ANNUAL
REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AMA GROUP LIMITED | ABN 50 113 883 560
SHAREHOLDERS INFORMATION
AMA GROUP LIMITED
Shareholder information and enquiries
ABN 50 113 883 560
Level 4, 130 Bundall Road
BUNDALL, QUEENSLAND, 4217
AUSTRALIA
Telephone: +61 5628 3272
Website: amagroupltd.com
All enquiries and correspondence regarding
shareholdings should be directed to
AMA Group’s share registry provider:
Computershare Investor Services Pty Limited
GPO Box 2975
MELBOURNE, VICTORIA, 3001
AUSTRALIA
Email: info@amagroupltd.com
Telephone: +61 3 9415 4000
Telephone: 1300 787 272
(Within Australia)
Website: computershare.com.au
Email: web.queries@computershare.com.au
Stock Exchange Listing
AMA Group Limited shares are listed on the
Australian Securities Exchange, code AMA.
2
WORLD CLASS AUTOMOTIVE SOLUTIONS
ANNUAL
REPORT
FOR THE YEAR ENDED 30 JUNE 2020
CONTENTS
Chair of the Board and Chief Executive Officer’s Review ........................................ 4
Directors’ Report ................................................................................................................... 8
Remuneration Report ..........................................................................................................21
Auditor’s Independence Declaration ............................................................................. 44
Financial Report ...................................................................................................................46
Director’s Declaration ....................................................................................................... 128
Independent Auditor’s Report ....................................................................................... 130
ASX Additional Information ............................................................................................ 138
3
AMA GROUP LIMITED | 30 JUNE 2020 CHAIR OF THE
BOARD AND
CHIEF EXECUTIVE
OFFICER’S
REVIEW
On behalf of the Board, it is our pleasure to present AMA Group Limited’s Annual Report for
the year ended 30 June 2020.
FY20 Financial performance
The Group reported revenue from continuing operations of circa $889 million for FY20,
representing a year-on-year increase of 46.5%. This increase in revenue is attributable to
a full 12 months trading in respect of acquisitions completed in FY19 and revenue from
acquisitions completed during FY20, notably 8 months of operations of Capital Smart and
ACM Parts.
Dry weather conditions late in the first half of FY20 reduced repair volumes and coupled
with a decrease in year-on-year new car sales and increases in costs of repair as a result
of Advanced Driver-Assistance Systems, resulted in a weaker than anticipated financial
performance for H1 FY20.
The impact of COVID-19 on our operations and revenue generation mainly in the last quarter
of FY20 resulted in FY20 Normalised EBITDAI of circa $53 million. Management’s responses
which included optimising resources, improving operational efficiencies, cost management
and cash preservation placed the business in a significantly better position than anticipated
at the outset of the pandemic, and we are pleased to have delivered a result above
expectations.
The Group remained cashflow positive (inclusive of Government wage subsidy programs)
during this period and the net debt position of circa $227 million at 30 June 2020 (excluding
any contingent vendor consideration) is also significantly better than anticipated at the
outset of the pandemic.
4
WORLD CLASS AUTOMOTIVE SOLUTIONS Anthony Day
Chair of the Board
Andrew Hopkins
Group Chief Executive Officer
The year in review
The Group started FY20 on a sound footing for achieving growth, improved financial and
operational performance and increasing shareholder returns.
Setting the Group up for significant growth, the business looked at several growth
opportunities and successfully acquired the Capital Smart and ACM Parts businesses in
October 2019. This included a long-term agreement with our major customer, Suncorp,
which secured the ongoing relationship and growth potential of the Group. Less than one
year later, the integration of Capital Smart is complete. The business is on target to achieve
annual synergies of $17 million by the end of FY21. The Group will continue to capitalise on
the scale benefits afforded by the size of the broader Group.
The transaction was funded via a fully underwritten circa $216 million equity raise, which was
well supported by existing and new investors and an increase in debt facilities of $250 million.
With our focus on acquisitions, the Group acquired the New Zealand based Fully Equipped
business in January 2021.
During the year, the Group secured its first major fleet customer contract, SG Fleet’s entire
customer base of approximately 4,000 repairs annually. This enables the Group to diversify
its offering and enter into this growing segment of the Australian vehicle market which the
Company has not previously serviced.
With Management’s commitment to driving efficiencies, cost management, and a return to
normal repair volume, the business performed well in Q3 FY20 delivering results in line with
achieving the FY20 targets outlined in our announcement to market in February 2020.
5
AMA GROUP LIMITED | 30 JUNE 2020 The annual revised terms for the motor repair partnership between Capital Smart and Suncorp delivering
average repair pricing and volume increases reflecting a change in the mix of repairs to be pathed
through the Capital Smart network, were agreed in April 2020. In addition, Management’s negotiations
with all its major insurance customers secured price and repair volume increases through the AMA Group
network. These provide sustained and improved revenue generation and profitability for the Group from 1
July 2020 (based on a normal operational environment).
As for most businesses, the Group has not been immune to the effects of the COVID-19 pandemic and the
emergence of COVID-19 in early March 2020 diverted the Board and Management’s focus to navigating
through the impact on our business. The restrictions imposed by the Australian and New Zealand
Governments to stem the spread of COVID-19, impacted kilometres travelled, which has a direct impact
on revenue generation. Management immediately responded with a focus on:
• Optimisation of costs in line with repair volume, ensuring customer service was maintained.
• Management of Government lockdowns and state-wide restrictions imposed in New Zealand and
Australia. Government wage subsidy programs assisted the Company in maintaining operations and
more importantly retaining capability and skill within the business.
•
Engagement with lenders to secure ongoing liquidity to endure an extended period of business
interruption.
• Adoption of a high standard of health and safety measures and provision of additional support to
our employees including via Employee Assistant Programs.
•
•
Regular Board meetings to assist Management and remain close to the business and developments.
The Board and senior employees reduced remuneration by 20% from May 2020 to June 2020.
With a strong focus on improving corporate governance, a number of improvements were made during
FY20, while at the same time managing the challenges of COVID-19 on the business.
In our commitment to improved performance and expanding, skills and expertise, Board and Senior
Management changes made during the year are set out below.
Board
The appointment of Anthony Day as Chair of the Board in September 2019.
Acknowledging the benefit that a broad range of skills and gender diversity brings to the Board,
the appointment of Nicole Cook was made in December 2019 and Carl Bizon joined the Board in
February 2020.
Senior Management
With Andy Hopkins taking on the leadership of AMA Group as Group CEO, Steven Bubulj was appointed
as CEO of AMA Panel in July 2019. David Marino, CEO of the acquired Capital Smart business transitioned
on acquisition, and Campbell Jones transitioned with the ACM Parts business as CEO of the newly
formed APAS Division.
The combined expertise of the Senior Management team comprising of Group CEO Andy Hopkins,
Group CFO Steven Becker and the Divisional CEOs, places the business in the best position to execute
on the Group’s future strategies.
Dividend
As a result of the impact of the COVID-19 pandemic on the second half performance and the
uncertainty of the duration of restrictions and resultant impact on the business, and to maintain
liquidity for a prolonged period, the Directors have prudently determined that a final dividend for
FY20 will not be declared.
6
WORLD CLASS AUTOMOTIVE SOLUTIONS CHAIR OF THE BOARD AND CHIEF EXECUTIVE OFFICER’S REVIEW
Outlook
Our expectation is that market conditions are likely to remain uncertain and therefore challenging at least
into Q1 FY21. The discipline and strategies implemented during this period which included cash and cost
management and optimising operations and resources in line with repair volumes are now entrenched in
the business, and Senior Management will continue to apply these disciplines as operational conditions
improve. With that backdrop and in our commitment to drive ongoing growth and deliver shareholder
value in FY21 and beyond, our key strategies are:
• Ongoing strategic review of the business in line with the broader objectives of AMA Group aimed at
•
•
•
•
•
•
maximising value for shareholders.
Continuing the consolidation of the vehicle panel repair industry.
Capitalising on industry technology advancements through innovation.
Diversifying our range of services to broaden coverage of the vehicle panel repair industry.
Focusing on fleet customer solutions via greenfield or brownfield platforms.
Enhancing value add of recycled parts.
Continuing to explore diversified, sizeable growth opportunities and, optimising learnings and
successes from the recent acquisition of Capital Smart.
• Ongoing improvement in our journey to achieve operational, systems and corporate governance
best practice.
•
Continuing to invest in the growth and development of employees at every level of the business
aimed at improving overall performance of the business.
All these factors secure the growth, success and sustainability of the Group into future years, for all
stakeholders. We will emerge from the current environment a much stronger and agile business that has
the capability to capitalise on the market opportunities.
While current restrictions are expected to remain in the short-term, we anticipate repair volumes to
increase in line with the lifting of restrictions on a state by state basis. Trends experienced in other
countries, including a slower return to public transport is expected to result in an uplift in repair volumes
as a result of an increase in kilometres travelled.
The Group’s Senior Management and all our people have done a great job in a difficult environment, we
are proud, and thank them for the way in which they have responded and adapted to deliver quality
service to our customers.
We also thank the Board, our customers, insurance partners, investors and all stakeholders for their
ongoing support of the Group throughout FY20.
FY21 has started really well with July results a lot better than expected as a result of repair volumes in
most states (except Victoria) at pre-COVID-19 levels or above. Our sights are set on growth opportunities,
ongoing successes of the Group in the year ahead, creating sustainable career opportunities for our
employees and to delivering shareholder value.
Anthony Day
Chair of the Board
Andrew Hopkins
Group CEO
7
AMA GROUP LIMITED | 30 JUNE 2020
DIRECTORS’
REPORT
INTRODUCTION
Your Directors present their report on the consolidated entity (referred to hereafter as
the “Group”) consisting of AMA Group Limited (“AMA” or the “Company”) and its
controlled entities for the Financial Year (FY) ended 30 June 2020.
This Directors’ Report has been prepared in accordance with the requirements of
Division 1 of Part 2M.3 of the Corporations Act 2001.
BOARD OF DIRECTORS
The Directors of AMA Group Limited during the year and up to the date of this report were:
Name
Anthony Day
Position
Dates
Chair of the Board and
Non-Executive Director
From 1 September 2019
Full Financial Year
Leath Nicholson
Non-Executive Director
Full Financial Year
Simon Moore
Non-Executive Director
Full Financial Year
Nicole Cook
Carl Bizon
Brian Austin
Non-Executive Director
From 1 December 2019
Non-Executive Director
From 3 February 2020
Non-Executive Director
Until 21 February 2020
Andrew Hopkins
Executive Director
Full Financial Year
Raymond Malone
Chair of the Board and
Executive Director
Until 31 August 2019
Raymond Smith-Roberts
Executive Director
Until 20 November 2019
PRINCIPAL ACTIVITIES
The principal activity of the Group is the operation and development of complementary
businesses in the automotive aftercare market. The Group is Australia’s largest vehicle
accident repairer and a leader in the vehicle accessories market.
8
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REVIEW AND RESULTS OF OPERATIONS
SIGNIFICANT CHANGES IN THE
STATE OF AFFAIRS
In additional to the acquisition of Capital Smart and
ACM Parts, the Group achieved a number of other
important milestones during the reporting period:
This is the first set of the Group’s annual financial
statements in which AASB 16 Leases has been
applied. Under the transition methods chosen,
comparative information has not been restated.
The 30 June 2020 results are therefore not
directly comparable to prior years.
On 31 October 2019, the Group completed the
acquisition of Capital S.M.A.R.T. Repairs Australia
Pty Ltd and its subsidiaries, and ACM Parts Pty Ltd.
This is the largest combined acquisition the Group
has completed to date, and a strategic milestone.
The transaction was funded via a fully underwritten
$215.6 million equity raise and a debt refinance,
from $125.0 million to $375.0 million.
The trading performance of the Group in
the second half of the financial year ended
30 June 2020 (H2 FY20) was significantly
impacted by the COVID-19 pandemic and the
restrictions imposed by Governments to help
stem the spread of the virus. These restrictions
affected one of the key external drivers of our
business, being kilometres travelled.
KEY ACHIEVEMENTS
On 31 October 2019, the Group’s newly
incorporated entity, Capital Smart Group
Holdings Pty Ltd, acquired Capital S.M.A.R.T.
Repairs Australia Pty Ltd and its subsidiaries
(referred to hereafter as “Capital Smart”).
The acquisition combined the Group’s
industry-leading platform and Capital Smart’s
best-in-class capabilities in low to medium severity
panel repairs. The acquisition included a long-term
service agreement under which Capital Smart
remains Suncorp’s recommended repairer.
The Group also completed the acquisition of
ACM Parts Pty Ltd (ACM Parts) on 31 October
2019. ACM Parts is an automotive parts distributor
and Australia’s largest recycler of collision and
mechanical parts for the automotive repair
industry. ACM Part’s largest customer segment
is the collision repair market, proving a strategic
fit for the Group.
•
The AMA Panel division acquired an
additional six new businesses which has
expanded the Group’s footprint in key
growth areas and aligns with the Group’s
strategic direction.
• Automotive Components & Accessories
Divisions (ACAD) and ACM Parts combined
under one division with a renewed focus
on internal supply, now referred to as
Automotive Parts and Accessory Solutions
(APAS).
The Group completed a fully underwritten
$215.6 million equity raise which was strongly
supported by both existing shareholders and
new institutional investors. This was used to
fund the acquisition of Capital Smart.
The Group received a further tranche of the
market incentive instalment from its paint
supplier in the amount of $59.5 million
(inclusive of GST). This was used to fund
the acquisition of Capital Smart.
•
•
• On 31 January 2020, the Group’s newly
incorporated entity, AMA Fully Equipped
NZ Holdings Pty Limited acquired Fully
Equipped Group Limited and its subsidiaries
(hereafter referred to as “Fully Equipped”).
The acquisition complements the APAS
division, increases the Group’s manufacturing
capabilities and product portfolio, and
extends its footprint in the New Zealand
market.
• AMA appointed Nicole Cook and Carl Bizon
as new independent, Non-Executive Directors.
Both appointments bring valuable knowledge
and skills to the Board.
•
•
•
The Group completed a syndication of
its debt facility in December 2019.
The syndication was well supported
by five new financiers.
In April 2020, the Group completed its
annual planning process with Suncorp
Insurance, establishing revised terms for the
motor repair partnership with Capital Smart,
which will deliver increased average repair
pricing and volume increases with effect
from 1 July 2020.
In June 2020, the Group completed its
service agreement negotiations with all key
insurance partners resulting in improved
pricing with effect from 1 July 2020 which will
allow the business to recover both standard
operating cost inflation and the cost of
increasing motor vehicle technology.
9
AMA GROUP LIMITED | 30 JUNE 2020
DIVISIONAL OVERVIEW
AMA Group is a world class automotive solutions company with operations in Australia and New Zealand.
The Group has grown substantially in the past five years, from less than $100 million revenue in FY15 to
revenue in excess of $800 million in FY20. The Group has three core divisions which are supported by a
corporate function. Details of the divisions are as follows:
Reportable
Segment
Vehicle Panel Repairs
Automotive Parts
and Accessories
Division
AMA Panel
Capital Smart
APAS
Description
AMA Panel specialises in
performing high quality
repairs from driveable
vehicles that have
sustained low-to-medium
collision damage up to
non-driveable vehicles
that have sustained high
severity collision damage.
AMA Panel is a smash
repairer of choice for
a number of different
insurers, consumers and
employees across
Australia and New Zealand.
Capital Smart specialises
in performing high quality
repairs for Suncorp
customers who have
driveable vehicles that
have sustained low-to-
medium collision damage.
Through the use of
innovative technologies,
digital capability and
efficient processes,
customers are able to
seamlessly book their
repair into a Capital Smart
site via an integrated
solution.
APAS provides automotive
parts and accessory
solutions to a wide range
of customer segments,
including panel repair sites,
wholesale and retail.
APAS comprises of:
•
•
ACM Parts
Automotive
Components &
Accessories Division
(ACAD)
•
Fully Equipped
The various businesses and
brands operate together
as one cohesive division.
10
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
Notwithstanding the above, reported revenue
from continuing operations has increased from
$606.7 million for FY19 to $889.0 million for FY20,
representing a 46.5% increase. The increase in
revenue is largely due to a full twelve months
trading for FY19 acquisitions and partial period
trading for FY20 acquisitions.
Operating profit before interest and tax has
decreased from $34.0 million profit for FY19 to
a $46.9 million loss for FY20. The operating loss
before interest and tax has been significantly
impacted by several large non-recurring and
abnormal items, including:
•
Impairment expense of $56.2 million in
relation to goodwill and right-of-use assets;
• Acquisition costs, predominantly relating
to the acquisition of Capital Smart and
ACM Parts; and
•
The adoption of the new accounting
standard AASB 16 Leases on 1 July 2019.
As a result of the above, the statutory results for
FY20 are not directly comparable to FY19.
The Directors have included the following
tables and reconciliations to enable the Group’s
stakeholders to compare the ‘Normalised EBITDAI’
of the Group. Normalised EBITDAI is used by the
Group to define the underlying results, adjusted
for acquisition transaction costs and other items
which are determined as not in the ordinary
course of business. The presentation of the
non-IFRS financial information provides
stakeholders the ability to compare against
prior periods in a consistent manner.
OPERATING RESULTS
The financial performance of the Group in the
first half of FY20 (H1 FY20) reflected the
challenging market conditions which resulted in
declining repair volumes, pressure on pricing and
the cost associated with new vehicle technologies
such as Advanced Driver-Assistance Systems
(ADAS). The automotive parts and accessories
division had also been impacted by a pronounced
year-on-year decline in new car sales, impacting
the industry as a whole.
Despite the challenges in H1 FY20, the Group
traded strongly through the third quarter of
financial year ended 30 June 2020 (Q3 FY20).
The normalisation of weather conditions and the
increased focus on our key drivers and initiatives
resulted in an improvement to both repair
volumes and operating margins. The vehicle
panel repairs division adjusted to the changing
conditions with cost-saving initiatives, offering
additional on-site automotive services (brakes,
wheel alignments, tyres etc) to customers, a focus
on acquiring profitable regional and prestige
shops, and taking on more complex repairs to fill
the decrease in low-severity and rapid repairs.
Although the Group traded strongly through
Q3 FY20, the trading performance for Q4 FY20
was significantly impacted by the COVID-19
pandemic. As a result of Government restrictions
in Australia and New Zealand, trading volumes
were lower than historical levels and the Group’s
forecasts for April to June 2020. One of the more
immediate impacts of the Government restrictions
is a reduction in kilometres travelled, both locally
and interstate, and consequently a reduction in
vehicle panel repair volume.
To address the reduction in repair volume,
the Group implemented a number of cost
saving initiatives, including site hibernations,
downscaling our workforce to match demand,
freezing of non-time critical capital expenditure
and a reduction of the Group’s senior employees
and Board remuneration. The Group proactively
engaged with other key stakeholders, including
landlords to seek a combination of waivers
and deferrals of rental commitments during
this period.
A number of entities within the Group qualified
for the Australian Federal Government’s
JobKeeper Assistance Program (JobKeeper) and
the New Zealand Wage Subsidy. Participation in
these programs has assisted us to support our
workforce through this difficult trading period
enabling the Group to make a faster recovery
when the economic environment improves.
11
AMA GROUP LIMITED | 30 JUNE 2020
AASB 16 Leases Impact on
Consolidated Statement of Profit or Loss
Unaudited, non-IFRS Financial Information
2020
Statutory
$’000
AASB 16
Adjustment
$’000
2020
Pre-AASB 16
$’000
Revenue and other income from continuing operations
888,957
(61)
888,896
Raw materials and consumables used
Employment benefits expense
Occupancy expense
Professional services expense
Other expense
Fair value adjustments on contingent vendor consideration
(418,400)
(316,887)
-
-
(418,400)
(316,887)
(25,924)
(46,795)
(72,719)
(15,479)
(25,729)
(4,501)
-
-
-
(15,479)
(25,729)
(4,501)
Depreciation and amortisation expense
(72,740)
39,002
(33,738)
Impairment expense
Loss before interest and tax
Finance costs
Loss before income tax from continuing operations
(56,177)
3,430
(52,747)
(46,880)
(4,424)
(51,304)
(27,877)
(74,757)
17,539
(10,338)
13,115
(61,642)
As set out above, AASB 16 Leases has significantly impacted the loss before income tax from continuing
operations. Prior to 1 July 2019, operating leases were disclosed as commitments, and payments made
were charged to the profit or loss, within occupancy expenses. From 1 July 2019, leases are recognised
as a right-of-use asset and a corresponding liability. Each lease payment reduces the lease liability and
recognises interest expense within finance costs. The right-of-use asset is depreciated over the shorter of
the asset’s useful life and the lease term on a straight-line basis. Whilst the new accounting standard does
not impact cash flows, or the Company’s bank covenants, it does exacerbate loss before income tax from
continuing operations by $13.1 million.
12
WORLD CLASS AUTOMOTIVE SOLUTIONS
Reconciliation to Normalised EBITDAI
Unaudited, non-IFRS Financial Information
Operating (loss) / profit before interest and tax
Adjustments:
Depreciation, amortisation and impairment
Fair value adjustments on contingent vendor consideration
DIRECTORS’ REPORT
2020
$’000
2019
$’000
(46,880)
34,036
128,917
16,208
4,501
(117)
Occupancy costs and other income impacted by AASB 16 Leases
(46,856)
-
Pre-AASB 16 Earnings before interest, tax, depreciation, amortisation, impairment
and fair value adjustments (“Pre-AASB 16 EBITDAI”, unaudited, non-IFRS term)
39,682
50,127
Normalisations:
Acquisition
Board and other officers restructure
Integration
Divisional restructure and reorganisation
Existing employee equity plan
Other
IT roll-out
Greenfield start-up
Procurement project
Litigation and resolution
Site closures and make good
Total Normalisations
Normalised EBITDAI (unaudited, non-IFRS term)
9,849
1,494
1,795
-
726
571
349
197
-
-
-
-
-
900
733
1,499
132
1,000
1,000
967
182
150
13,487
8,057
53,169
58,184
Normalised EBITDAI for FY20 has decreased by $5.0 million or 8.6%. As noted above, the decline is a
result of the challenging market conditions in H1 FY20 and the COVID-19 pandemic in Q4 FY20.
Although total normalisations for FY20 is $13.5 million, historical normalisations have been significantly
reduced. Normalisations predominately relate to the acquisition costs of Capital Smart, ACM Parts
and the unsuccessful acquisition of Horizon Global. There are no normalisations for the impact of the
COVID-19 pandemic, including JobKeeper.
The Group has recognised total impairment expense of $56.2 million, consisting of $52.8 million against
goodwill and $3.4 million against right-of-use assets. The majority of the impairment ($47.0 million)
relates to Capital Smart and is a result of the risk and uncertainty surrounding COVID-19, and allowances
made in respect of potential declines or delays in acquisition growth. Further details of impairment
expense and intangible assets are set out in notes B3(D) and C6 to the Consolidated Financial Statements.
The Directors also highlight that the fair value adjustments on contingent vendor consideration
is significantly larger than the prior comparative period. The $4.5 million fair value adjustments is
predominantly due to the strong trading performance in Wales Truck and Bus Repairs (acquired in
May 2019). The acquisition earn-out is calculated based on profitability, which is forecasted to be stronger
than originally anticipated at acquisition date. Any increases to contingent vendor consideration results
in a corresponding expense recognised in fair value adjustments within the profit or loss.
13
AMA GROUP LIMITED | 30 JUNE 2020
FINANCIAL POSITION
The financial position of the Group is strong with net assets of $343.0 million. The Group has performed
better in cash generation and use (inclusive of the effects of Government assistance such as JobKeeper)
than management expected at the outset of the COVID-19 pandemic.
As at 30 June 2020, the net debt (inclusive of 50% of the contingent vendor consideration) was
$251.8 million. The Company de-levered during H2 FY20, despite the difficult operating conditions due
to COVID-19. Set out below is the net debt calculation, which is presented consistently to the calculation
requirements of the Group’s Syndicated Facility Agreement.
Net debt
Financial liabilities – drawn cash facilities
Contingent vendor consideration – 50%
Jun
2020
$’000
Dec
2019
$’000
340,000
290,000
24,731
22,085
Jun
2019
$’000
80,568
25,348
Cash and cash equivalents
(112,916)
(48,510)
(12,096)
Net debt used in convenant calculations
251,815
263,575
93,820
In ongoing support of the business and to allow the Group to withstand a potential extended period
of disruption caused by COVID-19 restrictions, the Group’s existing unutilised funding facilities were
repurposed increasing our working capital facility by $35.0 million. In addition, covenant testing was
waived until 31 December 2020 and a more favourable covenant testing regime for the balance of
FY21 was implemented.
The Group’s liquidity remains strong and is well-funded to support the business during this period
of disruption.
14
WORLD CLASS AUTOMOTIVE SOLUTIONS CASH FLOW
DIVIDENDS
DIRECTORS’ REPORT
Cash flow for the period was in line with
expectations. Key points to note:
• An equity raising to new institutional
investors and existing shareholders during
the period raised $208.7 million (net of
transaction costs). These funds were used
to facilitate the acquisition of Capital Smart
and ACM Parts.
• The Group increased its debt facilities
to $375.0 million during the period, with
$340.0 drawn in cash at balance date
(excluding bank guarantees). The drawn
debt was to facilitate acquisitions, finalise
contractual earn-outs and for general
corporate purposes. Interest and borrowing
costs increased in line with expectations.
• During the period, the Group purchased new
businesses and paid earn-outs in respect of
existing acquisitions, totalling $451.6 million.
• The Group received a further tranche of
the market incentive instalment from its
paint supplier of $59.5 million (inclusive
of GST), as disclosed in cash flows from
operating activities.
A final dividend of 2.25 cents per fully franked
ordinary share was paid on 13 November 2019 in
respect of FY19.
As a result of the impact of COVID-19 on the
financial performance and the Group’s optimal
capital structure, a final dividend has not been
declared for FY20. This also allows the business to
focus on capital management and balance sheet
improvement in the short-term.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS OF OPERATIONS
The economic outlook and market conditions
across some business units are likely to remain
challenging at least for Q1 FY21 as Government
restrictions remain in place in certain Australian
states and New Zealand. The Directors anticipate
repair volumes will increase over time and for
trading volumes to return to normal run-rates
by the last quarter of FY21.
The Directors continue to be optimistic about
the positive changes and opportunities for the
business. The consolidation of panel repair sites
will create a more efficient infrastructure for the
future when volumes return. Most importantly,
the Group expects a faster recovery compared to
other businesses and industries as global trends
indicate an increase in use of vehicles compared
to the use of public transport.
Ongoing strategies based on the consolidation
of the panel repair division, expanding strategic
partnership agreements with key customers and
suppliers, exploring industry innovation and cost
management are expected to deliver earnings
growth and improved shareholder value.
Once trading conditions return, the Directors
are confident that the Group’s experienced
and capable Senior Management are well
positioned to execute the Group’s strategy
into FY21 and beyond.
EVENTS SINCE THE END OF THE
FINANCIAL YEAR
Subsequent to year end, the Group terminated a
supply agreement with a key supplier. The supply
agreement contained termination fees upon early
termination. The Group reached a settlement
with the supplier for $9.4 million (to be expensed
in the year ending 30 June 2021). The supplier
has agreed to pay rebates owed to the Group
of $3.2 million as at 30 June 2020. The net cash
settlement of $6.2 million is expected to be paid
by the Group in the financial year ending
30 June 2021.
15
AMA GROUP LIMITED | 30 JUNE 2020
DIRECTORS AND OFFICERS
CURRENT DIRECTORS
ANTHONY DAY
Non-Executive Chair of the Board since
1 September 2019
Non-Executive Director since 28 November 2018
ANDREW HOPKINS
Executive Director since 17 December 2015
Appointed Group Chief Executive Officer in
November 2018
Experience and expertise
Experience and expertise
With over 35 years in the insurance industry,
Anthony has a breadth of experience in all areas
of the insurance industry.
His most recent role, until October 2017, was as
the Chief Executive Officer of Suncorp Group’s
Insurance Business. He brings to the Board
leadership capability, business judgement and
an intimate understanding of our key customers,
Australasia’s auto insurance companies.
He has a 20-year track record of producing
market-leading results in both growth and
profitability, whilst delivering continuous
improvement in operations. Anthony founded
advisory business Elevate CEOs, which focusses
on developing leadership and strategic skills of
senior executives.
Anthony is also Chairman of Countrywide
Insurance Holdings Pty Ltd.
Listed Company directorships in last three years
Nil
Special responsibilities
Chair of the People, Culture, Remuneration and
Nomination Committee
Interest in Shares (Direct and Indirect)
519,324 Fully Paid Ordinary Shares
Andrew founded the Gemini Group in Perth in
2009 and since then built the Gemini brand into
one of the largest privately-owned consolidators
of integrated claims management and vehicle
repair services to the insurer, corporate and
consumer industry and markets.
He was integral to the merger of the Gemini
business with AMA Group in 2015, resulting in
AMA Group leading the industry in Australia
and New Zealand. Andrew has over 35 years’
experience in finance, acquisitions and
strategic management.
Over the years, Andrew has developed and
broadened key relationships with significant
insurance industry leaders. His passion for
innovation and growth creation continues to
be the driver of the growth both domestically
and internationally.
Andrew is also a Director of a number of private
companies.
Listed Company directorships in last three years
Nil
Special responsibilities
Group Chief Executive Officer (CEO)
Interest in Shares (Direct and Indirect)
37,790,269 Fully Paid Ordinary Shares
(16,805,621 escrowed until 27 November 2020)
1,985,295 Performance Rights issued in
accordance with the Performance Rights Program
16
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
LEATH NICHOLSON
BEcon(Hons), LLB(Hons), LLM(Commercial Law)
Non-Executive Director since
23 December 2015
SIMON MOORE
LLB(Hons), BCom(Hons)
Non-Executive Director since
28 November 2018
Experience and expertise
Experience and expertise
Leath was a Corporate Partner at a leading
Melbourne law firm, gaining experience with a
breadth of ASX listed entities, before co-founding
Foster Nicholson Jones in 2008. Leath’s principal
clients include ASX listed companies and high net
worth individuals.
Leath has an in-depth knowledge of the
automotive repair industry. Leath also has
particular expertise in mergers and acquisitions,
IT based transactions, and corporate governance.
Leath is also a Director of a number of private
companies.
Listed Company directorships in last three years
Non-Executive Chairman of Constellation
Technologies Limited
Non-Executive Director of Money3 Corporation
Limited (resigned 15 November 2019)
Special responsibilities
Member of the Audit & Risk Committee and the
People, Culture, Remuneration & Nomination
Committee
Interest in Shares (Direct and Indirect)
1,616,873 Fully Paid Ordinary Shares
Simon founded Colinton Capital Partners in 2017.
He is an experienced private equity investor with
significant public company Board experience,
having held Board roles with Healthscope Ltd
and Qube Ltd.
Simon brings to the Board strong corporate
finance skills and experience having held senior
roles in investment, financial, private equity,
investment banking and academic sectors.
Simon has extensive experience in successfully
developing and implementing plans to assist
the growth potential of businesses.
Prior to founding Colinton Capital Partners, he
was Managing Director and Global Partner of
The Carlyle Group for 12 years.
Listed Company directorships in last three years
Non-Executive Chairman of Palla Pharma Limited
Non-Executive Director of Alexium International
Group Ltd
Non-Executive Director of Firstwave Cloud
Technology Limited (resigned 30 August 2019)
Non-Executive Director of Megaport Limited
(resigned 23 September 2019)
Special responsibilities
Chair of the Audit & Risk Committee
Interest in Shares (Direct and Indirect)
30,327,186 Fully Paid Ordinary Shares
17
AMA GROUP LIMITED | 30 JUNE 2020
NICOLE COOK
Non-Executive Director since 1 December 2019
CARL BIZON
Non-Executive Director since 3 February 2020
Experience and expertise
Experience and expertise
Nicole is an experienced executive and
management consultant having spent most of
her career in professional services roles in both
established and start-up businesses, with a
particular focus on the Human Resources sector.
Most recently the CEO for Jobs for NSW, Nicole
remains focused on driving innovation through
growing Australian businesses in order to create
jobs and skills of the future. Prior to this, Nicole
was the Managing Director of innovative global
outsourced recruitment and HR firm PeopleScout,
where she oversaw the delivery and growth of
their solutions in the APAC region.
Nicole has over 20 years experience growing
SaaS based technology businesses, is a trusted
management consultant, focuses on driving
innovation through technology and has deep
domain expertise in Human Resources, energy
efficiency, supply chain, FinTech and more.
Carl’s career in the manufacturing and
automotive industries spans more than
25 years. Carl has held senior executive roles
with world leading manufacturing and
distribution businesses in various sectors
of the automotive industry.
Carl most recently served as President and CEO
of Horizon Global and prior to that was CEO of
Jayco Corporation and President and Managing
Director of TriMas Corporation’s Cequent
subsidiaries in Asia Pacific, Europe and Africa.
Carl has successfully led global businesses,
improving profitability and operational
performance, delivering efficiencies and
increasing margins. Carl’s expertise and
experience extends to mergers and acquisitions,
manufacturing, operations, sales, large scale
project management and IT.
Listed Company directorships in last three years
Nicole is also Chair of the Advisory Board of the
Sydney School of Entrepreneurship.
Nil
Listed Company directorships in last three years
Intellihr Ltd
Special responsibilities
Special responsibilities
Member of the Audit & Risk Committee
Interest in Shares (Direct and Indirect)
Member of the People, Culture, Remuneration &
Nomination Committee
Nil
Interest in Shares (Direct and Indirect)
55,000 Fully Paid Ordinary Shares
18
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
COMPANY SECRETARY
Fiona van Wyk was appointed Company Secretary on 25 November 2019. Fiona has over 25 years’
company secretarial, corporate governance and corporate compliance experience, most notably as
Company Secretary of the Mantra Group (ASX 200) for over 11 years. Fiona was integral to the
listing of Mantra Group on the ASX in 2014 and the sale of the business to AccorHotels in 2018.
Prior to Fiona’s appointment, Terri Bakos was Company Secretary from the commencement of the
financial year until her resignation on 25 November 2019.
FORMER DIRECTORS
Raymond Malone, former Executive Chair of the Board, resigned from the Board on 31 August 2019. He had
been an Executive Director since 23 January 2009 and Executive Chair of the Board since 19 March 2015.
Raymond Smith-Roberts, former Executive Director, resigned from the Board on 20 November 2019.
He had been an Executive Director since 28 February 2014.
Brian Austin, former Non-Executive Director, resigned from the Board on 21 February 2020. He had been
a Non-Executive Director since 23 December 2015.
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 2020, and the number of meetings attended by each Director are as follows:
Board
Meetings
Audit & Risk
Committee Meetings
People, Culture,
Remuneration and
Nomination Committee
Meetings
Anthony Day
Andrew Hopkins
Leath Nicholson
Simon Moore
Nicole Cook
Carl Bizon
Raymond Malone
Raymond Smith-Roberts
Brian Austin
A
24
22
24
24
11
9
5
11
6
B
24
24
24
24
12
9
6
11
15
A
-
-
4
4
-
2
-
-
1
B
-
-
4
4
-
2
-
-
2
A
4
-
4
1
3
-
-
-
-
B
4
-
4
1
3
-
-
-
-
Key:
A Number of meetings attended
B Number of meeting held during the time the Director held office or was a member of the committee during the year
- Not a member of the relevant committee
Notes:
Simon Moore was a member of the People, Culture, Remuneration and Nomination Committee until January 2020
Nicole Cook was appointed as a Non-Executive Director and a Member of the People, Culture, Remuneration and
Nomination Committee on 1 December 2019
Carl Bizon was appointed as a Non-Executive Director and a Member of the Audit & Risk Committee on 3 February 2020
Raymond Malone resigned as an Executive Chair of the Board on 31 August 2019
Raymond Smith-Roberts resigned as an Executive Director on 20 November 2019
Brian Austin resigned as a Non-Executive Director on 21 February 2020
19
AMA GROUP LIMITED | 30 JUNE 2020
ANNUAL STATEMENT BY THE PEOPLE, CULTURE,
REMUNERATION AND NOMINATION CHAIR
On behalf of the Board, I am pleased to present the FY20 Remuneration Report. The Board believes the
Group has performed well in difficult circumstances and wishes to recognise the Group Executives and
Senior Management for their contribution in managing the business through the impacts of the COVID-19
pandemic during H2 FY20.
Acknowledging the people, culture and nomination aspects as key drivers for business performance, the
Remuneration Committee expanded its responsibilities to include these key areas under a People, Culture,
Remuneration and Nomination Committee (PCRNC).
The PCRNC is committed to ongoing best practice governance in relation to its remuneration framework
and related governance processes.
This year we have undertaken a review of our remuneration framework, taking into consideration
stakeholder feedback and the key objectives of the business. As a result, we have made important
changes that will continue to drive long-term performance and ensure clear alignment with shareholder
interests and enhanced disclosure and transparency. The highlights from our journey to improve in these
key areas include:
•
•
•
the review and revision of employment contracts for Executives and Senior Management to ensure
terms are standardised across the Group and are in line with best practice;
improvements to the framework and structure of the short-term incentive (STI) to include key
financial and non-financial performance targets and a financial performance gate, designed to align
with the financial and growth performance objectives of the business;
implementation of the Performance Rights Program including the grant of performance rights to
Executives and Senior Management, subject to long-term performance measures;
•
revision and adoption of a number of governance policies to align with current best practice, including;
◦
◦
◦
◦
◦
Board Charter;
Audit Committee Charter;
Securities Trading Policy;
Conflicts of Interest and Related Party Transaction Policy;
Continuous Disclosure Policy;
◦ Whistleblower Policy; and
•
improved disclosure in the remuneration report in relation to the remuneration framework and
outcomes for Key Management Personnel (KMP).
The Board intends to grant FY21 Performance Rights, subject to long-term performance measures.
The notice of the 2020 Annual General Meeting will include details of the grants proposed.
In determining STI awards for Executive KMP for FY20, the Committee considered the impact to the
business as a result of COVID-19 and determined that, despite the significant efforts and contribution of
Executive KMP, no STI’s would be awarded in respect of FY20.
We trust this Remuneration Report provides insight into the high priority the Board places on listening and
responding to our stakeholders as we work to ensure that our framework and outcomes consistently
deliver on our commitment to responsible and effective remuneration practices.
Anthony Day
Chair of the People, Culture, Remuneration
and Nomination Committee
20
WORLD CLASS AUTOMOTIVE SOLUTIONS
REMUNERATION
REPORT
(AUDITED)
The Remuneration Report outlines the Group’s reward framework and is set out under
the following headings:
A. INTRODUCTION ............................................................................................................................ 22
B. KEY MANAGEMENT PERSONNEL ........................................................................................... 23
C. REMUNERATION FRAMEWORK .............................................................................................. 24
D. REMUNERATION COMPOSITION AND MIX ......................................................................... 26
E. EXECUTIVE REMUNERATION OUTCOMES FOR FY20 .....................................................30
F. ACTUAL REMUNERATION RECEIVED IN FY20 .................................................................. 33
G. EQUITY INSTRUMENT DISCLOSURES RELATING TO EXECUTIVE KMP .................... 34
H. REMUNERATION GOVERNANCE ............................................................................................ 35
I. NON-EXECUTIVE DIRECTOR REMUNERATION .................................................................. 37
J. OTHER TRANSACTIONS AND BALANCES WITH KMP ...................................................... 39
21
AMA GROUP LIMITED | 30 JUNE 2020 REMUNERATION REPORT (AUDITED)
A.
INTRODUCTION
The AMA Group Limited Board is pleased to present the Remuneration Report for KMP which focuses on
our remuneration strategies and outcomes for FY20.
The Board recognises that the broader aspects of people and culture are critically aligned with
remuneration structures and the success of achieving the strategic objectives of the Group. During the
year, the Board expanded the Remuneration Committee to include these focuses under a People, Culture,
Remuneration and Nomination Committee (PCRNC).
The Board is committed to clear and transparent communication of remuneration arrangements.
The approach to remuneration remains firmly aligned to delivery against Group strategy and creating
sustained growth in shareholder value.
The Group’s remuneration strategy, policies and practices are designed to attract and retain the
best people and reward employees for supporting and achieving the Group’s strategic, financial and
operational objectives. Remuneration is competitive with executives in comparable companies and roles,
and reviewed against performance measures and targets.
The Directors understand the importance of providing variable remuneration components that are
competitive and aligned to shareholder returns over the long-term. During FY20, the Board:
• granted performance rights under the Group’s long-term incentive (LTI) program which are subject
•
to long-term measurable performance metrics; and
implemented a more structured short-term incentive (STI) plan with key financial and non-financial
targets aligned with achieving short-term business objectives.
This report is presented in accordance with the requirements of the Corporations Act 2001 and its
regulations. Information has been audited as required by Section 308 (3C) of the Corporations Act 2001.
22
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
B.
KEY MANAGEMENT PERSONNEL
This report outlines remuneration arrangements in place for KMP which comprise all Directors
(Executive and Non-Executive) and other members of the AMA Group executive who have authority and
responsibility for planning, directing and controlling the activities of the Group.
The Group’s KMP for FY20 are detailed in Table 1.
TABLE 1 – KEY MANAGEMENT PERSONNEL
NON-EXECUTIVE DIRECTORS
Name
Anthony Day
Position
Dates
Chair of the Board and
Non-Executive Director
From 1 September 2019
Full Financial Year
Leath Nicholson
Non-Executive Director
Full Financial Year
Simon Moore
Nicole Cook
Carl Bizon
Brian Austin
Non-Executive Director
Full Financial Year
Non-Executive Director
From 1 December 2019
Non-Executive Director
From 3 February 2020
Non-Executive Director
Until 21 February 2020
EXECUTIVE DIRECTORS
Name
Position
Dates
Andrew Hopkins
Raymond Malone
Group Chief Executive Officer and
Executive Director
Full Financial Year
Chair of the Board and
Executive Director
Until 31 August 2019
Raymond Smith-Roberts
Executive Director
Until 20 November 2019
EXECUTIVE MANAGEMENT
Name
Steven Becker
Steven Bubulj
David Marino
Position
Dates
Group Chief Financial Officer
Full Financial Year
CEO AMA Panel
Full Financial Year
CEO Capital Smart
From 1 November 2019
Campbell Jones
CEO APAS
From 1 November 2019
23
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
C.
REMUNERATION FRAMEWORK
The Group’s remuneration framework supports the strategic objectives of the business and provides
the foundation for how remuneration is determined and paid. The Group strives to create an executive
remuneration framework with an appropriate mix of fixed and variable remuneration that drives a
performance culture. The structure ensures there is a strong link between executive remuneration
and the achievement of Group performance and returns to shareholders.
During the year, the Board undertook a comprehensive review of the executive remuneration framework
in response to feedback from stakeholders. A main area of the review focused on variable remuneration
and identifying performance metrics that were measurable, understood, appropriate, and aligned to the
interests of shareholders.
The review resulted in changes to the delivery of the Group’s incentive schemes with the introduction
of the Performance Rights Program (PRP). Executive KMP and other Senior Management are invited
to participate in the PRP with the incentive being linked to the long-term performance and objectives
of the Group.
The Group’s philosophy is to provide flexible and market competitive remuneration arrangements that
are linked to the remuneration objectives depicted in Figure 1.
FIGURE 1 – REMUNERATION OBJECTIVES
Market competitive
Aligned to shareholders’ sustainable value
Linked to Group’s strategy
Aligned to performance and culture - rewarding both financial and
non-financial outcomes
Attract, motivate and retain executive talent
24
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
C.
REMUNERATION FRAMEWORK (CONT.)
Set out in Table 2 is the remuneration framework aligned to the Group’s remuneration objectives.
TABLE 2 – REMUNERATION FRAMEWORK
Component
Performance measures
Purpose and link to objectives
Fixed remuneration
Salary and other
benefits
(including statutory
superannuation)
Short-term incentive
Performance based
incentives settled in
cash
Experience and qualifications
•
• Role and responsibility
• Reference to remuneration paid
by similar sized companies in
similar industry sectors
Internal and external relativities
•
STI performance criteria are set on an
annual basis by reference to financial
and strategic measures and individual
performance targets relevant to the
specific position.
Performance measures include:
•
Financial criteria
Group and Divisional EBITDA:
50 - 75% of STI target
• Non-Financial criteria
Individual performance targets:
25 - 50% of STI target
STI at risk:
Maximum of 50% of fixed remuneration
Long-term incentive
Performance conditions must be
satisfied before the conditional
rights vest.
A defined equity award
of conditional rights
granted under the
PRP and subject to
performance conditions
measured over a three-
year performance
period
Performance measures are based on
vesting conditions aligned with general
market practice.
Performance measures include:
•
•
Total shareholder return (TSR)
20% of LTI allocation
Earnings per share (EPS)
80% of LTI allocation
The performance conditions are
independent and tested separately.
LTI at risk:
Group CEO and Group CFO - maximum
of 150% of fixed remuneration
Divisional CEOs - maximum of 100% of
fixed remuneration
Set to attract, retain and motivate
the right talent to deliver on
strategy and contribute to the
Group’s financial and operational
performance.
Reward for performance against
annual objectives is aimed at
achieving the financial and
strategic objectives of the Group.
•
•
EBITDA delivers direct
financial benefits to
shareholders
Individual performance
targets are aligned to the
Group’s core values and
key strategic and growth
objectives.
On an annual basis, and in
consultation with Executives, the
Board has discretion to adjust STI
outcomes to ensure the individual
outcomes are appropriate and are
aligned with the Group’s financial
and strategic objectives and
values.
The performance conditions are
designed to encourage Executives
to focus on key performance
drivers which underpin the
long-term performance of
business strategies driving
sustainable long-term growth in
shareholder value.
Allocation of performance rights
encourages Executives to have a
long-term view which aligns
Executive and shareholder interest
through share ownership.
25
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
D.
REMUNERATION COMPOSITION AND MIX
Compensation packages include a mix of fixed and variable compensation, and short and long-term
performance-based incentives.
The graph below represents the target remuneration mix for Executive KMP in the current year.
The STI is provided at target levels, and the LTI amount is provided based on the expense incurred
during the current year.
19%
27%
20%
27%
10%
30%
7%
31%
6%
31%
54%
53%
60%
62%
63%
Group CEO
Andrew Hopkins
Group CFO
Steven Becker
AMA Panel CEO
Steven Bubulj
Capital Smart CEO
David Marino
APAS CEO
Campbell Jones
Fixed
STI
LTI
A) FIXED REMUNERATION
Fixed remuneration considers the complexity and expertise required of individual roles. To assess the
competitiveness of fixed remuneration, the PCRNC considers market data by reference to appropriate,
independent and externally sourced comparable benchmark information.
Fixed remuneration comprises cash salary, superannuation and long service leave. Additional annual
benefits may include motor vehicle allowances and any associated fringe benefits tax.
In the case of Executive KMP, any recommendation for a remuneration review will be made by the
Group CEO to the PCRNC.
B) SHORT-TERM INCENTIVES (STI)
The Group’s STI plan places a proportion of the Executive KMP remuneration ‘at risk’. An individual will
achieve maximum remuneration only if they meet key agreed objectives in terms of the Group’s overall
financial and strategic performance, which are aligned with returns for shareholders. Key components of
the STI include achieving:
• budgeted EBITDA for the Group;
• budgeted EBITDA for each Division; and
•
individual performance targets aligned with the Group’s core values and key strategic and
growth objectives.
Table 3 summarises the objectives of the Group’s STI plan and identifies the performance measures and
relevant weightings for FY20.
26
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
D.
REMUNERATION COMPOSITION AND MIX (CONT.)
TABLE 3 – STI PLAN OBJECTIVES AND MEASURES
Purpose
Motivate and reward employees for contributing to the delivery of annual business
performance.
Participation
Executive KMP and other eligible Senior Management.
Performance
period
The performance period is for the 12 months ended 30 June 2020.
Opportunity
Maximum STI opportunity as a percentage of fixed remuneration is 50%.
Financial
gateway
A minimum Group Normalised EBITDA of at least 75% of target must be achieved before any
STIs are payable.
Performance
targets
The achievement of individual performance targets (once the financial gateway has been
achieved) shall determine the proportion of the potential incentive that will be awarded.
Set out below are the performance goals and weightings that were applied in respect of FY20.
Measures
Financial
Category
Weighting of STI
Performance Goals
Financial
and business
improvement
50% - 75%
• Achieve budgeted EBITDA, as
relevant on a Group and Divisional
level 1
The weighting of financial outcomes at a minimum 50% maintains a strong link between actual
financial performance of the business and incentives awarded.
Non-financial
Individual
performance
targets
25% - 50%
•
•
Performance hurdles for Executive
KMP are established on an annual
basis in conjunction with the
Group CEO, and are based on
the individual contribution to
the achievement of the Group’s
core values and key strategic and
growth objectives
In the case of the Group CEO &
Group CFO, the individual hurdles
are established in conjunction with
the Board based on the individual
contribution to the achievement
of the Group’s core values and key
strategic and growth objectives.
Use of
discretion
The PCRNC, in its advisory role, reviews any proposed adjustments to STI outcomes and
makes recommendations for any changes to performance measures to the Board for
consideration and ultimate approval.
1 Group budgeted EBITDA is measured taking into account the financial impact of any acquisitions, significant restructuring costs, normalisations, or
changes in accounting standards, in order that the target is measured on a comparable basis.
Calculation of STI entitlements will be assessed after the end of each financial year and in conjunction
with the completion of the external audit of the Group’s Consolidated Financial Statements. Any
entitlements will be paid at a date determined by the Board following the release of the Group’s financial
results to the ASX. Payment of any STI award is at the discretion of the Board.
27
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
D.
REMUNERATION COMPOSITION AND MIX (CONT.)
C) LONG-TERM INCENTIVES (LTI)
The Group’s remuneration structure includes the alignment of LTIs for Executive KMPs with the delivery of
sustainable value to shareholders. This enables the Group to attract and retain executives of a high calibre
who are focused on delivering long-term growth to shareholders.
Employee Equity Plan
The Employee Equity Plan (the Plan) was approved by shareholders at the Annual General Meeting (AGM)
on 22 November 2018. The objective of the Plan is to assist in the reward, retention and motivation of
key employees by providing performance-based remuneration through equity participation. The Plan is
for the benefit of all employees (including Directors) of the Group. Awards under the Plan are issued to
eligible participants by way of:
•
•
•
•
an Option;
a Right;
a Share; or
a Performance Share.
Performance Rights Program
The PRP was approved by the Board in FY20 and is structured to incentivise eligible employees as
well as attract and promote executive retention. Under the PRP eligible participants are invited to
receive performance rights in the Company which are subject to long-term performance based vesting
conditions. The number of performance rights allocated to each participant is set by the Board based on
individual circumstances and performance.
The Board has determined that a combination of Earnings Per Share (EPS) and relative Total Shareholder
Return (TSR) are appropriate measures of performance that are linked to sustainable shareholder returns.
Relative TSR provides a comparative, external market performance benchmark against a peer group of
companies. EPS is a profitability ratio that provides an indication of the Group’s capacity to generate
earnings and profitability and is considered by the Board to be an appropriately challenging measure in
the context of the Group’s strategic objectives.
The key aspects of the LTI Program are summarised in Table 4.
28
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
D.
REMUNERATION COMPOSITION AND MIX (CONT.)
TABLE 4 – PRP OBJECTIVES AND MEASURES
Purpose
Eligibility
Instrument
Allocation
methodology
Opportunity
Assist in attracting and retaining executive talent, focus executive attention on driving
sustainable long-term growth and align the interest of executives with those of shareholders.
LTI grants are generally restricted to Executive KMPs and Senior Management who are most able to
influence shareholder value. Non-Executive Directors are not eligible to participate in the PRP.
Awards under the PRP are made in the form of performance rights which are granted by the
Company for nil consideration. A performance right is a right to acquire one fully paid AMA share
provided specified performance hurdles are met. No dividends/distributions are paid on unvested
LTI awards. This ensures that participants are only rewarded when performance hurdles have
been achieved at the end of the performance period.
The number of performance rights allocated to each participant is set by the Board and based on
individual circumstances and performance. Accounting standards require the estimated valuation
of the grants be recognised over the performance period. The maximum value is based on the
estimated fair value calculated at the time of the grant and amortised in accordance with the
accounting standard requirements.
The maximum LTI opportunity is equivalent to 150% of fixed remuneration for the Group CEO
and Group CFO. The maximum LTI opportunity for Divisional CEOs is equivalent to 100% of fixed
remuneration. To compensate the Group CEO, Group CFO and other Senior Management for
the absence of a PRP in FY19, an additional one-time grant equal to 50% of the FY20 grant, was
awarded in FY20.
Performance
period
Performance is measured over a three-year period. The FY20 grant has a performance period
commencing 1 July 2019 and ending 30 June 2022.
Performance
hurdles
The PCRNC will review the performance conditions annually to determine the appropriate hurdles
based on the Group’s strategy and prevailing market practice. The performance measures
applied to the LTI grants made during FY20 are:
Relative TSR
(20% of LTI
Allocation)
Relative TSR is an objective measure of shareholder value creation and is widely
understood and accepted by the various key stakeholders. The Group’s TSR
performance is measured relative to a comparison group consisting of AMA’s
primary market competitors. The comparison group includes AP Eagers Limited,
ARB Corporation Limited, Bapcor Limited, GUD Holdings Limited and Super
Retail Group Limited.
EPS
(80% of LTI
allocation)
Growth in EPS is a direct measure of Group performance and a strong
correlation with long-term shareholder return. The current EPS growth
calculation is a three-year compound annual growth rate (CAGR).
Relative TSR
EPS
Relative TSR
(percentile)
Percentage of TSR-tested
rights to vest
EPS CAGR
Percentage of EPS-tested
rights to vest
<50th
50th
>50 to 75th
Nil
50%
< 10%
10%
Nil
50%
Straight line pro-rata
vesting from 50% to 100%
> 10% and up
to 20%
Straight line pro-rata
vesting from 50% to 100%
Vesting of LTI grants is dependent on achieving relative TSR performance and EPS targets over a
three-year period.
The performance rights will automatically exercise if, and when, the Board determines the
performance conditions are achieved. If the performance rights vest, entitlements may be
satisfied by either an allotment of new shares to participants or by the purchase of existing shares
on-market. Any performance rights that do not vest at the end of the performance period will
lapse. The terms of the performance rights do not include re-testing provisions.
Vesting
schedule
Vesting/
delivery
Termination/
forfeiture
Participants must be employed at the time of vesting to receive an entitlement to shares.
The Board has discretion on vesting of unvested performance rights where an employee leaves
due to retirement, retrenchment or redundancy, or termination by mutual consent. Where an
employee leaves due to resignation or termination all unvested performance rights will lapse.
Change
of Control
Provisions
Clawback
policy
Hedging
The vesting of unvested performance rights, in the event of a change of control, is governed by
the Performance Rights Regulations pursuant to the Group’s Employee Equity Plan rules which
includes Board discretion in certain circumstances.
LTI arrangements are subject to clawback provisions that enable the Board to clawback any
unfair benefits whether vested or unvested as a result of fraud, dishonesty, breach of obligations
or knowing material misstatements of financial statements by a participant.
Consistent with the Corporation Act 2001, participants are prohibited from hedging their
unvested performance rights.
29
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
E.
EXECUTIVE REMUNERATION OUTCOMES FOR FY20
A) FIXED REMUNERATION
As announced on 10 October 2019, the Group CEO, Andrew Hopkins, entered into a new employment
contract with the Company. Under the terms of the new contract Andrew Hopkins’ annual fixed
remuneration was increased to $1,200,000 (2019: $900,000). The increase was awarded following a
benchmarking exercise against a peer group of similar sized industry participants.
During FY19, Andrew Hopkins transitioned from the role of AMA Panel CEO to AMA Group CEO.
The increase in remuneration appropriately reflects the additional responsibilities of the role as well as
the expanded accountabilities resulting from the acquisition of Capital Smart and ACM Parts which
resulted in a substantial increase in the size, scale and risk profile of the business.
With the appointment of Andrew Hopkins to the role of Group CEO, Steven Bubulj was appointed to the
role of CEO AMA Panel on 1 July 2019.
As a result of the Group’s current year business acquisitions, David Marino (CEO Capital Smart) and
Campbell Jones (CEO APAS) joined the Group on 1 November 2019.
The Board considers that the current Executive remuneration achieves an appropriate balance between
recognising the value-adding contribution of Executive KMP and improved shareholder outcomes.
As a response to COVID-19 and to minimise the financial impact to the Group, all Executive KMP agreed
to a 20% reduction in remuneration from May to June 2020.
The actual remuneration earned by executives in FY20 is set out in Section F.
B) SHORT TERM INCENTIVES
(i) STI financial gateway
An overarching Group financial performance gateway must be achieved for Executive KMP to be awarded
any of their target STI. The gateway supports the Group’s remuneration strategy, in aligning executive
remuneration opportunities with the performance of the business and with shareholder outcomes.
(ii) Financial performance
A portion of the STI outcome for each Executive KMP is based on the achievement of financial results
including budgeted EBITDA.
The assessment based on the Group and Divisional performance, ensures that Executive KMP are
rewarded for the financial outcomes of the Divisions within their responsibility, which contributes to the
performance of the Group as a whole.
The Group has demonstrated consistently strong performance during the past five years and with the
exception of FY20, predominantly due to COVID-19, EBITDA has increased year-on-year.
Table 5 summarises the Group’s achievements over the past five years and highlights the areas that drive
shareholder wealth. These include the financial performance measures linked to executive remuneration.
30
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
E.
EXECUTIVE REMUNERATION OUTCOMES FOR FY20 (CONT.)
TABLE 5 – COMPANY PERFORMANCE
Performance
Revenue ($’000)
Net Profit ($’000)
Normalised EBITDAI ($’000)
Basic EPS from continuing operations (cents)
Annual TSR (%)
Interim Dividend (cents)
Final Dividend (cents)
Share price at 30 June ($)
FY16
264.3
7.4
31.9
1.5
41.0
0.50
1.70
0.81
FY17
382.2
17.4
41.1
3.3
22.8
0.50
2.00
0.97
FY18
509.8
15.4
52.2
2.9
10.8
0.50
2.00
1.05
FY19
606.7
21.7
58.2
3.4
38.8
0.50
2.25
1.43
FY20
889.0
(71.5)
53.2
(9.8)
(58.0)
-
-
0.60
(iii) Individual performance targets
Performance measures vary by role and from year-to-year for individuals and are linked to the successful
achievement of short-term strategic objectives. Targets for individual performance measures are not
disclosed as these are considered to be commercially sensitive. Executive KMP have achieved different
outcomes with regards to their personal objectives during FY20.
The Board recognises the significant efforts and contribution of the Executive KMP during FY20.
However, as a result of COVID-19 and its impact on the Group performance and revenue generation,
particularly in Q4 FY20, the PCRNC in consultation with the Board & Executive KMP have determined
that no STIs will be awarded in respect of FY20.
C) LONG TERM INCENTIVES
(i) Performance Rights Program
The number of performance rights over ordinary shares in the Company granted to KMP under the PRP
in FY20 is outlined in Table 6. The grants were awarded at no cost to the participants and are subject to
performance conditions over a three-year period ending 30 June 2022.
Accounting standards require the estimated valuation of the grants be recognised over the performance
period. The maximum value is based on the estimated fair value calculated at the time of the grant and
amortised in accordance with the accounting standard requirements.
The valuation of rights is conducted by an independent advisor. The fair value is determined using a
Monte-Carlo simulation for the relative TSR component and Black Scholes Model for the EPS component.
Key inputs used in valuing performance rights granted during FY20 are as follows:
Grant date 1
Performance period start
Performance period end
Vesting date
12 Sep 2019 to 4 Dec 2019
1 July 2019
30 June 2022
1 July 2022
1 For the purposes of valuation, the grant date is determined in accordance with AASB 2 Share Based Payments.
31
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
E.
EXECUTIVE REMUNERATION OUTCOMES FOR FY20 (CONT.)
TABLE 6 – PERFORMANCE RIGHTS HELD AS AT 30 JUNE 2020
KMP
Performance
measure
Performance rights
awarded 1
Fair market value per
performance right
Value of performance
rights at grant date 2
Andrew Hopkins
Relative TSR
EPS CAGR
Steven Becker
Relative TSR
EPS CAGR
Steven Bubulj
Relative TSR
David Marino
EPS CAGR
Relative TSR
EPS CAGR
Campbell Jones
Relative TSR
EPS CAGR
Total
397,059
1,588,236
1,985,295 1
148,897
595,588
744,485 1
58,824
235,294
294,118
57,356
229,423
286,779
41,669
166,675
208,344
3,519,021
$0.42
$1.18
$0.50
$1.22
$0.56
$1.27
$0.57
$1.28
$0.37
$1.11
$166,765
$1,124,471
$1,291,236
$74,449
$435,970
$510,419
$32,941
$179,294
$212,235
$32,693
$176,197
$208,890
$15,417
$111,006
$126,423
$2,349,203
1 To compensate management for the absence of a PRP in FY19, an additional one-time grant equal to 50% of the FY20 grant, was awarded in the FY20 year.
2 The value of the performance rights reflects the fair value at the time of grant. For the LTI grants subject to EPS, 60 percent vesting is assumed in the
above valuation.
(ii) Options over unissued shares
As at 30 June 2020, 2,000,000 options remain on issue from a prior period. These options were granted
during the previous financial year to a KMP on termination of employment. Each option was issued for nil
consideration and is exercisable for $1.20 each. On 26 November 2019, the 2,000,000 options satisfied
the vesting conditions. All options remain unexercised as at 30 June 2020 and have an expiry date of
25 April 2021.
32
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
F.
ACTUAL REMUNERATION RECEIVED IN FY20
The remuneration for Executive KMP of the Group is set out in Table 7 below.
TABLE 7 – FY20 ACTUAL REMUNERATION
Non-
monetary
benefit 3
Other 4
Long-
term
benefits 5
Post-
employ-
ment
benefits 6
Equity
Settled
benefits 7
Perform
-ance
rights 8
Termin
-ation
benefits
Total
$
Perform
-ance
related
%
Salary 1
Bonus 2
Executive Directors
Andrew
Hopkins
2020 1,146,698
-
32,192
-
2019
900,000 450,000
-
100,000
-
-
-
14,002
-
430,412
- 1,623,304 26.5%
-
-
-
-
- 1,450,000
31.0%
- 650,000
827,012
-
-
1,756,068
-
-
-
-
1,886
5,251
- 700,000
15,818
20,040
-
-
-
13,715
25,000 250,000
-
195,989
690,217 49.6%
58,250
4,562
25,000 500,000
-
- 1,463,086
73.5%
Former Executive Directors
Raymond
Malone 9
Raymond
Smith-
Roberts 9
2020
169,875
2019
1,020,210
-
-
2020
113,082
92,431
2019
300,040
575,234
Executive Management
Steven
Becker
Steven
Bubulj 10
David
Marino 10
2020
343,269
2019
-
2020
354,283
2019
-
Campbell
Jones 10
2020
254,738
2019
-
Executive
remuneration
2020
416,827
-
2,525
2019
164,250 225,000
-
170,140
-
615,049
27.7%
-
- 403,456 55.8%
-
-
-
-
-
-
40,019
-
-
-
-
-
557
25,000
-
14,206
333 25,000
-
-
1,323
16,667
-
-
3,511
16,744
-
-
-
-
-
-
-
-
-
-
70,745
-
69,630
-
42,141
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
479,366
14.8%
-
-
441,903
15.8%
-
-
317,134
13.3%
-
-
-
-
2020 2,798,772
92,431
74,736
21,325
127,664 250,000 783,068 845,989 4,993,985
2019 2,384,500 1,250,234
-
858,250
20,380
59,246 500,000
-
- 5,072,610
1 Salary includes short-term absences. In response to COVID-19 and the Group’s cost and cash preservation measures, all Executive KMP have taken a
20% reduction in remuneration for the period May to June 2020.
2 Bonuses in respect of FY20 were not awarded to current Executive KMP. Bonus awarded to Raymond Smith-Roberts was in accordance with his
employment contract.
3 Non-monetary benefits represent the effective net cost to the Group, consisting of the taxable value of fringe benefits aggregated with the associated
fringe benefit tax payable of those benefits.
4 Other, which is only in respect of FY19, consists of the amortisation of Raymond Malone’s sign-on bonus ($500,000) and amounts paid in respect of
motor vehicle allowances.
5 Long-term benefits represents the movement in the provision for long service leave for amounts accrued and paid.
6 Post-employment benefits represents amounts paid for pension and superannuation benefits.
7 Equity settled benefits represents the non-cash accounting charge to the Group’s operating result relating to prior year amortisation of sign-on bonus
issued in shares to Raymond Smith-Roberts.
8 The accounting expense recognised in relation to rights granted in the year is based on the aggregate fair value at grant date recognised over the vesting
period. Refer to note F1 (B)(ii) in the Consolidated Financial Statements for further details regarding the fair value of performance rights. These values may
not represent the future value that the Executive KMP will receive, as the vesting of the Rights is subject to the achievement of performance conditions.
9 Raymond Malone and Raymond Smith-Roberts resigned from their positions as Executive Directors on 31 August 2019 and 20 November 2019 respectively.
10 Steven Bubulj was appointed a KMP on 1 July 2019. David Marino and Campbell Jones were appointed KMPs on 1 November 2019.
33
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
G.
EQUITY INSTRUMENT DISCLOSURES RELATING TO EXECUTIVE KMP
A) SHAREHOLDINGS
The number of shares in the Company held during the financial year by Executive KMP of the Group is set
out in Table 8 below.
TABLE 8 – EXECUTIVE KMP INTERESTS IN SHARES
2020
Executive Directors
Opening
Balance
Balance on
appointment
Other
changes (net) 1
Balance on
retirement
Closing
Balance
Andrew Hopkins
33,561,242
Former Executive Directors
Raymond Malone
Raymond Smith-Roberts
Executive Management
Steven Becker
Steven Bubulj
David Marino
Campbell Jones
Total
36,315,349
6,171,959
50,000
-
-
-
76,098,550
-
-
-
-
-
-
-
-
4,229,027
-
37,790,269
-
(36,315,349)
300,316
(6,472,275)
11,112
285,714
-
33,266
-
-
-
-
-
-
61,112
285,714
-
33,266
4,859,435
(42,787,624)
38,170,361
1 Other changes (net) represents shares that were purchased or sold during the year.
B) PERFORMANCE RIGHTS HELD DURING THE YEAR
The number of performance rights in the Company held during the year by Executive KMP is set out in
Table 9 below.
TABLE 9 – EXECUTIVE KMP INTERESTS IN PERFORMANCE RIGHTS
2020
Executive Director
Andrew Hopkins
Executive Management
Steven Becker
Steven Bubulj
David Marino
Campbell Jones
Total
Balance at
the start of
the year
Granted
during
the year
Exercised
during
the year
Lapsed/
forfeited
during
the year
-
-
-
-
-
-
1,985,295
744,485
294,118
286,779
208,344
3,519,021
-
-
-
-
-
-
-
-
-
-
-
-
Closing
Balance
1,985,295
744,485
294,118
286,779
208,344
3,519,021
There were no performance rights that vested during the year or are exercisable at the end of the year.
34
WORLD CLASS AUTOMOTIVE SOLUTIONS
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
H.
REMUNERATION GOVERNANCE
The Group’s remuneration arrangements for Executive KMP require approval by the Board, following
recommendation from the PCRNC. The role of the PCRNC is set out in its charter, which is reviewed
regularly to ensure that it applies best-practice remuneration policies. Further information on the role and
responsibilities of the PCRNC is available on the Company’s website:
https://amagroupltd.com/corporate-governance
The PCRNC met on four occasions during FY20 and held numerous informal discussions about broader
remuneration topics.
The diagram below provides an overview of the remuneration governance framework that has been
established by the Group.
THE BOARD
The Board maintains overall accountability for oversight of the Group’s remuneration policies.
Specifically, the Board reviews, applies judgement and, as appropriate, approves all remuneration
and benefit arrangements of KMP, having regard to the recommendations made by the PCRNC.
PEOPLE, CULTURE, REMUNERATION
& NOMINATION COMMITTEE
The Committee is delegated responsibility by the Board to review and make recommendations on:
Remuneration
policies and
framework for
the Group
Remuneration
policies in respect
of Non-Executive
Directors
Remuneration
composition for
Executive KMP
Design features
of Executive and
Senior Management
STI and LTI program
awards, including
setting performance
and other vesting
conditions
SENIOR
MANAGEMENT
Provides information relevant to
remuneration decisions and makes
recommendations to the PCRNC; and
Implements remuneration policies.
INDEPENDENT EXTERNAL
REMUNERATION ADVISORS
The PCRNC may seek advice from
independent remuneration consultants
in determining appropriate remuneration
policies for the Group.
35
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
H.
REMUNERATION GOVERNANCE (CONT.)
A) OUR RESPONSE TO SHAREHOLDER FEEDBACK
At the 2019 AGM, 28.86% of votes cast were against the adoption of the FY19 Remuneration Report,
constituting a ‘first strike’ under the Corporations Act 2001.
The Board has undertaken a comprehensive review of the Group’s executive remuneration framework and
engaged with shareholders, proxy advisers and other stakeholders to gain an understanding of their concerns
around the Group’s remuneration policy and practices. The Board has listened and taken all comments
into account and implemented a more structured remuneration strategy for Executive KMP. The structured
approach aims to achieve the right balance between the performance of the business and shareholder
interests, while at the same time motivating, incentivising, retaining and attracting executive talent.
In addition, the Group has provided additional and improved disclosure in relation to the components of
its remuneration framework with its outcomes aimed at providing shareholders with an increased level of
understanding of the Group’s remuneration considerations.
The Board believes the PRP is an appropriate mechanism to reward the Executive KMP for achieving
long-term growth objectives and places a significant proportion of total remuneration ‘at risk’.
B) INDEPENDENT REMUNERATION ADVISORS
Where appropriate, the Board and PCRNC consult with external remuneration advisors. When such external
remuneration advisors are selected, the Board considers potential conflicts of interest. Advisors’ terms of
engagement regulate their access to, and (where required) set out their independence from, members of
the Group’s management.
The requirement for external remuneration advisor services is assessed annually in the context of matters
the PCRNC needs to address. Advice received from external advisors is used as a guide but does not
serve as a substitute for the Directors’ thorough consideration of the relevant matters.
No remuneration recommendations, as defined by the Corporations Act 2001, were made by remuneration
advisors to the PCRNC during FY20.
C) SECURITIES TRADING POLICY
AMA has adopted a Securities Trading Policy that applies to all employees of the Group including
Non-Executive Directors, Executive KMP and their associated persons. The policy ensures compliance with
insider trading laws, to protect the reputation of the Group and maintain confidence in trading in
AMA Group Limited securities. The policy also prohibits specific types of transactions being made which
are not in accordance with market expectation or may otherwise give rise to reputational risk.
D) EXECUTIVE EMPLOYMENT AGREEMENTS
Remuneration and other terms of employment for Executive KMP are formalised in employment
agreements. These agreements are of a continuing nature and have no fixed term of service.
Specific information relating to the terms of the agreements for current KMP is set out in Table 10.
TABLE 10 – EXECUTIVE KMP EMPLOYMENT AGREEMENTS
Executive KMP
Base fee inclusive
of statutory
superannuation
Term of agreement
Notice period
and termination
entitlement
Andrew Hopkins
$1,200,000
Ongoing contract
Steven Becker
Steven Bubulj
David Marino
Campbell Jones
$450,000
$400,000
$585,000
$425,000
Ongoing contract
Ongoing contract
Ongoing contract
Ongoing contract
3 months
3 months
3 months
12 months
6 months
Review
period 1
Annual
Annual
Annual
Annual
Annual
1 This review will have regard to such matters as the responsibilities, performance and remuneration of the employee.
36
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
I.
NON-EXECUTIVE DIRECTOR REMUNERATION
A) POLICY AND APPROACH TO SETTING FEES
AMA’s remuneration policy for Non-Executive Directors aims to ensure the Group can attract and retain
skilled, experienced and committed individuals to serve on the Board and remunerate them appropriately
for their time and expertise.
The PCRNC is responsible for reviewing and making recommendations to the Board on the Group’s
remuneration framework and policies and all aspects of KMP remuneration. This includes Board
and Committee remuneration, taking into consideration the size and scope of the Group’s activities,
the responsibilities and liabilities of Directors, and demands placed upon them. In developing its
recommendations, the PCRNC may take advice from external consultants.
B) CHANGES TO BOARD COMPOSITION
During FY20, and to demonstrate the Board’s long-term strategy of growing the composition, capability,
gender diversity and independence of its members, Nicole Cook and Carl Bizon were appointed
as Independent Non-Executive Directors with effect from 1 December 2019 and 3 February 2020,
respectively.
Following the appointment, and in line with their respective expertise, Nicole Cook was appointed a
member of the PCRNC and Carl Bizon was appointed a member of the Audit & Risk Committee.
Brian Austin resigned as Non-Executive Director on 21 February 2020.
The Board elected Anthony Day to replace Raymond Malone as Chair of the Board effective 1 September
2019. In addition to his role of Chair, Anthony currently serves as Chair of the PCRNC.
No other changes were made to the composition of the Non-Executive Directors during the year.
C) CURRENT FEE STRUCTURE
Under the current fee framework, Non-Executive Directors are remunerated by way of a base fee.
Additional fees are not currently paid for participation on Board Committees. Fees are inclusive of
superannuation contributions required by the Superannuation Guarantee legislation.
In March 2020, a Conflicts of Interest and Related Party Transaction Policy was implemented which
prohibits Directors from earning success and other incentive fees from the provision of professional
advisory services.
Non-Executive Directors are not eligible for termination payments and do not receive retirement benefits
on resignation or retirement from the Board.
Non-Executive Directors are entitled to reimbursement for reasonable business-related expenses,
including travel expenses and are covered by the Group’s Directors and Officers liability insurance policy.
In order to maintain independence, and impartiality, Non-Executive Directors are not entitled to any form
of incentive payments.
Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool approved by
shareholders. At the 2019 AGM, shareholders approved an increase in the remuneration pool for Non-
Executive Directors to $1,100,000 per annum (2019: $400,000). The increase was sought to provide
flexibility to attract and retain Non-Executive Directors on remuneration terms commensurate with their
skills and expertise and to appropriately remunerate for additional Board and committee roles as deemed
appropriate. No increase in the pool limit is proposed for FY21.
37
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
I.
NON-EXECUTIVE DIRECTOR REMUNERATION (CONT.)
C) CURRENT FEE STRUCTURE (CONT.)
Anthony Day was appointed Chair of the Board effective 1 September 2019. In recognition of the
increased responsibilities and change in role, and to ensure competitive compensation in relation to
industry peers, the Board approved an increase in Anthony’s base fee to $275,000 per annum
(2019: $100,000).
As a response to COVID-19 and to minimise the financial impact to the Group, the Non-Executive
Directors agreed to a 20% reduction in remuneration for the period May to June 2020.
The current fees for Non-Executive Directors are set out in Table 11. All Non-Executive Directors invoice
the Company and the fees set out in Table 11 and Table 12 are exclusive of GST.
TABLE 11 – NON-EXECUTIVE DIRECTORS’ CURRENT AND ANNUAL FEES
Position
Chair and Non-Executive Director
Non-Executive Director
2020
$
275,000
100,000
2019 1
$
-
100,000
1 In 2019, no additional fee was paid for the role of Chair of the Board, as the Chair during that time was an Executive Director of the Group.
TABLE 12 – NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-Executive Directors
Anthony Day 1
Leath Nicholson
Simon Moore 2
Nicole Cook 3
Carl Bizon 4
Former Non-Executive Directors
Brian Austin 5
Non-Executive Directors remuneration
1 Anthony Day was appointed Chair of the Board on 1 September 2019.
2 Simon Moore waived his Non-Executive Director fees for the period 1 January 2020 to 31 December 2020.
3 Nicole Cook was appointed Non-Executive Director on 1 December 2019.
4 Carl Bizon was appointed Non-Executive Director on 3 February 2020.
5 Brian Austin resigned as Non-Executive Director on 21 February 2020.
2020
$
2019
$
222,083
96,667
50,000
55,000
38,333
66,667
528,750
58,333
100,000
58,333
-
-
100,000
316,666
38
WORLD CLASS AUTOMOTIVE SOLUTIONS
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
I.
NON-EXECUTIVE DIRECTOR REMUNERATION (CONT.)
D) EQUITY-BASED REMUNERATION
Non-Executive Directors may not participate in equity schemes of the Company.
TABLE 13 – NON-EXECUTIVE DIRECTORS’ INTERESTS IN SHARES
2020
Non-Executive Directors
Anthony Day
Leath Nicholson
Simon Moore
Nicole Cook
Carl Bizon
Former Non-Executive Directors
Brian Austin
Total
Opening
Balance
Balance on
appointment
Other
changes (net) 1
Balance on
retirement
Closing
Balance
100,000
1,673,395
20,025,000
-
-
112,000
21,910,395
-
-
-
-
-
-
-
419,324
(56,522)
10,302,186
55,000
-
-
-
-
-
-
24,889
(136,889)
519,324
1,616,873
30,327,186
55,000
-
-
10,744,877
(136,889)
32,518,383
1 Other changes (net) represents shares that were purchased or sold during the year.
J.
OTHER TRANSACTIONS AND BALANCES WITH KMP
In addition to specific disclosure requirements, the Group continuously re-assesses judgemental matters
surrounding relationships with KMP and completeness of its related party disclosures.
A) LOANS PROVIDED TO KMP
In FY16 and as part of the acquisition of Gemini Accident Repair Centres Pty Ltd (now AMA Group
Solutions Pty Ltd), the Group acquired unsecured loans to certain vendors of that entity. One of the loans
is with Andrew Hopkins, a Director of the Company.
Andrew Hopkins’ loan has not been repaid and it has been agreed that it will be extinguished against
future awards of short-term and long-term incentives, which are currently in place. If long-term incentives
are used to settle the loan, Andrew Hopkins must do all things necessary, including promptly realising the
value in cash, including by way of the sale or disposal of securities issued to him.
Andrew Hopkins’ loan accrues interest at a rate of 5.37% per annum and matures on 30 June 2022.
As at 30 June 2020, the balance outstanding on his loan is $1,339,130 (2019: $1,270,884).
The movement from prior year to the current balance of $1,339,130 is due to interest accrued.
39
AMA GROUP LIMITED | 30 JUNE 2020
REMUNERATION REPORT (AUDITED)
J.
OTHER TRANSACTIONS AND BALANCES WITH KMP (CONT.)
B) OTHER TRANSACTIONS WITH KMP
A number of KMP hold directorships or are associated with other entities. During the year, the Group
provisioned services from and transacted with entities that were controlled or significantly influenced by
members of the KMP.
Details of other transactions for the year ended 30 June with KMP and their related parties, and
recognised in the Consolidated Statement of Profit or Loss, are summarised in Table 14.
TABLE 14 – AMOUNTS RECOGNISED AS EXPENSES
Service and Entity
KMP
Legal and advisory services
Colinton Capital Partners Pty Ltd
Nicholson Ryan Lawyers
Property rental fees and outgoings
AV Ventures Pty Ltd
A&R Property Developments Pty Ltd
A&R Development Holdings Pty Ltd
Bundall Road Pty Ltd
Silvan Bond Pty Ltd
Malone Superannuation Fund
Simon Moore
Leath Nicholson
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Raymond Malone
Raymond Malone
2020
$
2019
$
3,150,000
-
1,541,683
940,528
4,691,683
940,528
201,201
188,093
475,587
901,528
442,063
809,474
457,037
-
29,707
178,244
9,902
59,415
SRFE Pty Ltd
Raymond Smith-Roberts
125,074
317,291
2,200,036
1,994,580
Claims management
A & R Insurance Management
(t/a Unity Specialised Services)
Training and recruitment
I-CAR Australia Limited
SRFE Pty Ltd
Insurance services
Andrew Hopkins
653,544
478,335
653,544
478,335
Steven Bubulj
189,502
-
Raymond Smith-Roberts
-
21,969
189,502
21,969
PSC Insurance Brokers (Aust) Pty Ltd
Brian Austin
Total expenses
685
685
103,000
103,000
7,735,450
3,538,412
The nature of transactions with KMP and their related parties are as follows:
• The Group engaged Colinton Capital Partners Pty Ltd to provide financial advisory and transactional
services in relation to the acquisition of Capital Smart and ACM Parts, and the related equity raise
and debt refinance.
• The Group utilises Nicholson Ryan Lawyers for ongoing legal and advisory services.
• The Group leases and incurs rental fees and outgoing expenses for sites in the Group, including
head office space.
• The Group transacts with Unity Specialised Services, a claims management business which handles
and allocates insurance claims from a number of major insurers into vehicle accident repair facilities
around Australia.
• The Group transacts with I-CAR Australia Limited, an industry based not-for-profit organisation.
I-CAR provides training to the collision repair industry.
• The Group used PSC Insurance Brokers (Aust) Pty Ltd as its General Insurance Broker.
40
WORLD CLASS AUTOMOTIVE SOLUTIONS
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
J.
OTHER TRANSACTIONS AND BALANCES WITH KMP (CONT.)
C) BALANCES WITH KMP
Details of balances as at 30 June with KMP and their related parties, and recognised in the Consolidated
Statement of Financial Position, are summarised in Table 15.
TABLE 15 – AMOUNTS RECOGNISED AS ASSETS AND LIABILITIES
Service and entity
KMP
Classification
2020
$
2019
$
Right-of-use assets 1
AV Ventures Pty Ltd
Andrew Hopkins
Right-of-use assets
1,394,672
A&R Property Developments Pty Ltd
Andrew Hopkins
Right-of-use assets
1,905,593
A&R Development Holdings Pty Ltd
Andrew Hopkins
Right-of-use assets
8,563,770
Bundall Road Pty Ltd
Andrew Hopkins
Right-of-use assets
2,536,481
Lease commitments until expiry (including all options) 1
AV Ventures Pty Ltd
Andrew Hopkins
Lease liabilities
A&R Property Developments Pty Ltd
Andrew Hopkins
Lease liabilities
A&R Development Holdings Pty Ltd
Andrew Hopkins
Lease liabilities
Bundall Road Pty Ltd
Andrew Hopkins
Lease liabilities
Claims management
A & R Insurance Management
(t/a Unity Specialised Services)
Andrew Hopkins
Trade and
other payables
Training and recruitment
I-CAR Australia Limited
Steven Bubulj
Trade and
other payables
Net liabilities
-
-
-
-
-
-
-
-
-
-
14,400,516
1,468,737
1,952,569
8,918,559
2,602,746
14,942,611
17,760
3,000
17,760
3,000
19,000
19,000
578,855
-
-
3,000
1 The Group adopted the new Australian Accounting standard AASB 16 Leases in the current year. The new standard requires the Group to recognise its lease
commitments as liabilities in the Consolidated Statement of Financial Position. The Group has adopted AASB 16 Leases using the modified retrospective
method from 1 July 2019 and has not restated comparatives for the 2019 reporting period. Therefore lease liabilities are not directly comparable.
41
AMA GROUP LIMITED | 30 JUNE 2020
OTHER ITEMS
CORPORATE GOVERNANCE STATEMENT
The Directors and the Group are committed to achieving
and demonstrating a high standard of corporate
governance. The Group’s Corporate Governance
Statement is located on the Company’s website at
amagroupltd.com/corporate-governance/
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 Group had no
adverse environmental issues during the year.
INSURANCE OF OFFICERS
AND INDEMNITIES
Insurance of officers
During the financial year, the Company paid a premium
in respect of a contract insuring the directors, the
company secretaries, and all executive officers of the
Company and of any related body corporate against
a liability incurred as such a director, secretary or
executive officer to the extent permitted by the
Corporations Act 2001.
The directors have not included details of the nature
of the liabilities covered or the amount of the premium
paid in respect of the directors’ and officers’ liability,
costs and charges, as such disclosure is prohibited
under the terms of the contract.
Indemnity of auditors
The Company has not during or since the end of the
financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer or auditor
of the Company or of any related body corporate
against a liability incurred as such an officer or auditor.
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.
42
WORLD CLASS AUTOMOTIVE SOLUTIONS DIRECTORS’ REPORT
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor (KPMG) for audit and non-audit
services provided during the year are set out in note F2 to the Consolidated Financial
Statements.
The Board of Directors has considered the position and, in accordance with advice
received from the Audit & Risk Committee, is satisfied that the provision of the non-audit
services is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit
services by the auditor, as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services have been reviewed by the Audit & Risk Committee to ensure
they do not impact the impartiality and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the
Corporations Act 2001 is set out on page 44.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191, relating to the ‘rounding off’ of amounts in the Directors’
Report. Amounts in the Directors’ Report have been rounded off in accordance with the
instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This Directors’ Report is signed in accordance with a resolution of the Board of Directors.
Andrew Hopkins
Director
25 August 2020
43
AMA GROUP LIMITED | 30 JUNE 2020
44
Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Lead 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, in relation to the audit of AMA Group Limited for the financial year ended 30 June 2020 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. KPMG Adam Twemlow Partner Gold Coast 25 August 2020 Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Lead 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, in relation to the audit of AMA Group Limited for the financial year ended 30 June 2020 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. KPMG Adam Twemlow Partner Gold Coast 25 August 2020 WORLD CLASS AUTOMOTIVE SOLUTIONS 4545
Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Lead 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, in relation to the audit of AMA Group Limited for the financial year ended 30 June 2020 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. KPMG Adam Twemlow Partner Gold Coast 25 August 2020 Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Lead 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, in relation to the audit of AMA Group Limited for the financial year ended 30 June 2020 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. KPMG Adam Twemlow Partner Gold Coast 25 August 2020 AMA GROUP LIMITED | 30 JUNE 2020 FINANCIAL
REPORT
FOR THE YEAR ENDED 30 JUNE 2020
CONTENTS
Consolidated Statement of Profit or Loss .....................................................................47
Consolidated Statement of Comprehensive Income..................................................48
Consolidated Statement of Financial Position .............................................................49
Consolidated Statement of Changes in Equity ........................................................... 50
Consolidated Statement of Cash Flows ..........................................................................51
Notes to the Financial Statements .................................................................................. 52
Directors’ Declaration ....................................................................................................... 128
These Financial Statements are Consolidated Financial Statements for the Group consisting of AMA Group Limited
and its controlled entities. A list of controlled entities is included in note E2.
The Financial Statements are presented in the Australian currency.
AMA Group Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business is:
Level 4, 130 Bundall Road, Bundall QLD 4217
The Financial Statements were authorised for issue by the Directors on 25 August 2020. The Directors have the
power to amend and reissue the Financial Statements.
All press releases, financial reports and other information are available at our Investor Centre on our website:
amagroupltd.com/
46
WORLD CLASS AUTOMOTIVE SOLUTIONS FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2020
Revenue and other income from continuing operations
B2
888,957
606,722
Notes
2020
$’000
2019
$’000
Raw materials and consumables used
Employee benefits expense
Occupancy expense 1
Professional services expense
Other expense
Fair value adjustments on contingent vendor consideration
Depreciation and amortisation expense 1
Impairment expense
Operating (loss) / profit before interest and tax
Finance costs 1
(Loss) / profit before income tax from continuing operations
Loss before tax from discontinued operations
(Loss) / profit before income tax
Income tax benefit / (expense)
(Loss) / profit for the period
(Loss) / profit is attributable to:
Members of AMA Group Limited
Non-controlling interests
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
1 Impacted by the adoption of AASB 16 Leases - refer note A2(D) and note C7.
2 Earnings per share for year ended 30 June 2019 is restated - refer note D2.
(418,400)
(253,556)
B3(C)
(316,887)
(237,515)
(25,924)
(44,115)
(15,479)
(5,458)
(25,729)
(15,951)
(4,501)
117
(72,740)
(16,208)
(56,177)
-
(46,880)
34,036
D7(B)
B3(A)
B3(D)
B3(B)
(27,877)
(2,595)
(74,757)
E5
(1,156)
31,441
(232)
(75,913)
31,209
B4(A)
4,445
(9,460)
(71,468)
21,749
(70,265)
21,553
E3
(1,203)
196
(71,468)
21,749
2020
Cents
2019 2
Cents
D2
D2
D2
D2
(9.82)
(9.82)
(9.93)
(9.93)
3.41
3.35
3.38
3.33
The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying notes.
47
AMA GROUP LIMITED | 30 JUNE 2020 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Net (loss) / profit
Notes
2020
$’000
(71,468)
2019
$’000
21,749
Other comprehensive expense
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Changes in fair value of cash flow hedges
D7(C)
Other comprehensive expense, net of tax
(269)
(185)
(454)
(63)
-
(63)
Total comprehensive (loss) / income, net of tax
(71,922)
21,686
Total comprehensive (loss) / income is attributable to:
Members of AMA Group Limited
Non-controlling interests
(70,719)
21,490
(1,203)
196
(71,922)
21,686
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
48
WORLD CLASS AUTOMOTIVE SOLUTIONS FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
ASSETS
Current assets
Cash and cash equivalents
Receivables and contract assets
Inventories
Current tax receivable
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets 1
Intangible assets
Other assets
Other financial assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Financial liabilities
Lease liabilities 1
Provisions
Other liabilities
Current tax payable
Total current liabilities
Non-current liabilities
Financial liabilities
Lease liabilities 1
Provisions
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Retained deficit
Total Group interest
Non-controlling interest
Total equity
Notes
2020
$’000
2019
$’000
D6
C1
C2
B4(C)
C4
C5
C7
C6
C4
C3
B4(E)
C8
D7
C7
C10
C9
B4(C)
D7
C7
C10
C9
B4(E)
112,916
72,099
38,744
3,338
10,295
237,392
93,090
345,409
694,087
605
1,878
15,160
1,150,229
12,096
60,339
28,763
-
9,294
110,492
63,340
-
263,056
7,253
2,044
10,560
346,253
1,387,621
456,745
117,596
21,784
35,207
33,466
15,844
-
223,897
363,620
320,305
13,116
63,196
60,467
820,704
66,341
24,496
103
23,038
12,500
4,713
131,191
106,767
29
10,224
16,061
-
133,081
1,044,601
264,272
343,020
192,473
D4
D5
E3
417,117
880
(91,318)
326,679
16,341
200,263
46
(8,128)
192,181
292
343,020
192,473
1 Impacted by the adoption of AASB 16 Leases - refer note A2(D) and note C7.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
49
AMA GROUP LIMITED | 30 JUNE 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Attributable to owners of
AMA Group Limited
Share
capital
$’000
Other
reserves
$’000
Retained
deficit
$’000
Notes
Non-
controlling
interests
$’000
Total
$’000
187,206
3,004
(19,429)
170,781
Total
equity
$’000
171,077
21,749
(63)
296
196
-
-
21,553
21,553
-
(63)
21,553
21,490
196
21,686
Balance at 1 July 2018
Profit for the period
Other comprehensive expense
Total comprehensive income for the period
-
-
-
Transactions with owners in their
capacity as owners:
Shares issued, net of transaction costs
D4
11,807
Employee equity plan D4, F1(C)
1,250
Lapsed options
Dividends provided for or paid
D3
-
-
(63)
(63)
-
153
-
-
11,807
1,403
-
-
-
11,807
1,403
-
(3,048)
3,048
-
-
(13,300)
(13,300)
(200)
(13,500)
Balance at 30 June 2019
200,263
46
(8,128)
192,181
292
192,473
13,057
(2,895)
(10,252)
(90)
(200)
(290)
Attributable to owners of
AMA Group Limited
Share
capital
$’000
Other
reserves
$’000
Retained
deficit
$’000
Notes
Non-
controlling
interests
$’000
Total
$’000
Total
equity
$’000
Balance at 1 July 2019
200,263
46
(8,128)
192,181
292
192,473
Loss for the period
Other comprehensive expense
Total comprehensive expense for the period
-
-
-
-
(70,265)
(70,265)
(1,203)
(71,468)
(454)
-
(454)
-
(454)
(454)
(70,265)
(70,719)
(1,203)
(71,922)
Transactions with owners in their
capacity as owners:
Shares issued, net of transaction costs
D4
216,854
Employee equity plan
F1(C)
Dividends provided for or paid
Purchase of shares from
Non-controlling interests
Non-controlling interests on
acquisition of subsidiary
D3
E3
E3
-
-
-
-
-
1,288
-
-
216,854
1,288
-
-
216,854
1,288
-
-
-
(12,215)
(12,215)
(169)
(12,384)
(710)
(710)
(123)
(833)
-
-
17,544
17,544
216,854
1,288
(12,925)
205,217
17,252
222,469
Balance at 30 June 2020
417,117
880
(91,318)
326,679
16,341
343,020
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
50
WORLD CLASS AUTOMOTIVE SOLUTIONS FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Notes
2020
$’000
2019
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
996,432
628,623
Market incentive received (inclusive of GST)
C9
59,510
33,990
Payments to suppliers and employees (inclusive of GST) 1
(895,420)
(615,700)
Interest received
Interest and other costs of finance paid 1
Income tax paid
330
389
(27,536)
(2,595)
(10,858)
(7,794)
Net cash inflows provided by operating activities
D6(B)
122,458
36,913
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from disposal of business
Payments for purchases of property, plant and equipment
Payments for intangible assets
Payments for businesses acquired and earn-outs
20
25
158
150
(13,285)
(10,885)
(510)
(4)
(451,597)
(55,307)
Cash acquired through business combinations
E6
19,488
-
Loan and other investments
Net cash outflows used in investing activities
-
1,095
(445,859)
(64,793)
Cash flows from financing activities
Equity raised, net of costs
Proceeds from borrowings
Repayment of borrowings
Payment of new borrowings transaction costs
Principal elements of lease payments 1
Dividends paid to AMA shareholders
208,711
D6(C)
378,500
9,509
52,750
D6(C)
(119,068)
(24,934)
D6(C)
(4,926)
D6(C)
(29,552)
-
-
D3
(9,310)
(13,300)
Dividends paid to non-controlling shareholders
E3(A)
(169)
Net cash inflows provided by financing activities
424,186
(200)
23,825
Net increase / (decrease) in cash and cash equivalents
100,785
(4,055)
Cash and cash equivalents, at the beginning of the financial year
Effects of exchange changes on the balances held in foreign currencies
12,096
35
16,214
(63)
Cash and cash equivalents, at the end of the financial year
D6(A)
112,916
12,096
1 Impacted by the adoption of AASB 16 Leases - refer to note A2(d) and C7.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
51
AMA GROUP LIMITED | 30 JUNE 2020 CONTENTS OF
THE NOTES TO
THE FINANCIAL
STATEMENTS
CONTENTS
A BASIS OF PREPARATION ..........................................................................................54
A1 Basis of preparation ......................................................................................................................54
A2 Significant accounting policies ...............................................................................................56
A3 Critical accounting estimates and judgements ..............................................................59
B PERFORMANCE FOR THE YEAR ........................................................................... 60
B1 Segment information ................................................................................................................... 60
B2 Revenue and other income ....................................................................................................... 62
B3 Other expense items.....................................................................................................................64
B4 Taxes .....................................................................................................................................................66
C ASSETS AND LIABILITIES .........................................................................................70
C1 Receivables and contract assets ............................................................................................70
C2
Inventories .......................................................................................................................................... 72
C3 Other financial assets .................................................................................................................. 73
C4 Other assets ...................................................................................................................................... 74
C5 Property, plant and equipment ............................................................................................... 75
C6
Intangible assets ............................................................................................................................. 77
C7 Right-of-use assets and lease liabilities ..............................................................................83
C8 Trade and other payables ..........................................................................................................86
C9 Other liabilities ................................................................................................................................. 87
C10 Provisions ...........................................................................................................................................88
52
WORLD CLASS AUTOMOTIVE SOLUTIONS FINANCIAL STATEMENTS
D CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT ...90
D1 Capital management ...........................................................................................................................90
D2 Earnings per share ..................................................................................................................................91
D3 Dividends ....................................................................................................................................................92
D4 Contributed equity ................................................................................................................................93
D5 Other reserves ........................................................................................................................................ 94
D6 Cash and cash equivalents ................................................................................................................95
D7 Borrowings and other financial liabilities ................................................................................... 97
D8 Financial risk management ..............................................................................................................101
E GROUP STRUCTURE ...................................................................................................... 108
E1 Parent entity information ................................................................................................................ 108
E2
Investments in controlled entities ............................................................................................... 109
E3 Non-controlling interests ................................................................................................................... 111
E4 Deed of cross guarantee ................................................................................................................... 113
E5 Discontinued operations ................................................................................................................... 115
E6 Business combinations ...................................................................................................................... 116
F OTHER INFORMATION ...................................................................................................120
F1 Share based payments ......................................................................................................................120
F2 Auditors’ remuneration ..................................................................................................................... 123
F3 Related party transactions .............................................................................................................. 123
F4 Commitments ......................................................................................................................................... 126
F5 Contingent liabilities ........................................................................................................................... 126
F6 Events occurring after the reporting period ...........................................................................127
53
AMA GROUP LIMITED | 30 JUNE 2020 A
BASIS OF PREPARATION
This section of the notes includes other information that must be disclosed to comply with the
accounting standards and other pronouncements, but is not immediately related to individual line
items in the financial statements.
BASIS OF PREPARATION
SIGNIFICANT ACCOUNTING POLICIES
A1
A2
A3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
A1 BASIS OF PREPARATION
This section describes the financial reporting framework within which the Consolidated Financial
Statements are prepared and a statement of compliance with the Corporations Act 2001 and
Australian Accounting Standards and Interpretations.
The Group is a for-profit entity which is incorporated and domiciled in Australia. The Consolidated
Financial Report of the Group for the year ended 30 June 2020 was authorised for issue in accordance
with a resolution of Directors on 25 August 2020.
The Consolidated Financial Statements have been prepared on the historical cost basis except for derivative
financial instruments and contingent vendor consideration which have been measured at fair value.
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with
current financial year presentation. Material reclassifications include:
• The amortisation of the market incentive was previously charged to the profit or loss, within revenue
and other income from continuing operations. The amortisation of the market incentive has been
reclassified to raw materials and consumables used, which is consistent to the offsetting cost in which
the amount relates to. Prior period has been reclassified for comparative purposes ($9,419,000).
• Within total revenue from external customers, a reclassification of prior period’s revenue between
vehicle panel repair services and sale of goods has been made ($6,342,000).
•
•
•
•
In the Consolidated Statement of Financial Position, contract assets have been reclassified from
inventories to receivables and contract assets. Prior period has been reclassified for comparative
purposes ($12,215,000).
In the Consolidated Statement of Cash Flows, receipts from customers and payments to suppliers
and employees have been reclassified to include Goods and Services Tax (GST). This is consistent
to the presentation of current period results and has nil impact to net cash inflows provided by
operating activities (gross up of $60,238,000).
In the Consolidated Statement of Cash Flows, the market incentive received has been separately
disclosed from receipts from customers. This is consistent to the presentation of current period
results and has nil impact to net cash inflows provided by operating activities ($33,990,000).
In the Consolidated Statement of Cash Flows, payments for earn-outs were previously recorded
in operating cashflows. This has been reclassified to payments for businesses acquired and
earn-outs, consistent to the presentation of current period results. This has an impact to net
cash inflows provided by operating activities and net cash outflows used in investing activities
($17,436,000). The reconciliation of profit before tax to operating cash flows has been updated
for this reclassification.
The Consolidated Financial Statements are presented in Australian dollars and amounts have been
rounded to the nearest thousand dollars unless otherwise stated, in accordance with ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191.
The Consolidated Financial Statements of the Group are general purpose financial statements which
have been prepared in accordance with the Corporations Act 2001, and Australian Accounting Standards
and Interpretations.
54 WORLD CLASS AUTOMOTIVE SOLUTIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
Compliance with Australian Accounting Standards ensures that the Consolidated Financial Statements
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). Consequently, these Consolidated Financial Statements have been prepared in
accordance with and comply with IFRS as issued by the IASB.
(A) GOING CONCERN
This general purpose Consolidated Financial Report has been prepared on a going concern basis, which
assumes that the Group will be able to meet its debts as and when they become due and payable.
As at 30 June 2020, the Group has current assets exceeding current liabilities by $13,495,000. Whilst this
is a positive working capital result, it is still impacted by the non-cash market incentive in other current
liabilities (refer note C9). In addition, the implementation of the new accounting standard, AASB 16 Leases
(refer note C7) impacts net current assets as the right-of-use asset is disclosed in non-current assets, but
future lease payments are split between current and non-current.
Management have prepared cash flow forecasts for the next twelve months that support the ability of
the Group to continue as a going concern. The cash flow forecasts assume that government restrictions
as a result of the COVID-19 pandemic will ease and trading volumes will return to normal run-rates by the
last quarter of FY21. The Group’s liquidity remains strong and the net debt position as at 30 June 2020 is
tracking better than originally anticipated at the outset of the COVID-19 pandemic.
In ongoing support of the business and to allow the Group to withstand a potential extended period
of disruption caused by COVID-19 restrictions, the Group’s existing unutilised funding facilities were
repurposed, increasing our working capital facility by $35,000,000. In addition, covenant testing was
waived until 31 December 2020 and a more favourable covenant testing regime for the balance of FY21
was implemented.
Whilst the Group have forecasted compliance with debt covenants for the next twelve months (31
December 2020, 31 March 2021 and 30 June 2021), the covenant calculations are sensitive to achieving
EBITDA including ongoing earnings accretion from synergies associated with acquisitions and generating
positive operating cashflows. In the event that COVID-19 restrictions impact the business to a greater
extent, the Group may need to request further waivers or deferrals from our financiers in relation to
covenant testing or undertake other alternative actions such as raising additional equity, securing
additional financing or the sale of assets, the outcome of which is unclear at the date of the approval of
this Consolidated Financial Report.
Although the COVID-19 pandemic is unprecedented, in the Directors’ opinion the Group remains resilient
to the challenges. The Directors consider that the cash flow forecasts and potential financing alternatives
available support the Group’s ability to continue as a going concern including ongoing compliance with
requirements of the Group’s finance facilities.
(B) COVID-19 CONSIDERATIONS
During the year ended 30 June 2020, the Group has been impacted by the global COVID-19 pandemic
which has had the following effect on items within the Consolidated Financial Statements:
Revenue
As a result of COVID-19 and government restrictions in Australia and New Zealand, trading volumes were
lower than historical levels and the Group’s forecast for April to June 2020.
Cost saving initiatives
The Group implemented a range of initiatives to minimise the financial impact of the pandemic, including:
• Downscaling our workforce and cost-base to match demand, including site hibernations;
• Proactively engaging with the Group’s landlords to seek a combination of waivers and/or deferrals
of rental payments;
• Freezing of non-time critical capital expenditure; and
• The Group’s senior employees and Board members agreed to a 20% reduction in remuneration
packages for the period May to June 2020.
55
AMA GROUP LIMITED | 30 JUNE 2020 A (B) COVID-19 CONSIDERATIONS (CONT.)
Site closures
The Group has taken the current opportunity to consolidate a number of panel repair sites, which has in
turn resulted in an impairment expense to right-of-use assets.
Government grants
A number of entities within the Group have qualified for the Australian Federal Government’s JobKeeper
Assistance Program (JobKeeper) and the New Zealand Wage Subsidy. Participation in these programs
has assisted the Group to support our workforce through this difficult trading period, enabling the Group
to make a faster recovery when the economic environment improves.
Estimation of recoverable amount of assets and CGUs
A critical accounting estimate and judgement is the estimation of the recoverable amount of assets
and goodwill allocated to cash-generating units (CGUs). Due to the risk and uncertainty surrounding
COVID-19, and allowances made in respect of potential declines or delays in acquisition growth, the
Group recognised an impairment charge against the carrying value of goodwill in the Capital Smart CGU.
The Group’s current cash flow projections support the carrying value of assets with the assumption that
government restrictions will ease and trading volumes will return to normal run-rates by the last quarter
of FY21.
Estimation of fair values of contingent vendor consideration
A critical accounting estimate and judgement is the estimation of fair values of contingent vendor
consideration. The fair value is measured using a discounted cash flow methodology and in making
this assessment, management have forecasted future profitability. The Group has forecasted future
profitability considering the economic impact of COVID-19 for each individual earn-out.
A2 SIGNIFICANT ACCOUNTING POLICIES
This section sets out the significant accounting policies upon which the Consolidated Financial
Statements are prepared as a whole. Where a significant accounting policy is specific to a note to
the Consolidated Financial Statements, the policy is described within that note. This section also
shows information on new accounting standards, amendments, and interpretations not yet adopted
and the impact they will have on the Consolidated Financial Statements.
(A) BASIS OF CONSOLIDATION
The Consolidated Financial Statements incorporate the assets and liabilities of all controlled entities in the
Group as at 30 June 2020 and the results of all controlled entities for the year then ended. A list of the
controlled entities is provided in note E2.
The Group controls an entity when the group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the transferred asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests are shown separately in the Consolidated Statement of Profit or Loss,
Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and
Consolidated Statement of Changes in Equity.
56
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PREPARATION
(B) GOODS AND SERVICES TAX (GST)
Revenues, expenses, assets and liabilities are recognised net of the amount of associated GST, unless the
GST incurred is not recoverable from the taxation authority. 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 taxation authority is included with other receivables
or payables in the Consolidated 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 taxation authority, are presented as
operating cash flows.
(C) NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
The Group has applied the following standards and amendments for the first time for their annual
reporting period commencing 1 July 2019:
• AASB 16 Leases
• AASB 2017-6 Amendments to Australian Accounting Standards - Prepayment Features with
Negative Compensation
• AASB 2017-7 Amendments to Australian Accounting Standards - Long-term Interests in Associates
and Joint Ventures
• AASB 2019-1 Amendments to Australian Accounting Standards - Annual Improvements
2015-2017 Cycle
• AASB 2019-2 Amendments to Australian Accounting Standards - Plan Amendment, Curtailment or
Settlement
•
Interpretation 23 Uncertainty over Income Tax Treatments
The Group had to change its accounting policies as a result of adopting AASB 16 Leases. The Group
elected to adopt the new rules retrospectively but recognised the cumulative effect of initially applying
the new standard on 1 July 2019 (refer (D) below).
The other amendments listed above did not have any impact on the amounts recognised in prior periods
and are not expected to significantly affect the current or future periods.
(D) CHANGES IN ACCOUNTING POLICIES
The Group has adopted AASB 16 Leases using the modified retrospective method from 1 July 2019 but
has not restated comparatives for the 2019 reporting period, as permitted under the specific transition
provisions in the standard. This method leads to nil impact on net assets at transition. The reclassifications
and the adjustments arising from the new leasing standard are therefore recognised in the opening
Consolidated Statement of Financial Position on 1 July 2019. The new accounting policies are disclosed
in note C7.
The Group leases property, motor vehicles and equipment. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. The lease agreements do not impose
any covenants, but leased assets may not be used as security for borrowing purposes.
Prior to 1 July 2019, leases of property (operating leases) were disclosed as commitments. Payments
made under operating leases (net of any incentives received from the lessor) were charged to the profit
or loss, within occupancy expenses.
From 1 July 2019, the Group applied a single recognition and measurement approach for all leases of
which it is the lessee, except for short-term and low-value assets. Leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased asset is available for use by the Group.
Each lease payment reduces the lease liability and recognises interest expense within finance costs.
The interest expense is charged to profit or loss over the lease period to produce a constant periodic rate
of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated
over the shorter of the asset’s useful life and the lease term on a straight-line basis.
57
AMA GROUP LIMITED | 30 JUNE 2020 A (i) Practical expedients applied
In applying AASB 16 Leases for the first time, the Group has used the following practical expedients
permitted by the standard:
•
•
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the accounting for operating leases with a remaining lease term of less than 12 months as at
1 July 2019 as short-term leases;
the accounting for operating leases with a cost value of $10,000 or less as low value leases;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial
application; and
the use of hindsight in determining the lease term where the contract contains options to extend or
terminate the lease.
(ii) Measurement of lease liabilities
On adoption of AASB 16 Leases, the Group recognised lease liabilities in relation to leases which had
previously been classified as ‘operating leases’ under the principles of AASB 117 Leases (the accounting
standard in force prior to 1 July 2019). These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s incremental borrowing rate as at 1 July 2019.
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on
1 July 2019 was 5.73%.
Set out below is a reconciliation between operating leases disclosed as Commitments to the Lease
Liability on transition:
Operating Lease Commitments disclosed at 30 June 2019
Discounted using the lessee's incremental borrowing rate at date of initial application
Add: Finance lease liabilities recognised at 30 June 2019
Add: Onerous lease provisions recognised at 30 June 2019
Less: Short-term leases recognised on a straight-line basis as an expense
Add: Adjustments as a result of a different treatment of extension and termination options
Total lease liabilities
Lease liabilities
Current
Non-current
Total lease liabilities
1 Jul 2019
$’000
82,011
73,686
132
418
(107)
153,561
227,690
21,478
206,212
227,690
(iii) Measurement of right-of-use assets
The associated right-of-use assets for property leases were measured using the modified retrospective
method from 1 July 2019. The right-of-use assets were measured at the amount equal to the lease liability,
adjusted for existing onerous lease provisions, prepayments and make good assets recognised in the
Consolidated Statement of Financial Position as at 30 June 2019.
58
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PREPARATION
(iv) Adjustments recognised in the Consolidated Statement of Financial Position
on 1 July 2019
Set out below are the movements in assets and liabilities recognised on adoption of AASB 16 Leases:
Assets
Increase in right-of-use assets
Decrease in property, plant and equipment
Decrease in other current assets
Decrease in other non-current assets
Total assets
Liabilities
Increase in lease liabilities
Decrease in current provisions
Decrease in non-current provisions
Total liabilities
1 Jul 2019
$’000
232,190
(3,616)
(230)
(786)
227,558
227,976
(344)
(74)
227,558
A3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
This section describes the critical accounting estimates and judgements that have been applied and
may have a material impact on the Consolidated Financial Statements.
In applying the Group’s policies, the Directors are required to make estimates, judgements, and
assumptions that affect amounts reported in this Consolidated Financial Report. The estimates,
judgements, and assumptions are based on historical experience, adjusted for current market conditions,
and other factors that are believed to be reasonable under the circumstances, and are reviewed on a
regular basis. Actual results may differ from estimates.
The estimates and judgements which involve a higher degree of complexity or that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next period
are included in the following notes:
• Note C6(B)(iv) - Estimation of recoverable amounts of assets and CGUs
• Note C7(H) - Estimation of lease term contracts with renewal options
• Note D7(B)(ii) - Estimation of fair values of contingent vendor consideration
• Note E6(F) - Estimation of fair values of assets and liabilities in business combinations where
provisional amounts have been recognised
• Note F1(D) - Estimation of fair values of equity instruments issued in share-based payments
Detailed information about each of these estimates and judgements is included in other notes together
with information about the basis of calculation for each affected line item.
The Directors no longer consider the provision for make good a critical accounting estimate or
judgement. As the Group has significantly grown in the past few years, the provision for make good is not
considered to have a high degree of complexity in comparison to current critical accounting estimates
and judgements. Given the value of make good utilised during the year, the Directors don’t consider there
a significant risk of causing a material adjustment to the carrying amount of provision for make good
within the next period.
59
AMA GROUP LIMITED | 30 JUNE 2020 A B
PERFORMANCE FOR THE YEAR
This section provides information that is most relevant to explaining the Group’s performance during
the year and where relevant, the accounting policies that have been applied.
B1
SEGMENT INFORMATION
B2 REVENUE AND OTHER INCOME
B3 OTHER EXPENSE ITEMS
B4
TAXES
B1 SEGMENT INFORMATION
The Group identifies different business divisions that are regularly reviewed by the Board and
executive management in order to allocate resources and assess performance. These divisions offer
different products and services and are managed separately. The segment disclosures present the
financial performance of each division and other material items.
(A) DESCRIPTION OF SEGMENTS AND PRINCIPAL ACTIVITIES
The Group determines and presents its operating segments based on the internal reports that
are reviewed and used by the Chief Operating Decision Makers (CODM). The Board and executive
management, identified as the CODM, assess the performance of the Group and determine the
allocation of resources.
The principal activity of the Group is the operation and development of complementary businesses in
the automotive aftercare market. The Group is Australia’s largest vehicle accident repairer and a leader
in the vehicle accessories market.
The Group operates in two geographic locations, being Australia and New Zealand.
Historically, when the Group was significantly smaller, the segments were presented for the
Automotive Components and Accessories Division (ACAD) on a disaggregated basis. In the half-year
ended 31 December 2019 and after the acquisition of ACM Parts, the Group combined ACAD and ACM
Parts and appointed a new CEO to lead the newly established division, Automotive Parts and Accessory
Solutions (APAS).
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.
As a result of the above, the reportable segments are:
• Vehicle Panel Repairs
• Automotive Parts and Accessories
Unless stated otherwise, all amounts reported are determined in accordance with the Group’s
accounting policies. All inter-segment transactions are eliminated on consolidation for the Consolidated
Financial Statements.
Comparative information has been reclassified on account of a change in segments.
60
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PERFORMANCE FOR THE YEAR
(B) ADJUSTED EBITDAI FROM REPORTABLE OPERATING SEGMENTS
In addition to using profit as a measure of the Group, the Board and CODM use adjusted EBITDAI as a
measure to assess the performance of the segments. Adjusted EBITDAI excludes the impact of AASB
16 Leases, discontinued operations and the effects of significant items which may have an impact on
the quality of earnings such as depreciation, amortisation, finance costs, fair value adjustments and
impairments where the impairment is the result of an isolated, non-recurring event.
A reconciliation of adjusted EBITDAI to (Loss) / profit from before income tax from continuing operations
is provided below:
Revenue and other income
Revenue from external customers
Inter-segment revenue
Other income
Total segment revenue from external
customers and other income
Vehicle Panel
Repairs
Automotive Parts
and Accessories
Total
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
787,528
-
999
788,527
517,268
-
2,687
519,955
110,871
(10,824)
227
100,274
85,857
(1,035)
1,912
86,734
898,399
(10,824)
1,226
888,801
603,125
(1,035)
4,599
606,689
Unallocated revenue and other income
Total group revenue from external customers and other income
156
888,957
33
606,722
EBITDAI
AASB 16 Leases impact to occupancy
costs and other income
Adjusted segment EBITDAI
(excluding impact of AASB 16 Leases)
95,772
(41,839)
46,623
-
7,842
(5,017)
12,495
-
103,614
(46,856)
59,118
-
53,933
46,623
2,825
12,495
56,758
59,118
AASB 16 Leases impact to occupancy costs and other income
Unallocated expenses
Depreciation, amortisation and impairment expense
Finance costs
Fair value adjustments on contingent vendor consideration
(Loss) / profit before income tax from continuing operations
(C) SEGMENT ASSETS AND LIABILITIES
46,856
(17,076)
(128,917)
(27,877)
(4,501)
(74,757)
-
(8,991)
(16,208)
(2,595)
117
31,441
Segment assets and liabilities are not directly reported to the CODM when assessing the performance of
the operating segments and are therefore not relevant to the disclosure.
(D) GEOGRAPHICAL INFORMATION
The Group operates in Australia and New Zealand. The table below provides information on the
geographical location of revenue from external customers which is allocated to a geography based on the
location of the operation it was derived. Revenue related to discontinued operations has been excluded.
Australia
New Zealand
Total
598,522
Revenue from external customers
Other income
4,632
Total group revenue from external customers and other income
867,183
1,375
2020
$’000
2019
$’000
2020
$’000
20,392
7
2019
$’000
3,568
-
2020
$’000
887,575
1,382
888,957
2019
$’000
602,090
4,632
606,722
61
AMA GROUP LIMITED | 30 JUNE 2020 B B2 REVENUE AND OTHER INCOME
The Group is Australia’s largest vehicle accident repairer and generates revenue primarily from its
panel repair services. Other revenue is derived from the sale of automotive parts and accessories.
(A) REVENUE FROM EXTERNAL CUSTOMERS AND OTHER INCOME
Set out below is the disaggregation of the Group’s revenue from external customers and other income.
The Group derives revenue from the transfer of goods and services over time and at a point in time.
From continuing
operations
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Vehicle Panel
Repairs
Automotive Parts
and Accessories
Unallocated
Total
Revenue from external
customers
Vehicle panel repair services
Sale of goods
Other services
Total revenue from external
customers
Other income
Interest income
Other income
Total other income
787,528
-
-
517,268
-
-
-
99,282
765
-
82,491
2,331
787,528
517,268
100,047
84,822
297
702
999
25
2,662
2,687
29
198
227
30
1,882
1,912
-
-
-
-
156
-
156
-
-
-
-
33
-
33
787,528
99,282
765
517,268
82,491
2,331
887,575 602,090
482
900
1,382
88
4,544
4,632
Revenue from external
customers and other income
788,527
519,955
100,274
86,734
156
33
888,957
606,722
Timing of revenue
recognition
Over time
At a point in time
Revenue from external
customers
Geographical markets
Australia
New Zealand
Revenue from external
customers
787,528
-
517,268
-
765
99,282
2,331
82,491
787,528
517,268
100,047
84,822
772,635
14,893
513,700
3,568
94,552
5,495
84,822
-
787,528
517,268
100,047
84,822
Total revenue and other
income from discontinued
operations
-
-
3,523
1,893
-
-
-
-
-
-
-
-
-
-
-
-
-
-
788,293
99,282
519,599
82,491
887,575 602,090
867,187
20,388
598,522
3,568
887,575 602,090
3,523
1,893
In respect of vehicle panel repair services:
• 89% is derived from insurers (2019: 81%);
•
the top two customers amount to $496,809,000 (2019: $266,237,000).
62
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PERFORMANCE FOR THE YEAR
SIGNIFICANT ACCOUNTING POLICIES
Revenue
Revenue from contracts with customers is recognised to depict the transfer of promised
goods or services to customers at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
Revenue is recognised in accordance with the following five-step process:
1.
2.
3.
4.
5.
Identifying the contract with the customer.
Identifying the performance obligations in the contract.
Determining the transaction price.
Allocating the transaction price to the performance obligations in the contract.
Recognising revenue as and when the performance obligations are satisfied.
Revenue is recognised for the major business activities as follows:
Vehicle Panel Repair Services
Revenue arising from these services relate to performance obligations satisfied over time
and in future periods. The output method, based on completed vehicle repairs, is used to
recognise revenue from such contracts for the services rendered during the period.
Estimates of revenues, costs or extent of progress toward completion are revised if
circumstances change. Any resulting increases or decreases in estimated revenues or costs
are reflected in profit or loss in the period in which the circumstances that give rise to the
revision become known by management. Jobs completed not invoiced are reflected as a
contract asset within other receivables until billed.
Sale of goods
The Group manufactures and sells automotive parts and accessories online, in the
wholesale market and through retail premises. Sales are recognised when control of the
goods has transferred, that is, when the goods are delivered to the wholesaler or sold to the
end customer.
Some goods are sold with retrospective volume discounts based on aggregate sales over a
specified period. Revenue from these sales is recognised based on the price specified in the
contract, net of the estimated volume discounts. Discounts are estimated based on experience
using the expected value method, and revenue is only recognised to the extent that it is highly
probable that a significant reversal will not occur.
A receivable is recognised when the goods are delivered as this is the point in time that the
consideration is unconditional as only the passage of time is required before the payment
is due.
Interest revenue
Interest revenue is recognised on a time proportional basis, taking into account the
effective interest rates applicable to the financial assets. It includes amortisation of any
discount or premium.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment
is established.
63
AMA GROUP LIMITED | 30 JUNE 2020 B B3 OTHER EXPENSE ITEMS
The Group has identified a number of items which are material due to the significance of their nature
and/or amount. They are listed separately below to provide a better understanding of the financial
performance of the Group.
(A) DEPRECIATION AND AMORTISATION EXPENSE
Depreciation expense on property, plant and equipment
Depreciation expense on right-of-use assets
Amortisation on intangibles
Total depreciation and amortisation expense
2020
$’000
20,498
39,796
12,446
72,740
2019
$’000
12,258
-
3,950
16,208
Depreciation and amortisation expense from discontinued operations
462
-
(B) FINANCE COSTS
Interest and other finance charges
Interest expense on lease liabilities
Amortisation of borrowing costs
Total finance costs
2020
$’000
9,471
17,539
867
27,877
2019
$’000
2,595
-
-
2,595
Interest expense on lease liabilities from discontinued operations
133
-
SIGNIFICANT ACCOUNTING POLICY
Finance costs
Finance costs are recognised as expenses in the period in which they are incurred. Finance
costs comprise interest on borrowings calculated using the effective interest method, interest
expense on lease liabilities, and amortisation of capitalised borrowing costs over the term of
the borrowings.
64
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PERFORMANCE FOR THE YEAR
(C) GOVERNMENT GRANTS
The Group is eligible for the Australian Federal Government’s JobKeeper Assistance Program and the
New Zealand Wage Subsidy as a result of the economic impact from COVID-19.
The temporary wage subsidies are recognised as government grants. The Group recognises the amount
received from the respective governments as an offset to employee benefit expenses.
Balance at 1 July
Received in cash during the year
Recognised in profit or loss
Balance at 30 June
2020
$’000
-
(21,146)
34,301
13,155
2019
$’000
-
-
-
-
A reconciliation of the net employee benefits expense recognised in the Consolidated Statement of Profit
or Loss is provided below:
Employee benefits expense - gross
Government grants offset against employee benefits expense
Employee benefits expense - net
2020
$’000
351,188
(34,301)
316,887
2019
$’000
237,515
-
237,515
SIGNIFICANT ACCOUNTING POLICY
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be
received, and all attached conditions will be complied with. The Group recognises the amount
received from government grants as an offset to the related expense item.
(D) IMPAIRMENT EXPENSE
The Group recognised the following non-cash impairment expense for the year ended 30 June 2020:
Impairment of goodwill - Capital Smart
Impairment of goodwill - APAS
Impairment of goodwill - AMA Panel
Impairment of right-of-use assets
Total impairment expense
Impairment of right-of-use assets from discontinued operations
2020
$’000
46,971
3,700
2,075
3,431
56,177
169
2019
$’000
-
-
-
-
-
-
During the year, the Group has recognised impairment charges in respect of goodwill against all three
operating segments. The carrying value of the CGUs have been reduced to the recoverable amount.
Refer to note C6 for further details.
Under AASB 16 Leases, right-of-use assets are tested for impairment in accordance with AASB 136
Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous
lease contracts. During the year and in response to the COVID-19 pandemic, the Group has taken the
opportunity to consolidate a number of panel repair sites and impair right-of-use assets which are no
longer expected to generate future economic benefits. Refer to note C7 for further details.
65
AMA GROUP LIMITED | 30 JUNE 2020 B B4 TAXES
This section presents the total income tax expense charged to the Group in respect of amounts
currently owing for taxable profits and future income taxes recoverable or payable in respect of
temporary differences. The Group presents a reconciliation of accounting profit or loss to income
tax and a summary of changes in future income tax recoverable or payable by major category.
(A) INCOME TAX (BENEFIT) / EXPENSE
Current tax
Current tax expense
Adjustments for current tax of prior periods
Total current tax expense
Deferred tax
Decrease / (increase) in deferred tax assets
Decrease in deferred tax liabilities
Total deferred tax benefit
Income tax (benefit) / expense
Income tax (benefit) / expense is attributable to:
Continuing operations
Discontinued operations
2020
$’000
3,493
(828)
2,665
2019
$’000
12,933
(41)
12,892
1,704
(8,814)
(7,110)
(2,821)
(611)
(3,432)
(4,445)
9,460
(4,098)
(347)
(4,445)
9,530
(70)
9,460
(B) RECONCILIATION OF ACCOUNTING PROFIT TO INCOME TAX (BENEFIT) / EXPENSE
(Loss) / profit before tax from continuing operations
Loss before tax from discontinued operations
2020
$’000
(74,757)
(1,156)
(75,913)
2019
$’000
31,441
(232)
31,209
Tax at the Australian tax rate of 30% (2019 - 30%)
(22,774)
9,363
Tax effect of amounts which are not (assessable) / deductible:
Non-deductible impairment expense
Non-deductible expenses
Fair value adjustments on contingent vendor consideration
Employee equity plan expense
Adjustments for current tax of prior periods
Recognition of previously unrecognised tax losses
Other
15,824
1,518
1,350
588
(828)
(113)
(10)
-
147
(35)
26
(41)
-
-
Income tax (benefit) / expense
(4,445)
9,460
66
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PERFORMANCE FOR THE YEAR
(C) RECONCILIATION OF INCOME TAX (RECEIVABLE) / PAYABLE
Balance at 1 July
Movement:
Income taxes payable for the current financial year
Adjustments for current tax of prior periods
Tax paid during the year
Acquired through business combinations
Balance at 30 June
(D) AMOUNTS RECOGNISED DIRECTLY IN EQUITY
Hedging reserve
Share capital
Total recognised directly in equity
(E) DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES
2020
$’000
4,713
3,493
(749)
(10,858)
63
(3,338)
2020
$’000
79
2,063
2,142
2019
$’000
(188)
12,933
(408)
(7,794)
170
4,713
2019
$’000
-
106
106
Deferred
tax assets
Deferred
tax liabilities
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Receivables and contract assets
Inventories
Property, plant and equipment
Right-of-use assets
Intangible assets
Trade and other payables
Lease liabilities
Provisions - employee benefits
Provisions - other
Deferred income
Capitalised expenditure
Tax losses
Other items
Deferred tax assets / (liabilities) - before set-off
261
189
286
-
-
2,022
106,358
11,182
2,300
-
3,493
1,515
79
127,685
57
219
60
-
-
1,054
-
7,929
732
-
3,073
-
86
13,210
-
-
(1,532)
(102,216)
(65,151)
-
-
-
-
(3,947)
-
-
(146)
(172,992)
Set-off of tax
Net deferred tax assets / (liabilities) - after set-off
(112,525)
15,160
(2,650)
10,560
112,525
(60,467)
-
-
-
-
365
-
-
-
-
(3,015)
-
-
-
(2,650)
2,650
-
Balance at 1 July
Movement:
Adoption of AASB 16 - Leases
Adjustments for tax of prior periods
To profit or loss
Through equity
Acquired through business combinations
Balance at 30 June
13,210
9,223
(2,650)
(3,254)
68,266
(1,777)
(1,704)
2,142
47,548
127,685
-
(150)
2,715
106
1,316
13,210
(68,266)
416
8,814
-
(111,306)
(172,992)
-
(7)
611
-
-
(2,650)
67
AMA GROUP LIMITED | 30 JUNE 2020 B (F) TAX LOSSES
Tax losses for which a deferred tax asset has been recognised
Revenue losses
Tax benefit @ 30%
Unused tax losses for which no deferred tax asset has been recognised
Unused revenue losses
Unused capital losses
Total unused tax losses
Potential tax benefit @ 30%
1 The 2019 losses have been restated due to tax returns amendments lodged during the current year.
2020
$’000
5,049
1,515
2,798
6,081
8,879
2,663
2019 1
$’000
-
-
3,173
6,081
9,254
2,776
The losses for which a deferred tax asset has been recognised represent revenue losses for the Company’s
partially-owned subsidiary, Capital Smart Group Holdings Pty Ltd (see (G) below). Management consider it
probable that future taxable profits would be available against which the tax losses can be recovered and,
therefore, the related deferred tax asset can be recognised. The losses can be carried forward indefinitely
subject to the loss utilisation tests and have no expiry date.
The unused revenue losses represent transferred tax losses for the Company and its wholly-owned
Australian resident entities. These transferred revenue losses have low available fractions. Management has
determined that future taxable profits are not sufficient to enable the benefits from the deductions for the
losses to be realised.
The unused losses have no expiry date. The benefit of the unused tax losses will only be obtained if:
• The Company derives future assessable income of a nature and an amount sufficient to enable the
benefits from the deductions for the losses to be realised.
• The Company continues to comply with the conditions for deductibility imposed by the law.
• No changes in tax legislation adversely affect the companies in realising the benefit from the
deductions for the losses.
(G) TAX CONSOLIDATION
The Company and its wholly-owned Australian resident entities formed a tax consolidated group with
effect from 1 September 2006. AMA Group Limited is the head entity of the tax consolidated group and has
assumed the current tax liabilities of the members in its tax consolidated group.
The Australian resident entities of the Capital Smart Group of companies formed a separate tax consolidated
group with effect from 31 October 2019. Capital Smart Group Holdings Pty Ltd is the head entity of the tax
consolidated group and has assumed the current tax liabilities of the members in its tax consolidated group.
The Consolidated Financial Statements incorporate the tax balances of both tax consolidated groups.
Income tax expense or benefit, deferred tax assets, and deferred tax liabilities arising from temporary differences
of the members of the tax consolidated groups are recognised by each subsidiary where the subsidiary would
have been able to recognise the deferred tax asset or deferred tax liability on a standalone basis.
The members of the tax consolidated groups have entered into tax funding agreements with each head
entity which sets out the funding obligations in respect of income tax amounts. The agreements require
payments by the subsidiaries to the head entity equal to the income tax liability assumed by the head entity.
The head entity is required to make payments to the subsidiaries equal to the current tax asset assumed by
the head entity.
In respect of carried forward tax losses brought into the tax consolidated groups on consolidation by
subsidiary members, the head entity will pay the subsidiary member for such losses when these losses
are transferred to the tax consolidated groups, where the subsidiary member would have been entitled to
recognise the benefit of these losses on a standalone basis.
68
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PERFORMANCE FOR THE YEAR
SIGNIFICANT ACCOUNTING POLICIES
Income tax
Income tax expense in the Consolidated Statement of Profit or Loss for the period presented
comprises current and deferred tax.
Income tax is recognised in the Consolidated Statement of Profit or Loss except to the
extent that it relates to items recognised in other comprehensive income, or directly in
equity, in which case the tax is also recognised in other comprehensive income, or directly
in equity, respectively.
Current tax
Current tax payable represents the amount expected to be paid to taxation authorities
on taxable income for the period, using tax rates enacted or substantively enacted at the
reporting date and any adjustment to tax payable in respect of previous periods.
Deferred tax
Deferred tax is calculated using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
and taxation purposes. Deferred tax is measured at the rates that are expected to apply in
the period in which the liability is settled, or asset realised, based on tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are not recognised if the temporary difference arises from
the initial recognition (other than in a business combination) of assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit or in relation to
the initial recognition of goodwill.
A deferred tax asset is recognised only to the extent that it is probable that future taxable
profits will be available against which the deductible temporary differences or unused tax
losses and tax offsets can be utilised. Deferred tax assets are reduced to the extent that it
is no longer probable that the related tax benefit will be realised.
The benefit of intangible assets with an indefinite useful life will flow to the Group on an annual
basis, therefore the carrying amount will be recovered through use.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the
same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
69
AMA GROUP LIMITED | 30 JUNE 2020 B C
ASSETS AND LIABILITIES
This section provides information about the working capital of the Group and major balance sheet items
including the accounting policies, judgements and estimates relevant in understanding these items.
RECEIVABLES AND CONTRACT ASSETS
INVENTORIES
C1
C2
C3 OTHER FINANCIAL ASSETS
C4 OTHER ASSETS
C5
C6
C7 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
C8
C9 OTHER LIABILITIES
C10 PROVISIONS
PROPERTY, PLANT AND EQUIPMENT
INTANGIBLE ASSETS
TRADE AND OTHER PAYABLES
C1 RECEIVABLES AND CONTRACT ASSETS
Receivables and contract assets predominantly consist of amounts owed to the Group by customers
for sales of goods and services in the ordinary course of business.
Trade receivables
Allowance for expected credit losses
Other receivables
Contract assets
2020
$’000
31,725
(394)
31,331
19,367
21,401
40,768
2019
$’000
29,770
(190)
29,580
8,513
22,246
30,759
Total receivables and contract assets
72,099
60,339
(A) ALLOWANCE FOR EXPECTED CREDIT LOSSES ON TRADE AND OTHER RECEIVABLES
As at 30 June, trade receivables of the Group were assessed for impairment. Movements in the allowance
for expected credit losses of receivables are set out below:
Balance at 1 July
Movement:
Acquired through business combinations
Additional expected credit losses recognised / (released)
Receivables written off / (written back) during the year as uncollectible
Balance at 30 June
2020
$’000
190
103
78
23
394
2019
$’000
259
-
(46)
(23)
190
70
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ASSETS AND LIABILITIES
(B) TRADE RECEIVABLES PAST DUE BUT NOT IMPAIRED
As at 30 June 2020, trade receivables of $4,103,000 (2019: $6,193,000) were past due but not impaired.
These relate to a number of customers for whom there is no recent history of default and for which full
payment is expected.
An ageing analysis of trade receivables past due but not impaired is set out below:
Up to 3 months
3 to 6 months
Total
(C) FAIR VALUE DISCLOSURE
2020
$’000
3,134
969
4,103
2019
$’000
4,497
1,696
6,193
Due to the short-term nature of these receivables and contract assets, their carrying amount is considered
to approximate their fair value. For information about the methods and assumptions used in determining
the fair value of the Group’s receivables and contract assets refer to note D8(D)(i).
(D) RISK EXPOSURE
Information concerning the credit risk of receivables and contract assets is set out in note D8(B)(ii).
SIGNIFICANT ACCOUNTING POLICIES
Trade and other receivables
Trade and other receivables are recognised initially at fair value and are subsequently
measured at amortised cost using the effective interest method, less an allowance for
expected credit loss. They generally have credit terms ranging from 30 to 60 days.
Allowance for expected credit losses on trade and other receivables
The Group assesses the expected credit losses associated with its trade and other receivables
on a forward-looking basis. The Group applies the simplified approach to measuring expected
credit losses, which requires expected lifetime losses to be recognised from initial recognition
of the receivables. To measure the expected credit losses, trade and other receivables that
share similar credit risk characteristics and days past due are grouped and then assessed for
collectability as a whole.
Contract assets
The Group presents any unconditional rights to consideration separately as a receivable while
those rights arising from satisfaction of performance obligations in a contract are presented
as contract assets. A right to consideration is unconditional if only the passage of time is
required before payment of that consideration is due. Contract assets are measured at the
actual amount of transaction price.
71
AMA GROUP LIMITED | 30 JUNE 2020 C C2 INVENTORIES
Raw materials and consumables
Finished goods
Total inventories
Finished goods
2020
$’000
17,900
20,844
38,744
2019
$’000
21,324
7,439
28,763
The Group periodically reviews the value of items in inventory and records write-downs or write-offs
based on its assessment of slow moving or obsolete inventory. Allowances are recorded against finished
goods for any such declines. During the year ended 30 June 2020, the Group recognised an allowance for
inventory obsolescence of $3,080,000 (2019: $730,000).
Finished goods - gross
Provision for inventory obsolescence
Finished goods - net
2020
$’000
23,924
(3,080)
20,844
2019
$’000
8,169
(730)
7,439
SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are valued at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less estimated costs of completion
necessary to make the sale.
Reviews are made periodically by management on inventories for excess inventories,
obsolescence and decline in net realisable value below cost. Allowances are recorded against
inventories for any such declines based on historical experience on obsolescence and slow-
moving inventory.
Costs incurred in bringing each product to its present location and condition are determined
after deducting rebates and discounts received or receivable and are accounted for, as follows:
• Raw materials - purchase cost on a first-in / first-out basis
• Finished goods - cost comprises direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure.
72
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
C3 OTHER FINANCIAL ASSETS
Other financial assets consist of loans provided to employees and related parties.
Employee loans
Total other financial assets
Employee loans
2020
$’000
1,878
1,878
2019
$’000
2,044
2,044
In FY16 and as part of the acquisition of Gemini Accident Repair Centres Pty Ltd (now AMA Group
Solutions Pty Ltd), the Group acquired unsecured loans to certain vendors of that entity. These loans have
not been repaid and it has been agreed that they will be extinguished against future awards of short-term
and long-term incentives, which are currently in place.
One of the loans is with Andrew Hopkins, a Director of the Company. Under the terms and conditions of
his loan agreement, interest is accrued at a rate of 5.37% per annum and the loan matures on 30 June
2022. For further information refer to note F3(E).
SIGNIFICANT ACCOUNTING POLICIES
Financial assets at amortised cost
The Group classifies its financial assets at amortised cost only if both of the following
criteria are met:
•
•
the asset is held within a business model whose objective is to collect the contractual
cash flows, and
the contractual terms give rise to cash flows that are solely payments of principal
and interest.
Amortised cost
Amortised cost is calculated as:
•
the amount at which the financial assets or financial liability is measured at
initial recognition;
•
less principal repayments;
• 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.
Gains and losses are recognised in profit or loss when the asset is derecognised, modified
or impaired.
73
AMA GROUP LIMITED | 30 JUNE 2020 C C4 OTHER ASSETS
Current
Acquisition deposits
Prepayments and other assets
Total current
Non-current
Acquisition deposits
Prepayments and other assets
Total non-current
Total other assets
2020
$’000
5,000
5,295
10,295
600
5
605
2019
$’000
4,000
5,294
9,294
5,600
1,653
7,253
10,900
16,547
SIGNIFICANT ACCOUNTING POLICY
Other assets
Acquisition deposits are held primarily as an offset to contingent vendor consideration and
will be released when the respective earn-outs are finalised. Prepayments and other assets are
capitalised expenses relating to future periods.
74
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
C5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment represents the investment by the Group in tangible assets.
(A) NET BOOK AMOUNTS AND MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT
Leasehold
improvements
$’000
Plant and
equipment
$’000
Furniture
and fittings
$’000
Motor
vehicles
$’000
Total
$’000
2018
Cost
Accumulated depreciation
Net book amount
Movement:
Additions
Acquired through business combinations
Disposals
Depreciation
Asset reclassification
Closing net book amount
2019
Cost
Accumulated depreciation
Net book amount
Movement:
Additions
Acquired through business combinations
Disposals
Depreciation
Effect of foreign exchange
Reclass to right-of-use asset
Asset reclassification
Reclass to intangible assets
Closing net book amount
2020
Cost
Accumulated depreciation
Net book amount
20,441
(5,370)
15,071
61,353
(28,725)
32,628
1,822
26
(92)
(20)
(3,401)
13,406
8,965
7,812
(324)
(11,776)
5,573
42,878
6,269
(2,311)
3,958
1,147
27
(124)
(349)
(1,683)
2,976
6,206
(2,442)
3,764
94,269
(38,848)
55,421
811
130
(23)
(113)
(489)
4,080
12,745
7,995
(563)
(12,258)
-
63,340
21,111
(7,705)
13,406
79,535
(36,657)
42,878
5,565
(2,589)
2,976
8,037
(3,957)
4,080
114,248
(50,908)
63,340
1,895
5,423
(300)
(3,001)
12
(2,870)
246
(42)
14,769
10,369
34,823
(590)
(15,611)
17
(746)
(677)
(55)
70,408
313
2,131
(70)
(966)
(3)
-
(551)
(266)
3,564
311
333
(392)
(962)
(3)
-
982
-
4,349
12,888
42,710
(1,352)
(20,540)
23
(3,616)
-
(363)
93,090
34,903
(20,134)
14,769
155,949
(85,541)
70,408
8,421
(4,857)
3,564
9,197
(4,848)
4,349
208,470
(115,380)
93,090
75
AMA GROUP LIMITED | 30 JUNE 2020 C SIGNIFICANT ACCOUNTING POLICIES
Property, plant and equipment
Each class of property, plant and equipment is carried at cost less any accumulated depreciation.
Cost includes expenditure that is directly attributable to the acquisition of the assets.
Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced.
All other repairs and maintenance are charged to the profit or loss during the reporting period
in which they are incurred.
Depreciation
Assets are depreciated from the date the asset is brought to use, or in business combinations,
the date of acquisition. Depreciation is calculated on either a straight line or diminishing value
basis as considered appropriate to write off the net cost of each item of plant and equipment
over its expected useful life to the Group. The expected useful lives are as follows:
• Plant and equipment: 2 to 15 years
• Vehicles: 4 to 8 years
• Furniture, fittings and equipment: 2 to 10 years
• Leasehold improvements: 5 to 15 years
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 Group, whichever is
the shorter.
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 depreciation and amortisation rates are reviewed annually and adjusted if appropriate.
An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Derecognition
An item of property, plant and equipment is derecognised when it is disposed of or no future
economic benefits are expected from its use or disposal. Gains and losses on disposals are
determined by comparing proceeds with the carrying amount and are recognised in the profit
or loss.
Impairment
The carrying amounts of the Group’s property, plant and equipment are reviewed for
impairment where there is an indication that the asset may be impaired (assessed at least
each reporting date) or when there is an indication that a previously recognised impairment
may need to be reversed.
76
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
C6 INTANGIBLE ASSETS
Intangible assets represent goodwill, customer contracts, other intangibles and software. Goodwill
arises when the Group acquires a business where consideration exceeds the fair value of net assets
acquired and represents the future benefits expected to arise from the purchase.
(A) NET BOOK AMOUNTS AND MOVEMENTS IN INTANGIBLE ASSETS
Goodwill
$’000
Customer
contracts
$’000
Other
intangibles
$’000
Software
$’000
Total
$’000
2018
Cost
Accumulated amortisation and impairment
Net book amount
Movement:
Additions and adjustments
Acquired through business combinations
Effect of foreign exchange
Amortisation
Closing net book amount
207,649
(10,652)
196,997
533
61,839
(6)
-
259,363
11,977
(9,635)
2,342
-
4,866
-
(3,558)
3,650
2019
Cost
Accumulated amortisation and impairment
Net book amount
270,015
(10,652)
259,363
16,843
(13,193)
3,650
Movement:
Additions and adjustments
Acquired through business combinations
Disposals
Amortisation
Impairment
Effect of foreign exchange
Reclass from property, plant and equipment
Closing net book amount
1,264
266,197
-
-
(52,746)
(216)
-
473,862
-
223,200
-
(11,543)
-
-
-
215,307
2020
Cost
Accumulated amortisation and impairment
Net book amount
537,260
(63,398)
473,862
240,043
(24,736)
215,307
650
(220)
430
-
5
-
(392)
43
155
(112)
43
-
2,385
(20)
(166)
-
-
-
2,242
2,517
(275)
2,242
-
-
-
-
-
-
-
-
-
-
-
655
2,494
(99)
(737)
-
-
363
2,676
220,276
(20,507)
199,769
533
66,710
(6)
(3,950)
263,056
287,013
(23,957)
263,056
1,919
494,276
(119)
(12,446)
(52,746)
(216)
363
694,087
7,721
(5,045)
2,676
787,541
(93,454)
694,087
77
AMA GROUP LIMITED | 30 JUNE 2020 C (B) GOODWILL AND INDEFINITE LIFE INTANGIBLES
For the purpose of impairment testing, goodwill acquired through business combinations is allocated to
each of the Group’s CGUs (or group of CGUs) and represents the lowest level within the Group at which
management monitors goodwill.
(i) Allocation of goodwill to groups of cash-generating units
During the current financial year, the Group continued to deliver on its growth strategy through the
acquisition and integration of complementary businesses in the automotive aftercare market. Details
of these acquisitions are provided in note E6. These acquisitions, consisting predominantly of Capital
Smart and ACM Parts, triggered a reorganisation of the Group’s structure and resulted in a revision of the
Group’s CGUs. Historically, goodwill was allocated to four CGUs - Vehicle Panel Repair, Manufacturing,
Distribution and Remanufacturing. As a result of current year acquisitions, goodwill is now monitored by
management as follows:
AMA Panel
Capital Smart
APAS1
Total goodwill
2020
$’000
242,520
191,634
39,708
473,862
2019
$’000
225,605
-
33,758
259,363
1 APAS includes the amalgamation of the Group’s historic CGUs comprising Manufacturing, Distribution and Remanufacturing.
(ii) Impairment of goodwill
Goodwill is assessed for impairment on an annual basis, or more frequently when there is an indication
that the CGU to which it belongs may be impaired. Where indicators exist, impairment testing is
undertaken by comparing the carrying and recoverable amounts of goodwill. Impairment losses are
recognised in the profit or loss when carrying amounts are higher than recoverable amounts.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and
its value in use. The recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken
into account. If no such transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies
or other available fair value indicators.
The Group completes a number of acquisitions every period. In most instances, the consideration
is made up of an upfront amount and a deferred amount based on profitability over a period.
The deferred consideration is generally contingent on profit measures such as EBITDA or EBIT.
For any acquisition (business, share, individual site or group of sites) where contingent vendor
consideration is still outstanding, the measurement of that liability is an indication that management
monitors the goodwill at the acquisition level. Therefore, for any acquisition with contingent vendor
consideration outstanding, the Group considers the recoverable amount of the related goodwill. An
impairment charge may be recognised as a result of the contingent vendor consideration decreasing,
and will generally offset any gain in the profit or loss recorded within fair value adjustments. Once the
contingent vendor consideration period has ended, goodwill in relation to the acquisition is aggregated
with the remaining goodwill in the CGU.
78
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
(ii) Impairment of goodwill (Cont.)
AMA Panel
The Group have considered the recoverability of goodwill in conjunction with revaluing the contingent
vendor consideration. Within the AMA Panel division, three earn-outs performed worse than originally
anticipated at the date of acquisition and as a result, the Group has recognised an impairment charge of
$2,075,000 to the profit or loss. The Group highlight that this impairment charge offsets the gain in the
profit or loss recorded within fair value adjustments, and decreases the value of goodwill in respect of
these acquisitions.
No other impairment charge of goodwill or other intangibles has been recognised in respect of the
AMA Panel division.
Capital Smart
The Group performed an annual impairment test to support the carrying value of goodwill. The
recoverable amount was calculated based on management’s assumptions using a fair value less cost of
disposal methodology. Due to the risk and uncertainty surrounding COVID-19, and allowances made in
respect of potential declines or delays in acquisition growth, Capital Smart’s recoverable amount was less
than the carrying value. This resulted in Capital Smart Group Holdings Pty Ltd recognising an impairment
charge of $50,200,000 in their profit or loss. The impairment charge was fully allocated to goodwill.
The Group elected to recognise the non-controlling interests in respect of Capital Smart Group Holdings
Pty Ltd as its proportionate share of the acquired entity’s net identifiable assets. As a result, the Group
has taken its proportionate share of the impairment charge, with a net impact to Group’s Consolidated
Statement of Profit or Loss of $46,971,000. The non-controlling interests’ share of the result for the
period excludes the impairment charge recognised against goodwill.
No other impairment charge of goodwill or other intangibles has been recognised in respect of the
Capital Smart division.
APAS
As a result of impairment indicators, the Group performed an impairment test on APAS’ CGUs at the
half-year to support the carrying value of goodwill. The impairment test occurred prior to the Group’s
restructure and managements revision of CGUs. The recoverable amount was calculated based on
management’s assumptions using a fair value less cost of disposal methodology. The results of this
assessment determined the carrying amount of an individual CGU within the APAS division was higher
than its recoverable amount and resulted in the Group recognising an impairment charge of $3,700,000
to the profit or loss for the half-year ended 31 December 2019. The impairment charge was fully allocated
to goodwill.
No other impairment charge of goodwill or other intangibles has been recognised in respect of the
APAS division.
79
AMA GROUP LIMITED | 30 JUNE 2020 C (iii) Key assumptions used in the calculation of the recoverable amount
Historically, the Group’s impairment testing was performed using the value in use methodology.
For FY20’s annual impairment tests, the Group based the impairment tests on a fair value less costs of
disposal methodology.
The recoverable amount was determined using a discounted cash flow model. This was calculated based
on the present value of cash flow projections over a five-year period with the period extending beyond
five years extrapolated using an estimated growth rate. Management have considered market evidence to
help corroborate the resulting value by comparing to relevant market multiples.
The value assigned to key assumptions represent management’s assessment of future trends in the
industry and are based on historical data from both external and internal sources. The approach and key
assumptions used in the calculation of the recoverable amount are summarised in the following table:
Assumption
Approach used to determine values
Pre-tax discount rates
The discount rate is a pre-tax measure estimated based on past experience, industry
average weighted average cost of capital and adjusted to incorporate risks associated
with each CGU. The cash flows are discounted using the pre-tax discount rate at the
beginning of the budget period.
FY21 (Year 1)
EBITDA growth rate
FY21 EBITDA is based on the Board approved budget. This has been based on past
experience, with adjustments where future activities are expected to differ materially
from past performance. The FY21 budget has been impacted by COVID-19 (albeit
partially offset by JobKeeper). The Group assumes that government restrictions in
response to the COVID-19 pandemic will ease and trading volumes will return to normal
run-rates by the last quarter of FY21.
FY22 to FY25 EBITDA FY22 to FY25 EBITDA is calculated using an EBITDA growth rate based on past
experience, industry trends and adjusted to reflect assumptions reasonably expected to
be available to a market participant.
Terminal growth rate
The terminal growth rate is used to extrapolate cash flows beyond the forecast period.
The terminal value is calculated using the Gordon Growth model.
Acquisition growth
The fair value less of cost of disposal approach is based on the highest and best use,
and includes expansionary capital expenditure and acquisition growth. Expansion and
acquisition growth has been probability weighted on expected completion, and has only
been included if it is consistent with a market participant's perspective.
Costs of disposal
The costs of disposal are estimated based on the Group's experience with disposal of
assets and on industry benchmarks.
AASB 16 Leases
impact
EBITDA used in the discounted cashflow model is based on a pre-AASB 16 basis, such
that rental payments are included in the cashflows. Right-of-use assets and lease
liabilities have been included in the carrying value of the CGU as it is assumed that a
potential buyer or market participant would assume both the right-of-use assets and
lease liabilities.
The goodwill allocated to the CGU’s, and the values assigned to a number of key assumptions are as follows:
CGU
2020
AMA Panel
Capital Smart 1
APAS 2
2019
Vehicle Panel Repair
Manufacturing
Distribution
Remanufacturing
Goodwill
$’000
Terminal
growth rate
%
Pre-tax
discount rate 3
%
FY21 EBITDA
growth rate
%
242,520
191,634
39,708
225,605
26,949
5,349
1,460
2.5
2.5
2.5
2.0
2.0
2.0
2.0
11.3
11.3
13.3
6.6
7.1
7.9
7.9
24.0
64.4
331.6
31.7
16.2
34.1
4.6
1 The FY21 EBITDA growth rate of 64.4% is due to improvement in gross margin as a result of group synergies, and other cost management strategies.
2 The FY21 EBITDA growth rate of 331.6% is due to ACM Parts being loss-making in FY20 and assumes ACM Parts will at least break-even in FY21.
3 Some of the assumptions included in the calculation of the pre-tax discount rate include a long-term risk free rate of 3.75%, a market risk premium of
6.00%, a beta coefficient of 0.75 and a debt-to-equity ratio of 25.00%.
80
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
(iv) Critical accounting estimates and judgements
Determining whether goodwill is impaired requires an estimation of the value in use or fair value less cost
of disposal of the cash-generating units to which goodwill has been allocated. The Group’s impairment
testing estimates the future cash flows expected to arise from the cash-generating unit and a suitable
discount rate in order to calculate the present value of those cash flows.
(v) Significant estimate: impact of possible changes in key assumptions
Management has determined the recoverable amount of the AMA Panel, Capital Smart and APAS
divisions by assessing the fair value less cost of disposal of the underlying assets. The valuation is
considered to be level 3 in the fair value hierarchy due to unobservable inputs used in the valuation
(refer note D8(D)).
The following table provides quantitative information regarding the key assumptions used for each CGU
and the impact of possible changes in key assumptions (with all other inputs remaining the same):
Key
assumption
Change in key
assumption
Impact of possible change
in key assumption
AMA Panel
Pre-tax discount
rate of 11.3%
Pre-tax discount
rate of 12.3%
If the pre-tax discount rate of 11.3% was 1.0% higher, there
would not be an indicator of impairment.
FY21 EBITDA growth
rate of 24.0%
FY21 EBITDA growth
rate of 0.0%
If the FY21 EBITDA growth rate was 0.0%, with all other years'
cash flows remaining the same, there would not be an indicator
of impairment.
Terminal growth
rate of 2.5%
Terminal growth
rate of 1.5%
If the terminal growth rate of 2.5% was 1.0% lower, there would
not be an indicator of impairment.
Capital Smart
Pre-tax discount
rate of 11.3%
Pre-tax discount
rate of 12.3%
FY21 EBITDA growth
rate of 64.4%
FY21 EBITDA growth
rate of 20.0%
FY21 EBITDA growth
rate of 64.4%
FY21 EBITDA growth
rate of 0.0%
Terminal growth
rate of 2.5%
Terminal growth
rate of 1.5%
If the pre-tax discount rate of 11.3% was 1.0% higher, there
would be an indicator of impairment. The additional impairment
charge would be $42,000,000, reducing the goodwill to
$149,634,000. If the pre-tax discount rate of 11.3% was 1.0%
lower, there would not be an indicator of impairment.
If the FY21 EBITDA growth rate was 20.0%, with all other years'
cash flows remaining the same, there would be an indicator
of impairment. The additional impairment charge would be
$4,500,000, reducing the goodwill to $187,134,000.
If the FY21 EBITDA growth rate was 0.0%, with all other years'
cash flows remaining the same, there would be an indicator
of impairment. The additional impairment charge would be
$6,522,000, reducing the goodwill to $185,112,000.
If the terminal growth rate of 2.5% was 1.0% lower, there would
be an indicator of impairment. The additional impairment
charge would be $46,600,000, reducing the goodwill to
$145,034,000.
APAS
Pre-tax discount
rate of 13.3%
Pre-tax discount
rate of 14.3%
If the pre-tax discount rate of 13.3% was 1.0% higher, there
would not be an indicator of impairment.
FY21 EBITDA growth
rate of 331.6%
FY21 EBITDA growth
rate of 0.0%
If the FY21 EBITDA growth rate was 0.0%, with all other years'
cash flows remaining the same, there would not be an indicator
of impairment. The FY21 EBITDA growth rate of 331.6% is due
to ACM Parts being loss-making in FY20 and assumes ACM
Parts will at least break-even in FY21.
Terminal growth
rate of 2.5%
Terminal growth
rate of 1.5%
If the terminal growth rate of 2.5% was 1.0% lower, there would
not be an indicator of impairment.
81
AMA GROUP LIMITED | 30 JUNE 2020 C SIGNIFICANT ACCOUNTING POLICIES
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost and
subsequently measured at cost less accumulated amortisation and impairment losses. Where
acquired in a business combination, cost represents the fair value at the date of acquisition.
Intangible assets with finite lives are amortised on a straight-line basis over their estimated
useful lives and tested for impairment whenever there is an indication that they may be
impaired. The amortisation period and method are reviewed at each financial year-end.
Intangible assets with indefinite lives are tested for impairment in the same way as goodwill.
Goodwill
Goodwill acquired in a business combination is initially measured at cost. Goodwill is measured
as the excess of the cost of the business combination over the fair value of the Group’s share of
the identifiable net assets acquired. Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses. If fair value of the net assets acquired is in excess of
the aggregate consideration transferred, the Group recognises the gain in the profit or loss.
Customer contracts
Customer contracts are recognised at cost, being fair value at the date of 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. The Group
amortises customer contracts using the straight-line method over a period of 4 to 15 years.
Other intangibles
Other intangibles consist of customer relationships, brands, patents and trademarks and are
recognised at the cost, being fair value at the date of acquisition. These intangibles have a
finite life and are carried at cost less accumulated amortisation and any impairment losses.
The Group amortises other intangibles using the straight-line method over 10 years.
Software
Costs associated with maintaining software programmes are recognised as an expense as
incurred. Development costs that are directly attributable to the design and testing of identifiable
and unique software products controlled by the group are recognised as intangible assets.
Directly attributable costs that are capitalised as part of the software include employee costs
and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point
at which the asset is ready for use.
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if events or changes
in circumstances indicate that they might be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs of disposal and value
in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
82
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
C7 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Right-of-use assets and lease liabilities have arisen upon adoption of AASB 16 Leases from 1 July
2019. Refer to note A2(D) for further information relating to the change in accounting policy.
(A) THE GROUP’S LEASING ACTIVITIES
The Group leases various offices, warehouses, site premises, equipment and vehicles. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions including
extension options.
Property leases are generally 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 additional terms.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in
the contract to the lease and non-lease components based on their relative stand-alone prices.
The lease agreements do not impose any covenants other than the security interests in the leased assets
that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
Up until 30 June 2019, leases of property, plant and equipment were classified as either finance leases
or operating leases. From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding
liability at the date at which the leased asset is available for use by the Group.
(B) AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
The Consolidated Statement of Financial Position shows the following amounts relating to leases:
Right-of-use assets
Leased properties
Leased equipment
Leased motor vehicles
Total right-of-use assets
Lease liabilities
Current
Non-current
Total lease liabilities
2020
$’000
344,943
369
97
345,409
1 July 1
2019
$’000
232,190
-
-
232,190
35,207
320,305
355,512
21,478
206,212
227,690
1 In the previous year, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as ‘finance leases’ under AASB 117
Leases. For adjustments recognised on adoption of AASB 16 Leases on 1 July 2019, please refer to note A2(D).
Additions to the right-of-use assets during the 2020 financial year were $24,084,000 (refer to (E) on the
following page).
83
AMA GROUP LIMITED | 30 JUNE 2020 C (C) AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
The Consolidated Statement of Profit or Loss shows the following amounts relating to leases:
Depreciation on right-of-use assets
Leased properties
Leased equipment
Leased motor vehicles
Total
Impairment expense
Interest expense (included in finance costs)
COVID-19 rent concession (included as a benefit in occupancy expenses) 1
Expense relating to short-term leases (included in occupancy expenses)
Expense relating to leases of low-value assets (included in occupancy expenses)
Total
2020
$’000
40,032
141
43
40,216
3,600
17,672
(614)
896
189
21,743
1 The Group has elected to apply the practical expedient to assess whether a COVID-19-related rent concession is a lease modification.
(D) AMOUNTS RECOGNISED IN THE CONSOLIDATED STATEMENT CASH FLOWS
The total cash outflow for leases for the year ended 30 June 2020 was $47,224,000.
(E) NET BOOK AMOUNTS AND MOVEMENTS IN RIGHT-OF-USE ASSETS
Opening balance at 1 July 2019 on adoption of
AASB 16 Leases
232,190
-
-
232,190
Leased
properties
$’000
Leased
equipment
$’000
Leased
Motor
Vehicles
$’000
Total
$’000
Movement:
Acquired through business combinations
Additions
Disposals
Depreciation
Modification to lease terms
Variable lease payments reassessment
Impairment
Effect of foreign exchange
Closing net book amount
2020
Cost
Accumulated depreciation and impairment
Net book amount
138,755
23,970
(2,774)
(40,032)
2,148
(5,685)
(3,600)
(29)
344,943
390,719
(45,776)
344,943
415
95
-
(141)
-
-
-
-
369
510
(141)
369
144
19
(23)
(43)
-
-
-
-
97
123
(26)
97
139,314
24,084
(2,797)
(40,216)
2,148
(5,685)
(3,600)
(29)
345,409
391,352
(45,943)
345,409
(F) SHORT-TERM LEASES AND LEASES OF LOW-VALUE ASSETS
The Group applies the recognition exemptions to its short-term and low-value leases of property,
equipment and motor vehicles. Short-term leases are leases with a lease term of 12 months or less.
Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a
straight-line basis over the lease term.
84
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
(G) EXTENSION AND TERMINATION OPTIONS
Extension and termination options are included in a number of property and equipment leases across the
Group. These terms are used to maximise operational flexibility in terms of managing contracts.
The majority of extension and termination options held are exercisable only by the Group and not by the
respective lessor.
(H) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered
by an option to terminate the lease, if it is reasonably certain not to be exercised.
In determining the lease term, the Group applies judgement and considers all facts and circumstances
that create an economic incentive to exercise an extension option, or not exercise a termination option.
Extension options (or periods after termination options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated).
At the end of each lease term, the Group assumes the lease arrangements will be automatically renewed
regardless of whether the lease is no longer enforceable. The lease will remain in effect until one of the
parties gives notice to terminate with no more than an insignificant penalty.
The initial lease term assessment is reviewed if a significant event or a significant change in circumstances
occurs which affects this assessment and that is within the control of the lessee.
SIGNIFICANT ACCOUNTING POLICIES
Lease liabilities
At commencement date of the lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments include
fixed payments (including in substance fixed payments) less any lease incentives receivable
and variable lease payments that depend on an index or rate. The lease payments also include
the exercise price of a purchase option reasonably certain to be exercised by the Group and
payments of penalties for terminating a lease, if the lease term reflects the Group exercising
the option to terminate. The variable lease payments that do not depend on an index or a rate
are recognised as an expense in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing
rate at the lease commencement date as the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a modification, a change in the
lease term, a change in the in-substance fixed lease payments or a change in the assessment
to purchase the underlying asset.
In May 2020, the International Accounting Standards Board (IASB) published ‘Covid-19-
Related Rent Concessions (Amendment to IFRS 16)’ amending the standard to provide lessees
with an exemption from assessing whether a COVID-19-related rent concession is a lease
modification. The amendments introduce an optional practical expedient that simplifies how a
lessee accounts for rent concessions that are a direct consequence of COVID-19.
The Group has elected to apply the practical expedient to assess whether a COVID-19-related
rent concession is a lease modification. The practical expedient will only apply if:
the revised consideration is substantially the same or less than the original consideration;
the reduction in lease payments relates to payments due on or before 30 June 2021; and
•
•
• no other substantive changes have been made to the terms of the lease.
85
AMA GROUP LIMITED | 30 JUNE 2020 C SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the
date the underlying asset is available for use). Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses and adjusted for any remeasurement of
lease liabilities.
The cost of the right-of-use assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the commencement date less any
lease incentives received. The recognised right-of-use assets are depreciated on a straight-line
basis over the shorter of its useful life and the lease term.
Right-of-use assets are tested for impairment which replaces the previous requirement to
recognise a provision for onerous lease contracts. Any identified impairment loss is accounted
for in line with the Group’s accounting policy for property, plant and equipment which is set
out in note C5.
C8 TRADE AND OTHER PAYABLES
Trade and other payables mainly consist of amounts owing to the Group’s suppliers that have
been invoiced or accrued.
Trade payables
Accrued expenses
Payroll and statutory liabilities
Other payables
Total trade and other payables
(A) FAIR VALUE DISCLOSURE
2020
$’000
79,119
15,211
19,818
3,448
117,596
2019
$’000
49,351
7,364
9,103
523
66,341
Due to the short-term nature, the carrying amount of trade and other payables is considered to
approximate their fair value. For information about the methods and assumptions used in determining the
fair value of the Group’s payables refer to note D8(D)(i).
SIGNIFICANT ACCOUNTING POLICIES
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. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months from the reporting date. Other payables
not due within a year are measured less cumulative amortisation calculated using the effective
interest method.
86
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C9 OTHER LIABILITIES
Current
Market incentive
Deferred revenue
Derivatives
Total current
Non-current
Market incentive
Deferred revenue
Derivatives
Total non-current
ASSETS AND LIABILITIES
2020
$’000
2019
$’000
12,100
3,513
231
15,844
62,331
800
65
63,196
12,500
-
-
12,500
16,061
-
-
16,061
Total other liabilities
79,040
28,561
(A) MARKET INCENTIVE
In a previous financial year, the Group entered into an agreement with a key supplier to purchase the
supplier’s products on an exclusive basis over an agreed period of time. In exchange for this exclusive
arrangement, and subject to certain conditions, the Group receives preferential benefits including the
upfront payment of the market incentive and the ongoing competitive price of the products.
The incentive is being amortised based on a percentage of the purchased product. Termination of the
arrangement by the Company, or the occurrence of an event of default requires the Company to repay all
unamortised balances.
The amount charged to profit or loss was previously disclosed within revenue from continuing operations.
This has been reclassified to raw materials and consumables used, which is consistent to the offsetting
cost in which the amount relates to. Prior period has been reclassified for comparative purposes.
During the current year, the Group received a further tranche equal to $54,100,000 (excluding GST)
(2019: $30,900,000). At 30 June 2020, an amount of $12,100,000 (2019: $12,500,000) has been
classified as current representing the anticipated reduction in this incentive over the next twelve months.
A reconciliation of the movement of the market incentive liability is set out below:
Balance at 1 July
Movement:
Market incentive received (excluding GST)
Offset against inventory
Charged to profit or loss - raw materials and consumables used
Balance at 30 June
2020
$’000
28,561
2019
$’000
7,080
54,100
(2,100)
(6,130)
74,431
30,900
-
(9,419)
28,561
87
AMA GROUP LIMITED | 30 JUNE 2020 C C10 PROVISIONS
Provisions are a liability recorded when there is uncertainty over the timing or amount that will
be paid but the expected settlement amount can be reliably estimated by the Group. The main
provisions held are in relation to employee benefits and make good onsite premises.
Current
Annual leave
Long service leave
Make good
Dividends
Onerous contracts 1
Other
Total current
Non-current
Long service leave
Make good
Onerous contracts 1
Total non-current
Total provisions
2020
$’000
2019
$’000
20,765
10,759
1,654
288
-
-
33,466
5,783
7,333
-
13,116
15,305
7,092
-
289
344
8
23,038
4,033
6,117
74
10,224
46,582
33,262
1 The Group has applied AASB 16 Leases using the modified retrospective approach and therefore the comparative information has not been restated and
continues to be reported under AASB 117 Leases.
(A) CARRYING AMOUNTS AND MOVEMENTS IN PROVISIONS
Movements in each class of provision during the financial year, other than employee benefits and other,
are set out below:
Balance at 1 July 2018
Movement:
Acquired through business combinations
Additional provisions recognised
Unused amounts reversed
Amounts used during the year
Balance at 30 June 2019
Movement:
Transfer to lease liabilities (AASB 16 Leases)
Acquired through business combinations
Additional provisions recognised
Unused amounts reversed
Amounts used during the year
Balance at 30 June 2020
Onerous
contracts
$’000
Dividends
$’000
Make good
$’000
608
243
3,974
-
-
(150)
(40)
418
(418)
-
-
-
-
-
-
46
-
-
289
-
-
-
-
(1)
288
1,132
1,081
(70)
-
6,117
-
2,265
1,770
(2)
(1,162)
8,988
Total
$’000
4,825
1,132
1,127
(220)
(40)
6,824
(418)
2,265
1,770
(2)
(1,163)
9,276
88
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASSETS AND LIABILITIES
(B) AMOUNTS NOT EXPECTED TO BE SETTLED WITHIN THE NEXT 12 MONTHS
The following amounts reflect employee benefits that are classified as a current liability, since the Group
does not have an unconditional right to defer settlement for this obligation, but are not expected to be
taken within the next 12 months:
Annual leave obligation expected to be settled after 12 months
Long service leave obligation expected to be settled after 12 months
Total
2020
$’000
6,973
8,914
15,887
2019
$’000
6,853
836
7,689
SIGNIFICANT ACCOUNTING POLICIES
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a
result of past events, it is probable the Group will be required to settle the obligation and the
amount has been reliably estimated. Provisions are not recognised for future operating losses.
Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating annual
leave and leave loading that are expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service, are recognised 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. The short-term employee benefit
obligations are recognised in the provision for employee benefits.
The current provision for employee benefits includes accrued annual leave and long service
leave. Long service leave includes all unconditional entitlements where employees have
completed the required period of service. Employee benefits are presented as current, since
the Group does not have an unconditional right to defer settlement. However, based on past
experience, the Group does not expect all employees to take the full amount of accrued leave
within the next 12 months.
Other long-term employee benefit obligations
The liability for long service leave that is not expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service, 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.
The non-current employee benefit represents a long-service leave provision which covers
conditional entitlements where employees have not completed their required period of
service, adjusted for the probability of likely realisation.
Make good
The Group is required to restore the leased premises of its sites to their original condition at
the end of the respective lease terms. A provision has been recognised for the present value
of the estimated expenditure required to remove any leasehold improvements. These costs
have been capitalised as part of the cost of right-of-use assets and are amortised over the
shorter of the term of the lease and the useful life of the assets.
Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised
and no longer at the discretion of the entity, on or before the end of the reporting period but
not distributed at the end of the reporting period.
89
AMA GROUP LIMITED | 30 JUNE 2020 C D
CAPITAL STRUCTURE, FINANCING
AND FINANCIAL RISK MANAGEMENT
Capital structure, financing and financial risk management provides information about the capital
management practices of the Group, shareholder returns for the year and discusses the Group’s
exposure and management to various financial risks.
CAPITAL MANAGEMENT
EARNINGS PER SHARE
D1
D2
D3 DIVIDENDS
D4 CONTRIBUTED EQUITY
D5 OTHER RESERVES
D6 CASH AND CASH EQUIVALENTS
D7 BORROWINGS AND OTHER FINANCIAL LIABILITIES
D8
FINANCIAL RISK MANAGEMENT
D1 CAPITAL MANAGEMENT
This section provides a summary of the capital management activities of the Group during the
period. The Group manages its capital structure with the objective of enhancing long-term
shareholder value through funding its business at an optimised weighted average cost of capital.
The Group’s objectives when managing capital are to:
•
safeguard its ability to continue as a going concern, so that they can continue to provide returns for
shareholder’s and benefits for other stakeholders, and
• maintain an optimal capital structure to reduce the cost of capital.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. As
at 30 June 2020, the gearing ratio was 36.2% (2019: 10.8%). The gearing ratio has been calculated with
reference to net debt which is presented in accordance with the requirements of the Syndicated Facility
Agreement. Comparative information has been recalculated based on current year presentation.
The Group’s capital includes ordinary share capital, financial liabilities (drawn cash facilities), cash and cash
equivalents and 50% contingent vendor consideration (consistent with the calculation of financial covenants in
accordance with the Syndicated Facility Agreement). There are no externally imposed capital requirements.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. This is
decided on the basis of maximising shareholder returns over the long term.
Net debt
Financial liabilities - drawn cash facilities
Contingent vendor consideration - 50%
Cash and cash equivalents
Net debt used in covenant calculations
Fully paid ordinary shares
Quoted (at market price) 1
Unquoted (at issue price)
Total fully paid ordinary shares
Total capital
Gearing ratio
Notes
D7(A)
D7(B)
D6
D4(A)
2020
$’000
2019
$’000
340,000
24,731
(112,916)
251,815
436,673
7,000
443,673
695,488
36.2%
80,568
25,348
(12,096)
93,820
763,508
8,100
771,608
865,428
10.8%
1 Fully Paid Ordinary Shares Quoted value has been calculated using the closing share prices as at 30 June each year.
90
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
D2 EARNINGS PER SHARE
Earnings per share (EPS) presents the amount of profit / (loss) generated for the reporting period
attributable to shareholders divided by the weighted average number of shares on issue. The
potential for any share rights issued by the Group to dilute existing shareholders’ ownership when
the share rights are exercised are also presented.
(A) RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
(Loss) / profit attributable to the ordinary equity holders of the Company:
Continuing operations
Discontinued operations
2020
$’000
(69,456)
(809)
(70,265)
2019
$’000
21,715
(162)
21,553
(B) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
In October 2019, AMA completed a placement and a rights issue. Under the entitlement offer for the
rights issue, eligible shareholders were invited to subscribe for 1 new AMA share for every 4.5 existing
AMA shares. All new shares offered were at $1.15 per new share issued, which represented a 5.3% discount
to the last close price on 27 September 2019. As the rights issue contained a bonus element and the rights
issue was offered to all existing shareholders, basic and diluted EPS have been adjusted retrospectively
for the bonus element for all periods presented.
Weighted average number of ordinary shares - basic
Effect of share options, contingent shares and performance rights on issue
Weighted average number of ordinary shares and potential ordinary shares - diluted
2020
Shares
2019 1
Shares
707,528,631
-
637,683,208
9,667,438
707,528,631 647,350,646
(C) BASIC EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary equity holders
of the Company by the weighted average number of ordinary shares outstanding during the period.
Continuing operations
Discontinued operations
Basic earnings per share
2020
Cents
(9.82)
(0.11)
(9.93)
2019 1
Cents
3.41
(0.03)
3.38
(D) DILUTED EARNINGS PER SHARE
Diluted EPS adjusts the basic EPS for the effects of any instruments that could potentially be converted
into ordinary shares. Potential ordinary shares shall be treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or increase loss per share from
continuing operations. The average market value of the Company’s shares for the purpose of calculating
the dilutive effect of share options and performance rights is based on quoted market prices for the
period that the options and performance rights were outstanding.
Continuing operations
Discontinued operations
Diluted earnings per share
2020
Cents
(9.82)
(0.11)
(9.93)
2019 1
Cents
3.35
(0.02)
3.33
At 30 June 2020, 42,677,769 potential ordinary shares (2019: 2,000,000) were excluded from the diluted
weighted-average number of ordinary shares calculation because their effect is anti-dilutive.
1 The calculation of earnings per share for the year ended 30 June 2019 is restated.
91
AMA GROUP LIMITED | 30 JUNE 2020 D D3 DIVIDENDS
Dividends are distributions of the Group’s profit after tax to shareholders and represent one of the
ways the Group distributes returns to its shareholders.
Declared and paid during the year (fully franked at 30%)
Final dividend for 2019: 2.25 cents (2018: 2.00 cents)
Interim dividend for 2020: Nil (2019: 0.50 cents)
Total
Proposed and unrecognised as a liability (fully franked at 30%)
Final dividend for 2020: Nil (2019: 2.25 cents)
2020
$’000
2019
$’000
12,215
-
12,215
10,595
2,705
13,300
-
12,215
The Group has established a dividend reinvestment plan under which holders of ordinary shares can elect
to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than
by being paid in cash. During the financial year the total number of shares issued under the plan was
2,156,921 at a 2.5% discount to the market price.
Dividends settled in cash
Dividend reinvestment plan
Total
Franking credit balance
Franking credits available for subsequent reporting period
based on tax rate of 30.0%
2020
$’000
9,310
2,905
12,215
2019
$’000
13,300
-
13,300
2020
$’000
2019 1
$’000
26,907
21,172
The above amounts represent the balances of the franking account as at the end of the financial year,
adjusted for:
•
•
franking debits that will arise from the payment of dividends recognised as a liability at the
reporting date; and
franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date.
1 The 30 June 2019 franking credit balance has been restated. The restatement predominantly relates to corrections to payment of dividends to be treated
as franking debits rather than franking credits.
92
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
D4 CONTRIBUTED EQUITY
Contributed equity represents the number of ordinary shares on issue. A reconciliation is presented
to show the movement in ordinary shares on issue.
(A) ORDINARY SHARE CAPITAL
Fully paid ordinary shares
Quoted
Unquoted
Total share capital
(B) MOVEMENTS IN ORDINARY SHARES
2020
Shares
2020
$’000
2019
Shares
733,903,518
7,179,430
741,082,948
410,117
7,000
539,166,324
8,355,901
417,117
547,522,225
200,263
20219
$’000
192,163
8,100
Quoted
Opening balance
Placement and rights issue 1
Employee share issue
Vendor share issue
Convert from Unquoted shares
Dividend reinvestment plan
Share buy-back
Transaction costs, net of tax
Total quoted
Unquoted
Opening balance
Vendor share issue
Convert to Quoted shares
Total unquoted
2020
Shares
2020
$’000
2019
Shares
2019
$’000
539,166,324
187,490,773
-
4,254,152
1,176,471
2,156,921
(341,123)
-
733,903,518
192,163
215,614
-
3,175
1,100
2,905
-
(4,840)
410,117
527,440,147
10,000,000
1,332,993
393,184
-
-
-
-
539,166,324
8,355,901
-
(1,176,471)
7,179,430
8,100
-
(1,100)
7,000
6,276,899
2,079,002
-
8,355,901
181,106
9,510
1,250
297
-
-
-
-
192,163
6,100
2,000
-
8,100
Total share capital
741,082,948
417,117
547,522,225
200,263
1 During the period 187,490,773 fully paid listed ordinary shares were issued to new sophisticated investors and existing shareholders at $1.15 each to raise
$215.6 million (before transaction costs).
SIGNIFICANT ACCOUNTING POLICIES
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.
Quoted Fully Paid 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.
Unquoted Fully Paid Ordinary shares entitle the holder to all the same benefits and
responsibilities of holders of Quoted Fully Paid Ordinary shares with exception that they do
not entitle the holder to participate in dividends or vote at general meetings of the Company.
As such they are not listed for trade on the ASX. They have been issued as part consideration
for the acquisition of various entities and are subject to a restriction period. In the event that
the business has met its earnings target at the completion of this restriction period, the shares
are then eligible to participate in dividends.
93
AMA GROUP LIMITED | 30 JUNE 2020 D D5 OTHER RESERVES
Reserves represent the cumulative gains or losses that have been recognised in the Consolidated
Statement of Other Comprehensive Income.
Share-based payments
Foreign currency translation
Hedging
Total other reserves
The nature and purpose of each reserve is as follows:
(i) Share-based payments reserve
2020
$’000
1,441
(376)
(185)
880
2019
$’000
153
(107)
-
46
The share-based payments reserve is used to recognise the fair value of equity-settled share-based
payments issued to employees, including key management personnel, as part of their remuneration.
Equity instrument disclosures relating to key management personnel can be found in note F1 and within
the Remuneration Report.
(ii) Foreign currency translation reserve
The foreign currency translation reserve is used to recognise foreign currency translation differences
arising on the translation of financial statements of the Group’s foreign entities into Australian Dollars.
(iii) Hedging reserve
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge,
considered an effective hedge, that are recognised in other comprehensive income. Amounts are
reclassified to profit or loss when the associated hedged transaction affects profit or loss.
94
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
D6 CASH AND CASH EQUIVALENTS
This section presents cash and cash equivalents in the Consolidated Statement of Financial
Position and a reconciliation of the Group’s profit for the period to net cash flows provided by
operating activities.
(A) CASH AND CASH EQUIVALENTS AS PRESENTED IN THE CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Cash and cash equivalents
2020
$’000
112,916
2019
$’000
12,096
(B) RECONCILIATION OF (LOSS) / PROFIT BEFORE INCOME TAX TO NET CASH
INFLOWS PROVIDED BY OPERATING ACTIVITIES
(Loss) / profit before income tax
Adjustment for:
Non-cash market incentive
Non-cash employee remuneration
Fair value adjustment on contingent vendor considerations
Amortisation of borrowing costs
Depreciation and amortisation (including discontinued operations)
Impairment (including discontinued operations)
Loss on disposal of property, plant and equipment
Other
Income tax paid
Total adjustments
Notes
C9
D7(B)
B3(B)
B3(A)
B3(D)
B4(C)
Decrease / (increase) in assets:
Receivables and contract assets
Inventories
Other assets
Total decrease / (increase) in assets
Increase / (decrease) in liabilities:
Trade and other payables
Provisions
Other liabilities
Total increase in liabilities
2020
$’000
(75,913)
2019
$’000
31,209
(6,130)
1,960
4,501
867
73,202
56,346
1,247
(169)
(10,858)
120,966
3,879
6,090
10,357
20,326
23,908
(14,067)
47,238
57,079
(9,419)
1,499
(117)
-
16,208
-
-
(557)
(7,794)
(180)
(1,250)
(10,881)
(4,635)
(16,766)
(3,705)
(494)
26,849
22,650
Net cash inflows provided by operating activities
122,458
36,913
95
AMA GROUP LIMITED | 30 JUNE 2020 D (C) CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following table provides a reconciliation between opening and closing balances recorded in the
Consolidated Statement of Financial Position arising from financing activities.
Lease
liabilities
Long-term
borrowings
Derivative
liability
Total liabilities from
financing activities
2020
$’000
132
2019
$’000
2020
$’000
2019
$’000
332
80,568
52,500
2020
$’000
-
-
(29,552)
384,932
355,512
-
(252)
52
378,500
(123,993)
867
52,750
(24,682)
-
132
335,942
80,568
-
-
296
296
2019
$’000
2020
$’000
2019
$’000
-
-
-
-
-
80,700
52,832
378,500
(153,545)
386,095
52,750
(24,934)
52
691,750
80,700
Balance at 1 July
Movement:
Cash inflows
Cash outflows
Non-cash additions
Balance at 30 June
SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include 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.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents
consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts
as they are considered an integral part of the Group’s cash management.
96
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
D7 BORROWINGS AND OTHER FINANCIAL LIABILITIES
This section provides a summary of the Group’s financial liabilities including borrowings, contingent
vendor consideration and derivative financial instruments. The Group manages its liquidity
requirements with a bank loan and interest rate swap.
Current
Contingent vendor consideration
Total current
Non-current
Bank loan, net of capitalised borrowing costs
Contingent vendor consideration
Total non-current
2020
$’000
21,784
21,784
2019
$’000
24,496
24,496
335,942
27,678
363,620
80,568
26,199
106,767
Total borrowings and other financial liabilities
385,404
131,263
(A) BORROWINGS
(i) Syndicated Facility Agreement
On 30 October 2019, the Group’s Facility Agreement with National Australia Bank Limited was terminated
and the Group entered into a new Syndicated Facility Agreement. The new agreement provides funding
for the Group’s ongoing core business and comprises a facility of $375,000,000 (2019: $125,000,000).
The key terms of this agreement are outlined below:
Facility
Limit
$’000
Cash
drawn
$’000
Guarantees
drawn
$’000
Available
$’000
Maturity Purpose
Facility A
147,500
147,500
Facility B
142,500
142,500
Facility C
50,000
32,500
-
-
-
Facility D
35,000
17,500
12,414
-
Oct 2022 For specific target share acquisition,
acquisition transaction costs and
refinance of existing debt.
- Oct 2024 For specific target share acquisition,
acquisition transaction costs and
refinance of existing debt.
17,500
Oct 2022 For general corporate purposes,
including permitted acquisitions,
growth capital expenditure and
associated fees, costs and expenses
and working capital advances up to a
sublimit of $35,000,000.
5,086 Oct 2024 For working capital, general corporate
purposes, bank guarantees and letters
of credit. At reporting date, $12,414,000
of bank guarantees had been issued
under Facility D. This is not included in
the Consolidated Statement of Financial
Position (refer note F5).
375,000
340,000
12,414
22,586
The Syndicated Facility Agreement also has a $50,000,000 Accordion Facility, with a tenure no earlier
than October 2024. The Accordion Facility is for permitted acquisitions or growth capital expenditure and
any associated fees, costs and expenses.
The effective interest rate on borrowings for the year ended 30 June 2020 was 3.75% (2019: 4.58%).
97
AMA GROUP LIMITED | 30 JUNE 2020 D (i) Syndicated Facility Agreement (Cont.)
The Group is required to make interest payments on the drawn debt. The repayment of principal is at
maturity date. For working capital draw-down there is either a clean-down obligation or a repayment
schedule starting from September 2021.
In response to COVID-19, the Group engaged its financiers to ensure it had access to additional liquidity
necessary to allow it to withstand a potential period of extended operational disruption. The Group’s
financiers were supportive and agreed to repurpose its existing facilities to increase our working capital
facility by another $35,000,000.
The Group is required to comply with financial covenants under the terms of the borrowing facilities
including a net leverage ratio and a fixed cover charge ratio.
The Group’s financiers agreed to waive covenant testing until 31 December 2020 and provide a more
favourable covenant testing regime for the balance of FY21.
The Group continues to closely monitor its forecast compliance with debt covenants and in the event
that the COVID-19 economic recovery is prolonged beyond management’s forecasts, the Group may be
required to renegotiate debt covenants in relation to its finance facilities.
(ii) Security and fair value disclosures
The Syndicated Facility Agreement is secured by a fixed and floating charge over all of the assets of the
Company and its wholly owned subsidiaries.
The carrying amount of the Group’s borrowings approximates their fair values, as commercial rates of
interest are paid, and the impact of discounting is not significant. For information about the methods and
assumptions used in determining the fair value of the Groups borrowings refer to note D8(D)(i).
(iii) Risk exposures
Details of the Group’s exposure to risks arising from borrowings are set out in note D8(A)(ii).
SIGNIFICANT ACCOUNTING POLICIES
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost, using the effective interest rate method.
Interest is accrued over the period it becomes due and unpaid interest is recorded as part of
current payables.
Borrowings are removed from the Consolidated Statement of Financial Position when the
obligation specified in the contract is discharged, cancelled or expired. The difference
between the carrying amount of a financial liability that has been extinguished or transferred
to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in the Consolidated Statement of Profit or Loss as other
income or finance costs.
98
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
(B) CONTINGENT VENDOR CONSIDERATION
Contingent vendor consideration represents the fair value of amounts which may become payable in
connection with business combinations. Payment is dependent on achieving predetermined targets
based on future performance and profitability.
The Group has recorded contingent vendor consideration to business vendors in accordance with relevant
business and share purchase agreements. The amounts are performance based and can be paid in a
mixture of shares and/or cash, depending on the agreement.
An analysis of this liability by type of consideration is set out below:
Current
Cash settlement 1
Share settlement
Total current
Non-current
Cash settlement 1
Share settlement
Total non-current
2020
$’000
2019
$’000
15,524
6,260
21,784
9,698
17,980
27,678
18,697
5,799
24,496
26,199
-
26,199
Total contingent vendor consideration
49,462
50,695
1 The cash settlement amount disclosed above represents arrangements where some or all of the consideration may be paid in cash and/or shares. Such
contingent payment arrangements depend on the specific terms and conditions of the agreement and are only agreed when the earn out period has finished.
(i) Movement in contingent vendor consideration
A reconciliation of the fair value of the contingent vendor consideration is provided below. Refer to note
D8(D)(ii) for further information on how the fair value has been determined.
Balance at 1 July
Movement:
Arising during the year
Cash settlements
Share settlements
Charged to profit or loss - fair value adjustments
Balance at 30 June
2020
$’000
50,695
2019
$’000
35,493
9,180
(11,739)
(3,175)
4,501
49,462
33,055
(17,436)
(300)
(117)
50,695
(ii) Critical accounting estimates and judgements
The carrying value of the contingent vendor consideration, payable as a result of the acquisition of
businesses and entities, incorporate a number of assumptions. In determining this value, management
have applied a discount factor and forecasted future profitability. The interest expense and the fair value
adjustments have been taken to the Consolidated Statement of Profit or Loss.
SIGNIFICANT ACCOUNTING POLICY
Contingent vendor consideration
Contingent vendor consideration is classified as a financial liability and is recognised
at fair value at the acquisition date. Amounts classified as a financial liability that are
subsequently not required to be paid at the end of the earn out period or are re-estimated
during the period are recognised in the Consolidated Statement of Profit or Loss.
99
AMA GROUP LIMITED | 30 JUNE 2020 D
(C) DERIVATIVES
The Group is party to derivatives in the normal course of business in order to hedge exposure to
fluctuation in interest rates. In accordance with the Group’s financial risk management policies, the Group
does not hold or issue derivatives for trading purposes.
During the year, the Group entered into interest rate swap contracts to fix the interest rate at 0.43% on
$193,500,000 of borrowings. Interest is payable based on a margin over bank bill swap rate. The swap
contract matures on 30 October 2024.
(i) Movement in derivatives
The Group’s hedging reserve disclosed in note D5 relates to the interest rate swap contract which is
designated as a cash flow hedge. A reconciliation of the fair value of the derivative is provided below. For
information about the methods and assumptions used in determining the fair value of derivatives refer to
note D8(D)(iii).
Balance at 1 July
Movement:
Revaluation - gross
Deferred tax
Balance at 30 June
(ii) Risk exposure
2020
$’000
-
264
(79)
185
2019
$’000
-
-
-
-
For information about the Group’s net exposure to cash flow interest rate risks refer to note D8(A)(ii)
SIGNIFICANT ACCOUNTING POLICIES
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and subsequently remeasured to their fair value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates its interest rate swap as a cash flow hedge. The Group documents at
the inception of the hedging transaction the relationship between hedging instruments and
hedged items, as well its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and
on an ongoing basis, of whether the derivatives that are used in hedging transaction have
been and will continue to be highly effective in offsetting changes in fair values or cash flows
of hedged items.
Cash flow hedge
When a derivative is designated as a cash flow hedging instrument, the effective portion of
changes in the fair value of the derivative is recognised in the Consolidated Statement of
Comprehensive Income and accumulated in the hedging reserve. Any ineffective portion of
changes in the fair value of the derivative is immediately charged to the profit or loss within
finance costs.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold,
terminated or exercised, or the designation is revoked, the hedge accounting is discontinued
prospectively. If the forecast transaction is no longer expected to occur, then the amount
accumulated in equity is recognised in the profit or loss.
100
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
D8 FINANCIAL RISK MANAGEMENT
This section provides a summary of the Group’s exposure to market, liquidity, and credit risks, along
with the Group’s policies and strategies in place to mitigate these risks.
Exposure to market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity
risk arises in the normal course of the Group’s business.
The Group’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 Group.
The risk management of the Group is carried out by executive management and conducted in a manner
consistent with policies approved by the Board. Executive management identifies, evaluates and mitigates
financial risks within the Group’s operating units.
The Group holds the following financial instruments:
Financial assets at amortised cost
Cash and cash equivalents
Receivables and contract assets
Other financial assets
Acquisition deposits
Total financial assets
Financial liabilities at amortised cost
Trade and other payables
Lease liabilities
Borrowings
Financial liabilities at fair value
Contingent vendor consideration
Derivatives
Total financial liabilities
Notes
2020
$’000
2019
$’000
D6
C1
C3
C4
C8
C7
D7
112,916
72,099
1,878
5,600
192,493
117,596
355,512
335,942
12,096
60,339
2,044
9,600
84,079
66,341
132
80,568
D7(B)
C9
49,462
296
50,695
-
858,808
197,736
101
AMA GROUP LIMITED | 30 JUNE 2020 D (A) MARKET RISK
Market risk is the risk that the fair value or future cash flows of a financial asset or financial liability will
fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange
risk, interest rate risk and price risk.
The Group’s exposure to market risk arises from adverse movements in foreign exchange and interest rates
which affect the Group’s financial performance. The Group is not exposed to any significant price risk.
(i) Foreign exchange risk
Foreign exchange risk is the risk that a change in foreign exchange rates may negatively impact the
Group’s cash flow or profitability because the Group has an exposure to a foreign currency or has foreign
currency denominated obligations.
The Group’s exposure to foreign exchange risk arises from its net investment in foreign subsidiaries, future
commercial transactions, and recognised assets and liabilities denominated in a currency that is not the
entity’s functional currency.
The following table summarises the carrying amounts of the Group’s financial assets and liabilities that
are denominated in other foreign currencies and discloses the sensitivity of net profit before tax to a 10%
change against the foreign currency with all other variables held constant.
Assets
US Dollar
NZ Dollar
SA Rand
Liabilities
US Dollar
NZ Dollar
SA Rand
Carrying amount
2020
$’000
997
16,930
-
17,927
1,289
13,890
-
15,179
2019
$’000
-10% PBT
2020
$’000
140
820
14
974
655
101
81
837
(100)
(1,693)
-
(1,793)
(129)
(1,389)
-
(1,518)
2019
$’000
(16)
(91)
(2)
(109)
(73)
(11)
(9)
(93)
+10% PBT
2020
$’000
2019
$’000
100
1,693
-
1,793
129
1,389
-
1,518
16
91
2
109
73
11
9
93
The exchange rates used in performing the above sensitivity analysis are as follows:
• The US Dollar exchange rate as at 30 June 2020 was $1.46 and the average exchange rate during
the year was $1.53.
• The NZ Dollar exchange rate as at 30 June 2020 was $0.94 and the average exchange rate during
the year was $0.93.
The Group 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.
The aggregate net foreign exchange gains / losses recognised in profit or loss were:
Net foreign exchange gain / (loss) in profit or loss
2020
$’000
13
2019
$’000
(39)
102
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
SIGNIFICANT ACCOUNTING POLICIES
FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
Items included in the Consolidated Financial Statements are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The
Consolidated Financial Statements are presented in Australian dollars (AUD).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are generally recognised in
profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and
qualifying net investment hedges or are attributable to part of the net investment in a foreign
operation.
Foreign exchange gains and losses that relate to borrowings are presented in the
Consolidated Statement of Profit or Loss, within finance costs. All other foreign exchange
gains and losses are presented in the Consolidated Statement of Profit or Loss on a net basis
within other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For
example, translation differences on non-monetary assets and liabilities such as equities held
at fair value through profit or loss are recognised in profit or loss as part of the fair value gain
or loss and translation differences on non-monetary assets such as equities classified at fair
value through other comprehensive income.
Group companies
The results and financial position of foreign operations that have a functional currency
different from the presentation currency are translated in the presentation currency as follows:
• Assets and liabilities for each Consolidated Statement of Financial Position presented
are translated at the closing rate at the date of that Consolidated Statement of
Financial Position.
•
Income and expenses for each Consolidated Statement of Profit or Loss and
Consolidated Statement of Comprehensive Income are translated at average exchange
rates (unless this is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at
the dates of the transactions; and
• All relating exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in
foreign entities and of borrowings and other financial instruments designated as hedges of
such investments, are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are
treated as assets and liabilities of the foreign operation and are translated at the
closing rate.
103
AMA GROUP LIMITED | 30 JUNE 2020 D (A) MARKET RISK (CONT.)
(ii) Interest rate risk
The Group holds both interest-bearing assets and interest bearing-liabilities, and therefore the Group’s
income and cash flows are subject to changes in market interest rates.
The Group’s main interest rate risk arises from long-term borrowings which expose the Group to interest
rate risk. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value interest rate risk.
The Group uses derivative financial instruments to hedge its exposure to fluctuations in interest rates and
manages its cash flow interest rate risk by using floating to fixed interest rate swaps. The Group agrees
to exchange, at specified intervals, the difference between fixed and variable interest rate amounts
calculated by reference to an agreed notional principal amount. These swaps are designated to hedge
interest costs associated with underlying debt obligations. The interest swap contract is designated as a
cash flow hedging instrument.
The Group entered into an interest rate swap contract in June 2020 to fix the interest rate at 0.43% on
$193,500,000 of borrowings. Interest payments are net settled every 6 months.
At reporting date, the Group has exposure to the following variable rate borrowings and interest rate
swap contracts:
Syndicated Facility Agreement 1
Interest rate swaps - syndicated loans 2
Net exposure to cash flow interest rate risk
Interest rate
2020
%
0.14%
0.43%
2020
$’000
Interest rate
2019
%
340,000
(193,500)
146,500
1.25%
-%
2019
$’000
80,568
-
80,568
1 The Interest rate for the Syndicated Facility Agreement is BBSY at latest rate setting notice (19 June 2020 and 27 June 2019 respectively).
The rate presented does not include any margin and line fees applicable under the loan agreement.
2 The rate presented does not include any margin and line fees applicable under the loan agreement.
An analysis by maturities is provided in note D8(C)(i).
The following table summarises the impact of interest rate changes, relating to existing borrowings
and financial instruments, on profit before tax and equity, net of tax. For the purpose of this disclosure,
sensitivity analysis is isolated to a 50 basis points increase / decrease in interest rates assuming all other
variables remain constant.
Impact on profit before tax
Impact on equity, net of tax
2020
$’000
1,130
(1,192)
2019
$’000
(284)
284
2020
$’000
2019
$’000
(2,091)
2,177
-
-
Floating rate
Increase of 50 bps
Decrease of 50 bps
(B) CREDIT RISK
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. The Group is exposed to credit risk from its operating activities (primarily
trade receivables) and from its financing activities, including deposits with banks and financial institutions,
foreign exchange transactions and other financial instruments.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount, net of any
provisions for impairment for each class of the following financial assets.
104
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
(B) CREDIT RISK (CONT.)
(i) Cash and cash equivalents
Credit risk from cash arises from balances held with counterparty financial institutions. Credit risk is
managed by the Group’s finance department which restrict the Group’s exposure to financial institutions
by credit rating band. For banks and financial institutions, only independently rated parties with a
minimum rating of “A” are accepted.
(ii) Receivables and contract assets
Customer credit risk is managed by each division’s established policies, procedures and controls relating
to customer credit risk management. Credit risk arising on receivables and contract assets is monitored
on an ongoing basis, mitigating exposure to impairment of receivables and contract assets.
The Group applies the AASB 9 Financial instruments simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all receivables and contract assets. Historically,
there has been no significant change in customers’ credit risk and the lifetime expected loss assessment
of the Group remains unchanged.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses based on historical credit loss experience, adjusted for forward looking factors specific to
the debtor and the economic environment. The provision rates are based on days past due for groupings
of various customer segments with similar loss patterns. The calculation reflects the probability-weighted
outcome, the time value of money and reasonable and supportable information that is available at the
reporting date about past events, current conditions and forecasts of future economic conditions.
Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include failure to make contractual payments for a period
of greater than 60 days past due. The Group does not hold any collateral in relation to these receivables.
The Group is exposed to concentrations of credit risk with its top two customers representing
approximately 26% of total trade receivables. The Group’s receivables are largely collected from national
insurers who have strong long-term credit ratings. The Group focuses largely on experienced payment
history and does not expect that these customers will fail to meet their obligations.
For the year ended 30 June 2020, the Group recognised an expected credit loss of $394,000
(2019: $190,000).
(C) LIQUIDITY RISK
Liquidity risk is the risk the Group will encounter difficulties in meeting the obligations associated with its
financial liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, sufficient
liquidity is available to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn
borrowing facilities and cash and cash equivalents) on the basis of expected cash flows. This is generally
carried out at an operational level on a weekly basis in accordance with practice and limits set by the
Group. This is to ensure ongoing liquidity, prompt decision making, and allow proactive communication
with its financiers.
Details of financing arrangements are disclosed in note D7(A). At the reporting date, the Group has total
undrawn committed facilities of $22,586,000 (2019: $38,282,000) available. These facilities may be
drawn at any time, subject to the terms of the lending agreements.
(i) Maturities of financial instruments
The tables below provide an analysis of the Group’s financial assets and liabilities into relevant maturity
groupings based on the remaining period between the reporting date and the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within
12 months equal their carrying balances as the impact of discounting is not significant.
105
AMA GROUP LIMITED | 30 JUNE 2020 D
(i) Maturities of financial instruments (Cont.)
Contractual maturities of financial instruments
2020
Non-derivatives
Financial assets realisable cash flows
Cash and cash equivalents
Receivables and contract assets
Other financial assets
Acquisition deposits
Total anticipated inflow on financial assets
Financial liabilities due for payment
Trade and other payables
Lease liabilities
Borrowings
Contingent vendor consideration - cash settlement
Total anticipated outflow on financial liabilities
Derivatives
Net Settled (Interest rate swaps)
Total outflow on derivatives
Within 1 year
$’000
Between
1 and 5 years
$’000
Over 5 years
$’000
Total
contractual
cash flows
$’000
112,916
72,099
-
5,000
190,015
-
-
1,878
600
2,478
-
-
-
-
-
112,916
72,099
1,878
5,600
192,493
(117,596)
(56,582)
(8,510)
(15,524)
(198,212)
-
(206,722)
(358,725)
(9,698)
(575,145)
-
(225,781)
-
-
(225,781)
(117,596)
(489,085)
(367,235)
(25,222)
(999,138)
(231)
(231)
(65)
(65)
-
-
(296)
(296)
Total outflow on financial instruments
(8,428)
(572,732)
(225,781)
(806,941)
2019
Financial assets realisable cash flows
Cash and cash equivalents
Receivables and contract assets
Other financial assets
Acquisition deposits
Total anticipated inflow on financial assets
Financial liabilities due for payment
Trade and other payables
Lease liabilities
Borrowings
Total expected outflow on financial liabilities
12,096
60,339
-
4,000
76,435
-
-
2,044
5,600
7,644
(66,341)
(103)
-
(66,444)
-
(29)
(80,568)
(80,597)
Net inflow / (outflow) on financial instruments
9,991
(72,953)
-
-
-
-
-
-
-
-
-
-
12,096
60,339
2,044
9,600
84,079
(66,341)
(132)
(80,568)
(147,041)
(62,962)
(D) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value of an asset or a liability
is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
The Group measures certain financial instruments at fair value at each reporting date using a hierarchy
based on the lowest level of input that is significant to the fair value measurement.
106
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CAPITAL STRUCTURE, FINANCING AND FINANCIAL RISK MANAGEMENT
(D) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (CONT.)
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 / liability,
either directly (as prices) or indirectly (derived from prices) (Level 2); and
inputs for the asset / liability that are not based on observable market data (unobservable inputs)
(Level 3).
There were no transfers between levels during the financial year.
(i) Carrying amount approximate fair values
The carrying amount of receivables and contract assets and trade and other payables are assumed to
approximate their fair values due to their short-term nature. The fair value of non-current borrowings is
estimated by discounting the future contractual cash flows at the current market interest rates that are
available to the Group for similar financial instruments. The carrying amount of the Group’s borrowings
approximates their fair values, as commercial rates of interest are paid, and the impact of discounting is
not significant.
(ii) Fair value of contingent vendor consideration
During the financial year, the Group has acquired various entities and businesses. In undertaking these
acquisitions, the Group has incurred contingent vendor consideration which consists of an obligation to
settle purchase consideration either by shares or cash in the future.
The carrying value of the contingent vendor consideration reflects its fair value and is classified as Level 3
of the fair value hierarchy. The fair value of the financial liabilities included in Level 3 of the hierarchy has
been determined using valuation techniques incorporating observable direct and indirect market data
relevant to the Group.
Total contingent vendor consideration
2020
$’000
49,462
2019
$’000
50,695
The expected payment is determined separately in respect of each individual earn-out agreement taking
into consideration the expected level of profitability of each acquisition.
The significant unobservable inputs are:
• Pre-specified earnings target, such as EBIT or EBITDA; and
• Discount rate in the range of 1.7% to 3.5% depending on the circumstances specific to each
contingent vendor consideration being measured.
Significant estimate: impact of possible changes in key assumptions:
The estimated fair value would increase / (decrease) if:
•
•
•
•
the earnings (EBITDA or EBIT) growth was 10% higher, the gross value of the contingent
consideration would increase by $3,056,000.
the earnings (EBITDA or EBIT) growth was 10% lower, the gross value of the contingent
consideration would decrease by $3,056,000.
the discount rate was 1% higher, the present value of the contingent vendor consideration would
decrease by $558,000.
the discount rate was 1% lower, the present value of the contingent vendor consideration would
increase by $576,000.
(iii) Fair value of derivative financial instruments
The fair value of the interest rate swap is the estimated amount that the entity would receive or pay to
terminate the swap at the balance sheet date, taking into account current interest rates, forward interest
yield curves and the current creditworthiness of the swap counterparties. The fair value of the interest
rate swap is calculated as the present value of the estimated future cash flows and is classified as Level 2
under the fair value hierarchy. Refer to D8(A)(ii) for sensitivity on floating interest rates.
107
AMA GROUP LIMITED | 30 JUNE 2020 D E
GROUP STRUCTURE
Group structure provides information about subsidiaries and how changes have affected the financial
position and performance of the Company, AMA Group Limited.
PARENT ENTITY INFORMATION
INVESTMENTS IN CONTROLLED ENTITIES
E1
E2
E3 NON-CONTROLLING INTERESTS
E4 DEED OF CROSS GUARANTEE
E5 DISCONTINUED OPERATIONS
BUSINESS COMBINATIONS
E6
E1 PARENT ENTITY INFORMATION
This section presents the stand-alone financial information of AMA Group Limited.
(A) SUMMARY FINANCIAL INFORMATION
Assets
Current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Loss for the period
Total comprehensive expense
2020
$’000
2019
$’000
50,122
516,772
9,867
189,868
54,856
343,496
26,571
182,527
173,276
7,341
417,117
1,256
(245,097)
173,276
200,263
153
(193,075)
7,341
(39,808)
(39,993)
(20,808)
(20,808)
(B) GUARANTEES ENTERED INTO BY THE PARENT ENTITY
The Parent entity has given unsecured guarantees in respect of financial trade arrangements entered
into by its subsidiaries. It is not practical to ascertain or estimate the maximum amount for which
the Company may become liable. At 30 June 2020, no subsidiary was in default in respect of any
arrangement guaranteed by the Company and all amounts owed have been brought to account as
liabilities in the financial statements.
SIGNIFICANT ACCOUNTING POLICIES
Financial information for the parent entity has been prepared on the same basis as the
Consolidated Financial Statements with the exception of investments in controlled entities
which are accounted for at cost.
108
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GROUP STRUCTURE
E2 INVESTMENTS IN CONTROLLED ENTITIES
The following section sets out the list of the Group’s significant investments in controlled entities.
The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of controlled entities are included in the Consolidated Financial Statements from the date on
which control commences until the date on which control ceases.
(A) SIGNIFICANT INVESTMENTS IN CONTROLLED ENTITIES
The Consolidated Financial Statements incorporate the assets, liabilities and results of the following
principal subsidiaries in accordance with the accounting policy described in note A2(A):
Country of
incorporation
Class of
shares
2020
%
2019
%
Equity holding
Name of entity
A.C.N. 107 954 610 Pty Ltd 1,2
A.C.N. 124 414 455 Pty Ltd 1,2
A.C.N.624 895 772 Pty Ltd 1,2
A.C.N. 624 896 000 Pty Ltd 1,2
ACAD Limited 1
Accident Management Australia Pty Ltd 1
Accident Repair Management Pty Ltd 1
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Accident Repair Management No. 2 Pty Ltd 1
Australia
Ordinary
Accident Repair Management No. 3 Pty Ltd 1
Australia
Ordinary
ACM Parts Pty Ltd 1,5
Alloy Motor Accessories Australia Pty Ltd 1
AECAA Pty Ltd 1
AMA1 Pty Ltd 1,2
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
AMA Fully Equipped NZ Holdings Pty Limited 6
New Zealand
Ordinary
AMA Group Solutions Pty Ltd 1
AMA Procurement Pty Ltd 1
Automotive Solutions Group Pty Ltd 1,2
BMB Collision Repairs Pty Ltd 1
Capital Smart Group Holdings Pty Ltd 4
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Capital S.M.A.R.T. Repairs Australia Pty Ltd 5
Australia
Ordinary
Capital S.M.A.R.T. Repairs New Zealand Pty Ltd 5
New Zealand
Ordinary
Carmax Australia Pty Ltd 1,2
Carmax New Zealand Limited 2
Custom Alloy Pty Ltd 1,2
Deering Autronics Australia Pty Ltd 1
Australia
Ordinary
New Zealand
Ordinary
Australia
Ordinary
Australia
Ordinary
Direct One Accident Repair Centre Pty Ltd 1
Australia
Ordinary
ECB Pty Ltd 1
Fleet Alliance Pty Ltd 1,2
FluidDrive Holdings Pty Ltd 1
Fully Equipped Auckland Limited 7
Fully Equipped Group Limited 7
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
New Zealand
Ordinary
New Zealand
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
90
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
-
100
100
100
100
-
-
-
100
100
100
100
100
100
100
100
-
-
109
AMA GROUP LIMITED | 30 JUNE 2020 E (A) SIGNIFICANT INVESTMENTS IN CONTROLLED ENTITIES (CONT.)
Name of entity
Country of
incorporation
Class of
shares
2020
%
2019
%
Equity holding
Fully Equipped Limited 7
New Zealand
Ordinary
Fully Equipped Wellington Limited 7
New Zealand
Ordinary
Geelong Consolidated Repairs Pty Ltd 1
Australia
Ordinary
Gemini Accident Repair Centres NZ Limited 2
New Zealand
Ordinary
Micra Accident Repair Centre Pty Ltd 1
Mr Gloss Holdings Pty Ltd 1
Mt Druitt Autobody Repairs Pty Ltd 1
Phil Munday’s Panel Works Pty Ltd 1
QPlus Production Pty Ltd 2,5
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Rapid Accident Management Services Pty Ltd 1
Australia
Ordinary
Repair Management Australia Pty Ltd 1
Australia
Ordinary
Repair Management Australia Bayswater Pty Ltd 1
Australia
Ordinary
Repair Management Australia Dandenong Pty Ltd 1
Australia
Ordinary
Repair Management New Zealand Limited
New Zealand
Ordinary
Ripoll Pty Ltd 1,2
Roo Systems Australia Pty Ltd 1
Australia
Ordinary
Australia
Ordinary
Service Body Manufacturing Australia Pty Ltd 1
Australia
Ordinary
Shipstone Holdings Pty Ltd 1
Smash Repair Canberra Pty Ltd 1
Tuff Accessories Limited 7
Uneek 4x4 Australia Pty Ltd 1
Australia
Ordinary
Australia
Ordinary
New Zealand
Ordinary
Australia
Ordinary
Woods Auto Shops (Cheltenham) Pty Ltd 1,2
Australia
Ordinary
Woods Auto Shops (Dandenong) Pty Ltd 1,3
Australia
Ordinary
Woods Auto Shops (Holdings) Pty Ltd 1
Australia
Ordinary
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 These companies are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2020 (refer note E4).
2 These companies are dormant.
3 The Group acquired the remaining 40% of this company on 1 July 2019.
4 The Group incorporated this company on 25 October 2019.
5 The Group acquired these companies on 31 October 2020.
6 The Group incorporated this company on 9 January 2020.
7 The Group acquired these companies on 31 January 2020.
-
-
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
-
100
100
60
100
SIGNIFICANT ACCOUNTING POLICIES
Unless otherwise stated, the Group’s controlled entities have share capital consisting solely of
ordinary shares that are held directly by the Group, and the proportion of ownership interests
held equals the voting rights held by the Group. The country of incorporation or registration is
also their principal place of business.
110
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
E3 NON-CONTROLLING INTERESTS
On 1 July 2015, the Group acquired 60% of the issued capital of Woods Auto Shops (Dandenong) Pty Ltd;
the operator of the Trackright businesses. On 1 July 2019, the Group acquired the remaining 40% interest
in Woods Auto Shops (Dandenong) Pty Ltd, increasing its ownership from 60% to 100%.
On 25 October 2019, the Group incorporated Capital Smart Group Holdings Pty Ltd with 90% of the
issued capital held by the Company. Capital Smart Group Holdings Pty Ltd is the head company of the
Capital Smart group of entities.
(A) FINANCIAL INFORMATION OF NON-CONTROLLING INTERESTS
Set out below is summarised financial information for these entities. The amounts disclosed for each
subsidiary are before intercompany eliminations.
Summarised Consolidated Statement of Financial Position
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated non-controlling interests
Summarised Statement of Comprehensive Income
Revenue
(Loss) / profit for the period
Other comprehensive income
Total comprehensive (loss) / income
(Loss) / profit allocated to non-controlling interests
2020
$’000
46,666
(59,568)
(12,902)
550,054
(259,891)
290,163
277,261
16,341
2020
$’000
196,178
(62,228)
1
(62,227)
(1,203)
2019
$’000
1,015
(1,907)
(892)
2,897
(1,275)
1,622
730
292
2019
$’000
6,546
491
-
491
196
Dividends paid to non-controlling interests
169
200
Summarised Consolidated Statement of Cash Flows
Net cash inflows from operating activities
Net cash outflows from investing activities
Net cash inflows / (outflows) from financing activities
Net increase in cash and cash equivalents
Balance at 1 July
Movement:
Dividends paid
Purchase of shares from non-controlling interests
Non-controlling interests on acquisition of subsidiary
Share of result for the period
Balance at 30 June
2020
$’000
11,035
(415,779)
433,082
28,338
2020
$’000
292
(169)
(123)
17,544
(1,203)
16,341
2019
$’000
1,677
(134)
(1,314)
229
2019
$’000
296
(200)
-
-
196
292
111
AMA GROUP LIMITED | 30 JUNE 2020 E (A) FINANCIAL INFORMATION OF NON-CONTROLLING INTERESTS (CONT.)
The Group elected to recognise the non-controlling interests in respect of Capital Smart Group Holdings Pty
Ltd as its proportionate share of the acquired entity’s net identifiable assets. As part of the annual impairment
test, Capital Smart Group Holdings Pty Ltd recognised an impairment charge of $50,200,000 against the
carrying value of goodwill. The Group has taken its proportionate share of the impairment charge, with a net
impact to Group’s Consolidated Statement of Profit or Loss of $46,971,000. The non-controlling interests’
share of the result for the period excludes the impairment charge recognised against goodwill.
(B) ACQUISITION OF REMAINING INTEREST IN WOODS AUTO SHOP
(DANDENONG) PTY LTD
The Group acquired the remaining 40% interest in Woods Auto Shops (Dandenong) Pty Ltd on 1 July
2019, increasing its ownership from 60% to 100%. The acquisition resulted in a difference recognised in
retained earnings which is set out in the table below:
Cash consideration paid to non-controlling shareholders
Carrying value of the non-controlling interests at 30 June 2019
Dividend paid to non-controlling shareholders in respect of FY19
Difference recognised in retained earnings
2020
$’000
833
(292)
169
710
2019
$’000
-
-
-
-
SIGNIFICANT ACCOUNTING POLICIES
Non-controlling interests
The Group recognises non-controlling interests in an acquired entity either at fair value or
at the non-controlling interests’ proportionate share of the acquired entity’s net identifiable
assets. The decision is made on an acquisition-by-acquisition basis. For the non-controlling
interests in Capital Smart Group Holdings Pty Ltd the Group elected to recognise the non-
controlling interest as its proportionate share of the acquired net identifiable assets.
Where the non-controlling interests are acquired or sold without loss of control, any excess
or deficit of consideration paid over the carrying amount is recognised in equity transactions.
The Group has elected to recognise this effect in retained earnings.
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of
the subsidiary, and any related non-controlling interests and other components of equity.
Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former
subsidiary is measured at fair value when control is lost.
112
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
E4 DEED OF CROSS GUARANTEE
The following section presents the Consolidated Statement of Profit or Loss and the Consolidated
Statement of Financial Position of the Company and certain wholly-owned companies that are
parties to a deed of cross guarantee.
The Company and each of the Australian wholly-owned subsidiaries identified in note E2 (together
referred to as the Closed Group) have entered into a Deed of Cross Guarantee (the Deed), as defined
in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (the Instrument). The effect of
the Deed is that each entity in the Closed Group guarantees the payment in full of all debts of the other
entities in the Closed Group in the event of their winding up. The Closed Group have also given a similar
guarantee in the event that the Company 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.
Pursuant to the Instrument, the wholly-owned subsidiaries within the Closed Group are relieved from the
requirement to prepare, audit, and lodge separate financial reports. The Trustee to this deed of cross
guarantee is Ripoll Pty Ltd; a member of the consolidated group. The Alternate Trustee to this deed of
cross guarantee is Woods Auto Shops (Cheltenham) Pty Ltd; which is also a member of the consolidated
group.
(A) CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND MOVEMENT IN
RETAINED DEFICIT OF THE CLOSED GROUP
Revenue and other income from continuing operations
Raw materials and consumables used
Employee benefits expense
Occupancy expense
Professional services expense
Other expense
Fair value adjustments on contingent vendor consideration
Depreciation and amortisation expense
Impairment expense
Operating (loss) / profit before interest and tax
Finance costs
(Loss) / profit before income tax from continuing operations
Loss before tax from discontinued operations
(Loss) / profit before income tax
Income tax benefit / (expense)
(Loss) / profit for the period
Retained deficit at the beginning of the financial year
(Loss) / profit for the period
Lapsed options
Dividends - AMA shareholders
Dividends - Minority Interest
Purchase of shares from non-controlling interests
Retained deficit at the end of the financial year
2020
$’000
2019
$’000
683,839
607,914
(312,495)
(250,029)
(19,947)
(13,928)
(19,408)
(4,501)
(46,745)
(48,871)
(32,085)
(19,365)
(51,450)
(1,156)
(52,606)
125
(52,481)
(258,016)
(235,414)
(43,477)
(5,530)
(16,579)
117
(15,982)
-
33,033
(2,595)
30,438
-
30,438
(9,231)
21,207
2020
$’000
2019
$’000
(8,342)
(19,597)
(52,481)
-
(12,215)
401
(710)
(73,347)
21,207
3,048
(13,300)
300
-
(8,342)
113
AMA GROUP LIMITED | 30 JUNE 2020 E (B) CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE CLOSED GROUP
ASSETS
Current assets
Cash and cash equivalents
Receivables and contract assets
Inventories
Other assets
Current tax receivable
Receivables from related entities
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Other assets
Other financial assets
Deferred tax assets
Receivables from related entities
Investments in controlled entities
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Financial liabilities
Lease liabilities
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Financial liabilities
Lease liabilities
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Retained deficit
Total equity
114
2020
$’000
2019
$’000
83,685
54,869
35,418
8,365
3,339
4,349
190,025
61,120
238,976
276,538
600
1,878
15,039
101,566
276,886
972,603
11,236
47,177
40,798
9,270
(4,466)
-
104,015
61,764
-
262,290
7,253
2,044
10,556
994
750
345,651
1,162,628
449,666
78,587
21,784
24,520
24,974
12,344
162,209
360,581
221,381
11,043
62,396
655,401
64,443
-
-
22,970
37,099
124,512
80,568
-
10,224
42,288
133,080
817,610
257,592
345,018
192,074
417,117
1,248
(73,347)
345,018
200,263
153
(8,342)
192,074
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
E5 DISCONTINUED OPERATIONS
This section presents the profit or loss from components of the Group that have either been
disposed of or sold during the year.
During the year, management undertook a strategic review of the Group’s business operations and
decided to discontinue the following entities:
• Alloy Motor Accessories Australia Pty Ltd
• Deering Autronics Australia Pty Ltd
• Roo Systems Australia Pty Ltd
Financial information relating to all discontinued operations for the reporting period is set out below.
Operating result
Revenue
Expenses
Loss before income tax
Income tax benefit
Loss after income tax of discontinued operations
Movement in cash flows:
Net cash (outflows) / inflows from operating activities
Net cash inflows from investing activities
Net cash outflows from financing activities
Net decrease in cash and cash equivalents
2020
$’000
2019
$’000
3,523
(4,679)
(1,156)
347
(809)
(1,019)
909
(110)
(220)
1,893
(2,125)
(232)
70
(162)
471
150
(1,036)
(415)
SIGNIFICANT ACCOUNTING POLICIES
Discontinued operations
A discontinued operation is a component of the Group that represents a separate major line of
business that is part of a disposal plan.
A business is classified as a discontinued operation when a decision is made to dispose of, or
close down, the whole or a substantial part of that business unit. Assets and liabilities of the
business unit are subsequently measured at the lower of their carrying amount and fair value,
less estimated costs to sell.
The results of discontinued operations are presented separately in the Consolidated
Statement of Profit or Loss.
115
AMA GROUP LIMITED | 30 JUNE 2020 E E6 BUSINESS COMBINATIONS
The following section provides a summary of the businesses acquired by the Group during the year
including details of the purchase consideration, net assets acquired and goodwill of each acquisition.
During the year, the Group acquired the operating assets and shares of various businesses throughout
Australia and New Zealand. These acquisitions are expected to increase the Group’s market share,
product offering and reduce costs through economies of scale.
(A) FINANCIAL INFORMATION FOR CURRENT YEAR ACQUISITIONS
Details of the purchase consideration, net assets acquired, and goodwill of each business acquired by the
Group during the year are presented in the following table.
Goodwill comprises the value of expected future benefits arising from the acquisitions. These include
synergies, growth opportunities and significant value creation through cost savings for the Group.
The goodwill recognised is not expected to be deductible for income tax purposes.
Capital
Smart and
ACM Parts
$’000
Fully
Equipped
$’000
Smash-
care
$’000
BF
Panels
$’000
All
Transport
$’000
Other
$’000
Total
$’000
416,904
-
416,904
11,520
3,111
14,631
8,516
-
8,516
1,381
2,581
3,962
3,276
-
3,276
2,381
2,447
4,828
443,978
8,139
452,117
Consideration:
Cash paid
Contingent vendor consideration
Total consideration
Net assets acquired:
Cash and cash equivalents
Receivables and contract assets
Inventories
Other current assets
Property, plant and equipment
Right-of-use assets
Identifiable intangibles
Other non-current assets
Trade and other payables
Other current liabilities
Lease liabilities
Current tax (liabilities) / assets
Provisions
Other non-current liabilities
Net deferred tax (liabilities) / assets
19,170
13,614
13,234
4,372
36,451
113,646
228,079
103
(26,278)
(3,077)
(114,571)
(134)
(24,594)
(164)
(64,592)
318
1,327
2,787
50
1,988
4,759
-
-
(1,069)
-
(4,759)
71
(170)
-
47
Net identifiable assets acquired
195,259
5,349
Non-controlling interests
Net assets acquired
(17,544)
177,715
-
5,349
-
277
-
9
1,598
8,227
-
-
-
-
(8,227)
-
(1,533)
-
460
811
-
811
-
-
-
-
399
2,461
-
-
-
-
(2,461)
-
(321)
-
96
174
-
174
-
439
50
3
345
3,499
-
-
-
-
(3,499)
-
(278)
-
84
-
279
-
173
19,488
15,936
16,071
4,607
1,120
6,722
-
-
41,901
139,314
228,079
103
-
-
(6,722)
-
(491)
-
147
(27,347)
(3,077)
(140,239)
(63)
(27,387)
(164)
(63,758)
643
1,228
203,464
-
643
-
1,228
(17,544)
185,920
Goodwill
239,189
9,282
7,705
3,788
2,633
3,600
266,197
116
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
(B) SUMMARY OF ACQUISITIONS
(i) Capital Smart and ACM Parts
On 25 October 2019, Capital Smart Group Holdings Pty Ltd was incorporated with ownership split
between AMA (90%) and Suncorp Insurance Ventures Pty Ltd (Suncorp) (10%).
On 31 October 2019, Capital Smart Group Holdings Pty Ltd acquired Capital S.M.A.R.T. Repairs Australia
Pty Ltd and its subsidiaries for a headline purchase price of $420 million. On 31 October 2019, AMA also
acquired ACM Parts Pty Ltd from Suncorp for headline purchase price of $20 million. The acquisition of
Capital Smart and ACM Parts were funded through an equity raise and debt refinance.
Capital Smart specialises in vehicle panel repair services, specifically in drivable vehicles that have
sustained low to medium collision damage. Capital Smart operates across 45 sites in Australia and 5 sites
in New Zealand.
ACM Parts is an automotive parts distributor and Australia’s largest recycler of collision and mechanical
parts for the automotive repair industry. ACM Parts operates in Victoria, Queensland and New South
Wales.
(ii) Fully Equipped
On 9 January 2020, AMA Fully Equipped NZ Holdings Pty Limited was incorporated by the Group.
On 31 January 2020, AMA Fully Equipped NZ Holdings Pty Limited acquired Fully Equipped Group
Limited and its subsidiaries. Fully Equipped is headquartered in Hamilton, New Zealand and operates out
of a further two distribution facilities in Auckland and Wellington. Fully Equipped is one of New Zealand’s
leading manufacturers and distributors of aftermarket automotive accessories. The acquisition extends
the Group’s footprint in the New Zealand market and complements the newly established Automotive
Parts and Accessory Solutions division.
(iii) Smashcare
On 29 August 2019, the Group acquired the Smashcare Group of businesses. The acquisition has added a
total of four panel repair sites in Victoria and New South Wales (at 30 June 2020, after site consolidation).
(iv) BF Panels
On 31 December 2019, the Group acquired BF Panels, one panel repair site located in regional New South
Wales.
(v) All Transport
The Group acquired All Transport Crash Repairs on 30 September 2019. The acquisition aligns with the
Group’s strategic direction of expanding into the heavy vehicle collision repair industry.
(vi) Other acquisitions
• Diplocks Collision Repair Centre (acquired 13 September 2019)
• Luxury BodyShop (acquired 24 February 2020)
• Graeme Hull Smash Repairs (acquired 6 March 2020)
117
AMA GROUP LIMITED | 30 JUNE 2020 E (C) REVENUE AND PROFIT CONTRIBUTION
The revenue and profit contribution to the Group from acquisitions from date of acquisition to reporting
date is presented below:
Capital
Smart and
ACM Parts
$’000
Fully
Equipped
$’000
Smash-
care
$’000
BF
Panels
$’000
All
Transport
$’000
Revenue
234,545
5,462
21,207
3,628
(Loss) / profit before tax
(73,556)
223
897
58
5,164
824
Other
$’000
Total
$’000
6,284
276,290
75
(71,479)
From the date of acquisition to 30 June 2020, these acquisitions generated revenue and other income of
$276,290,000 and a loss before tax of $71,479,000, including impairment expense. On a pro-rata basis,
the Group expects that if the above businesses were acquired on 1 July 2019, the acquisitions would have
generated revenue and other income of $412,530,000 and loss before tax of $82,497,000, including
impairment expense.
(D) ACQUISITION RELATED COSTS
Acquisition costs are predominantly included in professional services expense in the Consolidated
Statement of Profit or Loss and in operating cash flows in the Consolidated Statement of Cash Flows.
The acquisition related costs are set out below:
Capital
Smart and
ACM Parts
$’000
Fully
Equipped
$’000
Smash-
care
$’000
BF
Panels
$’000
All
Transport
$’000
Other
$’000
Total
$’000
Acquisition related costs
7,232
387
653
55
77
130
8,534
(E) PROVISIONAL ASSESSMENT OF FAIR VALUE
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the
measurement period, based on new information obtained about the facts and circumstances that existed
at acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date of
acquisition or (ii) when the acquirer receives all the information possible to determine fair value.
(i) Current year acquisitions
The net assets recognised in the 31 December 2019 Interim Financial Statements were based on a
provisional assessment of the fair value of each business acquired while the Group sought an independent
valuation for tangible assets (namely property, plant and equipment, leased assets and customer
contracts).
During H2 FY20, the valuations were completed. This resulted in the following changes to the acquisition
accounting:
• Net decrease to net identifiable assets acquired of $599,000;
• Net increase to goodwill of $599,000; and
• Nil change to contingent vendor consideration.
118
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS GROUP STRUCTURE
(ii) Prior year acquisitions
During the current year, the Group has finalised the acquisition accounting for prior year acquisitions.
The net assets recognised in the 30 June 2019 Consolidated Financial Statements were based on a
provisional assessment of the fair value of each business acquired while the Group sought independent
valuations for tangible assets (namely property, plant and equipment).
The valuations were completed during the current year. This resulted in the following changes to the
acquisition accounting:
• Net increase to net identifiable assets acquired of $723,000;
• Net decrease to goodwill of $38,000; and
• An increase to contingent vendor consideration of $685,000.
(F) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Business combinations are accounted for under AASB 3 Business Combinations and are initially accounted
for on a provisional basis. Acquisition accounting for business combinations requires identifiable assets
to be valued at fair value which often requires assumptions, estimates and judgements. Assumptions
required may include but are not limited to cash flows, weighted average cost of capital, replacement
cost, useful lives and an assessment of the market terms on leases. The Group often engages third-party
experts to conduct independent valuations of identifiable assets. The Group takes into consideration
all available information at the date of acquisition and any fair value adjustments in the final acquisition
accounts are retrospectively applied back to the acquisition date.
SIGNIFICANT ACCOUNTING POLICIES
Business combinations
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.
The group accounts for business combinations using the acquisition method when control is
transferred to the Group (refer note E2). The consideration transferred in the acquisition is
generally measured at fair value, as are the identifiable net assets acquired, and the amount
of any non-controlling interests in the acquiree. For each business combination, the Group
elects whether to measure the non-controlling interests in the acquiree at fair value or at its
proportionate share of the acquiree’s identifiable net assets.
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately.
Any contingent vendor consideration is measured at fair value at the date of acquisition. If an
obligation to pay contingent consideration that meets the definition of a financial instrument
is classified as equity, then it is not re-measured and settlement is accounted for within
equity. Otherwise other contingent consideration is remeasured at fair value at each reporting
date and subsequent changes in the fair value of the contingent vendor consideration are
recognised in profit or loss.
119
AMA GROUP LIMITED | 30 JUNE 2020 E F
OTHER INFORMATION
This section of the notes includes other information that must be disclosed to comply with the
accounting standards and other pronouncements, but that is not immediately related to individual
line items in the financial statements.
RELATED PARTY TRANSACTIONS
SHARE-BASED PAYMENTS
F1
F2 AUDITORS’ REMUNERATION
F3
F4 COMMITMENTS
F5
F6
CONTINGENT LIABILITIES
EVENTS OCCURRING AFTER THE REPORTING DATE
F1 SHARE BASED PAYMENTS
This section presents the Group’s benefits provided to employees through share-based incentives.
Employees are remunerated for their services or incentivised for their performance in part through
shares or rights to shares.
The Employee Equity Plan ( the “Plan”) was approved by shareholders at the AGM on 22 November 2018.
The Plan is designed to align employee and shareholder interests through share ownership. The Plan is for
the benefit of all employees (including Executive Directors) of the Company. Awards under the Plan are
issued to eligible participants by way of:
•
•
•
•
an Option;
a Right;
a Share;
a Performance Share.
(A) OPTIONS GRANTED UNDER THE EMPLOYEE EQUITY PLAN
Options are granted under the Plan for no consideration and carry no dividend or voting rights. When
exercisable, each option is converted into one fully paid ordinary share in the Company.
The vesting requirements of each option are not subject to the satisfaction of any specific performance or
service conditions.
(i) Movements during the year
There were no options granted during the current financial year. As at 30 June 2020, the Plan consists of
2,000,000 unissued shares under option.
Balance at 1 July
Movement:
Granted during the year
Forfeited / lapsed during the year
Balance at 30 June
2020
Number
of options
2019
Number
of options
2,000,000
14,000,000
-
-
2,000,000
(14,000,000)
2,000,000
2,000,000
The weighted average remaining contractual life at 30 June 2020 is 0.8 years (2019: 2.4 years).
120
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OTHER INFORMATION
(ii) Vesting conditions of options
The vesting requirements of each option are not subject to the satisfaction of any specific performance or
service conditions. On 26 November 2019, the 2,000,0000 options satisfied the vesting conditions.
All options remain unexercised as at 30 June 2020 and have an expiry date of 25 April 2021.
Summaries of the terms of each grant of options are set out below:
Grant Date
14/09/2015
25/04/2016
26/11/2018
Expiry Date
27/11/2018
25/04/2019
25/04/2021
Vesting Date
27/11/2016
25/04/2017
26/11/2019
Options
Granted
12,000,000
2,000,000
2,000,000
Vested
Exercised
Forfeited /
Lapsed
100%
100%
100%
-
-
-
100%
100%
-
(iii) Fair value of options granted
The Group uses the Black Scholes pricing methodology to measure the fair value of the options at grant
date. The inputs used for estimating fair value of the options are disclosed in the below table.
Grant date share price ($)
Fair value ($)
Exercise price ($)
Volatility (%)
Dividend yield (%)
Risk-free rate (%)
$0.90
$0.08
$1.20
25%
2.47%
2.02%
(B) PERFORMANCE RIGHTS PROGRAM
The Performance Rights Program (PRP) was implemented in FY20 (in accordance with the Plan) and acts
as the Group’s long-term incentive scheme to reward participants through variable remuneration. Under
the PRP, executives and other eligible senior employees are invited to receive performance rights in the
Company. Detailed remuneration disclosures including the link between the PRP and shareholder wealth
are provided in the Remuneration Report.
Under the PRP, each performance right enables the participant to acquire a share in the Company, at a
future date, subject to agreed vesting conditions. The number of performance rights allocated to each
participant is set by the Board and based on individual circumstances and performance.
(i) Vesting conditions of rights
Vesting of the performance rights is subject to continued employment with the Group and achievement
of performance hurdles which are based on the Group’s TSR (20%) and EPS (80%) performance over a
three-year period. Further details regarding these performance measures and how they are calculated
can be found in the Remuneration Report.
121
AMA GROUP LIMITED | 30 JUNE 2020 F (ii) Fair value of rights granted
The fair value of the EPS rights has been determined based on a Black Scholes Model as they are subject
to non-market performance conditions. Under this method the fair value is based on the share price at the
valuation date with an adjustment for the dividends foregone during the vesting period.
To reflect the impact of the market-based performance conditions, the fair value of the rights subject to
the TSR have been calculated using Monte-Carlo simulation techniques. The variables in the table below
are used as inputs into the model to determine the fair value of performance rights.
Grant date 1
Performance rights granted
Grant date share price ($)
Volatility (%) 2
Dividend yield (%)
Risk-free rate (%)
Fair value per TSR right ($)
Fair value per EPS right ($)
Vesting date
12 Sep 2019
1,369,687
1.32
30
2.8
0.88
0.50
1.22
1 Jul 2022
21 Oct 2019
1,269,117
1.37
30
2.8
0.78
0.56
1.27
1 Jul 2022
1 Nov 2019 20 Nov 2019 29 Nov 2019
413,603
1,985,295
1.24
1.27
30
30
2.8
2.8
0.65
0.71
0.41
0.42
1.18
1.15
1 Jul 2022
1 Jul 2022
591,697
1.38
30
2.8
0.78
0.57
1.28
1 Jul 2022
4 Dec 2019
208,344
1.20
30
2.8
0.68
0.37
1.11
1 Jul 2022
1 For the purposes of valuation, the grant date is determined in accordance with AASB 2 Share Based Payments.
2 The Company share price volatility is based on the Company’s average historical share price volatility at the grant date.
(C) EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS
Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expense were as follows:
Share-based payments expense
2020
$’000
1,288
2019
$’000
153
(D) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The cost of share-based payments plans is determined on the basis of the fair value of the equity
instrument at grant date. Determining the fair value assumes choosing the most suitable valuation model
for these equity instruments, by which the characteristics of the grant have a decisive influence. The input
into the valuation model includes relevant judgments such as the estimated probability of vesting and the
volatility of the underlying share.
SIGNIFICANT ACCOUNTING POLICIES
Share-based payments
The grant date fair value of equity-settled share-based payments is recognised as an expense
proportionally over the vesting period, with a corresponding increase in equity.
The fair value of instruments with market-based performance conditions (TSR) is calculated at the
date of grant using a Monte Carlo simulation model. The probability of achieving market-based
performance conditions is incorporated into the determination of the fair value per instrument.
The fair value of instruments with non-market-based performance conditions (EPS) and service
conditions and retention rights are calculated using a Black-Scholes option pricing model.
The amount recognised as an expense over the vesting period is adjusted to reflect the actual
number of instruments that vest except where forfeiture is failure to achieve market-based
performance conditions.
122
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION
F2 AUDITORS’ REMUNERATION
This section presents the total remuneration of the Group’s external auditors for audit, assurance,
and other services.
KPMG was appointed external auditor at the 2019 AGM. ShineWing Australia was the auditor for the year
ended 30 June 2019.
The following fees were paid or payable for services provided by the respective external auditor:
Audit and other assurance services
Audit and review of financial statements
Other assurance services
Total remuneration for audit and other assurance services
Other non-audit services
Due diligence services
Tax compliance services
Other services
Total remuneration for other non-audit services
2020
$
2019
$
876,705
2,277
878,982
421,050
-
421,050
1,277,490
62,335
13,223
1,353,048
-
-
-
-
Total auditors' remuneration
2,232,030
421,050
It is the Group’s policy to employ KPMG on assignments additional to their statutory audit duties where
KPMG’s expertise and experience with the Group are important. These assignments are principally tax
advice and due diligence on acquisitions, or where KPMG is awarded assignments on a competitive basis.
It is the Group’s policy to seek competitive quotes for all major consulting projects.
F3 RELATED PARTY TRANSACTIONS
This section highlights the Group’s transactions with its related parties and the extent these
transactions impacted the Group’s financial performance and position.
(A) PARENT ENTITY
The ultimate holding entity is AMA Group Limited. Information about the Group’s structure, including
details of the controlled entities and holding company are set out in note E2.
(B) KMP COMPENSATION
The total remuneration for KMP of the Group is set out below:
Short-term benefits
Other benefits
Long-term benefits
Post-employment benefits
Equity settled benefits
Termination benefits
Total KMP compensation
2020
$
2019
$
3,419,953
74,736
21,325
127,664
1,033,068
845,989
5,522,735
4,139,733
858,250
20,380
59,246
500,000
150,000
5,727,609
Detailed remuneration disclosures and information regarding compensation of KMP is provided in the
Remuneration Report.
123
AMA GROUP LIMITED | 30 JUNE 2020 F (C) OTHER TRANSACTIONS WITH KMP
A number of KMP hold directorships or are associated with other entities who transacted with the Group
during the year. The Group provisioned services from entities that are controlled or are significantly
influenced by members of the Group’s KMP. Details of other transactions (excluding GST) with KMP and
their related parties is summarised below.
Service and entity
Legal and advisory services
Colinton Capital Partners Pty Ltd
Nicholson Ryan Lawyers
Property rental fees and outgoings
AV Ventures Pty Ltd
A&R Property Developments Pty Ltd
A&R Development Holdings Pty Ltd
Bundall Road Pty Ltd
Silvan Bond Pty Ltd
Malone Superannuation Fund
SRFE Pty Ltd
Claims management
A & R Insurance Management
(t/a Unity Specialised Services)
Training and recruitment
I-CAR Australia Limited
SRFE Pty Ltd
KMP
Simon Moore
Leath Nicholson
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Raymond Malone
Raymond Malone
Raymond Smith-Roberts
2020
$
2019
$
3,150,000
1,541,683
4,691,683
201,201
475,587
901,528
457,037
29,707
9,902
125,074
2,200,036
-
940,528
940,528
188,093
442,063
809,474
-
178,244
59,415
317,291
1,994,580
Andrew Hopkins
653,544
478,335
Steven Bubulj
Raymond Smith-Roberts
653,544
478,335
189,502
-
189,502
-
21,969
21,969
685
685
103,000
103,000
Insurance services
PSC Insurance Brokers (Aust) Pty Ltd
Brian Austin
Total other transactions with KMP
7,735,450
3,538,412
The nature of transactions with KMP and their related parties are as follows:
• The Group engaged Colinton Capital Partners Pty Ltd to provide financial advisory and transactional
services in relation to the acquisition of Capital Smart and ACM Parts, and the related equity raise
and debt refinance.
• The Group utilises Nicholson Ryan Lawyers for ongoing legal and advisory services.
• The Group leases and incurs rental fees and outgoing expenses for sites in the Group, including
head office space.
• The Group transacts with Unity Specialised Services, a claims management business which handles
and allocates insurance claims from a number of major insurers into vehicle accident repair facilities
around Australia.
• The Group transacts with I-CAR Australia Limited, an industry based not-for-profit organisation.
I-CAR provides training to the collision repair industry.
• The Group used PSC Insurance Brokers (Aust) Pty Ltd as its General Insurance Broker.
124
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION
(D) BALANCES WITH KMP
Details of balances as at 30 June, and recognised in the Consolidated Statement of Financial Position with
KMP and their related parties is summarised below:
Service and entity
KMP
Classification
Right-of-use assets 1
AV Ventures Pty Ltd
A&R Property Developments Pty Ltd
A&R Development Holdings Pty Ltd
Bundall Road Pty Ltd
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Right-of-use assets
Right-of-use assets
Right-of-use assets
Right-of-use assets
Lease commitments until expiry (including all options) 1
AV Ventures Pty Ltd
A&R Property Developments Pty Ltd
A&R Development Holdings Pty Ltd
Bundall Road Pty Ltd
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Andrew Hopkins
Lease liabilities
Lease liabilities
Lease liabilities
Lease liabilities
Claims management
A & R Insurance Management
(t/a Unity Specialised Services)
Training and recruitment
I-CAR Australia Limited
Net liabilities
Andrew Hopkins
Trade and
other payables
Steven Bubulj
Trade and
other payables
2020
$
2019
$
1,394,672
1,905,593
8,563,770
2,536,481
14,400,516
1,468,737
1,952,569
8,918,559
2,602,746
14,942,611
-
-
-
-
-
-
-
-
-
-
17,760
3,000
17,760
3,000
19,000
19,000
-
-
578,855
3,000
1 The Group adopted the new Australian Accounting standard AASB 16 Leases in the current year. The new standard requires the Group to recognise its lease
commitments as liabilities in the Consolidated Statement of Financial Position. The Group has adopted AASB 16 Leases using the modified retrospective
method from 1 July 2019 and has not restated comparatives for the 2019 reporting period. Therefore lease liabilities are not directly comparable.
(E) LOANS PROVIDED TO RELATED PARTIES
In FY16 and as part of the acquisition of Gemini Accident Repair Centres Pty Ltd (now AMA Group
Solutions Pty Ltd), the Group acquired unsecured loans to certain vendors of that entity. One of the loans
is with Andrew Hopkins, a Director of the Company.
Andrew Hopkins’ loan has not been repaid and it has been agreed that it will be extinguished against
future awards of short-term and long-term incentives, which are currently in place. If long-term incentives
are used to settle the loan, Andrew Hopkins must do all things necessary including promptly realising the
value in cash, including by way of the sale or disposal of securities issued to him.
Andrew Hopkins’ loan accrues interest at a rate of 5.37% per annum and matures on 30 June 2022.
As at 30 June 2020, the balance outstanding of his loan is $1,339,130 (2019: $1,270,884). The movement
from prior year to the current balance of $1,339,130 is due to interest accrued.
There are no other loans with related parties outstanding as at the date of this report.
125
AMA GROUP LIMITED | 30 JUNE 2020 F F4 COMMITMENTS
This section presents the Group’s contractual obligation to make a payment in the future in relation
to purchases of property, plant and equipment, and lease commitments.
Capital expenditure commitments
Committed at the end of the reporting period
but not recognised as liabilities, payable:
Within one year
Later than one year but not later than five years
Later than five years
Total capital expenditure commitments
Operating lease commitments
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Total operating lease commitments
Total commitments for expenditure
2020
$’000
2019
$’000
-
-
-
-
237
270
-
507
507
30
-
-
30
25,342
51,939
4,730
82,011
82,041
F5 CONTINGENT LIABILITIES
Contingent liabilities are potential future cash payments where the likelihood of payment is not
considered probable or cannot be measured reliably.
Undertakings have been given by the Company in the normal course of business. It is not practicable to
ascertain or estimate the maximum amount for which the Company may become liable in respect thereof.
At 30 June 2020 no subsidiary was in default in respect of any arrangement guaranteed by the Company
and all amounts owed have been brought to account as liabilities in the financial statements.
Bank guarantees
2020
$’000
12,414
2019
$’000
6,150
126
WORLD CLASS AUTOMOTIVE SOLUTIONS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OTHER INFORMATION
F6 EVENTS OCCURRING AFTER THE REPORTING PERIOD
This section outlines events which have occurred between the reporting date and the date the
Financial Report is authorised for issue.
Subsequent to year end, the Group terminated a supply agreement with a key supplier. The supply
agreement contained termination fees upon early termination. The Group reached a settlement with the
supplier for $9,437,000 (to be expensed in the year ending 30 June 2021). The supplier has agreed to pay
rebates owed to the Group of $3,216,000 as at 30 June 2020. The net cash settlement of $6,221,000 is
expected to be paid by the Group in the financial year ending 30 June 2021.
No other matters or circumstances have occurred subsequent to period end that have significantly
affected, or may significantly affect, the operations of the Group, the results of those operations or the
state of affairs of the Group or economic entity in subsequent financial years.
127
AMA GROUP LIMITED | 30 JUNE 2020 F DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
the attached Financial Statements and notes thereto are in accordance with the Corporations Act
2001, including:
(i) complying with Australian Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements, and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
performance for the financial year ended on that date, and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable, and
(c)
at the date of this declaration, there are reasonable grounds to believe that the members of the
closed group will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in note E4.
Note A1 confirms that the Financial Statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors made pursuant to section 303(5) of the
Corporations Act 2001.
Andrew Hopkins
Director
Gold Coast
25 August 2020
128
WORLD CLASS AUTOMOTIVE SOLUTIONS
129
130
Key Audit Matters The Key Audit Matters we identified are: • Goodwill and intangible assets; • Business combination and recognition of goodwill and customer contracts; and • AASB 16 Leases. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Goodwill and intangible assets (Goodwill - $473.9m, Impairment - $52.7m) Refer to Note C6 Intangible assets to the financial report The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill assets for impairment, given the size of the balance (being 34% of total assets) and the significantly higher estimation uncertainty continuing from the business disruption impact of the COVID-19 global pandemic. Certain conditions impacting the Group increased the judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their fair value less costs of disposal models including: • Forecast cash flows, growth rates and terminal growth rates – the Group has experienced significant business disruption and incurred a loss during the year as a result of COVID-19 and impacts of reductions in market spend. This impacted the Group through the hibernation of selected businesses, loss of revenue and a reduction in the demand for products and services. These conditions and the uncertainty of their continuation increase the possibility of goodwill and intangible assets being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes for us to consider. We focused on the Working with our valuation specialists, our procedures included: • We considered the appropriateness of the fair value less costs of disposal method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards; • We assessed the integrity of the fair value less costs of disposal models used, including the accuracy of the underlying calculation formulas; • We considered the Group’s determination of their CGUs based on our understanding of the operations of the Group’s business, impact of the Capital Smart and ACM Parts acquisitions, and how independent cash inflows were generated, against the requirements of the accounting standards; • We met with management to understand the impact of COVID-19 to the Group and impact of government response programs to the FY20 results; • We compared the forecast cash flows contained in the fair value less costs of disposal models to revised forecasts reflecting the Group’s COVID-19 expected recovery rate approved by the Board; • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. We applied increased scepticism to current period forecasts in areas where previous Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent Auditor’s Report To the shareholders of AMA Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of AMA Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020; • Consolidated statement of profit or loss, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors' Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent Auditor’s Report To the shareholders of AMA Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of AMA Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020; • Consolidated statement of profit or loss, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors' Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. WORLD CLASS AUTOMOTIVE SOLUTIONS 131
Key Audit Matters The Key Audit Matters we identified are: • Goodwill and intangible assets; • Business combination and recognition of goodwill and customer contracts; and • AASB 16 Leases. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Goodwill and intangible assets (Goodwill - $473.9m, Impairment - $52.7m) Refer to Note C6 Intangible assets to the financial report The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill assets for impairment, given the size of the balance (being 34% of total assets) and the significantly higher estimation uncertainty continuing from the business disruption impact of the COVID-19 global pandemic. Certain conditions impacting the Group increased the judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their fair value less costs of disposal models including: • Forecast cash flows, growth rates and terminal growth rates – the Group has experienced significant business disruption and incurred a loss during the year as a result of COVID-19 and impacts of reductions in market spend. This impacted the Group through the hibernation of selected businesses, loss of revenue and a reduction in the demand for products and services. These conditions and the uncertainty of their continuation increase the possibility of goodwill and intangible assets being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes for us to consider. We focused on the Working with our valuation specialists, our procedures included: • We considered the appropriateness of the fair value less costs of disposal method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards; • We assessed the integrity of the fair value less costs of disposal models used, including the accuracy of the underlying calculation formulas; • We considered the Group’s determination of their CGUs based on our understanding of the operations of the Group’s business, impact of the Capital Smart and ACM Parts acquisitions, and how independent cash inflows were generated, against the requirements of the accounting standards; • We met with management to understand the impact of COVID-19 to the Group and impact of government response programs to the FY20 results; • We compared the forecast cash flows contained in the fair value less costs of disposal models to revised forecasts reflecting the Group’s COVID-19 expected recovery rate approved by the Board; • We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models. We applied increased scepticism to current period forecasts in areas where previous Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent Auditor’s Report To the shareholders of AMA Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of AMA Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020; • Consolidated statement of profit or loss, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors' Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Independent Auditor’s Report To the shareholders of AMA Group Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of AMA Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020; • Consolidated statement of profit or loss, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors' Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. AMA GROUP LIMITED | 30 JUNE 2020 132
expected rate of recovery for the Group and what the Group considers as their future business model as a result of expected synergies from business acquisitions and identified growth platforms when assessing the feasibility of the Group’s forecast cash flows. Assumptions included in the Group’s forecast cash flows are also sensitive to technology advancement, business expansion and market changes; • Forecast growth rates and terminal growth rates – In addition to the uncertainties described above, the Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy; and • Discount rate - these are complicated in nature and vary according to the conditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time, and the models approach to incorporating risks into the cash flows or discount rates. The Group’s modelling is highly sensitive to small changes in the discount rate. We involve our valuations specialists with the assessment. The Group uses complex models to perform their annual testing of goodwill for impairment. The models are largely manually developed, use adjusted historical performance, and a range of internal and external sources as inputs to the assumptions. Complex modelling, using forward-looking assumptions tend to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. The Group has a large number of operating businesses and completed a significant acquisition of Capital Smart Group Holdings Pty Ltd (Capital Smart) and ACM Parts Pty forecasts were not achieved and/or where future uncertainty is greater or volatility is expected; • We considered the sensitivity of the models by varying key assumptions, such as expected rate of recovery for the Group, forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range. We considered the interdependencies of key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of impairment and those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures; • We challenged the Group’s significant forecast cash flow and growth assumptions in light of the expected continuation of unprecedented uncertainty of business disruption and impacts of the COVID-19 global pandemic. We compared forecast growth rates and terminal growth rates to authoritative published studies of industry trends and expectations, and considered differences for the Group’s operations. We assessed key assumptions such as expected rate of recovery for the group and what the group considers as their future business model. We used our knowledge of the Group, business and customers, and our industry experience. We sourced authoritative and credible inputs from our specialists and market advisors; • We checked the consistency of the growth rates to the Group’s revised plans and our experience regarding the feasibility of these in the industry in which they operate; • We assessed the impact of technology, business expansion and market changes on the Group’s key assumptions, specifically forecast EBIT growth expected to be achieved through identified synergies, EBIT contribution from identified growth platforms, capital spend requirements and head office costs, for indicators of bias and inconsistent application, using our industry knowledge; • We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in; • We analysed the significant acquisitions of Capital Smart and ACM during the year and the Group’s internal reporting to assess the Group’s monitoring and WORLD CLASS AUTOMOTIVE SOLUTIONS 133
Ltd (ACM Parts) during the year necessitating our consideration of the Group’s determination of CGUs, based on the smallest group of assets to generate largely independent cash inflows. The Group reorganised its segments and made a significant acquisition of Capital Smart and ACM Parts during the year necessitating our consideration of the Group’s allocation of goodwill to the CGUs to which they belong based on the monitoring of the business. In addition to the above, the Group recorded an impairment charge of $47.0m against goodwill in relation to Capital Smart. This further increased our audit effort in this key audit area. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. management of activities, and the consistency of the allocation of goodwill to CGUs; • We recalculated the impairment charge against the recorded amount disclosed; and • We assessed the disclosures in the financial report using our understanding of the issue obtained from our testing and against the requirements of the accounting standards. Business combination and recognition of goodwill and customer contracts Refer to Note E6 Business combinations to the financial report The key audit matter How the matter was addressed in our audit On 31 October 2019, the Group acquired 90% of Capital Smart and 100% of ACM Parts for consideration of $416.9m, resulting in the recognition of customer contracts and other intangible assets of $228.1m and goodwill of $239.2m. These transactions are considered to be a key audit matter due to the: • Size of the acquisition having a significant impact on the Group’s financial statements; and • Group’s judgement and complexity relating to the determination of the fair values of assets and liabilities acquired in the transaction requiring significant audit effort. The Group engaged various external valuation experts to assess the fair value of certain assets including Our procedures included: • We evaluated the acquisition accounting by the Group against the requirements of the accounting standards; • We read the underlying transaction agreements to understand the terms of the acquisition and nature of the assets and liabilities acquired; • We assessed the accuracy of the calculation and measurement of consideration paid to acquire Capital Smart and ACM Parts; • We evaluated the valuation methodology used by the Group to determine the fair value of assets and liabilities acquired, considering accounting standard requirements and observed industry practices; • Working with our valuation specialists, we assessed the Group’s external expert reports and: • Considered the objectivity, competence, expected rate of recovery for the Group and what the Group considers as their future business model as a result of expected synergies from business acquisitions and identified growth platforms when assessing the feasibility of the Group’s forecast cash flows. Assumptions included in the Group’s forecast cash flows are also sensitive to technology advancement, business expansion and market changes; • Forecast growth rates and terminal growth rates – In addition to the uncertainties described above, the Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy; and • Discount rate - these are complicated in nature and vary according to the conditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time, and the models approach to incorporating risks into the cash flows or discount rates. The Group’s modelling is highly sensitive to small changes in the discount rate. We involve our valuations specialists with the assessment. The Group uses complex models to perform their annual testing of goodwill for impairment. The models are largely manually developed, use adjusted historical performance, and a range of internal and external sources as inputs to the assumptions. Complex modelling, using forward-looking assumptions tend to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. The Group has a large number of operating businesses and completed a significant acquisition of Capital Smart Group Holdings Pty Ltd (Capital Smart) and ACM Parts Pty forecasts were not achieved and/or where future uncertainty is greater or volatility is expected; • We considered the sensitivity of the models by varying key assumptions, such as expected rate of recovery for the Group, forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range. We considered the interdependencies of key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of impairment and those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures; • We challenged the Group’s significant forecast cash flow and growth assumptions in light of the expected continuation of unprecedented uncertainty of business disruption and impacts of the COVID-19 global pandemic. We compared forecast growth rates and terminal growth rates to authoritative published studies of industry trends and expectations, and considered differences for the Group’s operations. We assessed key assumptions such as expected rate of recovery for the group and what the group considers as their future business model. We used our knowledge of the Group, business and customers, and our industry experience. We sourced authoritative and credible inputs from our specialists and market advisors; • We checked the consistency of the growth rates to the Group’s revised plans and our experience regarding the feasibility of these in the industry in which they operate; • We assessed the impact of technology, business expansion and market changes on the Group’s key assumptions, specifically forecast EBIT growth expected to be achieved through identified synergies, EBIT contribution from identified growth platforms, capital spend requirements and head office costs, for indicators of bias and inconsistent application, using our industry knowledge; • We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in; • We analysed the significant acquisitions of Capital Smart and ACM during the year and the Group’s internal reporting to assess the Group’s monitoring and AMA GROUP LIMITED | 30 JUNE 2020 134
AASB 16 Leases (Right-of-use asset – $345.4m, lease liability – $355.5m, depreciation, interest expense and other lease related expenditure– $62.0m) Refer to Note C7 Right-of-use assets and lease liabilities to the financial report The key audit matter How the matter was addressed in our audit Accounting for leases using AASB 16 Leases (AASB 16) is a key audit matter as it is inherently complex and specific and individualised lease-features drive different accounting outcomes, increasing the need for interpretation, judgement and audit effort. We focused on: • First time adoption – the Group was required to determine interpretations for AASB 16 new and complex accounting requirements for the first time in the year, including new accounting policies. Interpreting an accounting standard is more challenging in its first year of existence. This necessitated the involvement of our accounting specialists. The Group also had to build new processes and controls to apply the requirements, which we had not tested before; • High volume of leases – the Group has a high volume of individualised lease agreements used to estimate the lease liability and right-of-use asset. A focus for us was the completeness of the lease population and the accuracy of multiple and varied inputs which may drive different accounting outcomes, including key terms of the lease agreements, such as key dates, fixed and variable rent payments, incentives and renewal options; and • Relative magnitude – the size of balances has a significant financial impact on the Group’s financial position and performance. The most significant areas of judgement we focused on was in assessing the Group’s: • Incremental borrowing rates used – these are meant to reflect the Group's entity specific credit risk and vary based on each lease term; • Lease terms where leases have Our procedures included: • Working together with our accounting specialists, we considered the appropriateness of the Group’s new accounting policies against the requirements of the accounting standard and our understanding of the business; • We obtained an understanding of the Group’s new processes and IT systems used to calculate the lease liability, right-of-use asset, depreciation and interest expense; • We assessed the completeness of the Group’s leases taking into consideration the selected transition approach and practical expedients upon adoption by the Group by: • Inquiring with the Group to understand their process to compile the Group’s listing of leases; • Inspecting a sample of lease agreements entered into by the Group and comparing these to the Group’s listing of leases; and • Inspecting relevant expense accounts for routine payments during the year to identify the existence of leases not included in the Group’s listing of leases; • We compared the Group’s inputs in the AASB 16 lease calculation model, such as, key dates, fixed and variable rent payments, incentives and renewal options, for consistency to the relevant terms of a sample of underlying source documents including signed lease agreements, lessor’s invoices, and the Group’s bank statements. We also compared the rate used by the Group in computing the variable rent payments to the Australian consumer price index; • We assessed the Group’s determination of lease terms based on the probability of the Group exercising the lease extension or termination options. We compared key management decisions for consistency to board approved plans, strategies and past practices; • We considered the sensitivity of the Group’s AASB 16 lease calculation model by varying the incremental borrowing rate, within a reasonably possible range. We did this to identify the risk of bias or inconsistency in intangibles, right-of-use assets and property, plant and equipment. The Group’s valuation model used to determine the fair value of acquired intangibles assets is complex and sensitive to changes in a number of key assumptions. This drives additional audit effort specifically on the feasibility of these key assumptions and consistency of application to the Group’s strategy. The key assumptions we focussed on in the valuations of intangible assets included forecast earnings, discount rates and useful lives. We involved our valuation specialists to supplement our senior audit team members in assessing this key audit matter. experience and scope of the Group’s external valuation experts; • Compared a sample of the Group’s external expert property, plant and equipment valuation reports to underlying fixed asset schedules of the acquirees; and • Examined and assessed the key assumptions in the Group’s external valuation expert report prepared in relation to the identification and valuation of intangible assets including: • Assessing the useful life of key customer contracts by using our industry experience and knowledge of the terms and conditions of the underlying agreements and against the accounting standard requirements ; • Checking forecast earnings assumptions were consistent with the Group’s valuation model used as part of the pre-acquisition due diligence process; and • Independently developing a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in. Using our industry knowledge and publicly available market data of comparable properties, we considered a sample of market rent estimates prepared by the Group’s external valuation experts utilised in the calculation of the fair value of right-of-use assets acquired in the transactions; • We recalculated the goodwill balance recognised as a result of the transactions and compared it to the goodwill amount recorded by the Group; and • We assessed the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. WORLD CLASS AUTOMOTIVE SOLUTIONS 135
AASB 16 Leases (Right-of-use asset – $345.4m, lease liability – $355.5m, depreciation, interest expense and other lease related expenditure– $62.0m) Refer to Note C7 Right-of-use assets and lease liabilities to the financial report The key audit matter How the matter was addressed in our audit Accounting for leases using AASB 16 Leases (AASB 16) is a key audit matter as it is inherently complex and specific and individualised lease-features drive different accounting outcomes, increasing the need for interpretation, judgement and audit effort. We focused on: • First time adoption – the Group was required to determine interpretations for AASB 16 new and complex accounting requirements for the first time in the year, including new accounting policies. Interpreting an accounting standard is more challenging in its first year of existence. This necessitated the involvement of our accounting specialists. The Group also had to build new processes and controls to apply the requirements, which we had not tested before; • High volume of leases – the Group has a high volume of individualised lease agreements used to estimate the lease liability and right-of-use asset. A focus for us was the completeness of the lease population and the accuracy of multiple and varied inputs which may drive different accounting outcomes, including key terms of the lease agreements, such as key dates, fixed and variable rent payments, incentives and renewal options; and • Relative magnitude – the size of balances has a significant financial impact on the Group’s financial position and performance. The most significant areas of judgement we focused on was in assessing the Group’s: • Incremental borrowing rates used – these are meant to reflect the Group's entity specific credit risk and vary based on each lease term; • Lease terms where leases have Our procedures included: • Working together with our accounting specialists, we considered the appropriateness of the Group’s new accounting policies against the requirements of the accounting standard and our understanding of the business; • We obtained an understanding of the Group’s new processes and IT systems used to calculate the lease liability, right-of-use asset, depreciation and interest expense; • We assessed the completeness of the Group’s leases taking into consideration the selected transition approach and practical expedients upon adoption by the Group by: • Inquiring with the Group to understand their process to compile the Group’s listing of leases; • Inspecting a sample of lease agreements entered into by the Group and comparing these to the Group’s listing of leases; and • Inspecting relevant expense accounts for routine payments during the year to identify the existence of leases not included in the Group’s listing of leases; • We compared the Group’s inputs in the AASB 16 lease calculation model, such as, key dates, fixed and variable rent payments, incentives and renewal options, for consistency to the relevant terms of a sample of underlying source documents including signed lease agreements, lessor’s invoices, and the Group’s bank statements. We also compared the rate used by the Group in computing the variable rent payments to the Australian consumer price index; • We assessed the Group’s determination of lease terms based on the probability of the Group exercising the lease extension or termination options. We compared key management decisions for consistency to board approved plans, strategies and past practices; • We considered the sensitivity of the Group’s AASB 16 lease calculation model by varying the incremental borrowing rate, within a reasonably possible range. We did this to identify the risk of bias or inconsistency in intangibles, right-of-use assets and property, plant and equipment. The Group’s valuation model used to determine the fair value of acquired intangibles assets is complex and sensitive to changes in a number of key assumptions. This drives additional audit effort specifically on the feasibility of these key assumptions and consistency of application to the Group’s strategy. The key assumptions we focussed on in the valuations of intangible assets included forecast earnings, discount rates and useful lives. We involved our valuation specialists to supplement our senior audit team members in assessing this key audit matter. experience and scope of the Group’s external valuation experts; • Compared a sample of the Group’s external expert property, plant and equipment valuation reports to underlying fixed asset schedules of the acquirees; and • Examined and assessed the key assumptions in the Group’s external valuation expert report prepared in relation to the identification and valuation of intangible assets including: • Assessing the useful life of key customer contracts by using our industry experience and knowledge of the terms and conditions of the underlying agreements and against the accounting standard requirements ; • Checking forecast earnings assumptions were consistent with the Group’s valuation model used as part of the pre-acquisition due diligence process; and • Independently developing a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in. Using our industry knowledge and publicly available market data of comparable properties, we considered a sample of market rent estimates prepared by the Group’s external valuation experts utilised in the calculation of the fair value of right-of-use assets acquired in the transactions; • We recalculated the goodwill balance recognised as a result of the transactions and compared it to the goodwill amount recorded by the Group; and • We assessed the adequacy of disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. AMA GROUP LIMITED | 30 JUNE 2020 136
extension or termination options – assessing the probability of exercising the extension or termination options to determine each lease term impacts the measurement of the lease, therefore is critical to the accuracy of the accounting. We involved our senior audit team members in assessing this key audit matter, along with our debt advisory specialists. application and to focus our further procedures; • Working together with our debt advisory specialists, we assessed the Group’s incremental borrowing rates applied to the leases, considering risk factors specific to the Group, the industry it operates in, and each lease term; • We assessed the integrity of the Group’s AASB 16 lease calculation model used, including the accuracy of the underlying calculation formulas. For a sample of leases, we recalculated the amount of lease liability, right-of-use asset, depreciation and interest expense relevant to this financial year and compared our recalculated amounts against the amounts recorded by the Group; and • We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. Other Information Other Information is financial and non-financial information in AMA Group Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • Preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; • Implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and • Assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. WORLD CLASS AUTOMOTIVE SOLUTIONS 137
Auditor’s responsibilities for the audit of the Financial Report Our objective is: • To obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • To issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of AMA Group Limited for the year ended 30 June 2020, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 21 to 41 of the Directors’ report for the year ended 30 June 2020. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Adam Twemlow Partner Gold Coast 25 August 2020 extension or termination options – assessing the probability of exercising the extension or termination options to determine each lease term impacts the measurement of the lease, therefore is critical to the accuracy of the accounting. We involved our senior audit team members in assessing this key audit matter, along with our debt advisory specialists. application and to focus our further procedures; • Working together with our debt advisory specialists, we assessed the Group’s incremental borrowing rates applied to the leases, considering risk factors specific to the Group, the industry it operates in, and each lease term; • We assessed the integrity of the Group’s AASB 16 lease calculation model used, including the accuracy of the underlying calculation formulas. For a sample of leases, we recalculated the amount of lease liability, right-of-use asset, depreciation and interest expense relevant to this financial year and compared our recalculated amounts against the amounts recorded by the Group; and • We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standard. Other Information Other Information is financial and non-financial information in AMA Group Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • Preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; • Implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and • Assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. AMA GROUP LIMITED | 30 JUNE 2020 ASX ADDITIONAL INFORMATION
In accordance with the ASX Listing Rules the following information, as at 17 August 2020, is provided:
SUBSTANTIAL HOLDERS
The Company hold current substantial holder notifications in accordance with section 671B of the
Corporations Act 2001 for the following:
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
CEDARFIELD HOLDINGS PTY LTD
DISTRIBUTION OF EQUITABLE SECURITIES
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Number of
shares held
145,569,932
137,608,812
73,437,627
42,236,746
37,290,269
Holders
514
1,418
776
1,643
298
% of total
shares held
19.84
18.75
10.01
5.76
5.08
Number of
shares held
265,246
4,001,343
6,055,499
54,667,230
668,914,200
4,649
733,903,518
There were 370 shareholders with less than a marketable parcel of 124,389 shares.
UNQUOTED EQUITY SECURITIES
As at 30 June 2020, there were 7,179,430 Fully Paid Ordinary Unquoted shares held by 2 individual
holders; with all holders having in excess of 100,000 units.
As at 30 June 2020, there were 5,837,743 performance rights (with the potential to take up ordinary
shares) issued to 13 participating employees under the AMA Group Limited Performance Rights Program.
As at 30 June 2020, there were 2,000,000 unquoted options (with the potential to take up ordinary
shares) exercisable at $1.20 each before 25 April 2021 held by 1 holder; with the holder having in excess
of 100,000 units.
There are no voting rights attached to the unquoted equity securities.
QUOTED EQUITY SECURITIES
As at 17 August 2020 there were 4,649 individual holders (21 August 2019: 1,974).
The voting rights attaching to the ordinary shares are:
a. On a show of hands every shareholder present at a meeting in person or by proxy shall have one vote;
and
b. Upon a poll, each share shall have one vote.
For details of registered office and share registry details refer to inside front cover – Shareholder Information.
138
WORLD CLASS AUTOMOTIVE SOLUTIONS ASX ADDITIONAL INFORMATION
TOP 20 SHAREHOLDERS (AS AT 17 AUGUST 2020)
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
CEDARFIELD HOLDINGS PTY LTD
UBS NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
Number of
shares held
145,569,932
137,608,812
73,437,627
42,236,746
37,290,269
34,440,301
32,674,837
COLINTON CAPITAL PARTNERS PTY LTD
18,922,581
SANDMAN 1 NOMINEES PTY LTD
MISSY NOMINEES PTY LTD
YERRUS HOLDINGS PTY LTD
BNP PARIBAS NOMS PTY LTD
MR LACHLAN ALEXANDER MCGILLIVRAY
BNP PARIBAS NOMINEES PTY LTD
CARLIAOLV INVESTMENTS PTY LTD
PLYMOUTH PTY LTD
ROMSEYVALE PTY LTD
MR PETER RAYMOND HEARD
SRFI PTY LTD
STANLEY'S BODY WORKS PTY LTD
9,777,779
5,035,830
4,200,001
3,037,535
2,916,624
2,908,247
2,600,000
2,600,000
2,523,459
2,433,410
2,382,000
2,296,857
% of total
shares held
19.84
18.75
10.01
5.76
5.08
4.69
4.45
2.58
1.33
0.69
0.57
0.41
0.40
0.40
0.35
0.35
0.34
0.33
0.32
0.31
Total: Top 20 holders of Fully Paid Ordinary Shares
564,892,847
76.97
SECURITIES SUBJECT TO ESCROW
Name
Fully Paid Ordinary Quoted
Fully Paid Ordinary Quoted
Fully Paid Ordinary Quoted
Fully Paid Ordinary Unquoted
Fully Paid Ordinary Unquoted
* Subject to non-date escrow terms
Number of
shares held
% of total
shares held
18,859,663
27 Nov 2020
530,634
*
413,950
20 Jul 2021
5,100,428
30 Sep 2020
2,079,002
30 Sep 2021
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139
AMA GROUP LIMITED | 30 JUNE 2020
World Class
Automotive Solutions
AMA Group Limited
ABN 50 113 883 560
Level 4
130 Bundall Road
Bundall QLD 4217
amagroupltd.com
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