotive Component Remanufacturing 30 June 2015 $'000 30 June 2014 $'000 11,514 27,067 7,349 1,826 47,756 11,563 10,196 7,349 1,826 30,934 The recoverable amount of the consolidated entity’s goodwill has been determined by a value-in-use calculation using a discounted cash flow model, based on 5-year cash projection budgets approved by the Board, using the key assumptions detailed on the next page: AMA GROUP LIMITED ANNUAL REPORT 2015 50 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Automotive Electrical & Cable Accessories Automotive Component Remanufacturing Vehicle Protection Products & Accessories Vehicle Panel Repair Motor Vehicle Accessory Distribution Cable & Accessory Distribution Motor Vehicle Transmission Repair All Other Segments Growth Rate % Pre-tax discount rate % 0 8.22 0 8.22 0 8.97 0 9.72 0 9.47 0 11.22 The value in use calculations use historical weighted average growth rates to project revenue & costs and management’s best estimates of what it believes will occur in future years. Due to the current effects of the economic environment on the automotive industry, the Company has adopted a conservative approach and used growth rates of 0%. The discount rates of 8.22% to 11.22% pre-tax reflect management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital adjusted for additional risk factors associated with each segment. Impact of possible changes in key assumptions Vehicle Protection Products & Accessories Segment If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would not be required to recognise any further impairment of goodwill in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (9.22% instead of 8.22%), the group would not be required to recognise any further impairment of goodwill in relation to this CGU. Vehicle Panel Repair Segment If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would not be required to recognise any further impairment of goodwill in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (9.22% instead of 8.22%), the group would not be required to recognise any further impairment of goodwill in relation to this CGU. Automotive Electrical & Cable Accessories Segment – Motor Vehicle Accessory Distribution If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would be required to recognise an impairment of goodwill of $714,631 (2014: $112,770) in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (9.97% instead of 8.97%), the group would be required to recognise an impairment of goodwill of $725,706 (2014: $27,272) in relation to this CGU. Automotive Electrical & Cable Accessories Segment – Cable & Accessory Distribution If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would not be required to recognise an impairment of goodwill in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (10.72% instead of 9.72), the group would not be required to recognise an impairment of goodwill in relation to this CGU. Automotive Component Remanufacturing Segment – Motor Vehicle Transmission Repair If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would not be required to recognise any further impairment of goodwill in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (10.47% instead of 9.47%), the group would not be required to recognise any further impairment of goodwill in relation to this CGU. AMA GROUP LIMITED ANNUAL REPORT 2015 51 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Automotive Component Remanufacturing Segment – All Other Segments If the base EBIT used in the value-in-use calculation for this CGU had decreased by 10% and then remained constant with no further growth applied, the group would not be required to recognise any further impairment of goodwill in relation to this CGU. If the estimated pre-tax discount rate for this CGU had been 1% higher than management’s estimates (12.22% instead of 11.22%), the group would not be required to recognise any further impairment of goodwill in relation to this CGU. Note 13. Deferred tax asset The balance comprises temporary differences attributable to: Amounts recognised in the statement of comprehensive income: Doubtful debts Employee benefits Accrued expenses Inventory Other (S40-880) Legal fees Amounts recognised in equity: Transaction costs on share issue Deferred tax asset 30 June 2015 $'000 30 June 2014 $'000 15 1,315 107 130 46 1 1,614 68 68 1,682 28 879 129 138 16 3 1,193 170 170 1,363 At 30 June 2015 the consolidated entity has no un-recouped revenue losses. (2014: nil). At 30 June 2015, the consolidated entity has estimated un-recouped capital losses of $3,747,900 (2014: $5,072,900) none of which have been brought to account as a deferred tax asset. The benefit of these losses will only be obtained if: (i) The companies derive future assessable income of a nature and an amount sufficient to enable the benefits from the deductions for the losses to be realised. (ii) The companies continue to comply with the conditions for deductibility imposed by the law. (iii) No changes in tax legislation adversely affect the companies in realising the benefit from the deductions for the losses. Note 14. Trade and other payables Current Trade payables Deferred consideration - key vendors Other payables Non-current Deferred consideration - key vendors Note 30 June 2015 $'000 30 June 2014 $'000 14a 14a 7,266 323 3,113 10,702 9,931 9,931 4,304 196 2,006 6,506 - - a) The Company has deferred and contingent consideration to Key Vendors for $11,078,456 (2014: $196,250) which, as per the relevant business purchase agreement includes amounts for performance based earn-outs to be paid in a mixture of shares and cash. The present value of the liability is $10,453,714 (2014: $196,250). Refer to note 20 for further information on how fair value has been determined for contingent consideration. AMA GROUP LIMITED ANNUAL REPORT 2015 52 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 15. Borrowings Current Bank bills commercial loan Lease liability Non-current Bank bills commercial loan Lease liability 30 June 2015 $'000 30 June 2014 $'000 7,777 553 8,330 - 11 11 - 5 5 - 16 16 During the current financial year, the Company negotiated two further extensions of the commercial loan facility. The current facility allows the company to draw-down up to $12m on an interest only basis until 31 December 2015 at which point the facility reduces to $10m through to 24 November 2016. The amount outstanding at 30 June 2015 is reflected as a current liability because it was fully repaid on 6 July 2015. The commercial facility includes the following covenants:- - - - provide copies of quarterly management financial reports achievement of interest cover ratio targets achievement of equity ratio targets Total secured liabilities The total secured liabilities (current and non-current) are as follows: Bank bills commercial loan Lease liability 30 June 2015 $'000 30 June 2014 $'000 7,777 564 8,341 - 21 21 Assets pledged as security The bank bills are secured by a fixed and floating charge over all of the assets and uncalled capital of AMA Group Limited and all of its subsidiaries. The lease liabilities were effectively secured as the rights to the leased assets recognised in the Statement of Financial Position revert to the lessor in the event of default. Financing arrangements Unrestricted access was available at the end of the reporting period to the following lines of credit: Bank bills commercial loan facility Used at balance date 30 June 2015 $'000 30 June 2014 $'000 12,000 7,777 - - AMA GROUP LIMITED ANNUAL REPORT 2015 53 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 16. Provisions Current Annual leave Long service leave Dividends Non-current Long service leave 30 June 2015 $'000 30 June 2014 $'000 2,070 1,592 119 3,781 251 251 1,439 974 69 2,482 235 235 Movements in provisions Movements in each class of provision during the current financial year, other than employee benefits, are set out below: Carrying amount at beginning of year Arising during the year Utilised Carrying amount at end of year Dividends 69 50 - 119 Total 69 50 - 119 Amounts not expected to be settled within the next 12 months The current provision for annual leave is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave within the next 12 months. The current provision for long service leave includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. The following amounts reflect leave that is classified as a current liability but is not expected to be taken within the next 12 months: Annual leave obligation expected to be settled after 12 months Long service leave obligation to be settled after 12 months Note 17. Deferred tax liability Note 30 June 2015 $'000 30 June 2014 $'000 1,061 722 1,783 529 554 1,083 The balance comprises temporary differences attributable to: Amounts recognised in statement of comprehensive income: Sundry debtors Sundry items Deferred tax liability 30 June 2015 $'000 30 June 2014 $'000 843 19 862 330 16 346 AMA GROUP LIMITED ANNUAL REPORT 2015 54 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 18. Equity - issued capital & to be issued Note 30 June 2015 Shares 30 June 2014 Shares 30 June 2015 30 June 2014 $'000 $'000 Ordinary Shares - fully paid 18a 334,250,963 334,250,963 334,250,963 334,250,963 74,904 74,904 74,904 74,904 18a) Movements in ordinary share capital Details Date Qty of Shares Issue price Opening Balance 1 July 2013 331,438,776 Shares issued to employees Shares issued to employees 23/08/2013 16/10/2013 798,910 2,013,277 $0.3142 $0.3390 Closing Balance at 30 June 2014 334,250,963 No shares were issued during the year Closing Balance at 30 June 2015 334,250,963 $'000 73,971 251 682 74,904 74,904 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote and, upon a poll, each share is entitled to one vote. Note 19. Equity - dividends On 29 August 2014 the Company declared a dividend (fully franked at 30%) and $5.316 million was paid on 3 December 2014. (2014: On 17 September 2013 the Company declared a dividend (95% franked at 30%) and $5.316 million was paid on 7 November 2013) 30 June 2015 $'000 30 June 2014 $'000 Franking credits available for subsequent financial years based on tax rate of 30% 1,832 93 The aforementioned amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: • • • franking credits that will arise from the payment of the amount of the provision for income tax franking credits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Note 20. Financial instruments Financial risk management objectives The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk, and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk and ageing analysis for credit risk. Risk management is carried out by senior management under policies approved by the board of directors. Management identifies, evaluates and mitigates financial risks within the consolidated entity's operating units. Market risk Foreign currency risk The consolidated entity continues to make purchases in US Dollars and therefore is exposed to foreign currency risk through foreign exchange rate fluctuations. The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the end of the reporting period were as per the table on the following page: AMA GROUP LIMITED ANNUAL REPORT 2015 55 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Consolidated US Dollar Assets Liabilities 30 June 2015 $'000 30 June 2014 $'000 30 June 2015 $'000 30 June 2014 $'000 - - - - 393 393 209 209 The consolidated entity had liabilities denominated in US Dollars of AUD $393,000 as at 30 June 2015 (2014: AUD $209,000). Based on this exposure, had the Australian Dollar weakened/strengthened by 10% against the US Dollar with all other variables held constant, the consolidated entity's result for the year and equity would have been $36,000 higher/lower. There were no assets or liabilities denominated in any other foreign currencies, other than US Dollars as at 30 June 2015 or as at 30 June 2014. The foreign exchange (loss)/gain for the year ended 30 June 2015 was ($3,000) (2014: $76,000 gain). The consolidated entity does not employ foreign currency hedges and has no official foreign currency policy. If the transactional value, net asset position and overall exposure were to increase it is likely that a policy will be adopted to mitigate risk. Price risk The consolidated entity and parent entity are not exposed to any significant price risk. Interest rate risk The consolidated entity and parent entity's main interest rate risk arises from short and long-term borrowings. All borrowings are issued at variable rates and this exposes the consolidated entity and parent entity to interest rate risk. The consolidated entity and parent entity attempt to mitigate this interest rate risk exposure by maintaining an adequate interest cover ratio and gearing ratio that ensures financing costs are not significant costs. The consolidated entity had bank bills outstanding as at 30 June 2015 of $7,777,000 (2014: $Nil). The consolidated entity has a commercial loan facility, now being interest only bank bills up to $12m. The consolidated entity aims to minimise the finance costs by minimising the outstanding balance at all times. Credit risk Credit risk is managed on a consolidated entity basis. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit and obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk, excluding the value of any collateral or other security, at the end of the reporting period to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements. As at 30 June 2015 the consolidated entity had no significant concentration of credit risk. Liquidity risk The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The consolidated entity has a process of monitoring overall cash balances on a strategic long term basis and at an operational level on a weekly basis. This is to ensure ongoing liquidity, prompt decision making and allow proactive communication with its funders. The consolidated entity’s current focus is to ensure it meets debt covenants, reduces debt, reduces costs and focuses on its current operations in the automotive aftercare market. Financing arrangements On 29 August 2014 the Company extended the bank facility to allow the Company to draw-down up to $10m (an extension of $2m) on normal commercial terms and on 23 December 2014 the Company further extended the bank facility to allow the Company to draw-down up to $12m (an extension of $2m) on normal commercial terms and this funding continues to be available to help fund earnings accretive acquisitions or other working capital needs. During the 2015 financial year, the consolidated entity has met all of the obligations under the financing arrangements. AMA GROUP LIMITED ANNUAL REPORT 2015 56 For personal use only 7,266 3,113 11,208 564 7,777 29,928 Total contractual maturities NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instruments. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the consolidated entity can be required to pay. The tables include both interest and principal cash flows, disclosed as remaining contractual maturities and these totals differ from their carrying amount in the statement of financial position for interest-bearing liabilities due to the interest component. 2015 Weighted average interest rate % 1 year or less Over 1 to 2 years Over 2 to 5 years Over 5 years Total contractual maturities $'000 $'000 $'000 $'000 $'000 Non-derivatives Non-interest bearing Trade payables Other payables Deferred cash consideration Interest bearing - variable rate Lease liability Bank bills commercial loan Total non-derivatives 6.76% 4.67% 7,266 3,113 330 553 11,262 10,878 10,878 11 7,777 7,788 2014 Weighted average interest rate % Non-derivatives Non-interest bearing Trade payables Other payables Deferred cash consideration Interest bearing - variable rate Lease liability Bank bills commercial loan Total non-derivatives 6.76% Fair value of financial instruments 1 year or less Over 1 to 2 years Over 2 to 5 years Over 5 years $'000 $'000 $'000 $'000 $'000 4,304 2,006 196 5 - 6,511 - - - 5 - 5 - - - 11 - 11 - - - - - - 4,304 2,006 196 21 - 6,527 The carrying amounts of financial instruments reflect their fair value. The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: • quoted prices in active markets for identical assets or liabilities (Level 1); • inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and • inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). 2015 Financial Liabilities Vendor loan 2014 Financial Liabilities Vendor loan Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - - - 10,454 10,454 10,454 10,454 Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - 196 196 - - 196 196 AMA GROUP LIMITED ANNUAL REPORT 2015 57 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ The fair value of the vendor loans included in Level 2 of the hierarchy has been determined using valuation techniques incorporating observable direct and indirect market data relevant to the Company. The fair value of the interest free loan included in Level 3 of the hierarchy has been determined using valuation techniques incorporating observable direct and indirect market data relevant to the Company and an estimation of the probability on paying the full amount of the calculate deferred settlements and earn-outs arising during the year. Level 3 items are reconciled below Carrying amount at beginning of year Arising during the year Fair Value adjustment Repaid 6 August 2013 Carrying amount at end of year 30 June 2015 $'000 30 June 2014 $'000 - 9,307 (856) - 8,451 5,436 - (5,436) - On 1 July 2014 the parent entity acquired RMA. In acquiring RMA, the Group incurred a contingent consideration liability consisting of an obligation to provide shares in the parent entity and make an additional cash payment to the vendor if the average profits of RMA for the 2015 to 2017 financial years exceed a pre-specified target level. The fair value of the contingent consideration (2015: $6,030,697) is measured using a discounted cash flow methodology and determined on the basis of the possible average profit figures of the subsidiary, weighted by the probability of each scenario. The discount rate used is based on the Group’s weighted average cost of capital. On 1 February 2015 the parent entity acquired BMB Prestige Collision Repairs & Browns Motors. In acquiring these operations, the Group incurred a contingent consideration liability consisting of an obligation to provide shares in the parent entity and make an additional cash payment to the vendor if the average profits of BMB Prestige Collision Repairs & Browns Motors for the 36 months following acquisition exceed a pre-specified target level. The fair value of the contingent consideration (2015: $3,276,305) is measured using a discounted cash flow methodology and determined on the basis of the possible average profit figures of the subsidiary, weighted by the probability of each scenario. The discount rate used is based on the Group’s cost of debt. The following table provides quantitative information regarding the significant unobservable inputs, the ranges of those inputs and the relationships of unobservable inputs to the fair value measurement: Significant Unobservable Inputs Used Range of Unobservable Inputs Used Estimated Sensitivity of Fair Value Measurement to Changes in Unobservable Inputs Anticipated annual growth rate in RMA profits – 17.5% in 2016 and 7% in 2017 Anticipated annual growth rate in BMB profits – 5% 16.5%– 18.5% & 6% - 8% 4%– 6% Discount rate (risk adjusted) –4.67% 4.57%– 4.77% If expected annual growth rate is 1% higher/lower, the fair value would increase/decrease by $Nil/$49,451 If expected annual growth rate is 1% higher/lower, the fair value would increase/decrease by $37,947/$37,703 If discount rate is 0.1% (10 bps) higher/lower, the fair value of the total deferred consideration would decrease/ increase by $20,237/$20,302 Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. The consolidated entity’s capital includes ordinary share capital, a bank bills loan facility, vendor loans and lease liabilities supported by financial assets. There are no externally imposed capital requirements. Borrowings Interest free vendor loans Less: Cash & cash equivalents Net (cash) / debt Note 15 14a 7 30 June 2015 $'000 30 June 2014 $'000 8,341 10,454 (2,197) 16,598 21 196 (2,098) (1,881) AMA GROUP LIMITED ANNUAL REPORT 2015 58 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Ordinary Shares (market price) Total capital Gearing ratio 200,551 217,148 8% 95,262 93,381 - Ordinary share value calculated using closing share prices as at 30 June each year. The consolidated entity may issue new shares or sell assets to either reduce debt or to invest in income producing assets. This is decided on the basis of maximising shareholder returns over the long term. Note 21. Key management personnel disclosures Directors The following persons were directors of AMA Group Limited during the financial year: Ray Malone Simon Doyle Ray Smith-Roberts Hugh Robertson Duncan Fischer Executive Chairman* and Chief Executive Officer Non-Executive Director Chief Operating Officer and Executive Director (appointed 28 February 2014)** Non-Executive Director*** Non-Executive Chairman**** *Appointed as Executive Chairman 11 March 2015 **Prior to his appointment to the board, Ray Smith-Roberts was already the Chief Operating Officer of AMA Group Limited ***Appointed 2 June 2015 ****Retired 11 March 2015 Other key management personnel There are no other persons who also had authority and responsibility for planning, directing and controlling the activities of the consolidated entity, directly or indirectly, during the financial year: Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term benefits Long-term benefits Post employment benefits Share based payments $'000 $'000 $'000 $'000 2015 Aggregate 2014 Aggregate 1,496 1,444 15 17 82 59 136 136 Total $'000 1,729 1,656 Shareholdings The number of shares in the parent entity held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: 2015 Balance as at 1 July 2014 Received as remuneration Received during the year on the exercise of options Other changes Balance as at 30 June 2015 Duncan Fischer* Simon Doyle Ray Malone Ray Smith-Roberts Hugh Robertson** 9,133,334 4,161,470 80,417,619 8,167,746 101,880,169 - - - - - - - - - - - - (9,133,334) - - - 230,000 (8,903,334) - 4,161,470 80,417,619 8,167,746 230,000 92,976,835 * Retired 11 March 2015 (Balance at date of retirement removed from list) ** Appointed 2 June 2015 (Initial holdings at appointment date) AMA GROUP LIMITED ANNUAL REPORT 2015 59 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ 2014 Balance as at 1 July 2013 Received as remuneration Received during the year on the exercise of options Other changes Balance as at 30 June 2014 Duncan Fischer Simon Doyle Ray Malone Ray Smith-Roberts 9,133,334 4,062,899 79,417,619 7,687,415 100,301,267 - - - 586,062 586,062 - - - - - 9,133,334 - 4,161,470 98,571 80,417,619 1,000,000 8,167,746 (105,731) 992,840 101,880,169 Options holding None of the directors or other members of Key Management Personnel of the consolidated entity, including their personally related parties, held any options over ordinary shares in the parent entity. Further disclosures The consolidated entity has applied the relief outlined in AASB 2008-4, by disclosing the full key management personnel disclosures in the directors' report only, thus not duplicating that information in the financial report. These transferred disclosures have been audited. Note 22. Remuneration of auditors During the year the following fees were paid or payable for services provided by the Company’s auditors or its related practices: Audit or review of the financial reports – Shine Wing Australia Note 23. Contingent liabilities 30 June 2015 $'000 30 June 2014 $'000 215 215 190 190 Unsecured guarantees, indemnities and undertakings have been given by the parent entity in the normal course of business in respect of financial trade arrangements entered into by its discontinuing subsidiaries and a Deed of Cross Guarantee (note 34) was entered into with its continuing subsidiaries during the financial year ended 30 June 2009. It is not practicable to ascertain or estimate the maximum amount for which the parent entity may become liable in respect thereof. At 30 June 2015 no subsidiary was in default in respect of any arrangement guaranteed by the parent entity and all amounts owed have been brought to account as liabilities in the financial statements. Bank guarantees 30 June 2015 $'000 30 June 2014 $'000 649 649 326 326 AMA GROUP LIMITED ANNUAL REPORT 2015 60 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 24. Commitments for expenditure Note 30 June 2015 $'000 30 June 2014 $'000 Capital commitments - property, plant & equipment Committed at the end of the reporting period but not recognised as liabilities, payable: Within one year Lease commitments – operating Committed at the end of the reporting period but not recognised as liabilities, payable: Within one year One to five years After more than five years Lease commitments – finance Committed at the end of the reporting period but not recognised as liabilities, payable: Within one year One to five years less future finance charges Represented as: Current commitment Non-current commitment 15 15 - - - - 4,497 5,275 785 10,557 2,484 3,220 1,017 6,721 553 11 564 - 564 553 11 564 5 16 21 - 21 5 16 21 Property leases periods 1 to 5 years (shown as operating leases) are non-cancellable with rent payable monthly in advance. Contingent rental provisions within lease agreements generally require minimum lease payments be increased by CPI or a percentage factor. Certain agreements have option arrangements to renew the lease for an additional term and an option to purchase the premises at the market price at time of option exercise. No operating leases have been recognised as onerous lease liabilities at 30 June 2015 nor at 30 June 2014. Note 25. Related party transactions Parent entity The parent and ultimate holding entity is AMA Group Limited. Subsidiaries Interests in subsidiaries are set out in note 26. Key management personnel Disclosures relating to key management personnel are set out in note 21 and the directors' report. Transactions with related parties The following transactions occurred with related parties: Payment for other expenses: Payments were made during the year to the following director related entities of Mr Ray Malone. Silvan Bond Pty Ltd - Rental fees Malone Superannuation Fund - Rental fees Mr Gloss Pty Ltd - Vendor payments & incentives* 30 June 2015 $'000 30 June 2014 $'000 152 43 150 345 141 33 530 704 *$Nil (2014: $Nil) was paid and $Nil (2014: $Nil) was payable at the reporting date to a director related entity of Ray Malone for employee incentive payments for Mr Gloss Holdings Pty Ltd (excluding any Key Management Personnel), a wholly owned subsidiary of AMA Group Limited. During the 2014 year the amount of $70,100 previously reported as payable at 30 June 2013 was reversed as an agreed adjustment. $600,000 was paid to Mr Gloss Pty Ltd during the 2014 year in satisfaction of the outstanding vendor loan liability. AMA GROUP LIMITED ANNUAL REPORT 2015 61 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Trade Receivable from and trade payable to related parties There are no trade receivables from or trade payables to related parties at the end of the reporting period. Loans to/from related parties The following balances are outstanding at the end of the reporting period in relation to loans with related parties: Loans from related parties: Loan from Mr Gloss Pty Ltd 30 June 2015 $'000 30 June 2014 $'000 - - (150) (150) The loan from Mr Gloss Pty Ltd, a related entity to Mr Ray Malone, is the total value of outstanding vendor payments payable to Mr Gloss Pty Ltd for the acquisition of the Mr Gloss panel beating business. Security for the vendor loan is outlined at note 14a. The final repayment instalment of this loan was paid on 31 July 2014. On 23 June 2015 the Company engaged the services of Wilson HTM Corporate Finance Limited to act as a joint lead manager in the placement of 75,000,000 shares. Hugh Robertson is associated with this firm. The placement was completed post year end with a fee payable to Wilson HTM Corporate Finance Limited. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates, except for loans to subsidiaries which are non-interest bearing. Note 26. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Name of entity Continuing Operations Alanco Australia Pty Ltd BMB Collision Repairs Pty Ltd Custom Alloy Pty Ltd ECB Pty Ltd FluidDrive Holdings Pty Ltd KT Cable Accessories Pty Ltd Mr Gloss Holdings Pty Ltd Perth Brake Parts Pty Ltd Phil Munday’s Panel Works Pty Ltd Repair Management Australia Pty Ltd Repair Management Australia Bayswater Pty Ltd Repair Management Australia Dandenong Pty Ltd Shipstone Holdings Pty Ltd Dis-continued Operations Diesel Test Pty Ltd Emission Services Pty Ltd (a) Registered 12/12/2014 (b) Acquired 29/11/2013 (c) Acquired 01/07/2014 (d) De–registered 23/07/2014 Country of incorporation Equity holding Note 2015 % 2014 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia (a) (b) (c) (c) (c) (c) (a) (d) (d) 100 100 100 100 100 100 100 100 100 100 100 100 100 - - 100 - 100 100 100 100 100 100 - - - - - 100 100 On 1 July 2014 AMA Group Limited acquired 100% of the ordinary shares of Phil Munday’s Panel Works Pty Ltd, Repair Management Australia Pty Ltd, Repair Management Australia Bayswater Pty Ltd and Repair Management Australia Dandenong Pty Ltd (collectively referred to as “RMA”) for the total consideration of $6,990,000 plus conditional earn-outs which could total up to $6,000,000 in Shares in AMA Group Limited (valued at 30 day VWAP immediately prior to 1 July 2014) plus up to $500,000 Supplementary Cash. RMA consists of two rapid repair shops and two traditional shops, based in the outer Eastern suburbs of Melbourne, Victoria. It has established two significant exclusive approved repairer contracts with RACV and does a lot of work AMA GROUP LIMITED ANNUAL REPORT 2015 62 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ for numerous other insurance companies. Geographically, it is complementary to our three Mr Gloss sites in Eastern Melbourne and it was acquired to allow the group to increase its participation in the consolidation of the panel industry and expand its presence in the rapid repair sector. We have already been able to obtain synergies with our existing panel repair operations at Mr Gloss and have achieved significant efficiencies through knowledge sharing and the implementation of improved control systems to increase customer satisfaction levels, productivity and efficiency throughout all panel sites, and ultimately we have been able to boost profitability. Following the acquisition we have now finalised all aspects of the acquisition fair value assessments and as such, we have prepared this report using these amounts. The figures include the earn-out elements of the deferred consideration valued at fair value using appropriate probability factors and discounting. Details of the acquisition are as follows:- Cash and cash equivalents Trade receivables Other current assets Plant and equipment Customer contracts Other intangibles Trade payables Employee benefits Other payroll related liabilities Accrued expenses Current tax payable Other current liabilities Net assets acquired Goodwill Acquisition-date value of the total consideration transferred Representing: Cash paid or payable to vendor Earn-Out Adjustment Shares Earn-Out Supplementary Cash Net Present Value Adjustments Acquisition costs $'000 (138) 473 71 2,009 1,048 21 (742) (288) (77) (75) (233) (157) 1,912 10,921 12,833 6,990 6,000 500 (657) 12,833 129 Cash used to acquire business, net of cash acquired: Acquisition-date value of the total consideration transferred Add: net cash overdraft assumed $’000 12,833 138 12,971 From the date of acquisition to 30 June 2015, RMA generated revenue of $18,527,667 and gross margin of $12,338,568 On 1 January 2015 AMA Group Limited acquired the business assets of Shipstone Accident Repair Specialists for the total consideration of $1,440,000. Shipstone was founded by Col Shipstone in 1967 and is an award winning prestige accident repairer based in Windsor on the north side of Brisbane with accreditation for Porsche, Audi, VW, Jaguar, Volvo, Infinity, Landrover & Subaru. Shipstone also has strong relationships with a number of key insurers. This acquisition is a strategic entry point into the Queensland panel repair market and the Shipstone business is the considerable repair work that resulted from Brisbane’s recent hailstorm. Following the acquisition we have now finalised all aspects of the acquisition fair value assessments and as such, we have prepared this report using these amounts. Details of the acquisition are as follows:- Inventory – work in progress Deferred tax assets Other current assets Plant and equipment Employee benefits Net assets acquired Goodwill Acquisition-date value of the total consideration transferred $'000 5 51 115 374 (171) 374 1,066 1,440 AMA GROUP LIMITED ANNUAL REPORT 2015 63 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Representing: Cash paid or payable to vendor 1,440 Acquisition costs Cash used to acquire business, net of cash acquired: 1,440 - Acquisition-date value of the total consideration transferred Add: net cash assumed $’000 1,440 - 1,440 From the date of acquisition to 30 June 2015, Shipstone generated revenue of $3,435,543 and gross margin of $1,716,233 On 1 February 2015 AMA Group Limited acquired the business assets of BMB Prestige Collision Repairs and Browns Motors for the total consideration of $910,000 plus conditional earn-outs which could total up to $1,999,998 in Shares in AMA Group Limited (valued at 30 day VWAP immediately prior to 1 February 2015) plus a cash amount based on a calculation using the Actual Average EBIT achieved over the 3 years following acquisition. Bruce Bennett founded BMB Prestige Collision Repairs (formerly Blackburn Motor Body) in 1977. With a continuous emphasis on customer service and workmanship excellence, over nearly four decades Bruce has succeeded in developing an expanding and pre-eminent collision repair operation, earning himself high esteem in the industry. A life-long entrepreneur and innovator, his partnership with the AMA Group Ltd brings a network of businesses including the flagship BMB Prestige in Blackburn and Browns Motors in Thornbury. We are delighted that Bruce has agreed to stay on with the business as General Manager and we are confident that together we will be able to strengthen our market position and grow our Panel segment successfully. BMB specialise in the repair of prestige vehicles and are certified repairers for Audi, Mercedes-Benz, Lexus, Nissan GTR, Infiniti and Subaru vehicles but also repair other makes such as BMW, Volkswagen, Holden, Mazda, Honda, Toyota, Mitsubishi, Nissan, Ford and many others. Browns Motors has been operating in Thornbury since 1952. Browns are approved repairers for many major insurance companies including RACV and Suncorp. Following the acquisition we have finalised most aspects of the acquisition fair value assessments however, we have prepared this report using provisional amounts as permitted by AASB3 Business Combinations. Details of the acquisition are as follows:- Trade receivables Deferred tax assets Plant and equipment Trade payables Lease liabilities Employee benefits Other current liabilities Net liabilities acquired Goodwill Acquisition-date value of the total consideration transferred Representing: Cash paid or payable to vendor Earn-Out Adjustment Shares Earn-Out Supplementary Cash Net Present Value Adjustments Acquisition costs $'000 269 154 1,685 (1,551) (722) (512) - (636) 4,714 4,078 910 2,000 1,663 (495) 4,078 - Cash used to acquire business, net of cash acquired: Acquisition-date value of the total consideration transferred Add: net cash assumed $’000 4,078 - 4,078 From the date of acquisition to 30 June 2015, BMB generated revenue of $6,198,778 and gross margin of $3,863,959 AMA GROUP LIMITED ANNUAL REPORT 2015 64 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Note 27. Events occurring after the reporting period From 1 July 2015 the Company agreed to manage the operations of Woods Accident Repair Centres with an option to acquire 100% of the shares of the entity Ripoll Pty Ltd (A.C.N. 074 509 612) which currently operates the Woods business. On 6 July 2015 the Company successfully completed a capital raising by issuing 75 million shares at 60c per security raising $45 million dollars before costs. On 6 July 2015 the Company paid off the balance of the commercial loan facility with Westpac. On 31 August 2015 the Directors declared a dividend, fully franked at 1.7 cents per security which is to be paid 30 October 2015. We are currently in negotiations to determine an appropriately sized banking facility to assist with working capital requirements and potential acquisitions. No other matters or circumstances have arisen since 30 June 2015 that have significantly affected, or may significantly affect the consolidated entity's operations in future financial years, the results of those operations in future financial years, or the consolidated entity's state of affairs in future financial years. Note 28. Reconciliation of profit after income tax to net operating cashflows Profit after income tax Depreciation and amortisation expense Net loss/(profit) on sale of non-current assets Equity issued in consideration of employment obligations Doubtful debts Stock Obsolescence Fair value adjustments (Increases)/Decreases in Accounts receivable (Increases)/Decreases in inventories (Increases)/Decreases in deferred tax assets (Increases)/Decreases in prepayments (Increases)/Decreases in other assets Increases/(Decreases) in Accounts payable Increases/(Decreases) in provision for income tax Increases/(Decreases) in deferred tax liabilities Increases/(Decreases) in employee benefits Increases/(Decreases) in other provisions Increases/(Decreases) in other liabilities Net operating cash flows Note 29. Earnings per share 30 June 2015 $'000 30 June 2014 $'000 9,090 1,314 25 - 12 27 191 (2,240) (1,379) (271) 726 - 346 (881) 516 344 - - 7,820 5,655 479 (14) 933 40 (212) 38 1,221 358 2,337 (2,644) - (804) 849 (2,092) 376 (143) (344) 6,033 Profit after income tax attributable to members of AMA Group Ltd 9,090 5,655 30 June 2015 $'000 30 June 2014 $'000 Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share Earnings from consolidated operations: Basic earnings per share Diluted earnings per share Number Number 334,250,963 - 334,250,963 333,537,059 - 333,537,059 Cents 2.72 2.72 Cents 1.70 1.70 AMA GROUP LIMITED ANNUAL REPORT 2015 65 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Discontinued operations: Basic earnings per share Diluted earnings per share Note 30. Share-based payments Cents - - Cents (0.06) (0.06) Options The Company has adopted an Employee Share Option Plan for the benefit of executive and non-executive Directors and full-time or part-time staff members employed by the Company. At the date of this report no options were on issue pursuant to the Employee Share Option Plan. No options were issued under the plan during the financial year ended 30 June 2015 and 30 June 2014 and there were no options remaining at the end of either year reported. Shares At 30 June 2015, the Company had accrued an equity bonus entitlement for employees to the value of $45,656, which appeared under employee benefits expense in the statement of comprehensive income. Subsequent to 30 June 2015, the employees elected to receive this bonus entitlement in cash rather than in shares. At 30 June 2014, the Company had accrued an equity bonus entitlement for employees to the value of $62,134, which appeared under employee benefits expense in the statement of comprehensive income. Subsequent to 30 June 2014, the employees elected to receive this bonus entitlement in cash rather than in shares. Note 31. Parent Information The following information has been extracted from the books and records of the parent and has been prepared in accordance with accounting standards. Assets Current assets Total assets Liabilities Current liabilities Total liabilities Net assets/(liabilities) Equity Equity attributable to equity holders of the parent Contributed equity Accumulated losses Total equity Profit/(loss) for the year Total comprehensive income /(loss) Guarantees and contingent liabilities Refer to note 23 for details of guarantees and contingent liabilities. Contractual commitments Refer to note 24 for details of contractual commitments. Note 32. Discontinued Operations 30 June 2015 $'000 30 June 2014 $'000 945 46,005 2,600 69,655 794 25,306 3,011 37,643 (23,650) (12,337) 74,904 (98,554) (23,650) 74,904 (87,241) (12,337) 30 June 2015 $'000 30 June 2014 $'000 (5,966) (5,207) (5,966) (5,207) (a) The following entities were classified as discontinued operations for the years ended 30 June 2015 and 2014: Diesel Test Pty Ltd - De-registered 23/07/2014 Emission Services Pty Ltd – De-registered 23/07/2014 AMA GROUP LIMITED ANNUAL REPORT 2015 66 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ (b) There was no profit or loss for the year ended 30 June 2015 from discontinued operations. The schedule over the page shows details of the comparative period results: Loss after tax from discontinued operations for the financial year (c) 30 June 2015 $'000 30 June 2014 $'000 - - 221 221 (c) The following were the results for the discontinued operations for the financial year: Revenue Direct costs and overheads Loss before tax Income tax expense Loss after tax from discontinued operations for the financial year 30 June 2015 $'000 30 June 2014 $'000 - - - - - - 175 175 46 221 The net cash flows of the discontinued operations which have been incorporated into the statement of cash flows are as follows: Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Net cash increase/(decrease) in cash generated by the discontinued division - - - - (175) 330 (155) (0) 30 June 2015 $'000 30 June 2014 $'000 Note 33. Class order disclosures Closed group class order disclosures The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Name of entity Alanco Australia Pty Ltd ECB Pty Ltd FluidDrive Holdings Pty Ltd KT Cable Accessories Pty Ltd Mr Gloss Holdings Pty Ltd Perth Brake Parts Pty Ltd Country of incorporation Australia Australia Australia Australia Australia Australia Equity holding 2015 % 100.0 100.0 100.0 100.0 100.0 100.0 2014 % 100.0 100.0 100.0 100.0 100.0 100.0 The trustee to this deed of cross guarantee is AMA 1 Pty Ltd which is not a member of the consolidated group. Entities subject to class order relief Pursuant to Class Order 98/1418, relief has been granted to the above entities from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports. As a condition of the Class Order the above entities entered into a Deed of Cross Guarantee on 16 March 2009. The effect of the deed is that AMA Group Limited has guaranteed to pay any deficiency in the event of winding up of a controlled entity or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to guarantee. The controlled entities have also given a similar guarantee in the event that AMA Group 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. If the Deed of Cross Guarantee and the subsequent closed group disclosures were contained in the accounts of AMA Group Limited, then an assessment would need to be made as to the fair value of the Deed of Cross AMA GROUP LIMITED ANNUAL REPORT 2015 67 For personal use only NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2015 __________________________________________________________________________________ Guarantee (as a financial guarantee to the Parent) and the details of the valuation and significant assumptions, estimate and judgements used within that valuation would need to be disclosed. Please refer to the disclosure surrounding financial guarantees in the financial statements of AMA Group Limited (see note 23) for further information on financial guarantees. The continuing entities and only the continuing entities are included in the deed of cross guarantee. The Statement of Comprehensive Income of the entities that are members of the Closed Group is reflected in the continuing entities Statement of Comprehensive Income. The consolidated statement of financial position of the entities that are members of the Closed Group is as shown below: Statement of Financial Position As at 30 June 2015 Closed group 30 June 2015 $'000 30 June 2014 $'000 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Receivables from related entities Property, plant and equipment Deferred tax assets Intangibles Other Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Current tax payable Provisions Total current liabilities Non-current liabilities Borrowings Deferred tax Liabilities Provisions Other Total non-current liabilities Total liabilities Net assets Equity Contributed equity Accumulated losses Total equity 1,314 8,507 6,026 908 16,755 (5,532) 1,640 1,682 51,117 1,957 50,864 67,619 6,503 - 950 2,541 9,994 7,777 862 168 9,931 18,738 28,732 38,887 74,904 (36,017) 38,887 1,484 7,680 5,654 983 15,801 (302) 1,509 1,363 31,013 2,509 36,092 51,893 5,775 - 1,818 2,314 9,907 - 346 203 - 549 10,455 41,437 74,904 (33,467) 41,437 AMA GROUP LIMITED ANNUAL REPORT 2015 68 For personal use only DIRECTORS’ DECLARATION 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 69 For personal use only DIRECTORS’ DECLARATION ______________________________________________________________________________________ The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 23 to 68 are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards, which as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and (b) give a true and fair view of the financial position as at 30 June 2015 and of the performance for the year ended on that date of the consolidated entity; 2. the Chief Executive Officer and Group Accountant have each declared that: (a) the financial records of the consolidated entity for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with the Accounting Standards; and (c) the financial statements and notes for the financial year give a true and fair view. 3. in the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Company and a number of its subsidiaries have entered into a deed of cross guarantee under which the Company and those subsidiaries guarantee the debts of each other. At the date of this declaration, there are reasonable grounds to believe that the parties to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are or may become, subject to by virtue of the deed. This declaration is made in accordance with a resolution of the Board of Directors. Ray Malone Executive Chairman Dated this 31st day of August 2015 Melbourne AMA GROUP LIMITED ANNUAL REPORT 2015 70 For personal use only INDEPENDENT AUDITOR’S REPORT 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 71 For personal use only INDEPENDENT AUDITOR’S REPORT ______________________________________________________________________________________ INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AMA GROUP LIMITED AND CONTROLLED ENTITIES Report on the Financial Report We have audited the accompanying financial report of AMA Group Limited and Controlled Entities (the “consolidated entity”), which comprises the statement of financial position as at 30 June 2015, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company AMA Group Limited and the entities it controlled at the year’s end or from time to time during the financial period. Directors’ Responsibility for the Financial Report The directors of AMA Group Limited are responsible for the preparation and fair presentation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. AMA GROUP LIMITED ANNUAL REPORT 2015 72 For personal use only INDEPENDENT AUDITOR’S REPORT ______________________________________________________________________________________ Opinion In our opinion: a) the financial report of AMA Group Limited and Controlled Entities is 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 2015 and of its performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 15 to 20 of the directors’ report for the year ended 30 June 2015. The directors of AMA Group Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the remuneration report of AMA Group Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. Matters relating to the Electronic Presentation of Audited Financial Report The audit report relates to the financial report of the consolidated entity for the year ended 30 June 2015 included on the website of AMA Group Limited. The directors of AMA Group Limited are responsible for the integrity of the website and we have not been engaged to report on its integrity. This audit report refers only to the financial report identified above and its does not provide an opinion on any other information which may have been hyperlinked to or from the financial report. If users of this financial report are concerned about the inherent risks arising from the electronic data communications, they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on the consolidate entity’s website. Shine Wing Australia (formerly Moore Stephens) Chartered Accountants Rami Eltchelebi Partner Melbourne, 31 August 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 73 For personal use only This page is intentionally left blank AMA GROUP LIMITED ANNUAL REPORT 2015 74 For personal use only SHAREHOLDER INFORMATION 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 75 For personal use only SHAREHOLDER INFORMATION as at 25 August 2015 ______________________________________________________________________________________ Number of holders of equity securities 409,250,963 fully paid ordinary shares are held by 2,435 individual holders. There are no unquoted options over ordinary shares held. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 1,001 5,001 10,001 to to to to 1,000 5,000 10,000 100,000 100,001 and over Total Holding less than a marketable parcel Equity security holders Holders 98 537 439 1,076 285 2,435 69 Ordinary Shares 43,168 1,677,913 3,560,391 36,774,940 367,194,551 409,250,963 14,623 Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary Shareholder Mr Gloss Pty Limited UBS Nominees Pty Ltd J P Morgan Nominees Australia Limited RBC Investor Services Australia Nominees Pty Ltd Citicorp Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited National Nominees Limited Mr Raymond Malone & Mrs Leona Malone Sandhurst Trustees Ltd Mirrabooka Investments Limited SRFE Pty Ltd Jese Pty Ltd Mr Richard John Calver Citicorp Nominees Pty Ltd Mr Stephen Matthew Shostak Yerrus Holdings Pty Ltd Altas Capital Pty Ltd Mr Lachlan Alexandar McGillivray Mr Ian Lindeman & Mrs Margaret Lindeman Amcil Limited Number held 67,961,015 25,355,305 22,367,222 18,515,960 18,506,333 17,346,856 12,568,739 8,490,335 8,111,706 6,243,298 6,086,062 5,822,195 5,602,600 5,128,000 4,949,642 4,947,404 4,161,470 3,720,388 3,600,001 3,272,192 252,756,723 % of total shares held 16.61% 6.20% 5.47% 4.52% 4.52% 4.24% 3.07% 2.07% 1.98% 1.49% 1.53% 1.42% 1.37% 1.25% 1.21% 1.21% 1.02% 0.91% 0.88% 0.80% 61.77% Substantial holders The Company hold current substantial holder notifications in accordance with section 671B of the Corporations Act for the following: Thorney Opportunities Limited 20,987,503 6.28% notified 26/06/2014 Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. AMA GROUP LIMITED ANNUAL REPORT 2015 76 For personal use only SHAREHOLDER INFORMATION as at 25 August 2015 ______________________________________________________________________________________ Listing rule 14.10.19 The entity used the cash and assets in a form readily convertible to cash that it had at the time of admission consistently with its business objectives. Shareholder enquiries Shareholders with enquiries about their shareholdings should contact the share registry: Computershare Investor Services Pty Ltd Yarra Falls, 452 Johnston Street, Abbotsford, Victoria 3067 Phone: +61 3 9415 4000 Fax: +61 3 9473 2500 Email: essential.registry@computershare.com.au Change of address, change of name, consolidation of shareholdings Shareholders should contact the Share Registry to obtain details of the procedure required for any of these changes. Annual report Shareholders do not automatically receive a hard copy of the Company’s Annual Report unless they notify the Share Registry in writing. An electronic copy of the Annual Report can be viewed on the Company’s website www.amagroupltd.com Tax file numbers It is important that Australian resident shareholders, including children and corporate entities, have their tax file number, ABN or exemption details noted by the Share Registry. CHESS (Clearing House Electronic Sub-register System) Shareholders wishing to move to uncertified holdings under the Australian Stock Exchange CHESS system should contact their stockbroker. Uncertified share register Shareholding statements are issued at the end of each month that there is a transaction that alters the balance of an individual/company’s holding. AMA GROUP LIMITED ANNUAL REPORT 2015 77 For personal use only This page is intentionally left blank AMA GROUP LIMITED ANNUAL REPORT 2015 78 For personal use only CORPORATE DIRECTORY 2015 AMA GROUP LIMITED ANNUAL REPORT 2015 79 For personal use only CORPORATE DIRECTORY ______________________________________________________________________________________ Executive Chairman and Chief Executive Officer Executive Director and Chief Operating Officer Non-Executive Director Non-Executive Director Directors Ray Malone Ray Smith-Roberts Simon Doyle Hugh Robertson Company Secretarial Phillip Hains Terri Bakos Registered Office Suite 1, 1233 High Street, Armadale, Victoria, 3143 Solicitors Foster Nicholson Jones Lawyers Level 6, 406 Collins Street, Melbourne, Victoria, 3000 Auditors Shine Wing Australia (formerly Moore Stephens) Level 10, 530 Collins Street, Melbourne, Victoria, 3000 Share Register Computershare Investor Services Pty Ltd Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067 P: +61 3 9415 4000 F: +61 3 9473 2500 W: www.computershare.com.au Bankers Westpac Banking Corporation Level 1, 439 Old Gympie Road, Strathpine, Queensland, 4032 Quoted Securities Ordinary Shares – ASX Code: AMA Website and Email W: www.amagroupltd.com E: info@amagroupltd.com AMA GROUP LIMITED ANNUAL REPORT 2015 80 For personal use only This page is intentionally left blank For personal use only For personal use only 

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