ANNUAL
REPORT
2016
AUB GROUP 2016 ANNUAL REPORT 1
THE LEADING PROVIDER
OF RISK MANAGEMENT,
ADVICE AND SOLUTIONS
FOR CLIENTS.
CONTENTS
Chairman’s Message
CEO’s Message
Social and Community Engagement
Performance Highlights
Board of Directors
Financial Report
Directors’ Report
Auditor’s Independence Declaration
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes In Equity
Notes to the Financial Statements
Directors Declaration
Independent Auditor’s Report
ASX Additional Information
Dividend Details
Corporate Information
2
3
4
5
6
8-27
28
29
30
31
32
33
35
96
98
99
100
101
AUB GROUP 2016 ANNUAL REPORT 1
CHAIRMAN’S
MESSAGE
AUB Group finished the year with a financial result that was
less than we had hoped, but in the context of market
headwinds the Group has maintained the trend of continuous
growth. The achievement of 3.3% growth of underlying Net
Profit After Tax, and a small increase in Earnings Per Share,
was at the lower end of our expectations. The activities that
represent the majority of our business being Australian
Insurance Broking and Underwriting Agencies, suffered the
triple effect of lower market premiums, increased competition
and lower interest rates. In response to these difficult
conditions, the majority of the individual businesses that make
up these areas showed a resolve to adapt to the prevailing
conditions.
Despite the market conditions, the Group offset the market
downturn and produced an Adjusted NPAT of $37.6 million.
Having declared a final dividend of 28 cents per share, the
total dividend for the year increased to 40 cents per share. We
believe the tough experience of the last three years will
evidence itself as improved performance and focus in the
future. AUB Group is in a strong financial position, and our
investment made to diversify our income base and strengthen
our operations put the Group in good stead for future growth,
even if the constrained premium climate continues longer than
expected.
Active management of our strategy and portfolio. The
strategic steps to diversify AUB Group into Insurance Broking
in New Zealand, along with an increased presence in the Risk
Services field has proved its worth, with strong profit growth
this financial year. Profit from our Risk Services businesses
grew from $2.0 million to $7.2 million, demonstrating the
benefits of the Group’s strategy to provide total risk
management solutions to clients. Our investment into the New
Zealand market is progressing ahead of expectations where
profit contribution increased from $0.3 million to $2.9 million
this year. Acquisitions in both areas took place throughout the
year as the strategy gathered momentum. We continue to be
optimistic about the opportunities for both these new areas.
We believe our model which shares real long term ownership
with the executives and founders of the business, sets us
apart from many now entering the market. We will continue to
concentrate our efforts on this diversified portfolio of business
assets as it provides resilience and flexibility to enhance value
for shareholders.
Partnership as our foundation. The AUB Group model which
sees us having less than 100% shareholdings in the
businesses we own, has at its core the sense of partnership.
Partnerships rely heavily on transparency, integrity and
goodwill to be effective. We bring these qualities to each of
the engagements we have with our companies. The
partnership model by its nature requires respect and
consideration of each partners’ view and opinion. While this
can sometimes be time consuming as everyone gets
comfortable with change, in our experience, this is a valuable
contributor to getting the future of each business right. In the
past we have been less involved in our partner businesses
than we are today, and for some this has required adjustment.
However, using the attributes of respectful partnership we are
now engaged with our companies more than ever before, and
we expect that this will bring benefit to all parties.
2 AUB GROUP 2016 ANNUAL REPORT
Focus on the client. AUB Group focusses predominantly on
the small and medium enterprise market, with a small number
of specialists servicing the large corporate market. Regardless
of the market or service, we have a fundamental belief that the
client will be better served, and have a more valued outcome,
by a person who has, or is employed by, an organisation
where the shareholders of the business work in the business.
The energy and commitment they bring to any service is that
much more because of the shared ownership under the AUB
Group model. We will continue to seek better client outcomes
through our partnership model.
Accelerating our culture through brand and people. To ensure
our Group name remains relevant and agnostic to all
segments and geographies that we serve, we completed a
company name and brand change this year, changing from
Austbrokers Holdings Limited to AUB Group Limited. We
continue to build the capability of our leaders, and this year
launched our AUB Group Academy. This leadership based
program is aimed at building capability in the areas of
strategic thinking, change management and leadership skills.
As an organisation we are committed to creating opportunities
for our people while at the same time enhancing our skills and
capabilities as an organisation.
Board Changes. The renewal of the AUB Group Board
continued this year. We welcomed a new Director in Paul
Lahiff, while Richard Longes retired after a decade on the
Board. In addition, Stephen Rouvray retired from his role of
CFO and Company Secretary in July. I thank Richard and
Stephen for their outstanding service and wise counsel at an
important time in AUB Group’s history. Pleasingly, the Board
and Executive changes over the past few years have been
transitioned seamlessly, allowing the business to continue to
thrive and grow.
Looking ahead, our primary focus will be on three key areas:
Growing revenue across all our business areas
Prudent management of our operating margin
Leveraging our collective scale to benefit our business
partners while minimising risk.
These are levers we can control and will make us more
resilient and flexible irrespective of any future market
environment impacts. The financial year ahead is an
interesting one. Premium rates in the insurance market
appear to be stabilising, and our Risk Services division gains
in reputation. Be assured we will focus on driving revenue,
keeping costs modest and be careful with our capital
management
On behalf of the board, I would like to thank all AUB Group
employees and our partner businesses for their effort to grow
your business.
David Clarke
Chairman
CEO’S
MESSAGE
The 2016 financial year showed positive underlying trends across
AUB Group. The soft premium cycle in Australasia continued, with
premium rates in commercial lines insurance continuing to fall over
the year - impacting Broking and Underwriting Agencies'
commission income. In addition, the reduction in interest rates
created further headwinds for our insurance intermediary operations
resulting in reduced interest income. Despite this, the Group
demonstrated good growth with Adjusted NPAT up 3.3% after
allowing for increased acquisition costs, resulting from our
deployment of over $77 million committed to new investments.
The focussed execution of our Group Strategy; ‘to be the leading
provider of risk management, advice and solutions to clients’
continued to deliver growth (organically and via acquisition),
resulting in continued diversification of our profit generation. Our
commitment to supporting our client’s risk needs (principally SME
and mid-market businesses) saw the improvement in underlying
broking income drivers, including increased policy count, premium
funding penetration and life insurance income. We continued
disciplined execution of our two main drivers:
Adherence to the proven and long standing Business model –
the owner-driver partnership model, where we work with our
partner businesses to drive mutual success. Examples this
year have been the acquisition of 60% of the Allied Group in our
Risk Services area, entering into partnership with KJ Risk in
Australian broking (Austbrokers), and selling down equity to
management in leading New Zealand broker, Runacres. Whilst
we do not normally divest businesses, this year we divested our
interests in 3 companies as a result of those businesses no
longer meeting our longer term interests. We re-invested these
proceeds in higher performing portfolios for shareholder benefit.
Adherence to our Operating Model – providing relevant
products and services, at cost, to partner businesses to help
drive profitability in our investments. This in turn improves the
dividend flow to the Group. During the year, the Group and our
partners have benefitted from leveraging our scale in
commercial agreements including increased usage of Premium
Funding. In addition, we have driven efficiencies via outsourcing
capabilities in ‘non-core’ activities such as telecoms and we
increased collaboration between partner businesses such as
claims management services between our Risk Services
partners and Underwriting Agencies.
Australian Broking (Austbrokers): Our partner businesses continued
to focus on levers in their control relating to income and expense
management, growing policy numbers, expanding premium funding
penetration and growing life insurance income. Whilst the
headwinds of premium rate and interest rate reductions resulted in a
decline in commission/fee income, it was less than the decline
experienced in the market. Additional fees were generated with the
renewal of our premium funding contract, which will benefit from
enhanced terms over the next 5.5 years. Acquisition activity was
muted for the industry this year, however our model proved
attractive with one stand alone and seven bolt-on acquisitions
undertaken in the year. Divestment of our interest in Strathearn
enabled a cash profit to be generated and the redeployment of
capital into higher yielding assets. Our partnership with leading
broking cluster group IBNA, under the AIMS banner, continued to
provide product and service benefits to our partners and I thank the
IBNA Board for the relationship.
Underwriting Agencies (SURA): This year we appointed a new
Managing Director, enabling his predecessor to focus on developing
new facilities and underwriting opportunities for the Group. With a
strong policy count, we continued to invest in the infrastructure
platform for our Strata agency and expect margins to improve over
the near term. Our focus on start-ups has traditionally delivered high
return on capital employed, so in FY16 we invested in two new
agencies yet to be launched to the market. While costs were
expensed during FY16, this investment will support revenue growth
and improve margins into FY17. Agency revenues were impacted
by not only market declines, but also by strong competition in the
key portfolios (Strata and Plant & Equipment) where average
premiums declined 9% on prior year. Despite this, growth in policy
count continued (up 7% in FY16) and profit commissions were
strong, demonstrating good underlying health for this area. Finally,
we divested a business (NewSurety) as it no longer aligned to the
Group’s portfolio. This in turn reduces risk and volatility in the
agency portfolio.
Risk Services: Demonstrated significant growth with investments
delivering to plan and strategic objectives. Acquisition activity
continued with one standalone (Allied Health Group) and a bolt on
acquisition (CIM) in the first half. Strong revenue increases were
seen across all operating business driven by growth in injury
management and rehabilitation services via increased panel
appointments and provision of claims services to insurers and
underwriting agencies. Expansion of our national footprint activities
are progressing, generating incremental revenue in key states.
Traction between our Risk Services capabilities and our broking
entities has helped deepen client relationships by providing
extended risk solutions. During the year we divested our interest in
a small risk consulting business that no longer aligned to the
Group’s model.
New Zealand: Our NZ business is performing ahead of plan and
exceeding strategic objectives. Activity of the past eighteen months
has consolidated our position as the largest broking management
group in New Zealand and the 3rd largest broking group in the
country by GWP (now more than 15% market share). Acquisitions
have been completed with both standalone and bolt-on businesses
being acquired. The acquisition of leading broking house, Runacres,
is performing well, and in line with our ‘skin in the game’ partner
model, we have since sold down 10% equity to the Managing
Director. Two smaller acquisitions (Hawkes Bay IB and Insurance
Brokers Alliance) occurred and we have since announced the
acquisition of 50% of Dawsons Insurance Brokers (Rotorua), with a
strong pipeline of opportunities evident for FY17.
Mark Searles
Chief Executive Officer & Managing Director
AUB GROUP 2016 ANNUAL REPORT 3
r
SOCIAL AND
COMMUNITY
ENGAGEMENT
For 30 years, above and beyond the good business sense of
corporate social responsibility, AUB Group has focused on
doing the right thing for our employees, our partners and our
communities.
AUB Group also makes a positive impact on the communities
where our employees live and work. In 2015, AUB Group and
its partner businesses together donated hundreds of
thousands of dollars to community and charitable
organisations across the country and overseas. Examples of
organisations supported include the Sunrise Children’s
Villages (through the Australian Cambodia Association); the
Create Foundation, which supports and promotes the voices
of over 40,000 children and young people in foster care; the
Australian Surf Lifesaving Association and the Reach
Foundation.
The Group’s partner businesses also support a number of
community events and organisations through fundraising,
corporate donations and volunteering.
4AUSTBROKERS 2016 ANNUAL REPORT
4 AUB GROUP 2016 ANNUAL REPORT
AUB GROUP 2016 ANNUAL REPORT 5
Reported
NPAT growth
PERFORMANCE
HIGHLIGHTS
GROWTH DRIVERS ACROSS ALL SEGMENTS
to $42.0 million +20.4%
+3.3%
+7.6%
+17.1%
39.7 cents in FY15 40CPS
+1.1%
Adjusted
NPAT growth
to $37.55 million
Earnings per
share growth
to 66.6 cents
Underlying
corporate
cost control
Group revenue
increase
to $233.88 million
FY16 dividend
increased from
AUSTRALIAN BROKING
NEW ZEALAND BROKING
Net profit before tax
-4.4% in FY16
$47.95M Net profit before tax
+883% in FY16
Policy count
Premium funding
Life insurance income
+1.0% New investments
+2.7%
+7.0%
$2.88M
+3
UNDERWRITING
RISK SERVICES
Net profit before tax
-21.4% in FY16
$10.35M Net profit before tax
+250% in FY16
$7.16M
Policy count
+7.0% Insurer panels
Profit commissions
+24.5% New investments
+3
+2
New investments
+2
AUSTBROKERS 2016 ANNUAL REPORT 5
AUB GROUP 2016 ANNUAL REPORT 5
AUB GROUP 2016 ANNUAL REPORT 5
BOARD OF
DIRECTORS
DAVID CLARKE
Chairman (commenced 26
November 2015)
RICHARD LONGES
Chairman (retired 26
November 2015)
MARK SEARLES
Chief Executive Officer
& Managing Director
RAY CARLESS
Non-Executive Director
ROBIN LOW
Non-Executive Director
PAUL LAHIFF
Non-Executive Director
.
6 AUB GROUP 2016 ANNUAL REPORT
FINANCIAL
REPORT
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
Plc, Head of Marketing at HSBC Plc. During the 1980s he held a
number of senior roles in marketing led organisations, including five
years at American Express Europe.
R. J. Carless BEc, MAICD
Ray Carless has over 35 years’ experience in the insurance
industry based in Australia but with management responsibilities
throughout the Pacific Rim. Until 2000 he was Managing Director of
reinsurance brokers Benfield Greig in Australia, a position he had
held for over 14 years, and he had also been a director of the
worldwide holding company located in London for 10 years. He has
been a director of a number of companies involved in the Australian
insurance industry since 2000. Mr Carless is a member of the Audit
and Risk Management, Nomination and Remuneration & People
Committees.
R. J. Low B Com, FCA, GAICD
Robin Low was a partner at PricewaterhouseCoopers with
over 29 years’ experience in financial services, particularly
insurance, and in assurance and risk management. Robin is
a member of the Audit and Assurance Standards Board and
on the board of a number of not-for-profit organisations
including Sydney Medical School Foundation, Public
Education Foundation and Primary Ethics. Ms Low chairs the
Audit and Risk Management Committee and is a member of
the Nomination and Remuneration & People Committees.
During the past three years Ms. Low served and continues to
serve as a Director of CSG Limited, Appen Limited and IPH
Limited.
P. A. Lahiff BSc Agr, GAICD
Paul joined the board of directors on 1 October 2015. Paul
was previously Chief Executive of Mortgage Choice Limited
(2003 - 2009) and prior to that was an Executive Director of
Heritage Bank and Permanent Trustee and held senior roles
in Westpac in Sydney and London. Paul is also Chairman of
NPP Australia Limited and a director of Smartline Personal
Mortgage Advisers, LIXI Australia and Retail Finance
Intelligence. Paul holds a BSc from Sydney University and is
a Fellow of the Australian Institute of Company Directors. Mr
Lahiff is a member of the Audit and Risk Management,
Nomination and Remuneration & People Committees.
Company Secretary
J. L Coss, BA, LLB, Dip CII, ANZIIF (Fellow) CIP, FGIA,
FCIS, Adv Dip (Management)
Justin joined AUB Group Ltd on 1 October 2015 and was
appointed Company Secretary on 30 November 2015. A
solicitor for over 20 years admitted to practice in New South
Wales and England & Wales, he was previously General
Counsel & Company Secretary of InterRISK Australia Pty Ltd
and prior to that was in private practice with Allens Arthur
Robinson. Justin is a member of the National Insurance
Brokers Association Regulatory Affairs Committee and is a
Director of the Association of Corporate Counsel Australia.
Your Directors submit their report for the year ended
30 June 2016.
DIRECTORS
The names and details of the Company’s Directors in
office during the financial year and until the date of this
report are as follows. Directors were in office for this entire
period unless otherwise stated.
Names, qualifications, experience and special responsibilities
D. C. Clarke LLB, (Non-Executive Chairman)
David Clarke was Chief Executive Officer of Investec Bank
(Australia) Limited from 2009 to 2013. Prior to joining
Investec Bank, David was the CEO of Allco Finance Group
and a Director of AMP Limited, following five years at
Westpac Banking Corporation where he held a number of
senior roles, including Chief Executive of the Wealth
Management Business, BT Financial Group. David has 35
years’ experience in investment banking, funds
management, property and retail banking. He was
previously employed at Lend Lease Corporation Limited
where he was an Executive Director and Chief Executive
of MLC Limited. David is Chairman of The University of
New South Wales Medicine Advisory Council, Deans
Circle and Charter Hall Group. Mr Clarke was elected
Group Chairman on 26 November 2015, is a member of
the Audit Committee and Chairs the Nomination and
Remuneration & People Committees.
R. A. Longes BA, LLB, MBA
Mr Longes retired as a Director and Group
Chairman at the Company’s Annual General
Meeting on 26 November 2015.
Richard Longes was a lawyer and partner in Freehill
Hollingdale & Page from 1974 – 1988. In 1988 he was a
founding Partner of the corporate advisory firm
Wentworth Associates and is now Chairman of Investec
Australia Limited. Until his retirement, he was the Group
Chairman, served on the Audit and Risk Management
Committee and chaired the Nomination and
Remuneration and People Committees of the Group.
During the past three years Mr. Longes served as a
Director of Boral Limited and Metcash Limited. He is
also a Director of Pain Management Research Institute.
M. P. L. Searles GAICD, DipM, Grad Dip Mktg
(Chief Executive Officer and Managing
Director)
In addition to his role as Group CEO, Mark serves on the
Boards of a number of Group companies including
undertaking the role of Chairman of Austagencies, NZ
Brokers Holdings and AIMS amongst others. Prior to
joining AUB Group, he was previously General Manager,
Broker & Agent and Chief Commercial Officer at CGU, a
division of IAG. From 2005-09, Mr Searles was with Zurich
Financial Services in the UK where he was Managing
Director, Direct & Partnerships and Chief Marketing
Officer. From 2001-05 he worked for Lloyds TSB Group
holding the positions of Marketing and Group Brands
Director and prior to that was Managing Director, CSL/
Goldfish/Goldfish Bank, the UK’s leading direct-to-
customer financial services group. During the 1990s he
held roles as Managing Director at MyBusiness Ltd, UK
Managing Director/ Marketing Director the Sage Group
8 AUB GROUP 2016 ANNUAL REPORT
Interests in the shares and options of the Company and
related bodies corporate.
As at the date of this report, the interests of the Directors in the
shares and options of AUB Group Limited were:
Number of
Number of
Options over
Ordinary
Ordinary
Shares
126,404
74,049
19,973
10,143
8,710
5,000
Shares
–
410,000
–
–
–
–
R. A. Longes
M. P. L. Searles
R. J. Carless
D. C. Clarke
R. J. Low
P.A. Lahiff
PRINCIPAL ACTIVITIES
AUB Group Limited (AUB Group or Group) is the leading equity-
based risk management, advice and solutions provider in
Australasia. The Group has a unique ‘owner-driver’ business
model; a clearly defined operating model and a focused strategy
to be the leading provider of risk advice and solutions for clients,
who are predominantly SME and mid-market businesses.
The Group business model is to hold equity stakes in partner
businesses and to provide a range of services to support
ongoing growth of equity partners. These services include
technology support via a centralised data centre capability;
common platforms to enable efficiency and effectiveness;
partnering, marketing, human resources and back office
services. Additionally, the Group manages/co-manages
networks of independent brokers (Cluster Groups) leveraging
the benefits of its services where appropriate.
The Group has business partnerships across Australia and New
Zealand comprising 75 equity businesses. The group services
more than 460,000 clients across 220 locations and represent in
excess of $4.5 billion of Gross Written Premium via our equity
partners and cluster Group management relationships. The
Group and its partners employ in excess of 3,000 people.
AUB Group primarily operates through two key segments:
Insurance Intermediaries, where it has equity investments in
businesses which provide insurance and risk related services to
clients. These include:
• Networks of broking businesses operating in Australia and
New Zealand, which provide risk and insurance broking
services to, primarily, small to medium sized business
clients; and
• Underwriting agency businesses, which provide specialist
insurance products for specialised market segments, that
are available via insurance brokers, in and outside the
Group’s broking network.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
Risk Services, where it has equity investments in businesses
which provide specialist risk solutions primarily in the people
and workplace risk areas, and also the provision of ancillary
risk assessment and related solutions in the Australian
market. These services are provided to insurance companies
and to commercial and government clients either directly or
via insurance brokers.
On 26 November 2015, the Group changed its name from
Austbrokers Holdings Limited to AUB Group Limited in
recognition of its expansion beyond Australian Broking.
There has been no significant change in the nature of these
activities during the year other than the continued expansion
of all areas of the business in Australia and New Zealand
including via acquisitions.
The Group’s Insurance Intermediaries revenue is largely
derived from commissions and fees earned on arranging
insurance policies and for other related products and
services. The amount of commissions earned is determined
by the volume of premiums placed which in turn is affected by
premium rates, sums insured and the general level of
economic activity.
Other revenue sources relate to interest earned on funds held
to pay insurers which will be affected by the prevailing
interest rate environment, income on insurance premium
funding, which is affected by premium and interest rates and
revenue derived from underwriters reflecting the profitability
and/or growth in the business placed, which will fluctuate
depending on results.
The Risk Services businesses earn fees for services such as
occupational health and safety consulting, injured worker
rehabilitation services, investigations, registered training, risk
advice and claims management to insurers and clients. Fees
are negotiated with state based scheme agents and insurers,
and in certain jurisdictions are gazetted.
OPERATING AND FINANCIAL REVIEW
Operating results for the year
In the year ended 30 June 2016 (FY2016) net profit after tax
(Reported NPAT) attributable to equity holders of the parent
increased by 20.4% to $42.002 million (2015: $34.887 million).
This includes the after tax profit on sale of AUB Group’s
investment in Strathearn Insurance Group Pty Ltd (Strathearn)
announced in December 2015, of $6.0 million, crystallising
strong investment returns to shareholders.
Reported NPAT includes fair value adjustments to the carrying
value of associates, profits on sale and deconsolidation of
controlled entities, contingent consideration adjustments and
impairment charges. If these items, together with the
amortisation of intangibles are excluded (as shown in the table
below), the net profit after tax (Adjusted NPAT) was $37.553
million in 2016 up 3.3% on prior year (2015: $36.345 million),
reflecting the underlying performance of the business.
Adjusted NPAT is a key measure used by management and the
board to assess and review business performance.
AUB GROUP 2016 ANNUAL REPORT 9
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
OPERATING AND FINANCIAL REVIEW (CONTINUED)
RECONCILIATION OF ADJUSTED NPAT TO REPORTED NPAT (1)
FY2016
FY2015
Variance
Net Profit after tax attributable to equity holders of the parent
Reconciling items net of tax and non controlling interest adjustments for:
Adjustments to contingent consideration for acquisitions of controlled entities and associates
2
Add back offsetting impairment charge to the carrying value of associates & goodwill, related
to above (as relevant)
Net adjustment
Add back adjustments to the carrying value of associate (impairment), not subject to
contingent consideration 3
Less profit on sale or deconsolidation of controlled entities net of tax 4
Less profit on sale of associates net of tax 5
Adjustment to carrying value of entities (to fair value) on date they became controlled or
deconsolidated 6
Net Profit from operations
Add back amortisation of intangibles net of tax 7
Adjusted NPAT
$ 000
$ 000
%
42,002
34,887
20.4%
343
(4,441)
-107.7%
3,114
4,104
-24.1%
3,457
(337)
1,125.8%
-
-
(191)
(6,047)
1,500
(817)
-
-100.0%
-76.6%
N/A
(5,725)
(3,224)
77.6%
33,496
32,009
4,057
4,336
37,553
36,345
4.6%
-6.4%
3.3%
1 The financial information in this table has been derived from the audited financial statements. The adjusted NPAT is non-IFRS financial information and as such has not been audited in
accordance with Australian Accounting Standards.
2 The Group’s acquisition policy is to defer a component of the purchase price, which is determined by future financial results. An estimate of the contingent consideration is made at the
time of acquisition and is reviewed and varied at balance date if estimates change, or payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where an
estimate or payment is reduced, an offsetting adjustment (impairment) is made to the carrying value.
3 In FY2015, one investment in an associate recorded an impairment, due to specific competitive circumstances in a niche segment of the market.
4 Profits on deconsolidation occur when interests in a controlled entity are sold and it becomes an associate.
5 During the period the Group sold its entire shareholdings in three associates and sold part of its shareholding in another, resulting in profits on sale. These may not occur in a future
periods unless similar transactions occur.
6 The adjustments to carrying values of associates or controlled entities arise where the Group increases its equity in associates whereupon they became controlled entities or decreases
its equity in a controlled entity and it becomes an associate (deconsolidated). As required by accounting standards the carrying values for the existing investments have been adjusted to
fair value and the increase included in net profit. Such adjustments will only occur in future if further acquisitions or sales of this type are made.
7 Amortisation of intangibles expense decreased over last year due to some intangible assets now being fully amortised. The expense is a non-cash item.
The 3.3% increase in Adjusted NPAT continues the trend
of year on year growth since listing. This result
demonstrates the strength of execution of the Group’s
strategy which in turn has grown income, with strong and
growing contributions from Risk Services and New
Zealand, in the context of a challenging insurance market,
where premium rates for commercial insurance have
declined by approximately 5% on average, over the
financial year.
The Group has benefited from the acquisition of three
standalone businesses utilising its ‘owner-driver’ model in
Australia and New Zealand and a number of smaller
acquisitions by business partners.
There have been changes to estimates of deferred
consideration amounts over the period, and where these
have been reductions to the estimates, a corresponding
decrease in the carrying value of the asset is recorded.
There have been no other impairment charges in the
current financial year.
Results by operating segment
Insurance intermediaries:
Australian Broking - profit decreased by 4.4% to $47.955
million in FY2016, in the context of premium rate
reductions of circa 5% on renewal business and reducing
interest rates. The result has been impacted by the sale of
the 50% interest in the Strathearn Insurance Group Pty Ltd
(Strathearn) in December 2015 and includes the profit
contribution from KJ Risk Insurance Brokers Pty Ltd
acquired on 1 July 2015 and several smaller acquisitions
by partner businesses. The result has benefited from
additional fees in the current year on the renewal of the
premium funding contract with Allianz, and will benefit from
enhanced terms over the next 5 years.
New Zealand Broking - profit increased to $2.880 million up
significantly on prior year. This includes a full year
contribution from Brokerweb Risk Services Ltd (BWRS)
and NZ Brokers Management Ltd acquired in November
2015 and a six month contribution from the acquisition of
Runacres & Associates Ltd net of interest and acquisition
costs. Our associate BWRS acquired two businesses in the
period.
10 AUB GROUP 2016 ANNUAL REPORT
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
OPERATING AND FINANCIAL REVIEW
(CONTINUED)
Results by operating segment (continued)
Underwriting Agencies – profit of $10.347 million was down
$2.815 million, impacted by a challenging competitive
environment.
Revenue was impacted by: reduced average premium
rates; income from contract renewals in FY15 not being
replicated in FY16; and the lost revenues from the
divestment of an associate. This was partly offset by
increased profit commissions and revenue from transition
services in relation to the sale of an associate.
Expenses increased over the year as a result of planned
investment to support future growth. With market
conditions deteriorating over the year, remedial actions
were taken in the second half, which reduced costs (versus
first half of FY2016). Furthermore, Underwriting Agencies
incurred expenses in seeding two start-ups in the current
year, which are due to be launched in FY17.
Policy count continued to grow (up 7% in FY16) as did
profit commissions, demonstrating the underlying health
and prospects for the business.
During the year, the Group divested its interest in NewSurety
Pty Ltd (NewSurety), a specialty surety business that no
longer aligned to strategy, reducing risk and volatility in the
portfolio. While Underwriting Agencies will not receive future
income from the divested NewSurety business in FY17, fees
from the continuation of the transitional services will partially
offset income reduction in FY17.
Risk Services – profit increased to $7.158 million, up
$5.118 million on prior year, from organic growth and the
contribution from Allied Health Australia Pty Ltd acquired
on 1 July 2015. The Risk Services businesses continue to
grow through expanded insurer relationships, entering new
states and through acquisitions.
The implementation of the AUB Group strategy has led to
the diversification of earnings, with Australian broking
businesses now contributing 70% to profit before corporate
expenses in FY2016, down from 88% in FY2012.
Growth in underlying corporate expenses were restricted to
1.1% in the current year, before the impact of short term
and long term incentive provisions. Total costs increased
7.5% after provisions for incentives, as little STI was paid in
FY2015 year as minimum hurdle rates were not met in that
year.
A reconciliation of the operating results presented above to
the Annual Report operating segments is set out below.
RECONCILIATION OF OPERATING SEGMENTS
Consolidated
FY2016
Consolidated
FY2015
Insurance
Risk
Insurance
Risk
Intermediary
Services
$000
$000
Total
$000
Intermediary
Services
$000
$000
Total
$000
Profit before tax and after non-controlling interests from:
- Insurance Broking - Australia
- Insurance Broking - New Zealand
- Underwriting Agencies
- Risk Services
47,955
2,880
10,347
-
-
-
47,955
50,147
2,880
293
10,347
13,162
-
-
-
50,147
293
13,162
-
7,158
7,158
-
2,040
2,040
Profit after tax and after non-controlling interests
61,182
7,158
68,340
63,602
2,040
65,642
Corporate income
Corporate expenses
Tax
Adjusted NPAT
2,601
(17,168)
-
-
2,601
1,939
(17,168)
(15,546)
-
-
1,939
(15,546)
46,615
7,158
53,773
49,995
2,040
52,035
(14,025)
(2,195)
(16,220)
(15,085)
(605)
(15,690)
32,590
4,963
37,553
34,910
1,435
36,345
Less amortisation expense (net of tax)
(3,797)
(260)
(4,057)
(4,336)
Less non-controlling interests in relation to adjustments1
Less tax expense in relation to adjustments2
(617)
(1,366)
-
-
(617)
(1,366)
(609)
(482)
(4,336)
(609)
(482)
-
-
Profit after income tax and non-controlling interests (refer
Annual Report note 23 Operating Segments)
26,810
4,703
31,513
29,483
1,435
30,918
1 Total shareholder returns includes all dividends and receipts on sale since inception, net of initial start-up costs, discounted at AUB Group cost of capital.
2 This includes adjustments to carrying value of associates, contingent consideration payments and profit on sale.
AUB GROUP 2016 ANNUAL REPORT 11
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
OPERATING AND FINANCIAL REVIEW
(CONTINUED)
Shareholder returns
On a Reported NPAT basis, earnings per share increased
by 17.1% over the prior year, and by 0.5% based on
Adjusted NPAT. Compound average growth rate in
earnings per share over the five years to 30 June 2016 on
this adjusted basis was 6.2%. Dividends per share
declared for FY2016 are 40.0 cents, an increase of 0.8%
on prior year.
The Company’s total shareholder return (comprising share
price growth and dividends paid) reflects the performance,
with a return of 17.3% for the five years to 30 June 2016 on
an annualised basis. These longer term returns are above
the returns for the ASX All Ordinaries and ASX Small
Ordinaries Indices.
FINANCIAL CONDITION
Shareholders’ equity increased to $351.235 million from
$311.326 million. The main reason for the increase was the
profit for the year. The reduction in equity through
dividends paid was partially offset by the increase in issued
capital arising from dividends paid being reinvested as a
result of the company’s dividend reinvestment plan and the
issue of shares as a result of the exercise of employee
share options.
The Group continues to generate positive cash flow from
operating activities of $34.038 million (2015: $41.520
million) excluding insurance trust account funds. After
investing and financing activities cash held increased from
$50.511 million to $70.933 million and includes cash
realised from the sale of associates. Borrowings increased
by $22.581 million to $88.646 million as a result of
acquisitions by the Group and from the deconsolidation of
a controlled entity. Borrowings of associates of $47.009
million (2015 $43.873 million) are not included in the Group
balance sheet as these entities are not consolidated. The
borrowings of associates relate largely to funding of
acquisitions, premium funding and other financing
activities.
The Company’s banking facilities were increased during
the financial year, with the limit now totaling $79.450 million
and the tenure extended to 30 November 2018.
Gearing increased to 20.2% in the year, as funds were
drawn down to pay for the acquisition of Runacres &
Associates in New Zealand. Net gearing (i.e. gearing ratio
net of cash at Group) was 15.3% at year end.
12 AUB GROUP 2016 ANNUAL REPORT
Dividends
Cents
$’000
Final dividend recommended:
• on ordinary shares
28.0
17,877
Dividends paid in the year:
• on ordinary shares - interim
• on ordinary shares - final
12
27.7
7,601
17,245
24,846
BUSINESS STRATEGIES
The Group’s strategic goal is ‘To be the leading provider of
risk management advice and solutions to clients’.
Our approach to achieving our strategic goal, balances the
immediate needs and profitability of the business today,
developing future growth areas, and ensuring the enduring
sustainability of the business through:
Building our client base, by enhancing value and
continuously improving and expanding our services;
Building new risk-related revenue streams; and
Evolving the total risk solutions customer value
proposition across different geographies in support of
a sustainable and profitable future.
Our strategy remains focused on supporting and growing
our core client-facing partner businesses of insurance
broking, underwriting agencies (insurance intermediaries)
and risk services, organically and via acquisition.
PROSPECTS FOR FUTURE FINANCIAL YEARS
Insurance premium rates in Australia and New Zealand
have been in decline for the last 24 months as a result of
competition between insurers and a benign claims
environment, consistent with previous cycles seen in the
insurance market. The last six months has seen signs of a
stabilisation of premium rates on renewal business.
The Broking businesses continue to focus on the levers of
profit they can control, including other sources of income
such as premium funding, fee for service income, life
insurance, services income and managing expenses,
mitigating the impact on margins. Similarly, Underwriting
Agencies will continue to focus on expense management
and new business development and will launch two new
underwriting agencies to the market in FY2017 to support
revenue growth.
Risk Services businesses are not impacted by the
insurance premium market, and prospects for these
businesses remain strong, as they expand into new states
and increase their presence on key insurer workers
compensation panels.
PROSPECTS FOR FUTURE FINANCIAL YEARS
(CONTINUED)
Any future acquisitions will also underpin future growth.
The Group continues to invest in corporate infrastructure
for long term growth as we expand into new areas and
geographies. In addition, achievement of growth targets will
mean an increase in costs as a result of an increase in
short term and long term incentives provisions, compared
to FY2016, as only a proportion of STI will be paid in
FY2016 and long term incentive awards did not meet
required hurdle rates.
In this context, organic growth, bolstered by acquisitions
should again provide moderate growth in FY17. The extent
of that growth will be impacted by the level of future
acquisitions, premium rates and interest rates.
Changes to premium rates (increases or decreases) will
continue to impact insurance broking and underwriting
agency businesses.
Changes in interest rates will impact interest earnings on
cash and trust accounts and interest expense on debt
facilities. On a net basis and at current gearing rates, the
Group generally benefits from increasing interest rates and
is negatively impacted by decreasing interest rates.
Profit commissions paid by underwriters, which depend on
the growth and profitability of business written, were a
significant contributor to the results in 2016 but cannot be
reliably predicted for future years.
KEY BUSINESS RISKS
The Group is exposed to multiple risks relating to conduct
of its various businesses. The following list of risks are not
meant to represent an exhaustive list.
Key risks that may impact the Group’s business strategy
and prospects for the future financial year include:
Continued negative premium rate environment –
insurance premiums rates are set by insurers
independently of AUB Group. A continued negative
premium rate environment would put further pressure
on margins in the Insurance Intermediaries segment.
To mitigate this our businesses and the Group focus
on business drivers that can be controlled, as outlined
above.
Cyber risk - the Group provides data centre and
system support services to many of our partners.
These services are supported by the Group and
external outsource providers. The Group constantly
monitors cyber threats, security and system
availability across the network we support. A group-
wide cyber insurance policy is in force.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
Regulatory change - the Australian and New Zealand
financial services market continues to undergo
significant regulatory change. The impact on the
general insurance broking sector has not been as
significant as other sectors. The impact on changes
to life insurance commission structures has been
more significant, however this is not a material
component of our business today. AUB Group
constantly monitors changes in legislation and
regulation and engages with government via
regulatory bodies to ensure we remain vigilant to
future changes and impact on our business.
Dependence of key suppliers – AUB Group has a
number of material outsourcing arrangements with
external providers that support critical functions.
These are largely in relation to technology and
telephony services. AUB Group regularly monitors
contracts, service level agreements and performance
targets to ensure required deliverables and standards
are met.
Disruption to broker model via digital or direct models.
To date, the SME segment has not been as impacted
by alternative distribution models as the retail
insurance lines, however the businesses are not
immune from these risks. The Group continues to
invest in technologies that support the broker’s role as
risk adviser to their clients, which we believe is critical
to their value proposition. In addition continued
investment in connectivity with insurers, ensures that
broker role can be delivered cost efficiently for clients.
Other significant risks include refinancing risk, misconduct
risk, loss of material binders in the underwriting agencies
business and succession planning within our partner
businesses. Management have controls and plans in place
to manage and mitigate these risks.
SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the
consolidated entity during the financial year, other than
acquisitions disclosed above.
SIGNIFICANT EVENTS
AFTER THE BALANCE DATE
On 25 August 2016 the Directors of AUB Group Limited
declared a final fully franked dividend on ordinary shares of
28.0 cents per share in respect of the 2016 financial year.
Based on the current number of ordinary shares on issue,
the total amount of the dividend is $17.877 million.
ENVIRONMENTAL REGULATION AND
PERFORMANCE
The Company is not subject to any particular or significant
environmental regulation under laws of the Commonwealth
or of a State or Territory or in New Zealand.
AUB GROUP 2016 ANNUAL REPORT 13
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
RISK MANAGEMENT
The Group takes a proactive approach to risk
management. The Board is responsible for ensuring that
risks, and also opportunities, are identified on a timely
basis and that the Group’s objectives and activities are
aligned with the risks and opportunities identified by the
Board. As it is considered that all non-executive directors
should be part of this process, they all serve on the Audit
and Risk Management Committee.
The Board has a number of mechanisms in place to ensure
that management’s objectives and activities are aligned
with risks identified by the Board. These include the
following:
Board approval of the strategic plan, which
encompasses the Group’s vision, mission and
strategy statements designed to meet
stakeholders’ needs and manage business risk.
Implementation of Board approved operating
plans and budgets and monitoring of progress
against these budgets, including the
establishment and monitoring of key
performance indicators of both a financial and
non-financial nature.
The allocation of specific responsibility to the
Audit and Risk Management Committee to
review, monitor and report on risk.
Key risks that may impact the Group’s business strategy
and prospects for the future financial year have been
included in the Operating and Financial Review.
SHARE OPTIONS
All options are granted over shares in the ultimate
controlling entity AUB Group Limited.
Unissued shares
As at the date of this report, there were 567,756 unissued
ordinary shares under options. Refer to note 16 of the
financial statements for further details of the options
outstanding.
Option holders do not have any right, by virtue of the
option, to participate in any share issue of the Company or
any related body corporate.
Options
The fourth tranche options vested on 29 September 2011
and no further options vested on the retest date of
September 2012. All options must be exercised no later
than 29 September 2015. During the year 11,099 options
were exercised leaving no unexercised options at reporting
date. The exercise price for each option was zero.
The fifth and sixth tranche of options have either vested or
lapsed prior to FY2016. Accordingly these plans are now
closed and are of no further effect.
14 AUB GROUP 2016 ANNUAL REPORT
The earliest vesting date for the seventh tranche of 21,430
options was 31 October 2014. All remaining options lapsed
during the year leaving no unexercised options at reporting
date.
For all options issued as part of the seventh tranche and
thereafter, if options are exercised within two years of the
date the options vest the shares cannot be disposed of
before the expiry of the two year period from the date the
options vested, except if employment is terminated.
The earliest vesting date for the eighth tranche of 32,203
options is 31 October 2015. Last year 5,713 options lapsed
leaving 26,490 outstanding at reporting date. All options
must be exercised no later than 5 October 2019. The
exercise price for each option was zero for all of the
options.
The earliest vesting date for the ninth tranche of 37,499
options is 30 October 2016. Last year 9,235 options
lapsed, leaving 28,264 outstanding at reporting date. All
options must be exercised no later than 5 October 2020.
The exercise price for each option was zero for all of the
options.
The earliest vesting date for the tenth tranche of 43,456
options is 31 October 2017. Last year 10,345 options
lapsed, leaving 33,111 outstanding at reporting date. All
options must be exercised no later than 31 October 2021.
The exercise price for each option was zero for all of the
options.
The earliest vesting date for the eleventh tranche of 69,891
options is 31 October 2018. All options are outstanding at
reporting date. All options must be exercised no later than
31 October 2021. The exercise price for each option was
zero for all of the options.
A grant of 233,000 options was made to the CEO on 15
January 2013 with an earliest vesting date of 1 January
2016. During the year, 73,000 were exercised, leaving
160,000 options outstanding at the reporting date. All
options must be exercised no later than 1 January 2020.
The exercise price for each option was zero for all of the
options.
A further grant of 250,000 options was made to the CEO
on 7 April 2016 with an earliest vesting date of 1 January
2019. All options must be exercised no later than 1 January
2023. The exercise price for each option was zero for all of
the options.
Shares issued as a result of the exercise of options
During the financial year, employees exercised options to
acquire 84,099 fully paid shares in AUB Group Limited for
no consideration. Consequently 84,099 ordinary shares
were issued during the financial year under the Senior
Executive Option Plan.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
INDEMNIFICATION AND INSURANCE OF
DIRECTORS AND OFFICERS
During or since the end of the financial year, the Company
has paid premiums in respect of a contract insuring all the
Directors and Officers of AUB Group Limited against
liabilities, past, present and future.
Structure
The Constitution and the ASX Listing Rules specify that the
aggregate remuneration of Non-Executive Directors shall
be determined from time to time by a general meeting. The
latest determination was approved by shareholders at the
2013 Annual General Meeting to increase the aggregate
remuneration to $750,000 per year.
In accordance with normal commercial practice, the
disclosure of the total amount of premiums under and the
nature of the liabilities covered by the insurance contract is
prohibited by a confidentiality clause in the contract.
The amount of aggregate remuneration sought to be
approved by shareholders and the manner in which it is
paid to Non-Executive Directors is generally reviewed
every second year.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young Australia, as part of
the terms of its audit engagement agreement, against
claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to
indemnify Ernst & Young during or since the financial year.
REMUNERATION REPORT
This remuneration report has been subject to audit and
outlines the remuneration arrangements in place for
Directors and Executives of AUB Group Limited (the
Company).
Remuneration philosophy
The performance of the Company depends upon the
quality of its Directors and Executives. To prosper, the
Company must attract, motivate and retain highly skilled
Directors and Executives.
To this end, the Company embodies the following
principles in its remuneration framework:
Provide competitive rewards to attract high calibre
executives;
Link executive rewards to shareholder value;
Have a significant portion of executive
remuneration ‘at risk’, dependent upon meeting
pre-determined performance benchmarks; and
Establish appropriate, demanding performance
hurdles for variable executive remuneration.
Remuneration and People Committee
The Remuneration and People Committee of the Board of
Directors of the Company is responsible for determining
and reviewing compensation arrangements for the
Directors, the Chief Executive Officer (CEO) and Senior
Management Team.
Non-Executive Director remuneration
Objective
The Board seeks to set aggregate remuneration at a level
that provides the Company with the ability to attract and
retain Directors of the highest calibre, whilst incurring a
cost that is acceptable to shareholders.
The Board considers advice from external consultants as
well as the fees paid to Non-Executive Directors of
comparable companies when undertaking the review
process. Advice was previously obtained in 2013 from an
external remuneration consultant to ensure that fees
charged at that time were in line with the current market.
As a result of their recommendations, fees were increased
from 1 April 2013. Notwithstanding that fees are normally
reviewed every second year, fees were not reviewed in
2015. The Board carried out a review in 2016 and taking
into account that a review had not been undertaken for
three years, determined that a 5% increase in the fees
payable to Non-Executive Directors was reasonable and
would take effect from 1 July 2016.
Each Non-Executive Director receives a fee for serving as
a Director of the Company which includes a fee for each
Board committee on which the Director sits. Both the
Chairman of the Board and the Chairman of the Audit and
Risk Management Committee receive an additional fee
recognising the additional workload that these positions
entail. Non-Executive Directors do not receive retirement
benefits, nor do they participate in any incentive programs.
From 1 April 2013 to 30 June 2016 each Non-Executive
Director has received an annual fee of $100,000 with the
Chairman of the Audit and Risk Management Committee
receiving an additional annual fee of $20,000 and the
Chairman of the Board receiving an additional annual fee
of $70,000.
The remuneration of Non-Executive Directors for the year
ended 30 June 2016 is detailed in Table 2 of this report.
Non-Executive Directors have been encouraged by the
Board to hold shares in the Company. It is considered good
governance for Non-Executive Directors to have a stake in
the companies on whose Boards they sit.
The shares held in the company by each Director are
detailed in Table 1 of this report.
Senior Manager and Executive Director remuneration
Objective
The Company aims to reward executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:
AUB GROUP 2016 ANNUAL REPORT 15
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
REMUNERATION REPORT (CONTINUED)
Senior Manager and Executive Director remuneration
(continued)
Reward executives for company, business unit and
individual performance against targets set by
reference to appropriate benchmarks;
Align the interest of executives with those of
shareholders;
Link rewards with the strategic goals and
performance of the Company; and
Ensure total remuneration is competitive by market
standards.
Structure
It is the Remuneration & People Committee’s practice that
a fixed term employment contract is entered into with the
Chief Executive Officer.
Remuneration consists of the following key elements:
Fixed Remuneration
Variable Remuneration – Short Term Incentive (STI)
Variable Remuneration – Long Term Incentive (LTI)
The CEO’s target remuneration mix comprises 46% fixed
remuneration, 16% target STI opportunity and 38% LTI.
Senior executives target remuneration mix ranges from 60-
70% fixed remuneration, 20-25% target STI opportunity
and 10-15% LTI. It is the Company’s practice to have fixed
remuneration at market median and total remuneration at
the upper quartile.
To ensure the Remuneration & People Committee is fully
informed when making remuneration decisions it seeks
external remuneration advice. This process is normally
carried out every second year. A formal appointment
process was undertaken in 2014 and
PricewaterhouseCoopers (PwC) was appointed to advise
on senior executive remuneration. In order to ensure that
the Remuneration and People Committee is provided with
advice, and as required, recommendations, free from
undue influence by members of the Key Management
Personnel (KMP) group to whom recommendations may
relate, the engagement of PwC by the Committee was
based on an agreed set of protocols that would be followed
by the Committee, PwC and members of the KMP. PwC
provided advice in the form of a written report providing
insights on remuneration trends and shareholder views and
market data in relation to CEO and executive
remuneration. No specific remuneration recommendations
were provided.
Fixed Remuneration
Objective
Fixed remuneration is reviewed annually by the
Remuneration & People Committee. The process consists
of a review of company-wide, business unit and individual
16 AUB GROUP 2016 ANNUAL REPORT
performance, relevant comparative remuneration in the
market and internally and, where appropriate, external
advice on policies and practices. As noted above, the
Committee has access to external advice independent to
management which was obtained as part of the 2014
review.
Structure
Senior executives are given the opportunity to receive their
fixed (primary) remuneration in a variety of forms including
cash and fringe benefits such as motor vehicles. It is
intended that the manner of payment chosen will be
optimal for the recipient without creating undue cost for the
Group.
The fixed remuneration component of the 9 key
management personnel of the Group is detailed in Table 2.
Variable remuneration – short term incentive (STI)
Objective
The objective of the STI program is to link the achievement
of the Group’s operational targets with the remuneration
received by the executives charged with meeting those
targets. The total potential STI is available at a set level so
as to provide sufficient incentive to the senior manager to
achieve the operational targets and such that the cost to
the Group is reasonable in the circumstances.
Structure
The Group sets financial targets and each executive has
set personal objectives against which their performance is
evaluated.
On an annual basis, a rating is determined for each
executive based on an evaluation of each executive’s
performance against predetermined objectives. This rating
is then applied to an allocated STI opportunity determined
as a percentage of fixed remuneration. This amount is then
scaled up or down to reflect the Group’s performance
against its financial target for growth in Adjusted NPAT
over the prior year to a maximum of two times. The
financial targets for growth are reviewed annually to ensure
they align with current expectations. As a result, the level of
incentive reflects the performance of the Company and the
executive, therefore ensuring it is aligned with
shareholders’ interests. An incentive pool is set aside
annually based on company performance and amounts are
allocated to individual executives as set out above. This
process usually occurs within three months of the reporting
date.
The aggregate of annual STI payments available for
executives across the Group is subject to the approval of
the Remuneration and People Committee. Payments made
are delivered as a cash bonus in the following reporting
period.
For the 2015 financial year, the STI cash bonus of
$200,000 provided in the financial statements was paid in
the 2016 financial year. The Remuneration and People
Committee considered the STI payments for the 2016
financial year and has allocated a pool in the sum of
REMUNERATION REPORT (CONTINUED)
Variable remuneration – short term incentive (STI)
(continued)
$1,417,233 for STI cash bonuses for staff and senior
management for the 2016 financial year. This amount has
been provided for in the 2016 financial year based on the
growth in the adjusted NPAT for the year over the prior
year.
Variable remuneration – long term incentive (LTI)
Objective
The objective of the LTI plan is to reward senior
executives in a manner that aligns this element of
remuneration with the creation of shareholder wealth.
As such, LTI grants are only made to executives who are
able to influence the generation of shareholder wealth and
thus have a direct impact on the Group’s performance
against the relevant long term performance hurdle.
Structure
LTI grants to executives are delivered in the form of
options.
The following were selected as the measures for the LTI
plan in 2016:
a)
total shareholder return (TSR) measured against
the S&P/ASX Small Ordinaries Index (the Target
Group); and
b) consolidated net profit after tax of the Company
for that financial year excluding fair value
adjustment to carrying values of associates,
profit on sale of entities or assets or
deconsolidation of controlled entities, contingent
consideration adjustments, impairment charges
and amortisation of intangibles, provided that the
Board has the discretion to adjust the Adjusted
NPAT to take into account abnormal or non-
security events (Adjusted EPS Growth).
It is believed the differing measures of TSR and Adjusted
EPS provide improved alignment between comparative
shareholder return and reward for executives.
Option exercise conditions
Exercise conditions:
a)
subject to satisfaction of the performance based
conditions referred to in paragraphs below, options
are tested on the date on which the Company’s
audited financial statements for the third financial
year ending after the grant are lodged with the
Australian Securities Exchange (the First Test
Date) and on the date on which the Company’s
audited financial statements for the fourth financial
year ending after the grant are lodged with the
Australian Securities Exchange four years (the
Second Test Date);
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
b) Options granted in FY2016 are comprised of 60%
EPS options and 40% TSR options and will vest
and may be exercised at the First Test Date,
subject to the Participant being an employee of the
Company or a subsidiary of the Company at the
time of exercise, (except where his or her
employment has been terminated by the Company
without cause or has terminated as a result of the
Participant being unable to perform his or her
duties due to illness, injury, incapacity or death)
and the performance hurdles as follows:
The EPS options – Adjusted EPS Growth
(i)
less than 4% per annum, 0% of the EPS
options will become exercisable;
(ii) equal to 4% per annum, 25% of the EPS
options will become exercisable;
(iii) between 4% and 7%, the percentage of
options that are exercisable will be
determined on a straight line basis;
(iv) equal to 7% per annum, 50% of the EPS
options will become exercisable;
(v) between 7% and 10%, the percentage of
options that are exercisable will be
determined on a straight line basis;
(vi) equal to 10% per annum, 100% of the EPS
options will become exercisable;
The TSR options - TSR
(i) less than the Target Group, 0% of the TSR
options will become exercisable;
(ii) equal to the Target Group, 50% of the TSR
options will become exercisable;
(iii) greater than the Target Group, the
percentage of options that are exercisable
will be determined on a straight line basis;
(iv) greater than 150% of the Target Group,
100% of the TSR options will become
exercisable.
c)
For options granted in FY2015 or earlier, if the
First Test Compound EPS Growth is:
(i) equal to 8.5%, 20% of the options will
become exercisable;
(ii) equal to 10%, 50% of the options will
become exercisable;
AUB GROUP 2016 ANNUAL REPORT 17
Company performance and the link to remuneration
Long term incentives are based on Adjusted EPS Growth
and Total Shareholder Returns.
Adjusted EPS Growth was 0.5% over FY2015. Compound
average growth rate in earnings per share over the five
years to June 2016 on this basis was 6.2%.
Total annualised shareholder return over the one year to
30 June 2016 was 16.6%. However the three year return
to 30 June 2016 was 1.06%, confirming the alignment of
executive remuneration to shareholder returns. The share
price increased over the financial year from $9.00 to
$10.10 at 30 June 2016.
Dividends per share for the financial year totalled 40 cents
compared to 39.7 cents in 2015.
It is expected that none of the grants made in 2012, 2013
and 2014 will vest based on performance to 30 June
2016.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
REMUNERATION REPORT (CONTINUED)
Option exercise conditions (continued)
(iii) between 10% and 15%, the percentage of
options that are exercisable will be
determined on a straight line basis;
(iv) 15% or more, 100% of the options will
become exercisable.
d)
If all of the options do not become exercisable on
the First Test Date and the performance criteria on
the second test date are higher than on the First
Test Date an additional number of options will
become exercisable as is equal to the difference
between the number of options which became
exercisable on the First Test Date and the number of
options which would have become exercisable on
the First Test Date using the performance criteria at
as the Second Test Date;
e) Any options which have not become exercisable by
the Second Test date lapse and are of no further
force or effect.
f) Options granted in the 2010–2016 financial years
have further restrictions on their disposal or the
disposal of any shares acquired on their exercise for
a further two years from vesting of these options.
g) Option exercise conditions for options granted in the
2014 and 2015 financial years were modified so that
between 8.5% and 10% Adjusted EPS Growth the
percentage of options that are exercisable will be
determined on a straight line basis.
h)
The exercise conditions for 200,000 of the options
granted to the CEO on 1 January 2013 (of which
160,000 remain unvested) are the same as set out
above for FY 2015 except that 20% vest below 8.5%
and between 8.5% and 10% Adjusted EPS growth
the options that are exercisable will be determined
on a straight line basis. The further 33,000 options
granted to the CEO on 1 January 2013 have no
performance hurdles and vested at 1 January 2016.
i)
The exercise conditions for the 250,000 options
granted to the CEO in 2016 are the same as set out
above in paras (a)-(f) for FY2016.
18 AUB GROUP 2016 ANNUAL REPORT
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
Details of Key Management Personnel (KMP)
The following persons were the executives with the
greatest authority for the planning, directing and
controlling the activities of the consolidated entity during
the financial year.
M. P. L. Searles
Director and Chief Executive Officer
J. S. Blackledge
Chief Financial Officer
(appointed 1 July 2015)
S. S. Rouvray
Chief Financial Officer and Company Secretary
(ceased 1 July 2015)
F. Gualtieri
National Manager – Group Services and Support (ceased
1 July 2015)
F. Pasquini
Chief Distribution Officer
S. Vohra
Chief Operating Officer
K. R. McIvor
Managing Director – New Zealand and Head of Group
Development
T. M. Stevens
Chief Information Officer
(ceased 20 May 2016)
N. F. Thomas
General Manager – Broker Network Development
Employment contracts
The CEO, Mr. Searles is employed under contract
terminating on 31 December 2018.
• From 1 July 2015, Mr. Searles received fixed
remuneration of $630,000 per annum.
• Mr. Searles was granted 233,000 options on 1
January 2013 to subscribe for ordinary shares under
the Senior Executive Option Plan comprised as
follows:
(i) 200,000 options are subject to performance
conditions. 40,000 of these options vested
under this grant on 1 January 2016 and,
subject to performance hurdles, further
options may vest on 1 January 2018.
(ii) 33,000 options are not subject to any
performance hurdles other than Mr.
Searles being an employee of a group.
These options vested 1 January 2016.
• Mr Searles was granted 250,000 additional options on
7 April 2016 to subscribe for ordinary shares under the
Senior Executive Option Plan. The options are subject
to performance conditions tested at 30 June 2018 and
vest on 1 January 2019. Unvested options are
retested at 30 June 2019 and may vest at 1 January
2020 subject to performance hurdles being met.
• Mr. Searles or the company may terminate this
contract by giving twelve months written notice. If Mr.
Searles terminates the contract prior to 31 December
2018, any unvested options held will be forfeited.
• The Company may terminate the contract at any time
without notice if serious misconduct has occurred.
Where termination with cause occurs, Mr Searles is
only entitled to that portion of remuneration that is
fixed, and only up to the date of termination. On
termination with cause any unvested options will
immediately be forfeited.
Other Key Management Personnel (KMP) have letters of
offer of employment or employment contracts with no
fixed term, and varying periods up to six months for either
party to terminate. Details of remuneration are contained
in Table 2.
AUB GROUP 2016 ANNUAL REPORT 19
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
REMUNERATION REPORT (CONTINUED)
Table 1: Shareholdings of Key Management Personnel
Shares held in AUB Group Limited at 30 June 2016
Jul-15
during year
during year
Jun-16
Balance at 01-
Shares
acquired
Shares
disposed
Balance at 30-
Directors
R. A. Longes (retired 26 November 2015)
R. J. Carless
D. C. Clarke
R. J. Low
P. A. Lahiff (appointed 1 October 2015)
M. P. L. Searles
Executives
S. S. Rouvray (ceased 1 July 2015)
J. S. Blackledge
F. Gualtieri (ceased 1 July 2015)
F. Pasquini
K. R. McIvor
S. Vohra
T. M. Stevens (ceased 20 May 2016)
N. F. Thomas
Total
122,473
19,973
7,500
8,320
–
–
384,528
–
11,076
70,186
–
–
989
3,931
126,404
-
2,643
390
5,000
74,049
–
–
–
6,853
–
–
–
–
–
–
–
–
–
–
–
11,076
–
–
–
–
–
–
19,973
10,143
8,710
5,000
74,049
384,528
–
–
77,039
–
–
–
989
625,045
92,866
137,480
580,431
R.A. Longes was deemed to have disposed of his total shareholding following his retirement from the board of directors on 26 November 2015.
Shares held in AUB Group Limited at 30 June 2015
Jul-14
during year
during year
Jun-15
Balance at 01-
Shares
acquired
Shares
disposed
Balance at 30-
Directors
R. A. Longes
D. J. Harricks (retired 27 November 2014)
R. J. Carless
D. C. Clarke
R. J. Low
M. P. L. Searles
Executives
S. S. Rouvray
F. Gualtieri
F. Pasquini
K. R. McIvor
S. Vohra
T. M. Stevens
N. F. Thomas
Total
117,540
27,000
17,973
2,500
–
–
320,169
37,210
43,147
–
–
–
–
4,933
–
2,000
5,000
8,320
–
64,359
3,866
33,039
–
–
–
989
–
–
–
–
–
–
–
30,000
6,000
–
–
–
–
122,473
27,000
19,973
7,500
8,320
–
384,528
11,076
70,186
–
–
–
989
565,539
122,506
36,000
652,045
All equity transactions with KMP's other than those arising from the exercise of options granted as part of their remuneration, have been entered into under terms and conditions no more
favourable than those the Group would have adopted if dealing at arm’s length.
20 AUB GROUP 2016 ANNUAL REPORT
REMUNERATION REPORT (CONTINUED)
Table 2: Compensation of Directors and other Key Management Personnel for the year-ended 30 June 2016 (Consolidated)
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
Post
Share-
emplo-
based
Short-term
yment
payment
*Cash
Non
Salary &
short term
monetary
Super-
**Equity
Total
perform-
ance
fees
incentive
benefits
annuation
options
Total
related
$
$
$
$
$
$
$
30-Jun-16
Directors
D. C. Clarke
Chairman (appointed Chairman 26 November 2015)
129,541
R. A. Longes
Chairman (retired 26 November 2015)
62,860
–
–
–
12,306
–
5,972
–
–
141,847
68,832
–
–
M. P. L. Searles*
Chief Executive
R. J. Carless
Non-executive Director
P. A. Lahiff
Non-executive Director (appointed 1 October 2015)
68,493
R. J. Low
Non-executive Director
Executives
S. S. Rouvray
109,589
Chief Financial Officer / Company Secretary (retired 1 July 2015)
–
J. S. Blackledge
569,428
18,750
28,497
35,000 164,792
816,467 22.48%
70,000
–
–
–
–
–
30,000
–
6,507
–
10,411
–
–
–
–
–
–
100,000
75,000
120,000
–
–
–
–
–
Chief Financial Officer (appointed 1 July 2015)
315,843
–
1,584
29,995 10,182
357,604 2.85%
F. Gualtieri
National Manager - Group Services and Support (ceased 1 July
2015)
F. Pasquini
Chief Distribution Officer
K. R. McIvor
–
–
–
–
–
–
–
269,017
12,500
42,403
22,500
9,833
356,253 6.27%
MD New Zealand and Head of Group Development
165,900
12,500
792
7,153
–
186,345 6.71%
S. Vohra
Chief Operating Officer
T. M. Stevens
305,239
12,500
1,583
28,963
9,841
358,126 6.24%
Chief Information Officer (ceased 20 May 2016)
218,094
12,500
55,597
20,781
9,523
316,495 6.96%
N. F. Thomas
General Manager – Broker Network Development
262,033
7,500
37,804
24,893
9,523
341,753 4.98%
2,546,037
76,250 168,260
234,481 213,694
3,238,722
*Short term incentives (STI) were paid during the year in respect of the group’s performance for 30 th June 2015. Any amount payable in respect of the
2016 performance will be paid during 2017 and will be included in the 2017 remuneration report. An estimate of the amounts ex pected to be paid in
respect of 30 June 2016 entitlements have been provided for in the 30 June 2016 Financial Statements.
** Share based payments are calculated on the accrued costs to the company recognising that options issued during the period will vest over three
years after taking into account a 50% probability that the group will achieve the performance hurdles required for those options to vest.
AUB GROUP 2016 ANNUAL REPORT 21
DIRECTORS’ REPORT
YEAR ENDED 30JUNE 2016
REMUNERATION REPORT (CONTINUED)
Table 3: Compensation of Directors and other Key Management Personnel for the year-ended 30 June 2015 (Consolidated)
Post
emplo-
Share-
based
Short-term
yment
payment
Cash
Non
Salary &
short term
monetary
Super-
Equity
Total
perform-
ance
fees
incentive
benefits
annuation
options
Total
related
30-Jun-15
Directors
R. A. Longes
Chairman
M. P. L. Searles
Chief Executive
R. J. Carless
Non-Executive Director
D. J. Harricks
Non-Executive Director (retired 27
November 2014)
R. J. Low
Non-Executive Director
(appointed 3 February 2014)
D. C. Clarke
Non-Executive Director
$
155,251
$
–
$
$
–
14,749
546,338
155,908
35,750
34,961
$
170,000
$
–
772,957
20.17%
$
–
–
–
65,000
13,261
102,293
–
–
–
–
–
35,000
100,000
–
35,000
–
48,261
–
9,718
–
112,011
–
16,507
–
100,000
–
–
–
–
(appointed 3 February 2014)
83,493
Executives
S. S. Rouvray
Chief Financial Officer/ Company Secretary
274,284
90,087
36,267
34,709
–
435,347
20.69%
F. Gualtieri
National Manager – Group Services and
Support
F. Pasquini
190,516
61,365
58,802
26,444
41,429
378,556
27.15%
Chief Distribution Officer
264,707
65,093
33,956
34,799
50,809
449,364
25.79%
K. R. McIvor
Chief Broking Officer
S. Vohra
333,601
67,273
13,678
25,782
52,599
492,933
24.32%
Chief Operating Officer
302,956
72,753
1,583
25,179
50,854
453,325
27.27%
T. M. Stevens
Chief Information Officer
(appointed 1 July 2014)
N. F. Thomas
General Manager
230,844
60,149
65,067
27,536
47,718
431,314
25.01%
Broker Network Development
66,437
–
10,905
6,312
–
83,654
0.00%
2,628,981
572,628
256,008
326,696
243,409
4,027,722
Compensation payments for N. F. Thomas only relate to the period from when he was appointed KMP on 16 March 2015
22 AUB GROUP 2016 ANNUAL REPORT
REMUNERATION REPORT (CONTINUED)
Table 4: Value of options granted as part of remuneration to Key Management Personnel (Consolidated)
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
*Value of
options
granted
Value of
options
Percentage of
Value of
remuneration
exercised
options
consisting of
during the
during the
lapsed during
options for
the year
the year
%
30 June 2016
Directors
year
$
year
$
M. P. L. Searles
1,845,000
538,901
$
–
34,370
–
145,109
18,451
–
104,574
–
–
–
61,090
–
58,999
59,043
–
57,135
57,135
–
–
–
28,920
–
–
–
–
Shares issued on exercise of
options
Options fully
vested
Shares
issued
No.
Paid per
during the
share
$
year
No.
22.48%
73,000
0.00
0.00%
2.85%
0.00%
6.27%
6.24%
0.00%
6.96%
4.98%
–
–
–
–
–
–
6,853
0.00
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,138,402
567,821
302,504
79,853
Shares issued on exercise of
options
*Value of
options
granted
Value of
options
Percentage of
Value of
remuneration
exercised
options
consisting of
during the
during the
lapsed during
options for
year
year
the year $
the year
$
–
$
–
Shares
issued
No.
%
0.00%
–
$
–
–
41,429
50,809
50,854
52,599
47,718
–
103,610
16,784
0.00%
64,359
24,277
53,415
9,154
8,966
–
–
–
–
–
–
–
–
10.94%
11.31%
11.22%
10.67%
11.06%
0.00%
3,866
32,415
–
–
–
–
Options fully
vested
Paid per
during the
share
$
–
3.74
0.00
3.71
–
–
–
–
year
No.
–
7,109
3,866
3,815
–
–
–
–
243,409
181,302
34,904
100,640
14,790
*Gross value of options granted during the period which will vest over three years if all performance hurdles required for options to vest, are met.
Shares issued on exercise of options during 2016 and 2015 were fully paid.
AUB GROUP 2016 ANNUAL REPORT 23
Executives
S. S. Rouvray
J. S. Blackledge
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
Total
30 June 2015
Directors
M. P. L. Searles
Executives
S. S. Rouvray
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
Total
DIRECTORS’ REPORT
YEAR ENDED 30JUNE 2016
REMUNERATION REPORT (CONTINUED)
Table 5: Number of options granted as part of remuneration
Fair value
per option
at grant
date
Exercise
price per
option
Year ended 30
June 2016
Executives
($) (note
($) (note
exercise
exercise
First
Last
Granted no.
Grant date
16)
16)
Expiry date
date
date
M. P. L. Searles
250,000
7-Apr-16
S. S. Rouvray
–
–
J. S. Blackledge
8,357
23-Nov-15
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
–
–
8,071
23-Nov-15
8,077
23-Nov-15
–
–
7,816
23-Nov-15
7,816
23-Nov-15
Total
290,137
7.91
–
7.31
–
7.31
7.31
0
7.31
7.31
0.00
1-Jan-23
1-Jan-19
1-Jan-23
–
–
–
–
0.00
23-Nov-22
23-Nov-18
23-Nov-22
–
–
–
–
0.00
23-Nov-22
23-Nov-18
23-Nov-22
0.00
23-Nov-22
23-Nov-18
23-Nov-22
–
–
–
–
0.00
23-Nov-22
23-Nov-18
23-Nov-22
0.00
23-Nov-22
23-Nov-18
23-Nov-22
Where options are exercised within two years after the date the options vest, any shares acquired on exercising of those options cannot be disposed
of prior to the expiry of the two year period from the date the options vested, excep t if employment is terminated.
Fair value
per option
Exercise
at grant
price per
date
option
Granted no.
Grant date
($) (note 16)
($) (note 16)
Expiry date
date
date
First
Last
exercise
exercise
–
–
–
–
4,558
31-Oct-14
5,590
31-Oct-14
5,595
31-Oct-14
–
–
9.0892
9.0892
9.0892
9.0892
9.0892
9.0892
–
–
–
–
–
–
–
–
0.00
31-Oct-21
31-Oct-17
31-Oct-21
0.00
0.00
0.00
0.00
0.00
31-Oct-21
31-Oct-17
31-Oct-21
31-Oct-21
31-Oct-17
31-Oct-21
31-Oct-21
31-Oct-17
31-Oct-21
31-Oct-21
31-Oct-17
31-Oct-21
31-Oct-21
31-Oct-17
31-Oct-21
K. R. McIvor
5,787
31-Oct-14
T. M. Stevens
5,250
31-Oct-14
N. F. Thomas**
4,396
31-Oct-14
Total
31,176
Where options are exercised within two years after the date the options vest, any shares acquired on exercising of those options cannot be disposed
of prior to the expiry of the two year period from the date the options vested, excep t if employment is terminated.
**Options allocated to N. F. Thomas were issued before he was appointed as a KMP on 16 March 2015.
24 AUB GROUP 2016 ANNUAL REPORT
Year ended 30
June 2015
Executives
M. P. L. Searles
S. S. Rouvray
F. Gualtieri
F. Pasquini
S. Vohra
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
REMUNERATION REPORT (CONTINUED)
Table 6: Option holdings of Key Management Personnel
Balance at
beginning of
Total options at year end
Options
Balance at
Not
Options held at 30
period 01-
Granted as
Options
lapsed/
end of period
Vested/
vested/not
June 2016
Director
Jul-15
remuneration
exercised
forfeited
30-Jun-16
exercisable
exercisable
M. P. L. Searles
233,000
250,000
73,000
–
410,000
Executives
S. S. Rouvray
J. S. Blackledge
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
5,473
–
17,317
25,877
10,589
10,953
14,910
8,319
–
8,357
–
8,071
8,077
–
7,816
7,816
–
–
–
6,853
–
–
–
–
5,473
17,317
2,938
–
10,953
–
–
–
8,357
–
24,157
18,666
–
22,726
16,135
Total
326,438
290,137
79,853
36,681
500,041
The outstanding options have an exercise price of $NIL.
During the current year a total of 319,891 zero priced options were issued (290,137 to KMP).
F. Gualtieri ceased to be a KMP on 1 July 2015. All unvested options lapsed on that date.
S. S. Rouvray ceased to be a KMP on 1 July 2015. All unvested options lapsed on that date.
T. M. Stevens ceased to be a KMP on 20 May 2016.
All options issued with an exercise price of $NIL and the expiry date of the options is 4 years after the vesting date.
–
–
–
–
–
–
–
–
–
–
410,000
–
8,357
–
24,157
18,666
–
22,726
16,135
500,041
Balance at
beginning of
Balance at
Options
end of
Options held at
period 01-
Granted as
Options
lapsed/
period 30-
Vested/
Not vested/not
30 June 2015
Jul-14
remuneration
exercised
forfeited
Jun-15
exercisable
exercisable
Total options at year end
Director
M. P. L. Searles
233,000
Executives
S. S. Rouvray
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
73,149
18,434
54,474
4,994
5,166
9,660
3,923
–
–
4,558
5,590
5,595
5,787
5,250
4,396
–
–
233,000
64,359
3,866
32,415
–
–
–
–
3,317
1,809
1,772
–
–
–
–
5,473
17,317
25,877
10,589
10,953
14,910
8,319
–
–
–
6,853
–
–
–
–
233,000
5,473
17,317
19,024
10,589
10,953
14,910
8,319
Total
402,800
31,176
100,640
6,898
326,438
6,853
319,585
The outstanding options have an exercise price of $NIL. During the year ended 30 June 2015 a total of 43,456 zero priced options were issued (31,176
to KMP).
N. F. Thomas became a KMP on 16 March 2015 and options issued before that date are shown above.
AUB GROUP 2016 ANNUAL REPORT 25
DIRECTORS’ REPORT
YEAR ENDED 30JUNE 2016
REMUNERATION REPORT (CONTINUED)
Table 7: The following options were granted, vested or lapsed during the year.
Granted
during
Fair value
of options
Number
Number
at grant
lapsed during
vested
M. P.L. Searles
S. S. Rouvray
J. S. Blackledge
F. Gualtieri
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens
N. F. Thomas
2012
2015
2011
2015
2011
2012
2013
2014
2008
2011
2015
2015
2013
2014
2015
2015
Grant year
current year
Award date
vesting date
–
31-Dec-13
1-Jan-16
250,000
7-Apr-16
1-Jan-19
–
31-Oct-11
31-Oct-14
8,357
23-Nov-15
23-Nov-18
31-Oct-11
31-Oct-14
31-Oct-12
31-Oct-15
date
$7.38
$7.91
$6.28
$7.31
$6.28
$7.71
–
–
–
–
–
–
8,071
8,077
–
–
7,816
7,816
290,137
30-Oct-13
30-Oct-16
$10.06
31-Oct-14
31-Oct-17
29-Sep-08
29-Sep-11
31-Oct-11
31-Oct-14
23-Nov-15
23-Nov-18
23-Nov-15
23-Nov-18
$9.09
$4.22
$6.28
$7.31
$7.31
30-Oct-13
30-Oct-16
$10.06
31-Oct-14
31-Oct-17
23-Nov-15
23-Nov-18
23-Nov-15
23-Nov-18
$9.09
$7.31
$7.31
year
during year
–
–
5,473
–
2,977
5,713
4,069
4,558
–
2,938
–
–
5,166
5,787
–
–
73,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,681
73,000
All options were issued with an exercise price of $NIL and the expiry date of the options is 4 years after the vesting date.
There are no loans outstanding owing by Key Management Personnel at 30 June 2016 (2015: NIL).
DIRECTORS’ MEETINGS
The number of Directors’ meetings (including meetings of committees of Directors) held during the year and the numbers
of meetings attended by each Director were as follows:
No. of meetings held:
No. of meetings attended:
R. A. Longes
M. P. L. Searles
R J Carless
D. C. Clarke
R. J. Low
P. A. Lahiff
Meetings of Committees
Directors’
Audit & Risk
Remuneration
Meetings
Management
Nomination
& People
8
3
8
8
8
8
7
8
3
-
8
8
8
6
1
1
-
1
1
1
-
4
2
-
4
4
4
1
Mr. Searles was not a member of any Committee. All other Directors were eligible to attend all meetings held except Mr . Lahiff who was appointed on 1
October 2015 and Mr. Longes who retired on 26 November 2015 and attended all meetings held during the year in the period in which he was a Director.
26 AUB GROUP 2016 ANNUAL REPORT
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2016
DIRECTORS’ MEETINGS (CONTINUED)
YEAR ENDED 30 JUNE 2016
Committee membership
As at the date of this report, the Company had an Audit and Risk Management Committee, Remuneration and People
Committee and a Nomination Committee of the Board of Directors. Members acting on the committees of the Board during
the year were:
Audit
Remuneration
Nomination
R. J. Low (Chairman)
R. A. Longes (ret 26/11/15)
R. A. Longes (ret 26/11/15)
R. J. Carless
R. J. Carless
R. J. Carless
R. A. Longes (ret 26/11/15)
D. C. Clarke (Chairman)
D. C. Clarke (Chairman)
D. C. Clarke
R. J. Low
R. J. Low
P. A. Lahiff (app 01/10/2015)
P. A. Lahiff (app 01/10/2015)
P. A. Lahiff (app 01/10/2015)
ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding
is applicable) under the option available to the Company under ASIC Class Order 2016/191. The Company is an entity to which
the Class Order applies.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Directors received an independence declaration from the auditors of AUB Group Limited. Refer to page 28 of the
Directors’ Report.
Non-audit services were provided in relation to taxation matters to the AUB Group by the entity’s auditor, Ernst &
Young in the financial year ended 30 June 2016. The directors are satisfied that the provision of non-audit services is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and
scope of each of the non-audit services provided means that auditor independence was not compromised. The amounts
received or due to be received are detailed in Note 25 of the Financial Report.
Signed in accordance with a resolution of the Directors
D.C. Clarke
Chairman
Sydney, 25 August 2016
M.P.L. Searles
Chief Executive Officer and Managing Director
AUB GROUP 2016 ANNUAL REPORT 27
AUDITOR’S INDENDENCE DECLARATION
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
As lead auditor for the audit of AUB Group Limited for the financial year ended 30 June 2016, I declare to the best of my
knowledge and belief, there have been:
a)
b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of AUB Group Limited and the entities it controlled during the financial year.
Ernst & Young
David Jewell
Partner
Sydney, 25 August 2016
28 AUB GROUP 2016 ANNUAL REPORT
Revenue
Other income
Share of profit of associates
Expenses
Finance costs
Income arising from adjustments to carrying values of associates, sale of
interests in controlled entities and broking portfolios
– Adjustments to carrying value of associates and estimates for contingent
consideration
– Profit from sale of interests in controlled entities and associates
Profit before income tax
Income tax expense
Net Profit after tax for the period
Net Profit after tax for the period attributable to:
Equity holders of the parent
Non-controlling interests
INCOME STATEMENT
YEAR ENDED 30 JUNE 2016
Notes
4 (i)
4 (ii)
4 (iii)
4 (iv)
4 (v)
4(vi)
4(vii)
5
Consolidated
2016
$’000
2015
$’000
202,977
191,339
7,629
23,272
5,313
20,695
(178,064)
(163,240)
(5,389)
50,425
(4,310)
49,797
1,730
8,759
60,914
12,127
1,881
2,088
53,766
10,909
48,787
42,857
42,002
6,785
34,887
7,970
48,787
42,857
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
8
8
66.6
66.5
56.9
56.7
AUB GROUP 2016 ANNUAL REPORT 29
STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2016
Net Profit after tax for the period
Other comprehensive income
Net movement in foreign currency translation reserve
Income tax benefit relating to currency translation
Other comprehensive income after income tax for the period
Total comprehensive income after tax for the period
Total comprehensive income after tax for the period attributable to:
Equity holders of the parent
Non-controlling interests
Consolidated
2016
$'000
2015
$'000
48,787
42,857
575
(13)
562
(192)
13
(179)
49,349
42,678
42,429
6,920
49,349
34,708
7,970
42,678
30 AUB GROUP 2016 ANNUAL REPORT
STATEMENT OF FINANCIAL POSITION
YEAR ENDED 30 JUNE 2016
Consolidated
2016
$’000
2015
$’000
Notes
6
6
9
10
9
10
11
13
14
5
17
5
18
19
17
18
5
19
20
21
21
21
21
70,933
87,513
165,801
670
50,511
105,498
165,053
150
324,917
321,212
163
40
143
72
133,894
141,661
9,806
6,507
246,746
199,836
5,535
396,184
721,101
5,574
353,793
675,005
239,510
252,380
5,593
12,415
4,461
5,975
10,055
8,624
261,979
277,034
11,452
2,730
9,520
84,185
107,887
369,866
351,235
141,708
146,533
5,384
248
370
19,280
2,735
7,189
57,441
86,645
363,679
311,326
128,890
128,165
5,707
(179)
540
294,243
263,123
56,992
48,203
351,235
311,326
AUB GROUP 2016 ANNUAL REPORT 31
Assets
Current Assets
Cash and cash equivalents
Cash and cash equivalents – Trust
Trade and other receivables
Other financial assets
Total Current Assets
Non-current Assets
Trade and other receivables
Other financial assets
Investment in associates
Property, plant and equipment
Intangible assets and goodwill
Deferred income tax asset
Total non-current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Income tax payable
Provisions
Interest bearing loans and borrowings
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Interest bearing loans and borrowings
Total Non-current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Retained earnings
Share based payments reserve
Foreign currency translation reserve
Asset revaluation reserve
Equity attributable to equity holders of the parent
Non-controlling interests
Total Equity
STATEMENT OF CASH FLOWS
YEAR ENDED 30 JUNE 2016
Cash flows from operating activities
Receipts from customers
Dividends received from others
Dividends/trust distributions received from associates
Interest received
Management fees received from associates/related entities
Notes
2016
$’000
Consolidated
2015
$ 000
191,629
182,458
2
20,454
3,619
11,099
15
18,464
3,623
10,136
Payments to suppliers and employees
(175,886)
(155,941)
Income tax (paid)
Interest paid
Net cash from operating activities before customer trust
account movements
Net (decrease)/increase in cash held in customer trust accounts
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from reduction in interests in controlled entities
Payment for increase in interests in controlled entities
6
7(a),(b)
7(a)
(Payments) for/proceeds from new consolidated entities, net of cash acquired 7(c),(d)
Cash outflow from sale/deconsolidation of controlled entities
Payment for new/additional interests in associates
7(e)
11
Payment for new broking portfolios purchased by members of the economic
entity
Proceeds from sale of broking portfolios by member of the economic entity
Proceeds from sale of associates (net of sale expenses)
Proceeds from sale of other financial assets
Proceeds from new shares issued to non-controlling interests
(Payment for)/proceeds from purchases/sale of other financial assets
Proceeds from sale of plant and equipment
Payment for plant and equipment and capitalised projects
Advances of mortgages to associates/related entities
Proceeds from mortgage repayments from associates/related entities
(12,700)
(4,179)
34,038
(9,292)
24,746
2,425
(291)
(40,007)
(10,539)
(2,971)
(1,836)
-
30,432
14
2,714
-
195
(5,032)
(2,316)
1,815
(13,366)
(3,869)
41,520
2,815
44,335
2,714
(990)
(17,605)
(7,008)
(16,423)
(1,631)
124
-
-
788
(34)
556
(2,695)
(84)
213
Net cash flows (used in) investing activities
(25,397)
(42,075)
Cash flows from financing activities
Dividends paid to shareholders
Dividends paid to shareholders of non-controlling interests
Proceeds from issue of share capital
Payment for contingent consideration on prior year acquisitions
Increase in/(repayment) of borrowings and lease liabilities
Advances to related entities
Net cash flows from financing activities
Net increase in cash and cash equivalents
(12,028)
(4,399)
-
(4,330)
23,387
458
3,088
2,437
(9,972)
(6,500)
7,192
(4,967)
16,797
(958)
1,592
3,852
Cash and cash equivalents at beginning of the period
156,009
152,157
Cash and cash equivalents at end of period
6
158,446
156,009
32 AUB GROUP 2016 ANNUAL REPORT
7(a))
-
1,800
-
1,800
835
2,635
STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2016
Attributable to equity holders of the parent
Foreign
Asset
currency
Share
based
Non-
Issued
Retained
revaluation
translation
payment
controlling
Total
capital
earnings
reserve
reserve
reserve
Total
interest
equity
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
128,890
128,165
540
(179)
5,707
263,123
48,203 311,326
-
-
-
42,002
-
42,002
-
427
427
-
-
-
42,002
6,785
48,787
427
135
562
42,429
6,920
49,349
Consolidated
At 1 July 2015
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Adjustment relating to an
increase in voting shares in
controlled entities (see note
Non controlling interests
relating to new acquisitions
(see note 7(c))
Adjustment resulting from the
deconsolidation of controlled
entity (see note 7(e))
Transfer from asset
revaluation reserve
Cost of share-based payment
Movement in tax benefit
related to employee share
trust transactions
On 30 October 2015 and 29
April 2016, 1,505,688 shares
were issued as a result of a
Dividend Reinvestment Plan
-
-
-
-
-
(see note 20)
12,852
Allotted 11,099 shares at an
issue price of $NIL (see note
20)
Allotted 73,000 shares at an
issue price of $NIL (see note
20)
-
-
Share issue expenses
(34)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(758)
170
(170)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,999
11,999
(758)
(6,566)
(7,324)
-
-
-
-
(312)
(312)
(11)
(11)
-
-
-
-
(312)
(11)
-
12,852
-
12,852
-
-
-
-
-
-
(34)
-
-
-
-
-
(34)
(24,846)
(4,399)
(29,245)
Equity dividends
-
(24,846)
At 30 June 2016
141,708
146,533
370
248
5,384
294,243
56,992 351,235
AUB GROUP 2016 ANNUAL REPORT 33
STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2016
Attributable to equity holders of the parent
Foreign
Asset
currency
Share
based
Non-
Issued
Retained
revaluation
translation
payment
controlling
Total
capital
earnings
reserve
reserve
reserve
$'000
$'000
108,339
114,836
$'000
1,000
$'000
$'000
Total
$'000
interest
equity
$'000
$'000
-
-
(179)
(179)
5,296
229,471
40,108 269,579
-
-
-
34,887
7,970
42,857
(179)
-
(179)
34,708
7,970
42,678
-
-
-
34,887
-
34,887
Consolidated
At 1 July 2014
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Adjustment resulting from the
consolidated entity disposing
of interests in controlled
entities (see note 7 (e))
-
108
Adjustment relating to an
increase in the voting shares
in controlled entities. (see
note 7(b)
-
1,205
Non controlling interests
relating to new acquisitions
(see note 7(d)
Transfer from asset
revaluation reserve
Cost of share-based payment
Movement in tax benefit
related to employee share
trust transactions
Allotted 132,800 and 27,834
respectively, as a result of
employees exercising options
-
-
-
-
(see note 20)
558
460
(460)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
On 15 October and 24
October 2014 and 30 April
2015, 696,147, 928,220 and
516,092 shares were issued
respectively as a result of a
Dividend Reinvestment Plan
(see note 20)
Share issue expenses
Equity dividends
At 30 June 2015
34 AUB GROUP 2016 ANNUAL REPORT
-
-
-
-
-
-
-
-
-
-
-
108
(12,520)
(12,412)
-
-
-
1,205
89
1,294
-
-
19,056
19,056
-
-
-
-
451
(40)
451
451
(40)
(40)
-
558
-
558
-
-
-
20,183
(190)
-
-
20,183
(190)
(23,331)
(6,500)
(29,831)
20,183
(190)
-
(23,331)
128,890
128,165
540
(179)
5,707
263,123
48,203 311,326
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
Information from the financial statements of controlled
entities is included from the date the parent entity
obtains control until such time as control ceases. Where
there is a loss of control of a controlled entity, the
consolidated financial statements include the
results for the part of the reporting period during which
the parent entity had control.
The financial information in respect of controlled
entities is prepared for the same reporting period as
the parent company using consistent accounting
policies. Adjustments are made to bring into line
dissimilar accounting policies that may exist.
All intercompany balances and transactions,
including unrealised profits arising from intra-group
transactions, have been eliminated in the
consolidated accounts. Unrealised losses are
eliminated unless costs cannot be recovered.
Non controlling interests represent the portion of
profit or loss and net assets in subsidiaries which
are not 100% owned by AUB Group. These are
presented separately in the income statement and
within equity in the consolidated Statement of
Financial Position. When the Group acquires a
non controlling interest in a subsidiary, the
transaction is accounted for as a transaction
between owners in their capacities as owners and
the difference between purchase price and
recorded value of non controlling interest is
accounted for as an equity transaction.
Transactions with owners in their capacity as
owners
A change in ownership interest without loss of
control is accounted for as an equity transaction.
The difference between the consideration
transferred and the book value of the share of the
non controlling interest acquired or disposed is
recognised directly in equity attributable to the
parent entity.
Where the parent entity loses control over a
controlled entity, it derecognises the assets
including goodwill, liabilities and non controlling
interests in the controlled entity together with any
cumulated translation differences previously
recognised in equity. The Group recognises the
fair value of the consideration received and the fair
value of the investment retained together with any
gain or loss in the Income Statement.
1. CORPORATE INFORMATION
The financial report of AUB Group Limited for the
year ended 30 June 2016 was authorised for issue
in accordance with a resolution of the directors on
25 August 2016.
On 26 November 2015, Austbrokers Holdings
Limited changed its name to AUB Group Limited.
AUB Group Limited is a for profit company limited by
shares incorporated in Australia whose shares are
publicly traded on the Australian Securities
Exchange.
The principal activities during the year of entities
within the consolidated group were the provision of
insurance broking services, distribution of ancillary
products, risk services and conducting underwriting
agency businesses.
2.1 CHANGES IN ACCOUNTING
POLICIES AND DISCLOSURES
The accounting policies and methods of computation are
the same as those adopted in prior years.
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of preparation of the financial report
The financial report is a general purpose financial
report which has been prepared in accordance
with the requirements of the Corporations Act
2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian
Accounting Standards Board. The financial report
has been prepared on a historical cost basis,
except where otherwise stated.
The financial report is presented in Australian
dollars ($) and all values are rounded to the
nearest $1,000 (where rounding is applicable)
under the option available to the Company under
ASIC Class Order 2016/191. The Company is an
entity to which the class order applies.
Certain previous period comparative information
has been revised in this financial report to conform
with the current period's presentation.
(b) Statement of compliance
The financial report complies with Australian Accounting
Standards as issued by the Australian Accounting Standards
Board and International Financial Reporting Standards ('IFRS')
as issued by the International Accounting Standards Board.
(c) Basis of consolidation
The consolidated financial statements are those of the
consolidated entity, comprising AUB Group Limited (the
parent company) and all entities that AUB Group
Limited (the Group) controlled from time to time during
the year and at the reporting date.
AUB GROUP 2016 ANNUAL REPORT 35
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(d) Earnings per share
Basic earnings per share is calculated as net
profit attributable to members of the parent,
adjusted to exclude any costs of servicing
equity (other than dividends) and preference
share dividends, divided by the weighted
average number of ordinary shares, adjusted
for any bonus element.
Diluted earnings per share is calculated as net
profit attributable to members of the parent,
adjusted for:
costs of servicing equity (other than
dividends) and preference share
dividends;
the after tax effect of dividends and
interest associated with dilutive potential
ordinary shares that have been
recognised as expenses; and
other non-discretionary changes in
revenues or expenses during the period
that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of
ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.
(e) Significant accounting judgements, estimates and
assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management
bases its judgements and estimates on historical
experience and on other various factors it believes to be
reasonable under the circumstances, the result of which
form the basis of the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under
different assumptions and conditions.
Management has identified the following critical
accounting policies for which significant
judgements, estimates and assumptions are made.
Actual results may differ from these estimates
under different assumptions and conditions and
may materially affect financial results or the
financial position reported in future periods.
Further details of the nature of these assumptions
and conditions may be found in the relevant notes
to the financial statements.
(i) Significant accounting judgements
Deferred tax assets are recognised for deductible
temporary differences as management considers that it is
36 AUB GROUP 2016 ANNUAL REPORT
probable that future tax profits will be available to
utilise those temporary differences.
(ii) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities
are often determined based on estimates and
assumptions of future events. The key estimates and
assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting
period are:
Impairment of goodwill / intangibles and investments in
associates
The Group determines whether goodwill is impaired at
least on an annual basis. This requires an estimation
of the recoverable amount of the cash-generating units
to which the goodwill is allocated. The assumptions
used in this estimation of recoverable amount and the
carrying amount of goodwill are discussed in note 15.
Share-based payment transactions
The Group measures the cost of equity-settled
transactions with employees by reference to the fair
value of the options at the date at which they are
granted. Other than for zero priced options, the fair
value is determined by an external valuer using a
binomial model. The fair value of the zero priced
options issued before 1 January 2013 was based on
the volume weighted average share price for the 5 day
period prior to the options being granted. From 1
January 2013, the fair value of the zero priced options
has been based on the dividend yield method taking
into account the vesting period, expected dividend
payout and the share price at the date the options
were granted.
Net assets acquired in a business combination
The Group measures the net assets acquired in a
business combination at their fair value at the date of
acquisition. Fair value is estimated with reference to
market transactions for similar assets or Discounted
Cash Flow (DCF) analysis.
Estimation of useful lives of assets
The estimation of useful lives of assets has been
based on historical experience as well as lease terms
for office fitouts. In addition, the condition of the asset
is assessed at least once per year and considered
against the remaining useful life. Adjustments to useful
lives are made when considered necessary.
Fair value of assets acquired
The Group measures the net assets acquired in
business combinations at their fair value at the date of
acquisition. If new information becomes available
within one year of acquisition about the facts and
circumstances that existed at the date of acquisition,
then any revisions to the fair value previously
recognised, will be retrospectively adjusted.
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(f)
Cash and cash equivalents
Cash and cash equivalents, and cash and cash
equivalents - trusts (trust cash), in the Statement of
Financial Position comprise cash at bank, in hand and
short-term deposits with an original maturity of three
months or less.
Trust cash relates to cash held for insurance premiums
received from policyholders which will ultimately be paid to
underwriters.
Trust cash cannot be used to meet business
obligations/operating expenses other than payments to
underwriters and/or refunds to policyholders.
For the purposes of the Statement of Cash Flows, cash
and cash equivalents as defined above are shown net of
outstanding bank overdrafts.
(g) Revenue recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the entity and the
revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is
recognised:
Commission, brokerage and fees
Commission, brokerage and fees are recognised when it
is probable that the Group will be compensated for
services rendered and the amount of consideration for
such services can be reliably measured. This is deemed to
be the invoice date. An allowance is made for anticipated
lapses and cancellations.
Interest
Revenue is recognised as interest accrues using the
effective interest method.
Dividends and Distributions from trusts
Revenue is recognised when the shareholder's right to
receive the payment is established.
Management fees
Revenue is recognised when the service has been
performed and the right to receive the payment is
established.
Other Income
"Other income" revenue is recognised when the service
has been performed and the right to receive the payment
is established.
(h) Leases
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement. This
requires an assessment of whether the fulfilment of the
arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the
asset.
Leases where the lessor retains substantially all the
risks and benefits of ownership are classified as
operating leases.
Finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased
item, are capitalised at the inception of the lease at the fair
value of the leased property or, if lower, at the present value
of the minimum lease payments. Lease payments are
apportioned between the finance charges and reduction of
the lease liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges
are recognised as an expense in profit or loss.
Operating lease payments are recognised as an expense in
the Income statement on a straight-line basis over the lease
term. Lease incentives are recognised in the income
statement as an integral part of the total lease expense.
(i) Trade and other receivables
Trade and other receivables which generally have 30 day
credit terms, are recognised and carried at original amount
less an allowance for lapses and cancellations. An estimate
for doubtful debts is made when collection of the full amount
is no longer probable. Bad debts are written-off when
identified.
Receivables include amounts due from policyholders in
respect of insurances arranged by controlled entities.
Insurance brokers have credit terms of 90 days from policy
inception to pay funds received from policyholders to
insurers. Insurance policies that are not paid in 90 days of
inception of the insurance are, in absence from approval
from insurer of an extended term to pay, cancelled from
inception date. The Group's exposure in relation to these
receivables is limited to commissions and fees charged.
(j) Investment in associates
The Group's investments in its associates are accounted for
under the equity method of accounting in the Consolidated
Financial Statements. These are entities in which the Group
has significant influence and which are not controlled
entities. The Group deems they have significant influence if
they have more than 20% of the voting rights.
AUB GROUP 2016 ANNUAL REPORT 37
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(j) Investment in associates (continued)
The financial statements of the associates are used by the
Group to apply the equity method. The reporting dates of the
associates and AUB Group are identical and adjustments are
made to bring into line dissimilar accounting policies used by
associates.
The investment in associates is carried in the consolidated
Statement of Financial Position at cost plus post-acquisition
changes in the Group's share of net assets of the associates,
less dividends and any impairment in value. The consolidated
income statement reflects the Group's share of the results of
operations of the associates.
Where there has been a change recognised directly in the
associate's equity, the Group recognises its share of any
changes and discloses this, when applicable, in the Statement
of Comprehensive Income.
(k) Interest-bearing loans and borrowing
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of issue
costs associated with the borrowing process. After initial
recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on
settlement.
Gains and losses are recognised in profit or loss when the
liabilities are derecognised.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
(l) Trade and other payables
Liabilities for trade creditors and other amounts are carried at
amortised cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or
not billed to the entity. Payables to related parties are carried at
the principal amount. Interest, when charged, is recognised as
an expense on an accrual basis. Payables are normally settled
on 90 day terms.
Trade and other payables include amounts payable to insurers
in respect of insurances arranged by controlled entities.
Insurance brokers have credit terms of 90 days from policy
inception to pay funds received from policyholders to insurers.
Insurance policies that are not paid in 90 days of inception of the
insurance are, in absence from approval from insurer of an
extended term to pay, cancelled from inception date.
(m) Business combinations
The acquisition method of accounting is used to account
for all business combinations. Cost is measured as the
fair value of the assets given, shares issued or liabilities
assumed at the date of exchange. All acquisition costs
including stamp duty and legal fees are charged against
profits as incurred.
Change in the ownership interest in a controlled
entity (without loss of control) is accounted for as a
transaction with owners in their capacity as owners
and these transactions will not give rise to a gain or
loss in the Income Statement. Where there is a
change in ownership and the Group loses control, the
gain or loss will be recognised in the Income
Statement and the carrying value of non-controlling
interests is reset to fair value.
In the year a new business is acquired, an estimate is
made of the fair value of the future contingent
consideration. Any variation to this amount in future
periods (either up or down) is recognised through the
Income Statement. Over accruals are recognised as
income in the year the amount is reversed and any
under accruals are charged as an expense against
profits. The contingent consideration is carried in the
Statement of Financial Position at net present value.
The interest expense in the income statement
relating to the unwinding of this discounting is offset
by a reduction in deferred tax which was raised at the
time the net present value adjustment was
recognised.
All identifiable assets acquired and liabilities and
contingent liabilities assumed in the business
combination are measured initially at their fair values
at the acquisition date, irrespective of the extent of
any non controlling interests.
(i) Goodwill
Goodwill on acquisition is initially measured at cost,
being the excess of the cost of the business
combination over the acquirer's interest in the fair
value of the identifiable net assets acquired at the
date of acquisition. Following initial recognition,
goodwill is measured at cost less any accumulated
impairment losses and is not amortised.
As at the acquisition date, any goodwill acquired is
allocated to each of the cash-generating units
expected to benefit from the combination's synergies.
Goodwill is reviewed for impairment annually, or
more frequently if events or changes in
circumstances indicate that the carrying value may
be impaired. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to
which the goodwill relates. Where the recoverable
amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised.
Where goodwill forms part of a cash-generating unit
and part of the operation of that unit is disposed, the
goodwill associated with the operation disposed of is
included in the carrying amount of the operation
when determining the gain or loss on disposal of the
operation.
38 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
(m) Business combinations (continued)
Impairment losses recognised for goodwill are not
subsequently reversed.
(ii)
Intangible assets - Insurance Broking
Register
Identifiable intangible assets acquired separately or
in a business combination are initially measured at
cost. The cost of an intangible asset acquired in a
business combination is its fair value as at the date
of acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated
amortisation and any accumulated impairment costs.
Internally generated intangible assets are not
capitalised and expenditure is charged against
profits in the year in which the expenditure is
incurred.
The useful lives of these intangible assets are
assessed to be finite. Intangible assets with finite
lives are amortised over the useful life, currently
estimated to be 10 years for broking portfolios/client
relationships and 15 years for financial services
businesses (life risk), and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an identifiable intangible
asset with a finite useful life is reviewed at least at
each financial year-end. Changes in the expected
useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are
accounted for by changing the amortisation period or
method, as appropriate, which is a change in
accounting estimate. The amortisation expense on
identifiable intangible assets with finite lives is
recognised in the expense category of the income
statement consistent with the function of the
intangible asset. Gains or losses arising from
derecognition of an identifiable intangible asset are
measured as the difference between the net
disposal proceeds and the carrying amount of the
asset and are recognised in the income statement
when the asset is derecognised.
(iii)
Revaluation
When a business combination occurs, the acquiree's
identifiable assets and liabilities are notionally
restated to their fair value at the date of the
exchange transaction to determine the amount of
any goodwill associated with the transaction. Any
adjustment to those fair values relating to previously
held interests of the acquiree is accounted for as an
adjustment to fair value and the movement is
reflected in the income statement as either a profit or
loss.
Prior to 1 July 2009, adjustments to fair value were
accounted for as a revaluation. This revaluation
which related to broking registers was credited to the
asset revaluation reserve and included in the equity
section of the Statement of Financial Position.
For revaluations that occurred prior to 1 July 2009, an
annual transfer from the asset revaluation reserve to
retained earnings is made for the difference between
amortisation based on the revalued carrying amounts
of the broking register and amortisation based on the
broking registers' original costs.
Upon disposal, any revaluation reserve relating to the
particular broking register being sold is transferred to
retained earnings.
(n) Investments and other financial assets
Loans and Receivables
Loans and receivables, including mortgages, are
non-derivative financial assets with fixed or
determinable payments that are not quoted in an
active market. Such assets are carried at amortised
cost using the effective interest method. Gains and
losses are recognised in the income statement when
the loans and receivables are derecognised or
impaired, as well as through the amortisation
process.
(o) Derecognition of financial assets and financial
liabilities
(i)
Financial assets
A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial
assets) is derecognised when:
the rights to receive cash flows from the
asset have expired;
the Group retains the right to receive cash
flows from the asset, but has assumed an
obligation to pay them in full without material
delay to a third party under a 'pass-through'
arrangement; or
the Group has transferred its rights to
receive cash flows from the asset and either
(a) has transferred substantially all the risks
and rewards of the asset, or (b) has neither
transferred nor retained substantially all the
risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive
cash flows from an asset and has neither transferred
or retained substantially all the risks and rewards of
the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group's
continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the
original carrying amount of the asset and the
maximum amount of consideration received that the
Group could be required to repay.
AUB GROUP 2016 ANNUAL REPORT 39
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(o) Derecognition of financial assets and financial
liabilities (continued)
When continuing involvement takes the form of a
written and/or purchased option on the transferred
asset, the extent of the Group's continuing
involvement is the amount of the transferred asset
that the Group may repurchase, except that in the
case of a written put option on an asset measured at
fair value, the extent of the Group's continuing
involvement is limited to the lower of the fair value of
the transferred asset and the option exercise price.
(ii)
Financial liabilities
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.
When an existing financial liability is replaced by
another from the same lender on substantially
different terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as a derecognition of the
original liability and the recognition of a new liability,
and the difference in the respective carrying
amounts is recognised in profit or loss.
(p) Impairment of financial assets
(i)
Financial assets carried at amortised cost
If there is objective evidence that an impairment loss
on loans and receivables carried at amortised cost
has been incurred, the amount of the loss is
measured as the difference between the asset's
carrying amount and the present value of estimated
future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial
asset's original effective interest rate (i.e. the
effective interest rate computed at initial recognition).
The carrying amount of the asset is reduced either
directly or through use of an allowance account. The
amount of the loss is recognised in profit or loss.
The Group first assesses whether objective
evidence of impairment exists individually for
financial assets that are individually significant, and
individually or collectively for financial assets that are
not individually significant. If it is determined that no
objective evidence of impairment exists for an
individually assessed financial asset, whether
significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics
and that group of financial assets is collectively
assessed for impairment. Assets that are individually
assessed for impairment and for which an
impairment loss is or continues to be recognised are
not included in a collective assessment of
impairment.
40 AUB GROUP 2016 ANNUAL REPORT
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised, the previously
recognised impairment loss is reversed. Any
subsequent reversal of an impairment loss is
recognised in profit or loss, to the extent that the
carrying value of the asset does not exceed its
amortised cost at the reversal date.
(ii)
Financial assets carried at cost
If there is objective evidence that an impairment loss
has been incurred on an unquoted equity instrument
that is not carried at fair value, the amount of the loss
is measured as the difference between the asset's
carrying amount and the present value of estimated
future cash flows, discounted at the current market
rate of return for a similar financial asset.
(q) Impairment of non financial assets
The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If
any such indication exists, or when annual impairment
testing for an asset is required, the Group makes an
estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of its fair
value less costs to sell and its value in use and 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 and the asset's value in use cannot be
estimated to be close to its fair value. In such cases
the asset is tested for impairment as part of the cash-
generating unit to which it belongs. When the carrying
amount of an asset or cash-generating unit exceeds
its recoverable amount, the asset or cash-generating
unit 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. Impairment losses relating to
continuing operations are recognised in those
expense categories consistent with the function of the
impaired asset unless the asset is carried at revalued
amount (in which case the impairment loss is treated
as a revaluation decrease).
Other than for goodwill and insurance broking
register, an assessment is also made at each
reporting date as to whether there is any indication
that previously recognised impairment losses may no
longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A
previously recognised impairment loss is reversed
only if there has been a change in the estimates used
to determine the asset's recoverable amount since the
last impairment loss was recognised. If that is the
case the carrying amount of the asset is increased to
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(q) Impairment of non financial assets (continued)
its recoverable amount. That increased amount cannot exceed
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in profit or loss
unless the asset is carried at revalued amount, in which case
the reversal is treated as a revaluation increase. After such a
reversal the depreciation charge is adjusted in future periods to
allocate the asset's revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
(r) Provisions and employee benefits
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event and it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability.
Where discounting is used, the increase in the provision due to
the passage of time is recognised as a finance cost.
Employee benefits
Liabilities for employee entitlements to annual leave and other
current entitlements are accrued at amounts calculated on the
basis of current wage and salary rates, including package costs
and on-costs. Liabilities for non accumulating sick leave are
recognised when the leave is taken and are measured at the
rate paid or payable.
Liabilities for employee entitlements to long service leave, which
are not expected to be settled within twelve months after
balance date, are accrued at the present value of the future
amounts to be made in respect of services provided by
employees up to the reporting date using the projected unit
credit method. Consideration is given to expected future wage
and salary level, experience of employee departures and
periods of service. The discount factor applied to all such future
payments is determined using the corporate bond rates
attaching as at the reporting date, with terms to maturity that
match, as closely as possible, the estimated future cash
outflows.
Any contributions made to the accumulation superannuation
funds by entities within the Group are charged against profits
when due.
(s) Foreign currency
Transactions in foreign currencies are translated to the
respective functional currencies of the entities at exchange rates
at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies
at the reporting date are retranslated to the functional currencies
at the exchange rate at that date. The foreign currency gain or
loss on monetary items is the difference between amortised cost
in the functional currency at the beginning of the year adjusted
for payments during the year and the amortised cost in foreign
currency translated at the exchange rate at the end of the year.
The assets and liabilities of foreign operations are translated to
Australian dollars at exchange rates at the reporting date. The
income and expenses of foreign operations are translated to
Australian dollars at exchange rates on the dates of the
transactions. Foreign currency differences are recognised in
other comprehensive income and presented in the foreign
currency translation reserve, in equity. If the foreign operation is
not a wholly owned controlled entity then the relevant proportion
of the translation difference is allocated to non controlling
interests.
(t) Issued capital
Ordinary share capital is recognised at the fair value of the
consideration received by the company, net of issue costs.
Ordinary shares have the right to receive dividends as declared
and, in the event of winding up the company, to participate in the
proceeds from the sale of all surplus assets in proportion to the
number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person
or by proxy, at a meeting of the company.
(u) Share-based payment transactions
The Group provides benefits to employees (including executive
directors) of the Group in the form of share-based payments,
whereby employees render services in exchange for shares or
rights over shares ('equity-settled transactions').
An Employee Share Options Plan (ESOP) is in place which
provides benefits to executive directors and senior executives.
The cost of these equity-settled transactions with employees is
measured by reference to the fair value of the equity instruments
at the date at which they are granted. Details of methodology to
value of zero priced options is included in note 16.
In valuing equity-settled transactions, no account is taken of any
performance conditions, other than conditions linked to the price
of the shares of AUB Group Limited (market conditions) if
applicable.
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled
to the award (the vesting period).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the
Group's best estimate of the number of equity instruments that
will ultimately vest. No adjustment is made for the likelihood of
market performance conditions being met as the effect of these
AUB GROUP 2016 ANNUAL REPORT 41
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(u) Share-based payment transaction (continued)
conditions is included in the determination of fair value at grant
date. The income statement charge or credit for a period
represents the movement in cumulative expense recognised as
at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards that are cancelled or where vesting is only
conditional upon a market condition.
In the event options are cancelled, or cancelled and reissued,
the unexpensed cost for these is brought forward and
recognised immediately in addition to the expense for any
reissued/new options.
If the terms of an equity-settled award are modified, as a
minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any
modification that increases the total fair value of the share-
based payment arrangement, or is otherwise beneficial to the
employee as measured, at the date of modification.
The dilutive effect, if any, of outstanding options is reflected as
additional share dilution in the computation of earnings per
share (see note 8).
(v) Income tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the year end
date as presented in the Statement of Financial Position.
Deferred income tax is provided on all temporary differences
at the date of the Statement of Financial Position between the
tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences except:
when the deferred income tax liability arises from the
initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination
and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
when the taxable temporary differences associated
with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the
reversal of the temporary difference can be controlled
and it is probable that the temporary differences will
not reverse in the foreseeable future. No deferred tax
liability has been recognised in respect of any
potential profit on the disposal of an associate or
controlled entity by the Group as there is no intention
of disposing of these assets in the foreseeable future.
Any tax liability will be recognised when the asset is
disposed.
Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward of unused
tax assets and unused tax losses, to the extent that it is
probable that taxable profit will be available against which
the deductible temporary differences and the carry-forward
of unused tax credits and unused tax losses can be
utilised, except:
when the deductible temporary differences arise from
the initial recognition of an asset or liability in a
transaction that is not a business combination and, at
the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
when the deductible temporary differences associated
with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax
asset is only recognised to the extent that it is probable
that the temporary difference will reverse in the
foreseeable future and taxable profit will be available
against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each year end date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred income tax assets are reassessed
at each year end date and are recognised to the extent
that it has become probable that future taxable profit will
allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at
the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax
rates and tax laws that have been enacted or substantively
enacted at the year end date as presented in the
Statement of Financial Position. Income taxes relating to
items recognised directly in equity are recognised in equity
and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only
if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and
liabilities relate to the same taxable entity and the same
taxation authority.
(w) Other taxes
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST) except:
when the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
receivables and payables, which are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or
payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a
gross basis and the GST component of cash flows arising
42 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
2.2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(w) Other taxes (continued)
from investing and financing activities, which is recoverable
from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.
(x) Plant and equipment
Plant and equipment, is stated at cost less depreciation and any
impairment in value.
Depreciation is calculated on a straight-line over the estimated
useful life of the asset as follows:
Motor vehicles 5 to 8 years.
Plant and equipment 5 to 10 years.
Impairment
The carrying value of plant and equipment is reviewed for
impairment at each reporting date, with recoverable amount
being estimated when events or changes in circumstances
indicate the carrying value may be impaired.
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs. If any such
indication exists and where the carrying value exceeds the
estimated recoverable amount, the asset or cash generating
unit is written down to their recoverable amount.
Derecognition and disposal
An item of property, plant and equipment is derecognised
upon disposal or when no further future economic benefits
are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in
profit or loss in the year the asset is derecognised.
(y) Make good provision
A provision has been made for the present value of
anticipated costs of future restoration of leased premises.
The provision includes future cost estimates associated with
dismantling existing fitouts, repainting of premises and carpet
replacement where necessary.
The calculation of this provision requires assumptions such
as engineering cost estimates and future labour costs. These
uncertainties may result in future expenditure differing from
the amounts currently provided. The provision recognised for
each site is periodically reviewed and updated based on the
facts and circumstances available at the time. Changes to the
estimates of future costs are recognised in the Statement of
Financial Position by adjusting both the expense or asset
and the provision. The related carrying amounts are
disclosed in note 18.
(z) Operating Segments
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenues and incur expenses, whose operating results are
regularly reviewed by members of the senior executive
management team who are the entity's chief operating
decision makers (CODM) to make decisions about resources
to be allocated to the segment and assess its performance
and for which discrete financial information is available.
Operating segments that meet the quantitative criteria as
prescribed by AASB 8 are reported separately. However, an
operating segment that does not meet the aggregation criteria
is still reported separately where information about the
segment would be useful for the users of the financial
statements. Information about other business activities and
operating segments that are below the quantitative criteria are
combined and disclosed in a separate category.
The company's corporate structure includes equity
investments in insurance intermediary entities.
The activities of an Insurance intermediary involves providing
insurance products, advice and services to clients which
range from individuals to small, medium and large enterprises.
Within the AUB Group, the intermediaries are made up of
insurance brokers, underwriting agencies and other providers
of insurance related services. The activities of these
businesses are similar in nature, regardless of whether it is a
general insurance risk business or life insurance risk
business. The only significant difference between the
operations is that the underwriting agencies distribute through
other intermediaries (brokers) to the final customer. All
businesses within the network deal with the same
underwriters, earn income based on a commission and/or fee
structure and the underwriting agencies are licenced under
the same regulatory framework as insurance brokers.
The New Zealand broking market, whilst operating under a
separate statutory regime and geographic region, operates in
a similar manner to brokers in Australia and therefore is not
considered a separate operating segment.
Discrete financial information about each of these segments is
reported to management on a regular basis and the operating
results are monitored separately for the purposes of resource
allocation and performance assessment. AUB Group have
defined these operations as being a separate segment,
“Insurance Intermediary Business”.
Although Risk Services entities within the group supply
insurance related services to the same underwriters that
support our brokers and underwriting agencies, they do not
earn commission in the same way but rather tender for
business and are paid on a fee for service basis based on the
tasks they perform. Risk Services businesses also differ from
Insurance Intermediary segment in that they do not require an
AFSL to operate and are governed by different legislation and
therefore are considered a separate segment, "Risk Services".
AUB GROUP 2016 ANNUAL REPORT 43
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Certain Australian and International Accounting Standards and interpretations have recently been issued or amended but
are not yet effective and have not been adopted by the group for the year end reporting period 30 June 2016. The directors
have assessed the impact of these new or amended standards and interpretations (to the extent relevant to the Group) as
follows:
Reference
Title
Summary
standard
Impact on financial report
Application
date of
Application
date for
Group
AASB 15
Revenue from
AASB 15 revenue from Contracts with customers
1 January
The Group is still assessing the
1 July 2018
Contracts with
replaces the existing revenue recognition standards
2018
impact of the changes required
Customers
AASB 111 Construction Contracts, AASB 118
under AASB 15 but it is not
Revenue and related Interpretations (Interpretation
expected that it will have a material
13 Customer Loyalty Programmes, Interpretation 15
impact on the financial report.
Agreements for the Construction of Real-estate,
Interpretation 18 Transfers of Assets from
customers.
AASB 15 specifies the accounting treatment for
revenue arising from contracts with customers
(except for contracts within the scope of other
accounting standards such as leases or financial
instruments). The core principle of IFRS 15 is that
an entity recognises revenue to depict the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange for those
goods or services.
AASB 2015-8 amended the AASB 15 effective date
so it is now effective for annual reporting periods
commencing on or after 1 January 2018. Early
application is permitted. AASB 2014-5 incorporates
the consequential amendments to a number
Australian Accounting Standards (including
Interpretations) arising from the issuance of AASB
15. AASB 2016-3 Amendments to Australian
Accounting Standards - Clarification to AASB 15
and to clarify the requirements on identifying
performance obligations principal versus agent
consideration and the timing of recognising revenue
from granting a licence and provides further
practical expedients on transition to AASB 15.
44 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONTINUED)
Reference
Title
Summary
standard
Impact on financial report
Application
date of
Application
date for
Group
AABB 16
Amendments
This Standard sets out the principles for the
1 January
Assets and liabilities arising from a lease
1 July
to IFRS 16
recognition, measurement, presentation and
2019
are initially measured on a present value
2019
"Leases"
disclosure of leases. The objective is to ensure
basis. The measurement includes non-
that lessees and lessors provide relevant
cancellable lease payments (including
information in a manner that faithfully represents
inflation-linked payments), and also
those transactions. This information gives a basis
includes payments to be made in
for users of financial statements to assess the
optional periods if the lessee is
effect that leases have on the financial position,
reasonably certain to exercise an option
financial performance and cash flows of an entity.
to extend the lease, or not to exercise an
The new standard will be effective on or after 1
option to terminate the lease. AASB 16
January 2019. Early application is permitted.
contains disclosure requirements for
The new standard will be effective on or after 1
lessees.
January 2019. Early application is permitted. A
Lessees will need to apply judgement in
lessee is required to recognise a right-of-use
deciding upon the information to
asset representing its right to use the underlying
disclose to meet the objective of
leased asset and a lease liability representing its
providing a basis for users of financial
obligations to make lease payments. A lessee
statements to assess the effect that
measures right-of-use assets similarly to other
leases have on the financial position,
non-financial assets (such as property, plant and
financial performance and cash flows of
equipment) and lease liabilities similarly to other
the lessee. It is expected that the
financial liabilities. As a consequence, a lessee
impact on the financial statements will
recognises depreciation of the right-of-use asset
result in an increase in fixed assets and
and interest on the lease liability, and also
a corresponding increase in lease
classifies cash repayments of the lease liability
liabilities.
into a principal portion and an interest portion and
presents them in the statement of cash flows
applying AASB 107 Statement of Cash Flows.
AASB 9
Financial
AASB 9 (December 2014) is a new standard that
1 January
The Group is still assessing the impact
1 July
Instruments
replaces AASB 139. This new standard
2018
of the changes required under AASB 9.
2018
supersedes AASB 9 issued in December 2009
(as amended) and AASB 9 (issued in December
2010) and includes a model for classification and
measurement, a single, forward looking "expected
loss" impairment model and a substantially
reformed approach to hedge accounting.
AUB GROUP 2016 ANNUAL REPORT 45
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
4. REVENUE AND EXPENSES
(i) Revenue
Commission, brokerage and fee income
Management fees from related entities
Revenue
(ii) Other income
Dividends from other persons/corporations
Interest from related persons/corporations
Interest from other persons/corporations
Other income
Total other income
(iii) Share of profit of associates
Share of net profits of associates accounted for using the equity method before amortisation (net of income tax
expense)
Amortisation of intangibles – associates
Total share of profit of associates
(iv) Expenses
Amortisation of intangibles – controlled entities
Amortisation of capitalised project costs
Salaries and wages
Share-based payments (credit)
Audit fees
Travel/telephone/motor/stationery
Depreciation of property, plant and equipment
Rent (operating leases)
Commission expense
Business technology and software costs
Insurance
Other expenses
Total other expenses
(v) Finance costs
Borrowing costs
Total finance costs
(vi) Adjustments to carrying value of associates and contingent consideration payments
Adjustments to carrying value of entities (to fair value) on the date they became controlled or deconsolidated (see
notes 7(d), (e))
Adjustment to contingent consideration on acquisition of controlled entities and associates (see notes 11 ,15)
Impairment charge relating to the carrying value of associates and goodwill (see notes 11,15)
Total adjustments to carrying value of associates
(vii) Profit from sale of interests in controlled entities and associates
Losses from sale of interests in controlled entities and associates
Profit from sale of interests in controlled entities and associates (see note 11)
Total profit from sale of interests in controlled entities, associates and contingent adjustments
46 AUB GROUP 2016 ANNUAL REPORT
Consolidated
2015
$’000
181,203
10,136
191,339
15
18
3,605
1,675
5,313
23,568
(2,873)
20,695
4,043
-
2016
$’000
191,878
11,099
202,977
2
54
3,565
4,008
7,629
26,536
(3,264)
23,272
3,323
405
113,866
101,865
(313)
1,488
8,079
2,532
9,729
12,358
4,640
4,676
17,281
178,064
5,389
5,389
5,724
277
(4,271)
1,730
(649)
9,408
8,759
451
1,585
7,889
2,119
9,790
11,650
4,438
4,647
14,763
163,240
4,310
4,310
3,029
4,456
(5,604)
1,881
-
2,088
2,088
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
5. INCOME TAX
Major components of income tax expense
Income statement
Current income tax
Current income tax charge
Adjustment for prior years
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense in income statement
A reconciliation between tax expense and the product of accounting profit before income tax
multiplied by the company's applicable income tax rate is as follows:
Profit before income tax
At the Company’s statutory income tax rate of 30% (2015: 30%)
Rebateable dividends
Equity accounted income from associates
Non-taxable gains/losses on sale
(Over)/under provision prior year
Income taxed at different tax rates on overseas operations
Tax on distributions from associates operating as trusts
Adjustments to contingent consideration on acquisition of controlled entities
and associates
Fair value adjustment to the carrying value of a controlled entity on the date it became
an associate
Fair value adjustment to the carrying value of an associate on the date it became
a controlled entity
Impairment charge relating to the carrying value of associates and controlled entities
Non deductible expenses/other
Income tax expense reported in the consolidated income statement
Income tax payable
Consolidated
2016
$’000
2015
$’000
13,485
(315)
12,808
(188)
(1,043)
(1,711)
12,127
10,909
60,914
18,274
(1)
53,766
16,130
(5)
(5,169)
(4,537)
(305)
(315)
(21)
(138)
(52)
(188)
(7)
(95)
(97)
(1,337)
(1,894)
-
-
(1,104)
1,281
512
1,681
423
12,127
10,909
5,593
5,975
AUB GROUP 2016 ANNUAL REPORT 47
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
5.
INCOME TAX (CONTINUED)
Consolidated
Consolidated
Statement of Financial Position
2015
2016
$’000
$’000
Income statement
2016
$’000
2015
$’000
1,821
8,685
(986)
9,520
5,535
5,535
1,917
6,485
(1,213)
7,189
5,574
5,574
(96)
-
(99)
–
(986)
(1,213)
39
(399)
(1,043)
(1,711)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liability
Income accrued not assessable
Unamortised value of broker register
Tax credit on insurance broking register amortisation
expense
Deferred income tax liabilities
Deferred tax asset
Provisions and accruals not claimed for tax purposes
Deferred income tax assets
Deferred tax (income)/expense
Tax consolidation
For the purposes of income taxation, AUB Group Limited entered into a Consolidated Tax Group with its 100% owned
controlled entities. Tax consolidation results in the 100% owned members being treated as part of the Head Company for
tax purposes rather than as a separate taxpayers.
The Income Tax Assessment Act (1997) provides that the Consolidated Tax Group is to be treated as a single entity for
Australian tax purposes with the Head Company responsible for the tax payable. AUB Group Limited formally notified the
Australian Taxation Office of its adoption of the tax consolidation regime by lodging notice with the Australian Taxation
Office.
The Consolidated Tax Group was formalised by entering into tax sharing and tax funding agreements in order to allocate
income tax payable to group members. Each member of the group calculates tax expense on an entity basis. The
agreement also provides that AUB Group Limited carries forward tax funding assets or tax funding liabilities for which an
intercompany loan is recognised between the parties.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the
allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the perio d, while
deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income
Taxes. Allocations under the tax funding agreement are made at the end of each quarter.
48 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
6. CASH AND CASH EQUIVALENTS
(a) Reconciliation of profit after tax to net cash flows from operations
Profit after tax for the period
Equity accounted (profits) after income tax
Dividends/trust distributions received from associates
Amortisation of intangibles
Losses from sale of interests in controlled entities and associates
Profit from sale of interests in controlled entities and associates
Adjustment to contingent consideration on acquisition of controlled entities and associates
Adjustments to carrying value of entities (to fair value) on the date they became controlled or
deconsolidated
Impairment charge relating to the carrying value of associates and goodwill
Depreciation of fixed assets
Amortisation of capitalised project costs
Share options expensed
Changes in assets and liabilities
(Increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Decrease in trust receivables
(Decrease) in trust payables
Increase/(decrease) in provisions
(Increase)/decrease in deferred tax asset
(Decrease) in deferred tax liability
(Decrease) in provision for tax
Net cash flows from operating activities
Cash and cash equivalents
Cash and cash equivalents – trust
Total cash and cash equivalents
Consolidated
2016
$’000
2015
$’000
48,787
42,857
(23,272)
(20,695)
20,454
3,324
649
(9,408)
(277)
18,464
4,043
-
(2,088)
(4,456)
(5,724)
(3,029)
4,271
2,532
405
(313)
(1,964)
(5,186)
203
5,604
2,119
-
451
(4,935)
1,441
20,251
(11,792)
(12,917)
2,630
(27)
(732)
186
24,746
70,933
87,513
(318)
1,178
(2,090)
(1,545)
44,335
50,511
105,498
158,446
156,009
Due to acquisitions/disposal of consolidated entities during the year, some changes in assets and liabilities shown above
will not agree to the movements in the Statement of Financial Position.
Non cash financing activity transactions include transactions resulting from the dividend reinvestment plan.
Trust cash (other than undrawn income) cannot be used to meet business obligations/operating expenses other than
payments to underwriters and/or refunds to policy holder.
AUB GROUP 2016 ANNUAL REPORT 49
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS
The business combinations referred to in note 7(a) - 7(e) relate to insurance broking and underwriting agency businesses
except for 7 (c), Allied Health Australia Pty Ltd and CIM Pty Ltd, which relates to risk services businesses.
A major strategy of the group is to acquire part ownership in insurance broking, underwriting agency and risk services
businesses or portfolios. The terms of these acquisitions vary in line with negotiations with individual vendors but are
structured to achieve the Group's benchmarks for return on investment.
Where acquisitions include an element of purchase price contingent on business performance, management has
estimated the fair value of this contingent consideration based on a probability weighted bes t estimate of future outcomes
for income or profit, on which the purchase price is determined, discounted to present value. Historical trends and any
relevant external factors are taken into account in determining the likely outcome.
An increase or decrease in the weighted best estimate of future outcomes will result in an increase or decrease in
contingent liabilities respectively.
For business combinations referred to in notes 7(c) and 7(d) goodwill represents the excess of the purchase consideration
over the fair value of identifiable net assets acquired at the time of acquisition of the business. As at acquisition date, a ny
goodwill relates to benefits from the combination of synergies as well as the entity's ability to generate future profits.
The Group measures the net assets acquired in business combinations at their fair value at the date of acquisition. If new
information becomes available within one year of acquisition about the facts and circumstances that existed at the date of
acquisition, then any revisions to the fair value previously recognised, will be retrospectively adjusted.
50 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS (CONTINUED)
(a) Equity transactions between owners–current year
Effective 1 July 2015, a controlled entity acquired all of the voting shares it did not hold in Interfin Pty Ltd (Interfin) by
issuing shares in AB Phillips and Associates Pty Ltd (AB Phillips) to the value of $336,846. This resulted in AUB Group
diluting its shareholding in AB Phillips from 58% to 56.9%.
Effective 1 February 2016, a controlled entity acquired a portfolio for a consideration $1,300,000 by issuing $500,000 of
voting shares plus a cash payment of $800,000. This transaction resulted in AUB Group diluting its shareholding in AB
Phillips from 56.9% to 55.4%.
Effective 1 July 2015, the consolidated entity diluted its voting shares in Austbrokers SPT Unit Trust (SPT) from 70%
to 60% after SPT issued $600,615 in additional units in the trust. As part of the transaction AUB Group Limited also
disposed of 206,243 units in SPT for $383,643.
Effective 28 October 2015, the consolidated entity acquired an additional 1.8% of the voting shares in InterRISK
Australia Pty Ltd (InterRISK) for $287,530 increasing its equity ownership from 77.1% to 78.9%.
Effective 1 November 2015, the consolidated entity sold 10% of the voting shares in Austbrokers Canberra Pty Ltd
(Canberra) for $1,500,000 decreasing its equity ownership from 85% to 75%.
Carrying value of assets attributable to Interfin, InterRISK, AB Phillips, and Canberra on the date of change in voting
shares were;
Cash
Receivables
Property plant and equipment
Intangibles
Total assets
Payables and provisions
Borrowings
Tax liabilities
Total liabilities
Net assets
Non-controlling interest in net assets
Net assets attributable to AUB Group
Cash (received) on sale of shares/units in trust
(Proceeds) from additional units in trust/shares issued
Cash paid
Capital gains tax on sale of units
Adjustment to non-controlling interest
Transfer to retained earnings on acquisition/dilution in voting shares
Carrying value
Carrying value
of assets
of assets
attributable to
attributable to
InterRISK and
Canberra, SPT
Interfin
and AB Phillips
$’000
16,207
17,135
298
25,161
58,801
$’000
18,947
16,249
979
13,664
49,839
32,289
31,743
-
17
3,805
988
32,306
36,536
26,495
(1,725)
24,770
-
-
291
-
(499)
208
13,303
-
13,303
(1,883)
(1,101)
-
59
1,333
1,592
AUB GROUP 2016 ANNUAL REPORT 51
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS (CONTINUED)
(b) Equity transactions between owners–previous period
Effective 1 August 2014, the Consolidated entity acquired an additional 10% of the voting shares in Austbrokers
Premier Pty Ltd (Premier) for $625,000 increasing its equity ownership to 90%.
Effective 1 July 2014, the Consolidated entity acquired an additional 9.1% of the voting shares in Sura
Hospitality Pty Ltd (Hospitality) as trustee for G.U.S. Trust for $364,368 increasing its equity ownership to 100%.
Effective 1 January 2015, the Consolidated entity disposed of 20% of the voting shares in Austbrokers Citystate
Pty Ltd (Citystate) for $1,308,603, decreasing its equity from 90% to 70%.
Effective 1 February 2015, the Consolidated entity disposed of 8% of the voting shares i n Aprikeesh Pty Ltd
(Aprikeesh) for $1,406,741, decreasing its equity from 66% to 58%.
Carrying value of assets attributable to Premier, Hospitality, Citystate and Aprikeesh on the date of change in
voting shares were;
Cash
Receivables
Property plant and equipment
Intangibles
Total assets
Payables and provisions
Tax liabilities
Total liabilities
Net assets
Cash paid/(received)
Adjustment to non-controlling interests
Tax expense on disposal of shares
Transfer to retained earnings on acquisition of voting shares in Premier and Hospitality and disposal
of voting shares in Citystate and Aprikeesh
Carrying
Carrying value
value of
of assets
assets
disposed in
acquired in
Citystate and
Premier and
Aprikeesh
Hospitality
$’000
9,004
5,467
306
$’000
1,183
7,180
111
3,065
5,591
17,842
14,065
12,460
8,401
458
88
12,918
8,489
4,924
5,576
(2,714)
588
430
990
(499)
-
(1,696)
491
52 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS (CONTINUED)
(c) Acquisition of new controlled entities– current year
On 1 July 2015, the Group acquired 60% of the voting shares in Allied Health Australia Pty Ltd (Allied) for $13,966,080 which
included the fair value of the deferred consideration payment of $4,490,984 payable no later than 24 months after the date of
acquisition. The maximum amount of the contingent consideration payable is $12,245,000.
On 1 July 2015, a controlled entity incorporated a new entity, Expert Strata Pty Ltd with issued capital of $200,000. The gr oup
acquired 55% of the voting shares of this entity contributing $110,000 of issued capital and non-controlling interests contributing
$90,000.
On 15 July 2015, a controlled entity acquired 100% of the voting shares in Financial Affairs Pty Limited (Financial Affairs) for
$4,256,340 which included a fixed deferred consideration payment of $816,340.
On 1 December 2015, Forean Group Holdings purchased the assets of Rebem Pty Ltd through a newly incorporated 100% owned
subsidiary, CIM Group Holdings Pty Ltd (CIM) for $2,453,244 including a contingent consideration of $698,612. There is no cap on
the contingent amount payable.
Effective 1 January 2016, an 80% controlled entity in New Zealand acquired 100% of the voting shares in Runacres and
Associates Ltd (Runacres) for $34,488,000.
On 31 December 2015, an 80% controlled entity in New Zealand issued additional voting shares totalling $13,120,800 including a
contribution from non-controlling interests of $2,624,160.
Portfolio acquisitions of $1.836 million that occurred during the year are not separately disclosed.
Fair values of the identifiable assets and liabilities of Allied, Financial affairs and CIM as at the date of acquisition were:
Fair values of the identifiable assets and liabilities of Runacres as at the date of acquisition were:
Fair value recognised on
Fair value recognised on acquisition
acquisition of Runacres
of Allied, Financial Affairs and CIM
Cash
Receivables
Intangibles
Plant and equipment
Total assets
Payables and borrowings
Borrowings
Deferred tax liability
Provisions
Total liabilities
Net assets
Net assets acquired
Purchase price – cash paid
Purchase price – deferred payment/contingent consideration
Total purchase price of acquisition
Goodwill arising on acquisition relating to the Group
Goodwill arising on acquisition relating to the non-controlling interests
Total goodwill arising on acquisition
Cash inflow on acquisition is as follows;
Net cash acquired with the controlled entity
Cash paid
Net cash (outflow)
$’000
8,330
10,199
11,235
594
30,358
12,685
-
3,146
39
15,870
14,488
14,488
34,488
-
34,488
20,000
-
20,000
8,330
(34,488)
(26,158)
$’000
821
1,740
1,277
438
4,276
1,375
344
383
631
2,733
1,543
1,310
14,670
6,006
20,676
19,366
9,077
28,443
821
(14,670)
(13,849)
The acquisition of 60% of Allied was effective on 1 July 2015. The acquisition contributed $1,023,494 to net profit after
tax and $15,609,210 to revenue.
The acquisition of 100% of Financial Affairs was effective on 15 July 2015. The acquisition contributed $291,505 to net
profit after tax and $1,705,513 to revenue. Had the acquisition taken place at the beginning of the period, the profit after
tax contribution would have been $291,505 and $1,719,602 to revenue.
The acquisition of 100% of CIM was effective on 1 December 2015. The acquisition contributed $120,700 to net profit
after tax and $1,494,313 to revenue. Had the acquisition taken place at the beginning of the period, the profit after tax
contribution would have been $264,034 and $2,625,099 to revenue.
The acquisition of 100% of Runacres was effective on 1 January 2016. The acquisition contributed $1,131,000 to net
profit after tax and $4,086,000 to revenue. Had the acquisition taken place at the beginning of the period, the profit after
tax contribution would have been $2,250,000 and $5,250,000 to revenue.
AUB GROUP 2016 ANNUAL REPORT 53
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS (CONTINUED)
(d) Acquisition of new controlled entities– previous period
On 1 July 2014, a controlled entity acquired 75% of the voting shares in Asia Mideast Insurance and Reinsurance Pty Ltd (AMIR )
for $2,301,750 which included a deferred consideration payment of $337,500, payable 12 months after the date of acquisition.
Effective 1 November 2014, the company incorporated a new controlled entity in New Zealand, NZ Brokers Holdings Ltd (NZBH)
with a share capital of $3,953,063 in which it has 80% interest in the voting shares. The carrying value of the investment in this
company is $3,164,851. The amount received from non-controlling interests amounted to $788,212.
Effective 1 November 2014, NZ Brokers Holdings Ltd acquired 100% of the voting shares of Brokerweb Management Ltd (BWM)
for $7,675,596 including a contingent consideration payment of $1,567,116. The maximum amount of the contingent
consideration is unlimited.
On 31 December 2014, the company owned 50% of the voting shares of Citycover (Aust) Pty Ltd (Citycover). On that date it
acquired a further 22.5% interest for $2,300,000. A further 2.5% was acquired on 1 January 2015 for $255,556. On 31 December
2014 Citycover ceased to be an associate and became a controlled entity.
Effective 1 February 2015, the company acquired 60% of the voting shares of Forean Group Holdings Ltd (Forean) for
$22,476,732 including a contingent consideration payment of $8,550,580. The range of possible contingent consideration
payments fall within $NIL and $9,900,000. Fair values of the identifiable assets and liabilities of acquisitions as at the date of
acquisition were:
Fair value recognised on acquisition
Cash
Receivables
Plant and equipment
Deferred tax asset
Intangibles
Total assets
Payables and borrowings
Deferred tax liability
Provision for taxation
Provisions
Total liabilities
Net assets
Net assets acquired
Purchase price – cash paid
Purchase price – deferred payment
Fair value adjustment on existing holding at the date of acquisition (see note 4(vi))
Carrying value of existing share in associate before acquisition
Total carrying value after acquisition
Goodwill arising on acquisition relating to the group
Goodwill arising on acquisition relating to the non-controlling interests
Total goodwill arising on acquisition
Cash inflow on acquisition is as follows;
Net cash acquired with the controlled entity
Cash paid
Net cash in(outflow)/flow
6,250
1,264
AMIR
$’000
3,020
3,511
27
-
-
6,558
5,733
133
37
347
308
231
1,964
338
-
-
2,302
2,071
690
2,761
3,020
1,964
1,056
BWM
Citycover
Forean
$’000
866
733
233
-
-
1,832
814
-
450
-
568
568
6,109
1,567
-
-
7,676
7,108
-
7,108
866
6,109
$’000
2,143
1,574
190
122
3,299
7,328
4,401
989
266
138
5,794
1,534
1,151
2,556
-
3,680
1,431
7,667
6,517
2,322
8,839
2,143
2,556
$’000
921
2,088
1,094
320
-
4,423
2,666
-
-
258
2,924
1,499
899
13,926
8,550
-
-
22,476
21,577
14,385
35,962
921
13,926
(5,243)
(413)
(13,005)
The acquisition of AMIR contributed a profit $16,314 to net profit after tax and $1,136,974 to revenue.
The acquisition of NZBH contributed a loss (after expensing acquisition costs), of $728,804 to net profit after tax and $30,859 to
revenue.
The acquisition of an additional 22.5% of Citycover was effective on 31 December 2014. The acquisition did not make a
contribution to the current period result other than its 50% contribution as an equity accounted associate.
BWM contributed a profit of $276,972 to net profit after tax and $1,807,914 to revenue.
The acquisition of Citycover contributed a profit of $327,505 to net profit after tax and $2,471,121 to revenue.
The acquisition of Forean contributed a profit of $824,866 to net profit after tax and $7,661,962 to revenue.
54 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
7. BUSINESS COMBINATIONS (CONTINUED)
(d) Acquisition of new controlled entities– previous period (continued)
If the acquisitions of BWM, Citycover and Forean occurred on 1 July 2014, the contribution to revenue and the net profit after tax
attributable to the owners of the group would have been $2,419,872 and $24,913,914 respectively.
The fair value of the identifiable net assets acquired of the entities above (excluding Citycover) were approximately equivalent to
the carrying values of assets acquired at the date of acquisition. The fair value of the assets acquired for Citycover were
approximately equivalent to the carrying values of assets except for the identifiable intangibles and associated deferred tax.
(e) Deconsolidation of controlled entities on loss of control - current year
On 1 July 2015, the Group disposed 5% of the voting shares in AEI Transport Pty Ltd and its controlled entities (AEIT) for
$990,662, reducing its equity from 55% to 50% and therefore it is no longer consolidated from that date.
Deconsolidation of controlled entities on loss of control - previous year
On 1 April 2015, the Group disposed of 10% of the voting shares in Adroit Holdings Pty Ltd (Adroit) for
$2,477,675 reducing its equity from 60% to 50% and therefore no longer consolidated from that date.
On 27 April 2015, the Group disposed of all of its units in Ballina Insurance Brokers Unit Trust (Ballina) for
$1,324,197, a trust 80% owned by North Coast Insurance Brokers Pty Ltd, a 70% owned controlled entity.
Carrying value of assets and liabilities
Assets
Cash
Receivables
Plant and equipment
Other assets
Intangibles
Total assets
Liabilities
Payables
Borrowings
Tax liabilities
Total liabilities
Net assets
Carrying value of controlled entity transferred to shares in associates
Fair value adjustment on the date the controlled entity became an associate
Fair value of associate on the date the Group lost controlling interest
Sale proceeds
Less: carrying value of controlled entities on consolidation
Reversal of previous period transaction between owners transferred to retained earnings on sale of
voting shares in controlled entity
Profit on sale of voting shares in controlled entity
Fair value adjustment on the date the controlled entity became an associate (see note 4(vi))
Profit on deconsolidation of controlled entities before tax and non-controlling interests
Tax expense
Total fair value adjustment and profit on deconsolidation of controlled entity - after tax
Non-controlling interests
Profit after tax and non controlling interests
Cash outflow on disposal is as follows;
2016
$’000
AEIT
11,530
13,577
58
93
11,143
36,401
22,725
2,000
171
24,896
11,505
3,593
6,313
9,906
991
(605)
758
1,144
6,313
7,457
(952)
6,505
-
6,505
2015
$’000
Adroit and Ballina
10,810
9,848
2,203
40
28,158
51,059
19,087
3,840
1,626
24,553
26,506
11,492
896
12,388
3,802
(2,626)
(108)
1,068
896
1,964
(641)
1,323
(571)
752
Net cash reduction on deconsolidation of controlled entity acquired with the controlled entity
Cash received on sale
Net cash (outflow) on deconsolidation of controlled entity
(11,530)
991
(10,539)
(10,810)
3,802
(7,008)
Adroit contributed $975,725 to profit after tax and non controlling interests up to the date it became an associate
on 1 April 2015.
Ballina contributed $110,241 to profit after tax and non controlling interests up to date of disposal.
AUB GROUP 2016 ANNUAL REPORT 55
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
8. EARNINGS PER SHARE (EPS) / DIVIDENDS PAID AND PROPOSED
Earnings Per Share (EPS)
(a) Earnings used in calculating EPS
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary
shares into ordinary shares.
(b) Changes in weighted average number of shares
There have been no significant transactions involving ordinary shares or potential ordinary shares that would
significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting
date and the date of completion of these financial statements.
(c) Information on the classification of securities
Options granted to employees as described in note 16 are considered to be potential ordinary shares and have been
included in the determination of the diluted earnings per share to the extent they are dilutive. These options have not
been included in the determination of the basic earnings per share. The amount of the dilution of these options is the
average market price of ordinary shares during the year minus the exercise price.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Net profit attributable to ordinary equity holders of the parent
Weighted average number of ordinary shares for basic earnings per share
Effect of dilution:
Weighted average number of shares under option adjusted for shares that would have
been issued at average market price
Weighted average number of ordinary shares adjusted for the effect of dilution
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2016
$’000
2015
$’000
42,002
34,887
2016
2015
Thousands
Thousands
shares
63,041
shares
61,295
160
202
63,201
61,497
66.6
66.5
56.9
56.7
56 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
8. EARNINGS PER SHARE (EPS) / DIVIDENDS PAID AND PROPOSED (CONTINUED)
(d) Equity dividends on ordinary shares:
Dividends paid and proposed
Final franked dividend for financial year ended 30 June 2014: 26.5 cents
Interim franked dividend for financial year ended 30 June 2015: 12.0 cents
Final franked dividend for financial year ended 30 June 2015: 27.7 cents
Interim franked dividend for financial year ended 30 June 2016: 12.0 cents
Total dividends paid in current year
Consolidated
2015
$’000
15,923
7,408
–
-
23,331
2016
$’000
–
–
17,245
7,601
24,846
In addition to the above, dividends paid to non controlling interests totalled $4,399,000 (2015:
$6,500,000)
Dividends proposed and not recognised as a liability
Final franked dividend for financial year ended 30 June 2015: 27.7 Cents
–
17,245
Final franked dividend for financial year ended 30 June 2016: 28.0 Cents
Dividends paid per share (cents per share)
Dividends proposed per share (cents per share) not recognised at balance date
(e) Franking credit balance
The amount of franking credits available for the subsequent financial year are:
17,877
17,877
39.7
28.0
–
17,245
38.5
27.7
– franking account balance as at the end of the financial year at 30% (2015: 30%)
32,255
31,481
– franking credits that will arise from the payment of income tax payable as at the end of the
financial year
The amount of franking credits available for future reporting periods
– impact on the franking account of dividends proposed or declared before the financial report
was authorised for issue but not recognised as a distribution to equity holders during the year
The amount of franking credits available for future reporting periods after payment of dividend
1,966
34,221
(7,662)
26,559
2,635
34,116
(7,391)
26,725
AUB GROUP 2016 ANNUAL REPORT 57
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
9. TRADE AND OTHER RECEIVABLES
Trade receivables
Amount due from customers on broking/underwriting agency operations
Amount due from clients in respect of premium funding operations
Other receivables – related entities
Total receivables (current)
Trade receivables
Total receivables (non-current)
10. OTHER FINANCIAL ASSETS
Mortgages – related entities (amortised cost)
Other
Total other financial assets (current)
The mortgages are secured by registered fixed and floating charges over assets in the
business, securities and supplemented with cross guarantees and indemnities where
necessary.
Other
Total other financial assets (non-current)
11. INVESTMENT IN ASSOCIATES
Investment in associates
Investments at equity accounted amount:
Associated entities – unlisted shares
58 AUB GROUP 2016 ANNUAL REPORT
Consolidated
2016
$’000
2015
$’000
29,961
22,031
126,788
139,946
6,366
2,686
-
3,076
165,801
165,053
163
163
629
41
670
40
40
143
143
128
22
150
72
72
Consolidated
2016
$’000
2015
$’000
133,894
141,661
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
11. INVESTMENT IN ASSOCIATES (CONTINUED)
Austral Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
A & I Member Services Pty Ltd
Androit Holdings Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
Adroit Holdings Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
A & I Member Services Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
Brokerweb Risk Services Ltd*
Brett Grant and Associates Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
A & I Member Services Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Austbrokers Dalby Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers RIS Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
Brokerweb Risk Services Ltd*
JMD Ross Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
Adroit Holdings Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Austbrokers ABS Aviation Pty Ltd
Brett Grant and Associates Pty Ltd
Brokerweb Risk Services Ltd*
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Markey Group Pty Ltd
A & I Member Services Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
Brokerweb Risk Services Ltd*
Austbrokers Dalby Insurance Brokers Pty Ltd
Global Assured Finance Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Markey Group Pty Ltd
Brett Grant and Associates Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
A & I Member Services Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Global Assured Finance Pty Ltd
Brokerweb Risk Services Ltd*
MGA Management Services Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Austbrokers RIS Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
Brokerweb Risk Services Ltd*
Northlake Holdings Pty Ltd
MGA Management Services Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Brett Grant and Associates Pty Ltd
Brokerweb Risk Services Ltd*
Austbrokers Dalby Insurance Brokers Pty Ltd
Peter L Brown & Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Bruce Park Pty Ltd
Brokerweb Risk Services Ltd*
Austbrokers Dalby Insurance Brokers Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Brett Grant and Associates Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Rivers Insurance Brokers Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Strathearn Insurance Group Pty Ltd (sold December 2015)
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Supabrook Pty Ltd
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
SRG Group Pty Ltd
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Bruce Park Pty Ltd
Strathearn Insurance Group Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Markey Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
Supabrook Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
Brokerweb Risk Services Ltd*
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Strathearn Insurance Group Pty Ltd
Austbrokers RIS Pty Ltd
Global Assured Finance Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Western United Financial Services Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
MGA Management Services Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Coffs Harbour Insurance Brokers Unit Trust
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
WRI Insurance Brokers Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Aust Re Brokers Pty Ltd
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Markey Group Pty Ltd
Supabrook Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Tasman Underwriting Pty Ltd
Northlake Holdings Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Peter L Brown & Associates Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Northlake Holdings Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Northern Tablelands Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Peter L Brown & Associates Pty Ltd
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
The Procare Group Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Aust Re Brokers Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
Tasman Underwriting Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Longitude Insurance Pty Ltd***
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
Rivers Insurance Brokers Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Millennium Underwriting Agency Pty Ltd**
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Newsurety Pty Ltd (sold February 2016)
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Strathearn Insurance Group Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
Aust Re Brokers Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Supabrook Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
SRG Group Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Risk Strategies Pty Ltd (sold February 2016)
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
SRG Group Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
MGA Management Services Pty Ltd
WRI Insurance Brokers Pty Ltd
Brokerweb Risk Services Ltd*
Nexus (Aust) Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
A & I Member Services Pty Ltd
Longitude Insurance Pty Ltd***
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
Western United Financial Services Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Blumberg Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Adroit Holdings Pty Ltd
Newsurety Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
WRI Insurance Brokers Pty Ltd
Western United Financial Services Pty Ltd
Bluestone Insurance Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
R.G Financial Services
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
WRI Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Risk Strategies Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Austcan Risk Services (UK) Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Bruce Park Pty Ltd
Nexus (Aust) Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
HQ Insurance Pty Ltd
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Austbrokers AEI Transport Pty Ltd and controlled entities
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
A & I Member Services Pty Ltd
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Coffs Harbour Insurance Brokers Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
Blumberg Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
A & I Member Services Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
Risk Strategies Pty Ltd
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Aust Re Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
KJ Risk Insurance Brokers Pty Ltd
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Bluestone Insurance Pty Ltd
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Adroit Holdings Pty Ltd
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Nexus (Aust) Pty Ltd
Markey Group Pty Ltd
Tasman Underwriting Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
R.G Financial Services
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Austbrokers RIS Pty Ltd
Rivers Insurance Brokers Pty Ltd
Nexus (Aust) Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Blumberg Pty Ltd
Global Assured Finance Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Tasman Underwriting Pty Ltd
Bruce Park Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Austcan Risk Services (UK) Ltd
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Rivers Insurance Brokers Pty Ltd
Nexus (Aust) Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Austbrokers ABS Aviation Pty Ltd
Strathearn Insurance Group Pty Ltd
Blumberg Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Bruce Park Pty Ltd
Supabrook Pty Ltd
Bluestone Insurance Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Millennium Underwriting Agency Pty Ltd**
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
MGA Management Services Pty Ltd
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
HQ Insurance Pty Ltd
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Strathearn Insurance Group Pty Ltd
Blumberg Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Bruce Park Pty Ltd
Supabrook Pty Ltd
Bluestone Insurance Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Brett Grant and Associates Pty Ltd
R.G Financial Services
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Nexus (Aust) Pty Ltd
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Supabrook Pty Ltd
Bluestone Insurance Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
Brett Grant and Associates Pty Ltd
SRG Group Pty Ltd
R.G Financial Services
MGA Management Services Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brokerweb Risk Services Ltd*
Austcan Risk Services (UK) Ltd
Western United Financial Services Pty Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Longitude Insurance Pty Ltd***
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Austbrokers Dalby Insurance Brokers Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Rivers Insurance Brokers Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Strathearn Insurance Group Pty Ltd
Blumberg Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
SRG Group Pty Ltd
R.G Financial Services
MGA Management Services Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Brokerweb Risk Services Ltd*
Western United Financial Services Pty Ltd
Austcan Risk Services (UK) Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Austbrokers Dalby Insurance Brokers Pty Ltd
HQ Insurance Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Newsurety Pty Ltd
Longitude Insurance Pty Ltd***
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Rivers Insurance Brokers Pty Ltd
Nexus (Aust) Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Supabrook Pty Ltd
Bluestone Insurance Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
SRG Group Pty Ltd
MGA Management Services Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Western United Financial Services Pty Ltd
Austcan Risk Services (UK) Ltd
Northern Tablelands Insurance Brokers Pty Ltd
Sura Travel Pty Ltd (Formerly Sura Accident And Health Pty Ltd)
Austbrokers Dalby Insurance Brokers Pty Ltd
HQ Insurance Pty Ltd
WRI Insurance Brokers Pty Ltd
Northlake Holdings Pty Ltd
Longitude Insurance Pty Ltd***
Insurance Advisernet Australia Pty Ltd/Insurance Advisernet Australia Unit Trust
Countrywide Tolstrup Financial Services Group Pty Ltd/Countrywide Tolstrup Group Unit Trust
Peter L Brown & Associates Pty Ltd
Sura Professional Risks Pty Ltd (Formerly Mint Plus Pty Ltd)
Newsurety Pty Ltd
Insurance Advisernet Holdings Pty Ltd/Insurance Advisernet Holdings Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
The Procare Group Pty Ltd
Risk Strategies Pty Ltd
JMD Ross Insurance Brokers Pty Ltd
Coffs Harbour Insurance Brokers Unit Trust
Rivers Insurance Brokers Pty Ltd
Nexus (Aust) Pty Ltd
Markey Group Pty Ltd
Aust Re Brokers Pty Ltd
Blumberg Pty Ltd
Strathearn Insurance Group Pty Ltd
Global Assured Finance Pty Ltd
Tasman Underwriting Pty Ltd
Supabrook Pty Ltd
KJ Risk Insurance Brokers Pty Ltd
Millennium Underwriting Agency Pty Ltd**
SRG Group Pty Ltd
R.G Financial Services
MGA Management Services Pty Ltd
Cinesura Entertainment Pty Ltd (Formerly One Liability Underwriting Pty Ltd)
Equity
percentage
owned
2015
2016
%
50
50
50
50
%
50
55
55
50
49.9
49.9
50
49.9
49.9
40
50
49.9
49.9
49.9
49.9
49.9
49.0
49.9
49.9
50
49.9
49.9
49.9
–
49.9
50
50
49.9
49.9
40
50
49.9
49.9
49.9
49.9
49.9
–
49.9
49.9
50
49.9
49.9
49.9
49.9
49.9
50
49.9
49.9
50
49.9
49.9
37.5
50
50
50
50
50
50
49.9
49.9
37.5
50
50
50
50
50
56.1
56.1
–
50
–
50
50
50
50
30
50
50
50
50
50
50
–
–
Equity accounted
amount
2016
$’000
2,787
9.597
–
2015
$’000
2,916
–
–
13,333
13,375
2,653
253
1,523
1,661
2,610
179
1,425
1,667
16,499
15,743
3,029
2,879
15,350
15,870
874
877
803
880
3,742
3,855
–
1,752
–
–
12,199
10,485
117
5,554
562
94
5,506
490
11,337
10,528
3,074
2,917
–
21,215
785
2,137
1,985
3,052
2,214
155
140
943
498
446
71
–
794
–
696
–
939
2,097
1,895
2,898
2,064
317
187
647
520
481
–
–
898
224
469
1,054
11,157
11,887
103
–
5
63
102
–
–
–
40.4
40.4
1,877
1,535
133,894 141,661
AUB GROUP 2016 ANNUAL REPORT 59
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
11. INVESTMENT IN ASSOCIATES (CONTINUED)
* The Group has an 80% interest in the controlled entity which has a 50% interest in Brokerweb Risk Services Ltd.
** The controlled entity owns 18.4% of Millennium Underwriting Agency Pty Ltd. The consolidated entity has a further 31.6%
interest indirectly through an associate.
*** A controlled entity owns 37.5% of Longitude Insurance Pty Ltd. The consolidated entity has a further 18.58% interest indirectly
through an associate.
During the current year, the following transactions occurred;
On 1 July 2015, the consolidated entity acquired 49% of the voting shares of K J Risk Pty Ltd for $1,748,134.
On 1 July 2015, the Group disposed 5% of the voting shares in AEI Transport Pty Ltd and its controlled entities for $ 990,622
reducing its equity from 55% to 50%. On that date AEI Transport Pty Ltd ceased to be a controlled entity and became an
associate.
On 1 July 2015, a controlled entity acquired 50% of the voting shares in a newly incorporated entity, Austbrokers RG Financial
Services Pty Ltd for $100.
On 1 January 2015, the consolidated entity acquired an associate, Austcan Risk Services (UK) Ltd for $30.
During the current period, further adjustments to contingent considerations in respect of associates resulted in a reduction to the
estimates previously recognised by the Consolidated Group by $2,231,640. As the revised contingent consideration estimates were
below the original estimated contingent consideration payments, a corresponding and offsetting impairment charge of $2,231,64 0
was recognised against the carrying value of that associate (see note 4(vi)).
During the current period, further adjustments to contingent considerations in respect of an associate resulted in an increas e to
the estimates previously recognised by the Consolidated Group by $881,000. In the previous year the estimate was reduced by
$687,000 with a corresponding impairment charge recognised in the profit and loss. During the current year the contingent
consideration was increased by $881,000 to reflect the estimated final payment. A $687,000 impairment charge booked in the
previous year has been reversed and a further $195,000 has been charged agai nst profits in the current year (see note 4(vi)).
During the year the consolidated entity disposed of the following associates;
On 1 December 2015, the consolidated entity disposed of all the voting shares in Strathearn Insurance Group Pty Ltd.
On 1 February 2016, the consolidated entity disposed of all the voting shares in Risk Strategies Pty Ltd.
Between 30 September 2015 and 1 March 2016, a controlled entity disposed all of the voting shares owned in NewSurety Pty
Ltd.
The total sales proceeds (before disposal costs) in respect of the sale of the associates above were $30,648,882.
During the previous year, the following transactions occurred;
On 1 July 2014, the consolidated entity acquired 50% of the voting shares of Nexus (Aust) Pty Ltd for $12,253,179 which
includes an amount of $6,653,179 that represents the contingent consideration amount payable in the next 2 years.
On 1 September 2014, the consolidated entity acquired 50% of the voting shares of Risk Strategies Pty Ltd for $1,083,386
which includes an amount of $383,386 which represents the contingent consideration payable in 12 months. On 1 July 2014,
a controlled entity acquired 50% of the voting shares of Bluestone Insurance Pty Ltd and Blumberg Pty Ltd for $50 and
$103,000 respectively.
On 1 November 2014, a controlled entity in New Zealand acquired 50% of the voting shares of Brokerweb Risk Services Ltd
for $16,801,889 which includes an amount of $6,780,164 which represents the contingent consideration payable in the next 2
years.
On 31 December 2014, the company owned 50% of the voting shares of Citycover (Aust) Pty Ltd (Citycover). On that date it
acquired a further 22.5% interest for $2,300,000. Citycover ceased to be an associate and became a controlled entity.
On 1 April 2015, the company reduced its interest in the voting shares of Adroit Hol dings Pty Ltd from 60% to 50%. On that
date Adroit Holdings Pty Ltd ceased to be a controlled entity and became an associate. NRIG Pty Ltd an associate owned by
Adroit Holdings Limited also ceased to be a direct associate of the consolidated group on that date .
60 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
11. INVESTMENT IN ASSOCIATES (CONTINUED)
Other information in respect of associated entities which carry on business directly or through controlled entities.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
The principal activity of each associate is insurance broking, except for associates owned by Austagencies Pty
Ltd, which are underwriting agents and The Procare Group Pty Ltd which offer risk related services.
The proportion of voting power held by the controlling entity in respect of each associate is 50% except for
Coffs Harbour Unit Trust, Longitude Insurance Pty Ltd where voting power is 37.5%, Millennium Underwriting
where the voting power is 18.4%, HQ Insurance Brokers Pty Ltd where the voting power is 40.4% and Austcan
risk Services (UK) Ltd where the voting power is 30%.
The reporting date of each associate is 30 June 2016 (prior year reporting date 30 June 2015).
There have been no significant subsequent events affecting the associates' profits for the year.
Other than disclosed in note 15, there were no other impairments of investment in associates for the year.
All associates, including unit trusts, were incorporated or established in Australia except for Brokerweb Risk
Services Ltd which is incorporated in New Zealand and Austcan Risk Services (UK) Limited which is
incorporated in the United Kingdom.
The entity's share of the associate's commitments and contingent liabilities are disclosed in note 22.
The entity's share of associates' profits/(losses)
Revenue
Operating profits before income tax
Amortisation of intangibles
Net profit before income tax
Income tax expense attributable to operating profits
Share of associates’ net profits
(i) The entity’s share of the assets and liabilities of associates:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Consolidated
2016
$’000
2015
$’000
108,473
97,710
34,060
(3,264)
30,796
(7,524)
23,272
29,240
(2,873)
26,367
(5,672)
20,695
220,047
206,047
54,212
47,928
(210,656)
(199,556)
(10,122)
53,481
(8,387)
46,032
AUB GROUP 2016 ANNUAL REPORT 61
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
12. SHARES IN CONTROLLED ENTITIES
All controlled entities are incorporated in Australia except for AUB Group NZ Ltd and its controlled entity which are
incorporated in New Zealand, and comprise:
Equity Interest Held
Name and Interests in controlled entities:
Austbrokers Pty Ltd and its controlled entities
– Austbrokers Investments Pty Ltd
– Austbrokers Trade Credit Pty Ltd
– Austbrokers SPT Pty Limited as trustee for Austbrokers SPT Unit Trust
– Finsura Holdings Pty Ltd And Its Controlled Entities
– Finsura Insurance Broking (Australia) Pty Ltd
– Finsura Financial Services Pty Limited
– Finsura Investment Management Services Pty Limited
– Finsura Insurance Broking Unit Trust
– RI Hornsby Pty Limited
Allied Health Australia Pty Ltd
AUB Group Services Pty Ltd (formerly Austbrokers Services Pty Ltd)
AUB Group Business Centre Pty Ltd (formerly Austbrokers Business Centre Pty Ltd)
Kyros Cook & Associates Pty Ltd
Adept Insurance Brokers Pty Ltd and its controlled entity
– Geary Smith Pty Limited
AB Phillips Group Pty Ltd (previously Aprikees Pty Ltd) and its controlled entities
– AB Phillips Pty Ltd
– Austbrokers Compensation Services Pty Ltd
– Interfin Pty Ltd
– Financial Affairs Pty Ltd
AEI Holdings Pty Ltd/AEI Insurance (Brokers) Pty Ltd
Austbrokers Financial Solutions (Syd) Pty Ltd and its controlled entities
– SPT Financial Services Pty Ltd
– Austbrokers Financial Solutions (ACT) Pty Ltd
Austbrokers C.E. McDonald Pty Ltd and its controlled entity
– Traders Voice Services Pty Ltd
Austbrokers Central Coast Pty Ltd and its controlled entity
– Austbrokers Central Coast Financial Services Pty Ltd
Austbrokers City State Pty Ltd
Austbrokers Premier Pty Ltd
Austbrokers Southern Pty Ltd
Austbrokers Canberra Pty Ltd
2016
%
100
100
75
60
70
70
70
70
70
70
60
100
100
100
100
100
56
56
56
56
100
100
75
52
75
100
100
80
80
70
90
80
75
2015
%
100
100
75
70
70
70
70
70
70
70
-
100
100
100
100
100
58
58
48
46
-
100
75
52
75
100
100
80
80
70
90
80
85
Australian Bus And Coach Underwriting Agency Pty Ltd
100
100
62 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
12. SHARES IN CONTROLLED ENTITIES (CONTINUED)
Equity Interest Held
2016
2015
Austbrokers AEI Transport Pty Ltd and controlled entities (deconsolidated on 1 July 2015)
– Carriers Insurance Brokers Pty Ltd
– Austbrokers AEI Pty Ltd
– Chegwyn Insurance Brokers Pty Ltd
Austbrokers Sydney Pty Ltd and its controlled entities
– Austbrokers FWR Pty Ltd
– Austbrokers Professional Services Pty Ltd
Austbrokers RWA Pty Ltd and its controlled entities
– Austbrokers RWA Financial Services Pty Ltd
– CTRL Pty Ltd
AHL Insurance Brokers Pty Ltd (sold on 29 February 2016)
AHL Insurance Brokers (Aust) Pty Ltd
Austagencies Pty Ltd and its Controlled Entities
– Sura Plant & Equipment Pty Ltd (formerly CEMAC Pty Ltd)
– Sura Film & Entertainment Pty Ltd (formerly Cinesure Pty Ltd)
– Latitude Underwriting Agency Pty Ltd
– Dolphin Insurance Pty Ltd
– Sura Hospitality Pty Ltd as trustee for G.U.S Trust
– All-Trans Underwriting Pty Ltd
– Sura Pty Ltd (previously Celestial Underwriting Agency Pty Ltd)
– Trinity Pacific Underwriting Agency Pty Ltd
– 5 Star Underwriting Agency Pty Ltd
– Film Insurance Underwriting Agency Pty Ltd
– Lawsons Underwriting Agency Ltd
– Sura Labour Hire Pty Ltd
– Expert Strata Pty Ltd
– Sura Construction Pty Ltd
– Sura Engineering Pty Ltd
Asia Mideast Insurance and Reinsurance Pty Ltd
Citycover (Aust) Pty Ltd
Comsure Insurance Brokers Pty Ltd and controlled entity
– Comsure Financial Solutions Pty Ltd
%
50
40
30
30
100
100
80
60
30
60
-
100
100
100
100
100
100
100
100
100
100
100
100
90
90
55
51
51
75
75
80
60
%
55
44
35.6
35.6
100
100
80
60
30
60
100
100
100
100
100
100
100
100
100
100
100
100
100
90
90
-
51
51
75
75
80
60
AUB GROUP 2016 ANNUAL REPORT 63
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
12. SHARES IN CONTROLLED ENTITIES (CONTINUED)
Forean Group Holdings Pty Ltd and its controlled entities
– Altius Group Pty Ltd
– Rehabilitation Services Pty Ltd
– Occheath Network Pty Ltd
– Psych Health Intervention Pty Ltd
– Altius Group Services Pty Ltd
– CIM Group Holdings Pty Ltd
AUB Group NZ Ltd (formerly NZ Broker Holdings Ltd)
– NZ Brokers Management Ltd
– Runacres and Associate Ltd
Austbrokers Coast to Coast Pty Ltd (formerly Power Insurance Brokers Pty Ltd)
Insurics Pty Ltd
InterRISK Australia Pty Ltd and its controlled entities
– InterRISK Queensland Pty Ltd
– Atlas Insurance Brokers Pty Ltd
Shield Underwriting Holdings Pty Ltd
McNaughton Gardiner Insurance Brokers Pty Ltd and its controlled entity
– McNaughton Gardiner Financial Services Pty Ltd
North Coast Insurance Brokers Pty Ltd and its controlled entities
– NCFS Unit Trust
Austbrokers Terrace Insurance Brokers Pty Ltd and controlled entity
– Austbrokers Financial Solutions (SA) Pty Limited
AUB International Pty Ltd
Austbrokers employee share acquisition schemes trust
Equity Interest Held
2016
2015
%
60
60
60
60
60
60
60
80
80
80
75
100
77.1
37
27
100
70
70
70
70
70.8
47
100
100
%
60
60
60
60
60
60
-
80
80
-
75
100
77.1
37
27
100
70
70
70
70
70.8
47
-
100
See note 7 - Business Combinations, for details of increases and decreases in voting shares in controlled entities and
acquisition of new controlled entities during the current and previous year.
During the current year AUB Group Limited incorporated a new controlled entity AUB International Pty Ltd for $1.
During the previous year a controlled entity incorporated a new controlled entity Sura Labour Hire Pty Ltd for $100.
During the current period, further adjustments to contingent considerations in respect of controlled entities resulted in a
reduction to the estimates previously recognised by the Consolidated Group by $2,039,518. As the revised contingent
consideration estimates were below the original estimated contingent consideration payments, a corresponding and
offsetting impairment charge of $2,039,518 was recognised against the carrying value of those associates (see note
4(vi)).
During the current period, further adjustments to contingent considerations in respect of controlled entities resulted in
increases to the estimates previously recognised by the Consolidated Group by $3,799,302. This amount was charged
against profits in the current year (see note 4(vi)).
64 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
13. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment
Year ended 30 June 2016
Plant and
Motor
Property
equipment
vehicles
$’000
$’000
$’000
Balance at the beginning of the year
730
16,690
Acquisition of controlled entities
Disposal of controlled entities
Translation movements
Additions during the year
Disposals during the year
Property, plant and equipment at cost
Depreciation
-
-
-
73
-
803
1,249
(214)
7
4,408
(3,047)
19,093
Balance at the beginning of the year
114
11,593
Acquisition of controlled entities
Disposal of controlled entities
Disposals during the year
Translation movements
Depreciation during year
Accumulated depreciation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
Year ended 30 June 2015
Balance at the beginning of the year
Acquisition of controlled entities
Disposal of controlled entities
Additions during the year
Disposals during the year
Property, plant and equipment at cost
Depreciation
-
-
-
-
10
124
616
679
730
-
-
-
-
730
684
(156)
39
2,152
11,307
5,097
7,786
18,946
2,284
(4,654)
1,216
(1,102)
16,690
Balance at the beginning of the year
104
12,465
Acquisition of controlled entities
Disposal of controlled entities
Disposals during the year
Depreciation during year
Accumulated depreciation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
-
-
-
10
114
626
616
963
(2,649)
(898)
1,712
11,593
6,481
5,097
Consolidated
Total
$’000
18,821
2,098
(214)
20
5,031
(3,397)
22,359
12,314
1,066
(156)
1,401
849
-
13
550
(350)
2,463
607
382
-
(3,005)
(198)
(3,203)
6
325
1,122
794
1,341
1,706
279
(418)
468
(634)
1,401
656
56
(220)
(282)
397
607
1,050
794
45
2,487
12,553
6,507
9,806
21,382
2,563
(5,072)
1,684
(1,736)
18,821
13,225
1,019
(2,869)
(1,180)
2,119
12,314
8,157
6,507
AUB GROUP 2016 ANNUAL REPORT 65
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
14. INTANGIBLE ASSETS AND GOODWILL
Capitalised
project costs
Goodwill
Insurance
broking
registers
$’000
$’000
$’000
Consolidated
Total
$’000
225,987
63,343
(2,038)
475
(13,608)
274,159
26,151
(2,466)
3,728
27,413
199,836
246,746
198,170
59,525
1,011
(2,273)
(448)
(29,998)
225,987
23,950
(1,842)
4,043
26,151
174,220
199,836
43,725
12,693
-
-
(3,036)
53,382
26,151
(2,466)
3,323
27,008
17,574
26,374
46,911
3,553
-
-
-
(6,739)
43,725
23,950
(1,842)
4,043
26,151
22,961
17,574
1,011
181,251
-
-
-
-
50,650
(2,038)
475
(10,572)
1,011
219,766
–
–
405
405
1,011
606
-
-
1,011
-
-
-
1,011
-
-
-
-
-
–
-
–
–
181,251
219,766
151,259
55,972
-
(2,273)
(448)
(23,259)
181,251
-
-
-
-
151,259
181,251
Year ended 30 June 2016
Balance at the beginning of the year
Additional businesses and portfolios acquired
Impairment charge
Translation of foreign exchange rate movements
Deconsolidation of controlled entity
Total intangibles
Amortisation
Balance at the beginning of the year
Deconsolidation of controlled entity
Amortisation current year
Accumulated amortisation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
Year ended 30 June 2015
Balance at the beginning of the year
Additional businesses and portfolios acquired
Capitalised project costs
Impairment charge
Translation of foreign exchange rate movements
Deconsolidation of controlled entity
Total intangibles
Amortisation
Balance at the beginning of the year
Deconsolidation of controlled entity
Amortisation current year
Accumulated amortisation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
1,011
66 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
14. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired
at the time of acquisition of the business. As at acquisition date, any goodwill relates to benefits from the
combination of synergies as well as the entity's ability to generate future profits.
The balance of the Insurance broking register will be amortised over the remaining period ranging from 1 to 10
years (15 years for financial services business) depending on original acquisition date.
Individual intangible assets material to the Group are attributable to the following controlled entities.
(i) Goodwill
Consolidated
2016
$’000
2015
$’000
Interrisk Australia Pty Ltd and its controlled entity
18,995
20,352
Austbrokers Sydney Pty Ltd and its controlled entities
14,355
23,882
Forean Holdings and its controlled entities
38,349
35,962
Austagencies and its controlled entities
33,828
34,521
AUB Group NZ Limited and its controlled entities
27,134
6,659
Citycover Australia Pty Ltd
Allied Health Pty Ltd
8,689
8,689
22,693
-
(ii) Insurance Broking Registers
AUB Group NZ Limited
Interrisk Australia Pty Ltd and its controlled entity
Austbrokers Sydney Pty Ltd and its controlled entities
Remaining amortisation
period (years)
2016
2015
9.5
7.0
8.0
-
10,674
-
8.0
9.0
3,055
4,981
1,963
2,194
AUB GROUP 2016 ANNUAL REPORT 67
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
15. IMPAIRMENT TESTING OF INTANGIBLE ASSETS, GOODWILL
AND INVESTMENT IN ASSOCIATES
The recoverable amount of the equity accounted associates and goodwill and insurance broking registers arising on
consolidation of controlled entities is determined based on the higher of the directors' estimate of fair value of the cash
generating unit (CGU) to which they relate less costs to sell and its value in use. In determining fair value, each controlled
entity or associate is considered a separate CGU or grouped into a single CGU for impairment testing where cash inflows
are interdependant. Interdependant businesses have the following similar characteristics;
the nature of the products and services
the type of class of customer for their products and services
the methods used to distribute their products or provide their services
if applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities.
the business is integrated with other entities and the results are interdependent.
In the current year, the group has reviewed the operations of the underwriting agency and the New Zealand businesses,
which led to a reassessment of the structure of the CGUs to bring them more in line with the requirements of AASB 136.
Consequently, the underwriting agency businesses and the New Zealand businesses have each been aggregated into
single CGUs . These CGUs represent the lowest level within the Group at which the goodwill is monitored for internal
management purposes and reflects the interdependency of cash inflows generated therein.
Insurance broking entities and risk services entities are still viewed as separate CGUs at the entity level for impairment
purposes, consistent with the previous year treatment.
The measure used in assessing the directors' fair value is based on the directors' estimates of the sustainable profits,
which have been tested against the current and prior year's profits as well as the following year's financial budgets
approved by senior management. After determining the appropriate after tax profit for each associate/controlled entity, the
after tax profit is multiplied by a profit multiple from within the range of 9.87 to 11.46 times (2015: 9.84 to 11.52 times).
These profit multiples have been determined based on the cost of capital for each cash generating unit factoring in an
assumed sustainable profit growth of 2.0% per annum (2015: 2.0%). The profit multiples used are reviewed against
externally accessible factors and are considered by directors to be reflective of generally accepted market values.
When considered appropriate, an alternative test is applied to determine directors' estimates of fair value. This measure
applies a multiple of 1.8 times to broking revenue (2015: 1.8 times) for general insurance broking busin esses and 2.5 times
to life insurance renewal commissions (2015: 2.5 times). These valuation bases are commonly used in the market to
determine value for acquisitions of similar businesses.
Where fair value less cost of sale methodology does not support the carrying value of an asset, a secondary Value in Use
methodology is used. If this produces a higher valuation than Fair Value, this valuation is used for the Recoverable
Amount. This measurement takes into account the expected discounted cash flows for the next 5 years based on the
forecast profitability (DCF). The valuation under this approach takes into account the weighted average cost of capital
(WACC) for those entities and also looks at the expected long term growth rate of 2.0% (2015: 2.0%) with a terminal value
calculation at the end of 5 years. This methodology will result in a better estimate valuation for entities where the current
year profit or the following year budget may not factor in the medium and long term expected growth from thi s business.
The fair value and value in use measurements were categorised as level 3 fair value based on the inputs in the valuation
technique used (see note 28 (c)).
In previous periods, external expert advice had been sought in relation to the determination of the appropriate weighted
average cost of capital (WACC) to be used in determining the profit multiples. For this financial year, this calculation was
updated internally. The WACC is based on the cost of capital calculated for each cash generat ing unit after taking into
account market risks, a risk loading recognising the size of the business, current borrowing interest rates, factoring in the
borrowing capacity of the businesses and the risk free rate. The 10 year bond rate prevailing at year end was used for the
current year after factoring in a risk margin. The risk free rate (before risk margin) used in the current year is 2.41% (2015:
2.5%). The resulting fair values derived from the appropriate measure are compared to the carrying value f or each cash
generating unit and in the event that the carrying value exceeds the recoverable amount, an i mpairment loss is recognized.
Key assumptions for the value in use methodology
Post tax discount rates
Short term revenue growth rate (1-5 years)
Long term revenues growth rate
2016
%
10.7 – 12.1
1.0 – 5.0
1.5 – 2.0
2015
%
NA
NA
NA
68 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
15. IMPAIRMENT TESTING OF INTANGIBLE ASSETS, GOODWILL
AND INVESTMENT IN ASSOCIATES (CONTINUED)
The Group's acquisition policy is to pay a deposit and defer a component of the purchase price to be determined based on
future financial results. Estimates of the final acquisition cost are made and recognised in the financial statements. An
estimate of the contingent consideration is made at the time of acquisition and is reviewed and varied at balance date if
estimates change or actual payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where
an estimate is reduced an offsetting adjustment (impairment) is made to the carrying value.
During the current year, due to current market conditions further adjustments to contingent considerations in respect of
prior year acquisitions resulted in a net reduction to the estimates previously recognised by the Consolidated Group. Where
the revised contingent consideration estimates were below the original estimated contingent consideration payments, a
corresponding and offsetting impairment charge of $4,271,000 (2015:$4,104,000) was recognised against the carrying
value of those investments (see note 4(vi)).
The resulting fair value of an associate using the valuation methodology outlined above resulted in an impairment of $NIL
(2015: $1,500,000). The previous year impairment was due to specific competitive circumstances in a niche segment of
the market impacting income. The previous year impairment represented 0.4% of the Group's investment in associates
and controlled entities. The previous year impairment loss was charged to the income statement (see note 4(vi)).
Adjustments relating to controlled entities
Adjustments relating to associates
Impairment charge relating to an associate
Contingent
consideration
adjustments
Impairment charges
2016
$’000
(1,759)
2,036
-
2015
$’000
2,473
1,983
-
2016
$’000
2,040
2,231
-
2015
$’000
2,273
1,831
1,500
Total
277
4,456
4,271
5,604
No reasonable possible change in key assumptions would result in the recoverable amount of a cash generating unit that is material to the group's
total investment in intangible assets, goodwill and investment in associates, being significantly less than the carrying value included in the accounts.
AUB GROUP 2016 ANNUAL REPORT 69
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
16. SHARE-BASED PAYMENT PLANS
Employee share option plan
The share-based payments expense recognised in the income statement is included in note 4 (iv) Expenses. The following
table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share options
issued during the year:
Unless otherwise stated, all options are granted over shares in the ultimate controlling entity, AUB Group Limited.
Share options
Outstanding at the beginning of the
2016
No.
2015
2016
2015
No.
WAEP ($)
WAEP ($)
year
378,687
508,834
0.12
Granted during the period – zero
priced options
319,891
43,456
0.00
Exercised during the period: options
issued during 2007
-
(132,800)
0.00
Exercised during the period: options
issued during 2008
(11,099)
-
4.22
Exercised during the period: options
issued during 2011
-
(27,834)
0.00
Exercised during the period: options
issued during 2013
(73,000)
-
0.00
Lapsed/forfeited during the period:
options issued during 2010
-
(12,969)
0.00
Lapsed/forfeited during the period:
options issued during 2011
(21,430)
Lapsed/forfeited during the period:
options issued during 2012
Lapsed/forfeited during the period:
options issued during 2013
Lapsed/forfeited during the period:
options issued during 2014
Outstanding at the end of the year
(5,713)
(9,235)
(10,345)
567,756
-
-
-
-
378,687
0.00
0.00
0.00
0.00
0.00
1.10
0.00
4.20
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.12
The outstanding balance as at 30 June 2016 is represented by:
NIL (2015: 11,099) options granted on 29 September 2008, exercisable 3 years from 29 September 2008 at an
exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options
were issued was $4.22.
NIL (2015: 21,430) Share options were granted on 31 October 2011, exercisable 3 years from 31 October 2011 at an
exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options
were issued was $6.28.
26,490 (2015: 32,203) Share options were granted on 31 October 2012, exercisable 3 years from 31 October 2012 at
an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the
options were issued was $7.71.
160,000 (2015: 233,000) Share options were granted on 15 January 2014, exercisable 3 years from 1 January 2013 at
an exercise price of $NIL. The options were valued using the dividend yield method resulting in an option price of
$7.38.
70 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
16. SHARE-BASED PAYMENT PLANS (CONTINUED)
Employee Share Option Plan (continued)
28,264 (2015: 37,499) Share options were granted on 30 October 2013, exercisable 3 years from 30 October 2013 at
an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the
options were issued was $11.15. The options were valued using the dividend yield method resulting in an option price
of $10.06.
33,111 (2015: 43,456) Share options were granted on 31 October 2014, exercisable 3 years from 31 October 2014 at
an exercise price of $NIL. The volume weighted average share price for the 5 business days prior to the date the
options were issued was $10.28. The options were valued using the dividend yield method resulting in an option price
of $9.09.
69,891 Share options were granted on 23 November 2015, exercisable 3 years from 23 November 2018 at an exercise
price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were
issued was $8.48. The options were valued using the dividend yield method resulting in an option price of $7.31.
250,000 Share options were granted on 7 April 2016, exercisable 3 years from 1 January 2019 at an exercise price of
$NIL. The volume weighted average share price for the 5 business days prior to the date the options were issued was
$8.73. The options were valued using the dividend yield method resulting in an option price of $7. 91.
All options must be exercised by no later than 7 years from the issue date.
During the year the following options were granted, exercised or lapsed
11,099 Share options were exercised on 16 October 2015 at an exercise price of $NIL. The volume weighted average
price for the 5 business days prior to the date the options were exercised was $8.82.
25,293 Zero priced options, lapsed due to staff members resigning.
69,891 Share options were granted on 23 November 2015, exercisable 3 years from 23 November 2018 at an exercise
price of $NIL. The options were valued using the dividend yield method resulting in an option price of $7.31.
21,430 options lapsed due to vesting conditions over the 4 years ended 30 June 2015, not being met.
250,000 Share options were granted on 7 April 2016, exercisable 3 years from 1 January 2019 at an exercise price of
$NIL. The options were valued using the dividend yield method resulting in an option price of $7.91.
73,000 Share options were exercised on 6 April 2016 at an exercise price of $NIL. The volume weighted average price
for the 5 business days prior to the date the options were exercised was $8.42.
During the previous year the following options were granted, exercised or lapsed
43,456 Share options were granted on 31 October 2014, exercisable 3 years from 31 October 2014 at an exercise
price of $NIL. The volume weighted average share price for the 5 business days prior to the date the options were
issued was $9.0892. The options were valued using the dividend yield method resulting in an option price of $9.09.
132,800 Share options were exercised on 12 September 2014 at an exercise price of $4.20. The volume weighted
average price for the 5 business days prior to the date the options were exercised was $10.87.
12,969 options lapsed due to vesting conditions over the 4 years ended 30 June 2014, not being met.
27,834 Share options were exercised on 16 December 2014 at an exercise price of $NIL. The volume weighted
average price for the 5 business days prior to the date the options were exercised was $10.08.
The fair value of the zero priced options issued before 1 January 2013 was based on the volume weighted average share
price for the 5 day period prior to the options being granted. From 1 January 2013, the fair value of the zero p riced options
has been based on the dividend yield method taking into account the vesting period, expected dividend payout and the
share price at the date the options were granted.
The weighted average remaining contractual life for the share options outstanding at 30 June 2016 is 5.32 years (2015:
4.59 years).
AUB GROUP 2016 ANNUAL REPORT 71
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
16. SHARE-BASED PAYMENT PLANS (CONTINUED)
Option Exercise conditions
These option exercise conditions apply to all options issued up to 30 June 2015 except 233,000 options issued to the Chief
Executive Officer (CEO) on 15 January 2013.
a) subject to satisfaction of the performance based conditions referred to in paragraphs (b) and (c) below, the
options will vest 3 years after the date of grant;
b)
if the First Test Compound Earnings Per Share Growth (Compound Growth) is:
i)
ii)
iii)
iv)
greater than or equal to 8.5% per annum, 20% of the options will become exercisable;
equal to 10% per annum, 50% of the options will become exercisable;
between 10% and 15%, the percentage of options that are exercisable will be determined on a pro rata
basis so that the number of options that are exercisable will increase from 50% by 1 percentage point for
every 0.1% percent additional Compound Growth over 10%;
15% per annum or more, 100% of the options will become exercisable in each case on the date on
which the Company's audited financial statements for the third financial year ending after the grant are
lodged with the Australian Securities Exchange (the "First Test Date");
c)
if all of the options do not become exercisable on the First Test Date and the Second Test Compound Growth is
higher than the First Test Compound Growth then on the date on which the Company's audited financial
statements for the fourth financial year ending after the grant are lodged with the Australian Secu rities Exchange
(the "Second Test Date") an additional number of options will become exercisable as is equal to the difference
between the number of options which became exercisable under paragraph (b) and the number of options which
would have become exercisable if paragraph (b) applied on the basis of the Second Test Compound Growth
(rather than the First Test Compound Growth);
d) any options which have not become exercisable by the Second Test Date lapse and are of no further force or
effect.
e) Option exercise conditions for options granted in the 2014 financial year were modified so that between 8.5% and
10% EPSG the options that are exercisable will be determined on a pro rata basis so that the number of options
that are exercisable will increase from 20% by 2 percentage points for every 0.1% additional Compound Growth
over 8.5%.
The exercise conditions for 233,000 (73,000 options vested and were exercised during the current year) options granted to
the CEO on 1 January 2013 are the same as set out above except that between 8.5% and 10% compound growth the
options that are exercisable will be determined on a pro rata basis so that the number of options that are exercisable will
increase from 20% by 2 percentage points for every 0.1% additional Compound Growth over 8.5%.
The following option exercise conditions apply to all options issued after 1 July 2015.
60% of options issued are subject to the compound annual growth rate hurdle set out in Part (b) below (EPS options).
40% of options issued will be subject to the total shareholder return hurdle set out in Part (d) below (TSR options)
a) subject to satisfaction of the performance based conditions referred to in paragraphs (b) and (c) below, the EPS
options will vest 3 years after the date of grant;
b)
if the First Test Compound Earnings Per Share Growth (Compound Growth) is:
i)
ii)
greater than or equal to 4.0% per annum, 25% of the options will become exercisable;
between 4% and 7%, the percentage of options that are exercisable will be determined on a pro rata
basis so that the number of options that are exercisable will increase from 25% by 1 percentage point
for every 0.12% additional growth over 4.0%;
iii)
equal to 7% per annum, 50% of the options will become exercisable;
72 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
16. SHARE-BASED PAYMENT PLANS (CONTINUED)
Option Exercise conditions (continued)
iv)
v)
vi)
between 7% and 10%, the percentage of options that are exercisable will be determined on a pro rata
basis so that the number of options that are exercisable will increase from 50% by 1 percentage point
for every 0.06% additional growth over 7%;
10% per annum or more, 100% of the options will become exercisable
in each case on the date on which the Company's audited financial statements for the third financial
year ending after the grant are lodged with the Australian Securities Exchange (the "First Test Date");
c)
if all of the options do not become exercisable on the First Test Date and the Second Test Compound Growth is
higher than the First Test Compound Growth then on the date on which the Company's audited financial
statements for the fourth financial year ending after the grant are lodged with the Australian Securities Exchange
(the "Second Test Date") an additional number of options will become exercisable as is equal to the difference
between the number of options which became exercisable under paragraph (b) and the number of options which
would have become exercisable if paragraph (b) applied on the basis of the Second Test Compound Growth
(rather than the First Test Compound Growth);
d) subject to satisfaction of the performance based conditions referred to in paragraphs (e) and (f) below, the TSR
options will vest 3 years after the date of grant;
e) The percentage of TSR options that will be exercisable on the 3 Year Test Date is;
i)
ii)
iii)
At Target Group (100% of Target Group TSR) 50% of TSR options become vested
Between 100% and 150% of Target Group, the number of TSR options that are exercisable will increase
from 50% by 1 percentage point for every 1% increase in TSR against the Target Group over 100%.
If all of the TSR options do not become exercisable on the Second Test Date and the 4 Year TSR, as a
percentage of the Target Group TSR, is higher than the 3 Year TSR, as a percentage of the Target
Group TSR, then on the Second Test Date an additional number of TSR options will become exercisable
equal to the difference between the number of TSR options which became exercisable at the First Test
Date and the number of TSR options which would have become exercisable if the 4 Year TSR had been
applied.
iv)
Any TSR options which have not become exercisable by the Second Test Date lapse and are of no
further force or effect.
f) Target Group means the companies in the S&P/ASX Small Ordinaries Index as adjusted by the Board, in its
discretion, to take into account matters or events, which may distort the results. This may include, but is not
limited to, removing entities in a particular sector or entities affected by takeovers, mergers or de -mergers.
AUB GROUP 2016 ANNUAL REPORT 73
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Amount payable on broking/underwriting agency operations
Contingent consideration and other payables
Other payables – related entities
Total trade and other payables (current)
Non-current
Contingent consideration and other payables
Trade payables
Total trade and other payables (non current)
Included in trade and other payable are the following contingent consideration payables:
Balance at the beginning of the year
Contingent consideration on current year acquisitions (at net present value)
Payments made in respect of previously recognised contingent consideration
Adjustments to contingent consideration payments previously recognised
Reversal of prior year impairment charge (see note 11)
Foreign currency translation movements
Interest recognised in original contingent consideration at net present value
Consolidated
2016
$’000
2015
$’000
27,141
11,542
186,253
217,647
25,371
22,596
745
595
239,510
252,380
11,334
19,280
118
-
11,452
19,280
28,259
6,006
(4,330)
(277)
687
683
1,189
13,747
24,271
(4,967)
(4,456)
-
(638)
302
Balance at the end of the year
32,217
28,259
74 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
18. PROVISIONS
Year ended 30 June 2016
Balance at the beginning of the year
Acquisition/disposal of controlled entity
Arising during the year
Employee
Make good
entitlements
provision
$’000
$’000
11,918
603
1,741
872
-
11
Consolidated
Total
$’000
12,790
603
1,752
Balance at the end of the year
14,262
883
15,145
Current 2016
Non-current 2016
Total provisions
Year ended 30 June 2015
Balance at the beginning of the year
Disposal of controlled entity
Arising during the year
Balance at the end of the year
Current 2015
Non-current 2015
Total provisions
12,006
2,256
409
474
12,415
2,730
14,262
883
15,145
11,938
(1,259)
1,239
764
97
11
12,702
(1,162)
1,250
11,918
872
12,790
9,793
2,125
262
610
10,055
2,735
11,918
872
12,790
Make good provision on leased premises
In accordance with the various lease agreements, the Group must restore the leased premises to a similar
condition that existed prior to leasing the premises by removing all fixed and removable partitions. A provision has
been included for expected amounts payable.
Because of the long-term nature of the liability, the greatest uncertainty in estimating the provision is the cost that
will ultimately be incurred. During the year further amounts were provided for premises leased during the year.
Current lease durations range from less than 1 year to 10 years. Make good payments will only be made at the end
of the lease.
Employee entitlements
'Refer to note 2.2 (r) for the relevant accounting policy and a discussion of the significant estimation an d
assumptions applied in the measurement of this provision.
AUB GROUP 2016 ANNUAL REPORT 75
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
19. INTEREST BEARING LOANS AND BORROWINGS
Current
Secured bank loan *
Obligations under finance leases and hire purchase contracts (note 22)
Unsecured loan from other related parties
Total interest bearing loans and borrowings (current)
Non-current
Secured bank loan *
Obligations under finance leases and hire purchase contracts (note 22)
Unsecured loan from other related parties
Total interest bearing loans and borrowings (non current)
* The Group has negotiated facilities through various banks as shown below. Details of those
facilities are as follows;
Summary of secured bank loans
St George Bank
Macquarie Bank
Commonwealth Bank
National Australia Bank
Hunter Premium Funding
Westpac NZ Bank
Total secured bank loans
Consolidated
2016
$’000
2015
$’000
2,975
7,393
1,069
772
417
459
4,461
8,624
83,692
56,891
493
-
534
16
84,185
57,441
65,067
47,826
4,871
1,245
2,677
353
440
1,136
2,898
524
12,454
11,460
86,667
64,284
The facilities are subject to financial undertakings and warranties typical of facilities of this nature and have sub -limits for
various purposes including acquisitions.
On 1 December 2015, AUB Group Limited accepted terms for the refinancing and increasing of the existing St George Bank
finance facilities for a further 3 years. The finance facility was increased from $50.8 million to $79.5 million, including $20.118
(NZ $21 million) advanced to a controlled entity in New Zealand.
In addition to the St George Bank facilities provided to AUB Group Limited, controlled entities within the group have al so
negotiated other facilities with both St George Bank and other banks as disclosed below. Whilst the facilities expire beyond the
next 12 months some facilities have provision for mandatory principal repayments during the facility period. These mandatory
repayments are shown as current liabilities.
The facilities are subject to financial undertakings and warranties typical of facilities of this nature and have sub -limits for
various purposes including acquisitions.
During the current and prior years, there were no defaults or breaches of terms and conditions of any of these facilities.
76 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
19. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Group borrowing facilities
as at 30 June 2016
Facility provider
Type of
borrowing
AUB Group Limited
Total
Undrawn
Amount
Borrowing
Non
Interest
Variable
facility
amount
utilised
amount
Current
current Expiry date
rate
/ fixed
$’000
$’000
$’000
$’000
$’000
$’000
%
(Var/fix)
St George Bank
Loan facility
53,500
16,500
37,000
37,000
Credit cards
1,450
-
1,450
Bank
guarantee /
overdraft
5,000
478
4,522
-
-
-
-
-
37,000
30/11/2018
3.16
-
30/11/2018
17.45
Var
Var
-
30/11/2018
N/A
Var
Facilities arranged by
other controlled entities
St George Bank
Loan facility
30,662
2,595
28,067
28,067
2,088
25,979
10/07/2020
3.51 - 6.14
Fix/Var
Westpac NZ Bank
Loan facility
12,454
Bank overdraft
70
70
-
-
-
12,454
12,454
-
-
-
13/03/2018
12,454
31/01/2018
N/A
4.24
Var
Var
Between
02/07/2015
&
10,669
1,526
9,143
9,146
887
8,259
20/06/2021
4.65 - 8.89
Var
113,805
21,169
92,636
86,667
2,975
83,692
Between
31/10/2017
&
Type of
borrowing
Total
Undrawn
Amount
Borrowing
Non
Interest
Variable
facility
amount
utilised
amount
Current
current Expiry date
rate
/ fixed
$’000
$’000
$’000
$’000
$’000
$’000
%
(Var/fix)
Finance facilities with
other banks
Total borrowing facilities
Group borrowing facilities
as at 30 June 2015
Facility provider
AUB Group Limited
St George Bank
Loan facility
45,000
7,935
37,065
37,065
Credit cards
Bank
guarantee /
overdraft
1,000
-
1,000
5,000
553
4,447
-
-
-
-
-
37,065
30/07/2016
3.68 - 5.35
-
30/07/2016
17.50
Var
Var
-
30/07/2016
N/A
Var
Facilities arranged by
other controlled entities
Between
02/07/2015
&
St George Bank
Loan facility
15,482
4,721
10,761
10,761
6,594
4,167
10/07/2020
3.68 - 6.2
Fix/Var
Westpac NZ Bank
Loan facility
11,460
Bank overdraft
70
70
-
-
-
11,460
11,460
-
-
-
13/03/2018
11,460
31/01/2018
N/A
5.46
Var
Var
Finance facilities with
other banks
Total borrowing facilities
5,184
186
4,998
4,999
799
4,200
20/06/2018
4.99. - 6.6
Var
83,196
13,465
69,731
64,284
7,393
56,891
Between
31/10/2017
&
AUB GROUP 2016 ANNUAL REPORT 77
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
20. ISSUED CAPITAL
Issued capital opening balance
128,890
108,339
Net proceeds from dividend reinvestment plan
12,852
20,183
Consolidated
2016
$’000
2015
$’000
On 11 September 2014 allotted 132,800 shares at an issue price of $4.20
On 16 December 2014 allotted 27,834 shares at an issue price of $nil
On 10 October 2015 allotted 11,099 shares at an issue price of $nil
On 6 April 2016 allotted 73,000 shares at an issue price of $nil
Share issue expenses
Issued capital
-
-
-
-
558
–
–
–
(34)
(190)
141,708
128,890
Consolidated
2016
2015
Shares
Shares
No.
No.
Number of shares on issue (ordinary shares fully paid)
63,846,476
62,256,689
Movements in number of shares on issue
Beginning of the financial year
On 10 October 2015 allotted 11,099 shares at an issue price of $NIL.
On 30 October 2015 1,004,770 shares were issued at $8.629 as a result of a Dividend
Reinvestment Plan.
On 29 April 2016 500,918 shares were issued at $8.3468 as a result of a Dividend
Reinvestment Plan.
On 6 April 2016 73,000 shares were issued at an issue price of $NIL.
On 11 September 2014 allotted 132,800 shares at an issue price of $4.20.
On 15 October 2014 696,147 shares were issued at $9.8016 as a result of a Dividend
Reinvestment Plan.
On 24 October 2014 928,220 shares were issued at $9.8016 as a result of a Dividend
Reinvestment Plan.
On 16 December 2014 allotted 27,834 shares at an issue price of $NIL.
On 30 April 2015 516,092 shares were issued at $8.2522 as a result of a Dividend
Reinvestment Plan.
Total shares on issue
62,256,689
59,955,596
11,099
1,004,770
500,918
73,000
-
-
-
-
-
-
-
-
132,800
696,147
928,220
27,834
516,092
63,846,476
62,256,689
-
78 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
20. ISSUED CAPITAL (CONTINUED)
Ordinary shares have the right to receive dividends and, in the event of winding up the company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
Of the total shares issued up to 30 June 2016, 73,000 had restrictions whereby the shares could not be disposed of
before 1 January 2018, except in the case where employee who own the shares, resigns.
21. NATURE AND PURPOSE OF RESERVES
Asset revaluation reserve
The asset revaluation reserve was used to record movements in the revalued amounts of broker register acquired through
step up acquisition of broking subsidiaries before 1 July 2009. From this date, fair value adjustments on business
combinations are no longer recognised through the asset revaluation reserve but in the income statement. The reserve
can only be used to pay dividends in limited circumstances. The current year amortisation expense relating to those step
ups is transferred to retained earnings when the amortisation expense is charged to the profit and loss account.
Foreign currency translation reserve
This reserve is used to record foreign currency differences from translation of the financial information of foreign
operations that have a currency other than Australian dollars.
Share based payment reserve
This reserve is used to record the value of equity benefits provided to employees and directors as part of their
remuneration. Refer to note 16 for further details of these plans.
Non controlling interests
This is measured at their proportionate share of the acquirees' identifiable net assets.
Interest in: Ordinary shares
Retained earnings
Consolidated
2015
$’000
–
48,203
48,203
2016
$’000
–
56,992
56,992
AUB GROUP 2016 ANNUAL REPORT 79
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
22. COMMITMENTS AND CONTINGENCIES
Finance lease and hire purchase commitments – group as lessee
The Group has finance leases and hire purchase contracts for various items of software and plant
and machinery. These leases have terms of renewal but no purchase options and escalation
clauses. Renewals are at the option of the specific entity that holds the lease.
Finance lease and hire purchase commitments
Payable
– Not later than one year
– Later than one year and not later than five years
– Later than five years
Minimum lease and hire purchase payments
Deduct: future finance charges
Present value of minimum lease and hire purchase payments (refer note 19)
Operating lease commitments – group as lessee
The Group has entered into leases for premises, commercial leases on certain motor vehicles and
fixed assets. These leases have an average life of between 3 and 10 years with no renewal option
included in the contracts. There are no restrictions placed upon the lessee by entering into these
leases.
Operating lease commitments: non cancellable
Operating leases contracted for but not capitalised in the financial statements
Payable
– Not later than one year
– Later than one year and not later than five years
– Later than five years
Operating lease commitments – associates as lessee
Operating lease commitments: non cancellable
Operating leases contracted for but not capitalised in the financial statements
Payable
– Not later than one year
– Later than one year and not later than five years
– Later than five years
Contingent liabilities
Estimates of the maximum amounts of contingent liabilities that may become payable
AUB Group Limited has guaranteed loan facilities provided to associates in proportion to its
shareholding.
AUB Group Limited has guaranteed lease facilities provided to associates in proportion to its
shareholding.
80 AUB GROUP 2016 ANNUAL REPORT
Consolidated
2015
$’000
2016
$’000
1,117
519
–
1,636
74
1,562
6,758
18,099
5,508
30,365
2,289
5,945
2,104
10,338
799
564
–
1,363
57
1,306
4,880
4,792
–
9,672
2,248
3,609
28
5,885
5,373
3,656
460
1,035
5,833
4,691
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
22. COMMITMENTS AND CONTINGENCIES (CONTINUED)
AUB Group Limited has provided indemnities to other shareholders of related entities and associates in relation to guarantees
given by those shareholders, to financiers of or lessors to entities in which AUB Group Limited has an equity interest. At
balance date no liability has arisen in relation to these indemnities.
AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and associates,
granting options to put shares held in related companies or associates to AUB Group Limited at market values current at the
date of exercise of that option. These have been given in relation to shares in the related entity/associate pledged by the
borrower as security for funding provided to those shareholders in relation to the acquisition of those shares.
AUB Group Limited has entered into agreements with various shareholders of related entities and associates, granting
options to put shares held by those shareholders to AUB Group Limited at market values current at the date of exercise of
that option. The earliest the put option can be exercised is 5 years from the date of AUB acquiring its initial shareholding in
those entities, which falls within the next 3-5 years.
23. OPERATING SEGMENTS
The company's corporate structure is organised into two business units which have been identified as separate
reportable segments as follows:
equity investments in Insurance Intermediary entities (insurance broking and underwriting agencies); and
equity investments in Risk Services entities.
Discrete financial information about each of these segments is reported to management on a regular basis and the operating
results are monitored separately for the purposes of resource allocation and performance assessment.
Management believes that all of the Group's equity investments in insurance intermediary entities or providers of insurance,
exhibit similar economic characteristics and have therefore been aggregated into a single reporting segment, being the
insurance intermediary sector. This assessment is based on each of the operating segments having similar products and
services, similar types of customer, employing similar operating processes and procedures and operating within a common
regulatory environment.
The Risk Services segment comprises of equity investments in risk related service entities operating under a separate
jurisdiction and licence as well as a separate regulatory framework. The financial information of entities that fall within Risk
Services have been aggregated into one operating segment.
AUB GROUP 2016 ANNUAL REPORT 81
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
23. OPERATING SEGMENTS (CONTINUED)
30 June 2016
30 June 2015
Insurance
Risk
Insurance
Risk
Intermediary
Services
Total
Intermediary
Services
Total
$’000
$’000
$’000
$’000
$’000
$’000
Revenue
Interest from other persons / corporations
3,545
20
3,565
3,593
12
3,605
Other income received from customers
168,341
38,700 207,041
185,398
7,649 193,047
Total Income
171,886
38,720 210,606
188,991
7,661 196,652
Share of profit of associates
Share of Net Profits of Associates Accounted for using
the Equity Method (net of income tax expense)
24,914
1,622
26,536
22,958
610
23,568
Amortisation of Intangibles - Associates
(2,892)
(372)
(3,264)
(2,873)
-
(2,873)
Total Revenue
Less: Expenses
193,908
39,970 233,878
209,076
8,271 217,347
Amortisation of Intangibles - controlled entities
Amortisation of capitalised Project Costs
Depreciation of property plant and equipment
Other expenses
Borrowing costs
3,323
405
2,119
-
-
3,323
405
4,043
-
-
-
4,043
-
413
2,532
2,043
76
2,119
141,868
29,936 171,804
151,462
5,616 157,078
5,373
16
5,389
4,310
-
4,310
Total expenses including borrowing costs
153,088
30,365 183,453
161,858
5,692 167,550
Profit before income tax
Less: Income tax expense
Profit after income tax
40,820
9,605
50,425
47,218
2,579
49,797
(9,525)
(2,602)
(12,127)
(10,315)
(594)
(10,909)
31,295
7,003
38,298
36,903
1,985
38,888
Less: Non-controlling interest
(4,485)
(2,300)
(6,785)
(7,420)
(550)
(7,970)
Profit after income tax and non-controlling interests
26,810
4,703
31,513
29,483
1,435
30,918
Other Adjustments to carrying value of associates,
contingent consideration payments and profit on sale
(see note 4(vi),(vii))
Profit after non controlling interests attributable to
shareholders of the parent
Other comprehensive income attributable to members
of AUB Group Limited
Profit after non controlling interests and other
comprehensive income
10,489
42,002
427
42,429
3,969
34,887
(179)
34,708
Segments include intergroup charges at commercial terms and conditions for services rendered. These charges are eliminated
on consolidation.
82 AUB GROUP 2016 ANNUAL REPORT
23. OPERATING SEGMENTS (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
Geographic information
Revenue
Revenue - Australia
Revenue - New Zealand
Total Revenue
The revenue attributable to each region is based on the income earned from clients that
reside in those regions.
Total non-current assets
Non current assets - Australia
Non-current assets - New Zealand
Total non-current assets
Consolidated
2015
$’000
2016
$’000
224,179
215,260
9,699
2,087
233,878
217,347
333,884
62,300
396,184
324,173
29,620
353,793
Non current assets attributable to each region have been aggregated based on the assets that reside wi thin each business in
addition to any assets within the Consolidated Group that are necessary in the operation of those businesses.
24. SUBSEQUENT EVENTS
On 25 August 2016 the Directors of AUB Group Limited declared a final dividend on ordinary shares in respect of the 2016
financial year. The total amount of the dividend is $17,877,013 which represents a fully franked dividend of 28.0 cents per
share. The dividend has not been provided for in the 30 June 2016 financial statements.
25. AUDITORS REMUNERATION
Amounts received or due to Ernst & Young (Australia) for:
Audit of the financial statements
Other – including taxation services
Total
Amounts received or due to other audit firms for:
Audit of the financial statements
Other assurance related services
Other – taxation services
Total
Total auditors’ remuneration
Consolidated
2016
$
2015
$
987,807
44,369
952,575
112,155
1,032,176
1,064,730
350,735
418,363
10,080
94,704
14,820
87,173
455,519
520,356
1,487,695
1,585,086
AUB GROUP 2016 ANNUAL REPORT 83
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
26. RELATED PARTY DISCLOSURES
a) The following related party transactions occurred during the year:
(i) Transactions with related parties in parent, controlled entities and associates.
Entities within the wholly owned group charge associates $11,098,753 (2015: $10,136,090) management fees for expenses
incurred and services rendered.
Entities within the wholly owned group invest in trusts managed by related parties. These transactions are at normal
commercial terms and conditions.
(ii) Transactions with related parties in controlled entities and associates.
Entities within the wholly owned group provide funds to other entities within the group. These funds are non-interest bearing
and are repayable on demand. See note 9 for amounts receivables from related parties $2,686,093 (2015: $3,076,233) and
note 17 for payables to related parties $744,610 (2015: $594,477).
Entities within the wholly owned group have advanced funds to other related entities.
John Edward Hallman
Austbrokers Aviation Pty Ltd
Austbrokers Hiller Marine Pty Ltd
R G Financial Services
A & I Member Services Pty Ltd
Geebeejay Pty Ltd
Mishjola Pty Ltd
Tapmaa Pty Ltd
Longitude Insurance Pty Ltd
2016
$
2015
$
-
5,492
10,704
-
53,035
-
32,191
-
9,877
10,081
7,800
15,550
-
50,000
-
50,000
1,318,623
1,436,032
Sura Travel Pty Ltd (formerly Sura Accident and Health Pty Ltd)
816,950
750,569
Tasman Underwriting Pty Ltd
Austbrokers AEI Transport Pty Ltd
Austbrokers AEI Pty Ltd
Aust Re Brokers Pty Ltd
Newsurety Pty Ltd
Australian Insurance Broking Services Pty Ltd
Damian Price
HQ Insurance Pty Ltd
Sura Professional Risk Pty Ltd
Gard Insurance Pty Ltd
Austbrokers Financial Solution RG Pty Ltd
Venrick Pty Ltd
Blumberg Pty Ltd
Brokerweb Risk Services Ltd
Tezzared Pty Ltd
Tibec Pty Ltd
84 AUB GROUP 2016 ANNUAL REPORT
24,487
8,863
30,078
-
2,385
-
8,498
12,142
39,406
23,309
-
15,750
12,671
11,867
-
6,720
78,203
450,809
78,257
921
-
20,000
70,000
70,000
31,157
13,628
13,771
-
-
30,000
48,000
94,500
2,686,093
3,076,233
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
26. RELATED PARTY DISCLOSURES (CONTINUED)
(ii) Transactions with related parties in parent, controlled entities
and associates (continued)
Other payables – related entities
2016
$
2015
$
James Wiechman Pty Ltd ATF Wiechman Family Trust
227,719
159,444
Peter Curtis Pty Ltd ATF Curtis Family Trust
Areten Pty Ltd
Tim Parry
Budin Financial Services Pty Ltd
Integal Insurance Solutions Pty Ltd
Judd O'Shea
Rhys Bastian
Corunnaa Investments Pty Ltd
121,547
75,815
44,817
53,725
2,181
697
90,220
115,220
-
24,644
19,644
-
101,731
-
10,364
-
SPFS Enterprises Pty Ltd ATF Salisbury Family Trust
126,387
164,932
744,610
594,477
(iii) Transactions with other related parties.
Entities within the wholly owned group charge associated entities interest on interest bearing loans. Total interest charged
for the period was $54,277 (2015: $17,765). The interest charged is on normal commercial terms and conditions.
Further loans have been advanced to members of the economic entity of $2,315,000 (2015: $84,000). Members of the
economic entity have repaid loans issued by AUB Group Services Pty Ltd totalling $1,815,000 (2015: $213,000) during the
year. The balance outstanding at 30 June 2016 was $629,000 (2015: $128,000).
A key management personnel, K. McIvor, has a 20% interest in the voting shares of a controlled entity, AUB Group NZ
Limited.
A party related to M. P. L. Searles provides services to an associate on normal commercial terms and conditions.
(iv) Transactions with directors and director-related entities.
Entities within the wholly owned group receive fees for arranging insurance cover for directors and/or director related
entities. These transactions are at normal commercial terms and conditions
Other than disclosed above and in note 26 (c), there were no other transactions with director or directors ’ related entities.
Information regarding outstanding balances at year end is included in notes 9, 10 and 17.
b) Details of Key Management Personnel
The non-executive directors of the company in office during the year and until the date of signing this report are:
D. C. Clarke (appointed Chairman from 26 November 2015) Chairman (non-executive)
R. J. Carless
P. A. Lahiff (appointed 1 October 2015)
R. A. Longes (retired 26 November 2015)
R. J. Low
Director (non-executive)
Director (non-executive)
Chairman (non-executive)
Director (non-executive)
AUB GROUP 2016 ANNUAL REPORT 85
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
26. RELATED PARTY DISCLOSURES (CONTINUED)
b) Details of Key Management Personnel (continued)
The following persons were the executives with the greatest authority for the planning, directing and controlling the activities
of the consolidated entity during the financial year:
M. P. L. Searles
S. S. Rouvray (ceased 1 July 2015)
J. S. Blackledge (appointed 1 July 2015)
F. Gualtieri (ceased 1 July 2015)
F. Pasquini
S. Vohra
K. R. McIvor
T. M. Stevens (ceased 20 May 2016)
N. F. Thomas
Managing Director and Chief Executive Officer
Chief Financial Officer and Company Secretary
Chief Financial Officer
National Manager - Group Services and Support
Chief Distribution Officer
Chief Operating Officer
Head of Group Development
Chief Information Officer
General Manager – Broker Network Development
a)
There are no loans outstanding owing by Key Management Personnel at 30 June 2016 (2015: NIL).
b) Compensation of Key Management Personnel by Category
Short-term
Post employment
Other long-term
Termination benefits
Share-based payment
Consolidated
2016
$
2015
$
2,790,547
3,457,617
234,481
326,696
-
-
–
–
213,694
243,409
3,238,722
4,027,722
86 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
27. PARENT ENTITY INFORMATION
Assets
Cash and cash equivalents
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Total liabilities
Net assets
Equity
Issued capital
Share based payments
Retained earnings
Total shareholders equity
Profit for the year before income tax
Income tax (credit)
Net profit after tax for the period
Other comprehensive (expense)/income after income tax for the period
2016
$’000
2015
$’000
19,441
56,246
10,134
79,187
167,474
146,018
243,161
235,339
17,635
4,583
37,000
59,218
9,238
11,186
37,065
57,489
183,943
177,850
141,708
128,890
5,384
36,851
5,707
43,253
183,943
177,850
18,433
(796)
19,229
-
35,532
(519)
36,051
-
Total comprehensive income after tax for the period
19,229
36,051
Other information
Guarantees entered into by the parent entity in relation to the debts of its controlled entities or
associates
Austbrokers Holdings Ltd has guaranteed loan facilities provided to associates in proportion
to its shareholding.
Austbrokers Holdings Ltd has guaranteed lease facilities provided to associates in proportion
to its shareholding.
Contingent liabilities
10,477
7,118
460
10,937
1,035
8,153
AUB Group Limited has provided indemnities to other shareholders of related entities and associates in relation to
guarantees given by those shareholders, to financiers of or lessors to entities in which AUB Group L imited has an equity
interest. At balance date no liability has arisen in relation to these indemnities.
AUB GROUP 2016 ANNUAL REPORT 87
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
27. PARENT ENTITY INFORMATION (CONTINUED)
AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and
associates, granting options to put shares held in related companies or associates to AUB Group Limited at market values
current at the date of exercise of that option. These have been given in relation to shares in the related entity/associate
pledged by the borrower as security for funding provided to those shareholders in relation to the acquisition of those
shares.
AUB Group Limited has entered into agreements with various shareholders of related entities and associates, granting
options to put shares held by those shareholders to AUB Group Limited at market values current at the date of exercise of
that option. The earliest the put option can be exercised is 5 years from the date of AUB acquiring its initial shareholding in
those entities, which falls within the next 3-5 years.
28. FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
The Group's principal financial instruments comprise receivables, mortgages, cash and short-term deposits, payables,
finance leases, overdrafts, interest bearing loans and borrowings and bank overdrafts.
The Group manages its exposure to key financial risks, including interest rate and foreign currency risk in accordance with
the Group's financial risk management policy. The objective of the policy is to support the delivery of the Group's financial
targets whilst protecting future financial security.
The Group does not enter into derivative transactions nor has any significant foreign currency transactions.
The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for
identification and control of financial risks rests with the Board Audit and Risk Management Committee, supported by a
Management Committee, under the authority of the Board. The Board reviews and agrees policies for managing each of
the risks identified below.
Risk exposures and Responses
a) Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, intercompany
receivables, mortgages, trade and other receivables. Although there is a concentration of cash and cash equivalents held
with a major bank, credit risk is not considered significant.
The company’s exposure to credit risk is concentrated in the financial services industry with parties which are considered
to be of sufficiently high credit quality. There are no financial assets which are past due or impaired.
Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not
significant.
Amounts due from premium funding operations
Amounts due from premium funding operations include amounts due from policyholders in respect of insurances arranged by a
controlled entity. These arrangement with policyholders have repayment terms up to 10 months from policy inception. The
individual funding arrangements are used to pay insurers. Should policyholders default under the premium funding arrangement,
the insurance policy is cancelled by the insurer and a refund issued which is credited against the amount due. The Group's credit
risk exposure in relation to these receivables is limited to commissions and fees charged plus any additional interest charged
under the premium funding arrangement.
Insurance Broking Account receivables
Receivables include amounts due from policyholders in respect of insurances arranged by controlled entities. Insurance
brokers have credit terms of 90 days from policy inception to pay funds received from policyholders to insurers. Should
policyholders not pay, the insurance policy is cancelled by the insurer and a credit given against the amount due. The
Group's credit risk exposure in relation to these receivables is limited to commissions and fees charged. Commission
revenue is recognised after taking into account an allowance for expected revenue losses on policy lapses and
cancellations, based on past experience.
The Group's assets and liabilities include amounts due from policyholders and amounts due to underwriters from broking
activities. Due to the reasons disclosed above, these assets and liabilities have been excluded from the Group’s credit risk
analysis.
88 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
a) Credit Risk (continued)
The net difference between the assets and liabilities relate to the undrawn commission and fee income brought to account
in revenue. This amount has been deducted from amounts payable on broking/underwriti ng agency operations.
Assets and liabilities relating to Insurance Broking Account.
Amounts due from customers on broking/underwriting agency operations.
Cash held on trust
Amounts payable on broking/underwriting agency operations.
Undrawn income
Net receivables included in Insurance Broking Account
Financial assets
Consolidated
2016
$’000
2015
$’000
126,788
87,513
139,946
105,498
(186,253)
(217,647)
(28,048)
(27,797)
–
–
The Group’s exposure to credit risk in relation to financial assets arises from potential default of the counterparty, with a
maximum exposure equal to the carrying amount of these financial assets. There is no significant concentration of risks
within the Group as cash and cash equivalents are invested amongst a number of financial institutions to minimise the risk
of defaults by counterparties.
Cash and cash equivalents are deposited with Australian and New Zealand Banks. The majority of trade receivables are
expected to be collected within 90 days. The remainder of the financial assets are to related entities or entities that have a
relationship to our associates and are either on call or where loans have a fixed maturity date, are secured by fixed and
floating charges (see note 10). At 30 June 2016, all financial assets were neither past due nor impaired.
Financial assets
Cash and cash equivalents
Trade and other receivables
Amounts due from clients in respect of premium funding activities
Related party receivables
Mortgages – other
Other receivables
The amount for trade and other receivables included in the table above excludes insurance broking account
receivables.
Consolidated
2015
$’000
50,511
22,174
-
3,076
128
94
2016
$’000
70,933
30,124
6,366
2,686
629
81
110,819
75,983
AUB GROUP 2016 ANNUAL REPORT 89
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
b) Liquidity Risk
The company’s objective is to maintain adequate cash to ensure continuity of funding and flexibility in its day-to-day
operations.
The company reviews its cash flows weekly and models expected cash flows for the following 12 to 24 months (updated
monthly) to ensure that any stress on liquidity is detected, monitored and managed, before risks arise.
To monitor existing financial assets and liabilities as well as enable an effective controlling of future risks, the Group ha s
established comprehensive risk reporting that reflects expectations of management of expected settlement of fi nancial
assets and liabilities.
The Group's main borrowing facilities are provided by St George Bank, although some controlled entities have arranged
borrowing facilities with other banks. The terms of these arrangements have been disclosed in Note 19 "Inte rest bearing
loans and borrowings".
The company considers the maturity of its financial assets and projected cashflows from operations to monitor liquidity
risk.
Liquidity risk arises in the event that the financial assets/liabilities are not able to be re alised/settled for the amounts
disclosed in the accounts on a timely basis.
The table below reflects all contractually fixed pay-outs and receivables for settlement, repayments and interest resulting
from recognised financial assets and liabilities. Cash flows for financial assets and liabilities without a fixed amount or
timing are based on the conditions existing at 30 June 2016 with comparatives based on conditions existing at 30 June
2015.
The table summarises the maturity profile of the Groups financial assets and financial liabilities based on contractual
undiscounted payments.
Financial assets
Due not later than six months
Six months to not later than one year
Later than one year and not later than five years
Later than five years
Financial liabilities
Due not later than 12 months
Later than one year and not later than five years
Later than five years
2016
$’000
Consolidated
2015
$’000
318,215
321,136
6,702
75
203
215
-
–
325,120
321,426
(243,971)
(95,637)
–
(261,004)
(76,721)
–
(339,608)
(337,725)
The Group's liquidity risk relating to amounts receivable/ payable from broking operations have been included in the table above, although trust cash and
amounts due from insurance broking account receivables/broking account payables are not available to meet operating expenses/business obligations other
than for payments to underwriters and/or repayments to policyholders. Should policyholders not pay, the insurance policy is cancelled by the insurer and a
credit given against the amount due. The Group's liquidity risk in relation to these receivables is limited to commissions and fees charged.
The risk implied from the values shown in the table, reflects a balanced view of cash inflows and outflows. Lease liabilities, trade
payables and other financial liabilities mainly originate from the financing of assets used in the Group's ongoing operations such as
plant and equipment and investments in working capital, e.g. trade receivables and deferred payments on broker acquisitions.
90 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
c) Fair Values of recognised assets and liabilities.
Set out below is a comparison by category of the carrying value and the fair value of all the Group’s financial instruments.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as
a whole:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement in unobservable.
The Company’s contingent considerations made in relation to acquisitions of controlled entities and associates are
categorised as level 3. These are valued based on the inputs in the valuation used on new acquisitions during the
reporting period, refer to Note 7.
All other assets and liabilities measured at fair value are categorised as level 2 under the three level hierarchy reflecting the
availability of observable market inputs when estimating the fair value.
Financial assets
Cash and cash equivalents
Trade and other receivables
Amounts due from clients in respect of premium funding
operations
Related party receivables
Mortgages – related entities
Mortgages – other
Loan with associated entities
Total financial assets
Financial liabilities
Loans and other borrowings
Carrying value
2016
$’000
2015
$’000
Fair value
2015
$’000
2016
$’000
158,446
156,009
158,446
156,009
156,912
162,119
156,912
162,119
6,366
2,686
629
41
40
-
3,076
128
22
72
6,366
2,686
629
41
40
-
3,076
128
22
72
325,120
321,426
325,120
321,426
(88,646)
(66,065)
(88,641)
(66,130)
Trade and other payables and accruals
(250,962)
(271,660)
(250,962)
(271,660)
Total financial liabilities
(339,608)
(337,725)
(339,603)
(337,790)
Market values have been used to determine the fair value of securities. The fair value of loans and notes and other financial assets has been
calculated using market interest rate.
The Group's fair value of recognised assets and liabilities above include trust cash and amounts relating to receivables/ payables from broking operations, although
trust cash and amounts due from insurance broking account receivables/broking account payables are not available to meet oper ating expenses/business obligations
other than for payments to underwriters and/or repayments to policyholders.
AUB GROUP 2016 ANNUAL REPORT 91
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
c) Fair Values of recognised assets and liabilities (continued)
The value of the deferred consideration payments outstanding at 30 June 2016 was $32.2 million (2015: $28.3 million)
Of the $32.2 million, a total of $20.9 million relates to contingent consideration payments which are due to be paid within 9 0
days and are based on actual results for those businesses as at 30 June 2016. The balance of $11.3 million is due to be due
to be paid over the next 15 to 24 months and is shown in the accounts as a non current liability. (See note 17 for movements
in contingent consideration estimates).
The fair value of the non current deferred contingent consideration payments may change as a result of changes in the
projected future financial performance of the acquired assets and liabilities.
Reasonable possible changes in assumptions will change these deferred payments as follows:
If the full year 2017 operating profit declines by 10% compared to the current forecast, a reduction of $3.4 million in the
deferred consideration would result.
If the full year 2017 operating profit increases by 10% compared to the current forecast, an increase of $3.2 million in the
deferred consideration would result.
Management has assessed that cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other
current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged i n a
current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as
interest rates, individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the
expected losses of these receivables. As at 30 June 2016, the carrying amounts of such receivables, net of a llowances, were
not materially different from their calculated fair values.
The fair value of unquoted instruments, loans from banks and other financial liabilities, obligations under finance leases, a s
well as other non-current financial liabilities is estimated by discounting future cash flows using rates currently available for
debt on similar terms, credit risk and remaining maturities.
Fair values of the Group’s interest-bearing borrowings and loans are determined by using DCF method using discount rate
that reflects the issuer’s borrowing rate as at the end of the reporting period.
d) Market Risk
Interest rate risk
The Group's exposure to interest rate movements relates to cash and cash equivalents held by the Group and the Group's
long-term debt obligations. To manage interest rate risk, interest rates on borrowings are fixed for a period depending on
market conditions. This risk is minimal as the Group holds cash received from policyholders to pay insurers in excess of the
amount of borrowings and therefore the group has a hedge against interest rate rises. Mortgage loans generally have interest
rate resets every six months. In the event of interest rate rises, a net increase in interest revenue will occur due to cash and
cash equivalents exceeding borrowings.
92 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
d) Market Risk (continued)
Interest rate risk (continued)
The main risk to the Group is in relation to interest rate reductions which will decrease the net income earned on cash and
cash equivalents held. The cash held to pay insurers must be held in prescribed investments (Australian bank accounts or
deposits) and as such will be subject to market interest rate fluctuations. The Group has at balance date, the following mix
of financial assets and liabilities exposed to Australian variable interest rate risk.
Financial assets
Cash and cash equivalents (including trust account balance)
Mortgages – related entities
Mortgages – other
Total financial assets
Financial liabilities
Loans and other borrowings
Net exposure to interest rate movements
Borrowings fixed for a period greater than 12 months have been excluded from the table above.
Consolidated
2016
$’000
2015
$’000
158,446
156,009
629
41
128
22
159,116
156,159
(88,279)
(65,054)
70,837
91,105
The Group's long term policy is to maintain a component of long term borrowings at fixed interest rates, which are carried at
amortised cost and it is acknowledged that exposure to fluctuations in fair value is a by -product of the Group's policy. Due to
the current low interest rate environment, the group has determined that variable interest rates will result in a better overall
interest rate risk than fixing for extended periods. Of the total current and non current interest bearing loans and borrowin gs
totalling $86.7 million (2015:$66.1 million), $367,000 (2015: $1.1 million) has been fixed for periods greater than 12 months at
approximately 6.1% (2015: 6.1%). All other borrowings are based on variable interest rates. See note 19 for full details of
terms and conditions.
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of
existing positions, alternative financing and the term for fixing interest rates.
The following sensitivity analysis is based on the interest rate exposures in existence at year end. The sensitivity for the prior
year has been prepared on an equivalent basis.
At year end, had interest rates moved as illustrated in the table below, with all other variables held constant, post tax pro fits
and equity would have been affected as follows:
Judgements of reasonably possible movements.
Consolidated
+0.5% (50 Basis points) (2015 +0.50% (50 Basis points))
-0.5% (50 Basis points) (2015 -0.50% (50 Basis points))
Post tax profits Higher/(lower)
Higher/(lower)
Impacts directly to equity
2016
$’000
349
(349)
2015
$’000
319
(319)
2016
$’000
2015
$’000
–
–
–
–
The net increase in consolidated profits in respect of interest rate rises is due to the net positive impact of interest bearing
assets being greater than borrowings.
AUB GROUP 2016 ANNUAL REPORT 93
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
d) Market Risk (continued)
Equity securities price risk
Equity securities price risk arises from investments in equity securities. The group does not invest in listed equity
securities or derivatives.
At year end, the Group had no material exposure to equities other than to shares in associated entities and co ntrolled
entities and therefore has no exposure to price risk that has not already been reflected in the financial statements. The
Group tests for impairment annually and reviews all investments at least half yearly. The methodology for testing for
impairment is shown in note 15. Other than shown below, there were no impaired investments at balance date. At 30
June 2016, an impairment charge totalling $4,271,000 (2015: $5,604,000) relating to the carrying value of controlled
entities and associates was recognised and was shown as an expense in the income statement. The impairment charge
was offset against a reduction in contingent consideration payments in respect of controlled entities and associates plus
further current year adjustments resulting in a net movement of $277,000 (2015: $4,456,000) that was in excess of the
expected settlement amounts and were credited to the income statement.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in
foreign currency rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the
Group's operating activities (when revenue or expenses is denominated in a foreign currency) and the Grou p's investment
in overseas controlled entities.
The Group does not hedge its exposure in foreign currencies.
The majority of the foreign exchange rate exposure relates to the investment in New Zealand (NZ) operations, although
some controlled entities raise client invoices in foreign currency denominations.
At year end, had foreign exchange rates moved as illustrated in the table below, with all other variables held constant, post
tax profits (other comprehensive income) and equity would have been affected as follows:
Judgements of reasonably possible movements.
Consolidated
-NZ $0.10 (ten cents) (2015 -NZ $0.10 (ten cents)
+NZ $0.10 (ten cents) (2015 +NZ $0.10 (ten cents)
Post tax profits Higher/(lower)
Higher/(lower)
Impacts directly to equity
2016
$’000
1,397
(1,397)
2015
$’000
320
(320)
2016
$’000
–
–
2015
$’000
–
–
94 AUB GROUP 2016 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2016
28. FINANCIAL INSTRUMENTS (CONTINUED)
e) Capital Management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order
to provide returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
issue new shares or sell assets to reduce debt if required.
The Group monitors capital on the basis of the gearing ratio. The debt to equity ratio is calculated as total borrowings
divided by total equity and borrowings.
During 2016, the Group's strategy was to maintain a gearing ratio of not greater than 30% which was unchanged from 2015.
The gearing ratios at 30 June were as follows;
Debt to equity ratio
Interest bearing loans and borrowings (see note 19)
Total equity
Total equity and borrowings
Debt/Equity plus Borrowings Ratio
f)
Put Option
Consolidated
2016
$’000
2015
$’000
88,646
66,065
351,235
311,326
439,881
377,391
20.2%
17.5%
AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and
associates, granting options to put shares held in related companies or associates to AUB Group Limited at market
values current at the date of exercise of that option. These have been given in relation to shares in the related
entity/associate pledged by the borrower as security for funding provided to those shareholders in relation to the
acquisition of those shares.
AUB Group Limited has entered into agreements with various shareholders of related entities and associates, granting
options to put shares held by those shareholders to AUB Group Limited at market values current at the date of
exercise of that option. The earliest the put option can be exercised is 5 years from the date of AUB acquiring its initial
shareholding in those entities, which falls within the next 3-5 years.
At balance date no liability has arisen in relation to these indemnities.
AUB GROUP 2016 ANNUAL REPORT 95
INDEPENDENT AUDITOR’S REPORT
DIRECTORS DECLARATION
YEAR ENDED 30 JUNE 2016
In the opinion of the directors:
i.
the financial statements and notes of the consolidated entity are in accordance with the Corporations
Act 2001, including:
1. giving a true and fair view of the consolidated entity’s financial position as at 30 June
2016 and of its performance for the year ended on that date;
2. complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
ii.
iii.
iv.
the financial statements and notes also comply with International Financial Reporting Standar ds
as disclosed in note 2.2;
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
this declaration has been made after receiving the declarations required to be made to the Directors
in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June
2016.
On behalf of the Board
D.C. Clarke
Chairman
M. P. L. Searles
Chief Executive
Officer and Managing
Director
Sydney, 25 August 2016
Sydney, 25 August 2016
96 AUB GROUP 2016 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the
independence requirements of the Corporations Act 2001.
We have given to the directors of the company a written
Auditor’s Independence Declaration, a copy of which is
included in the directors’ report.
Opinion
In our opinion:
(a)
the financial report of AUB Group Limited is in
accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated
entity's financial position as at 30 June 2016
and of its performance for the year ended on
that date; and
(ii) complying with Australian Accounting
Standards and the Corporations Regulations
2001; and
(b)
the financial report also complies with
International Financial Reporting Standards as
disclosed in Note 2.2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 15 to
26 of the directors' report for the year ended 30 June 2016. 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 responsibility is to
express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of AUB Group
Limited for the year ended 30 June 2016, complies with
section 300A of the Corporations Act 2001.
Ernst & Young
David Jewell
Partner
Sydney, 25 August 2016
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF AUB GROUP
LIMITED
Report on the financial report
We have audited the accompanying financial report of
AUB Group Limited, which comprises the consolidated
statement of financial position as at 30 June 2016, the
consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then
ended, notes comprising a summary of significant
accounting policies and other explanatory information, and
the directors' declaration of the consolidated entity
comprising the company and the entities it controlled at
the year's end or from time to time during the financial
year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards
and the Corporations Act 2001 and for such internal
controls as the directors determine are necessary to
enable the preparation of the financial report that is free
from material misstatement, whether due to fraud or error.
In Note 2.2, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance about
whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the
auditor's judgment, including the assessment of the
risks of material misstatement of the financial report,
whether due to fraud or error. In making those risk
assessments, the auditor considers internal controls
relevant to the entity's preparation and fair presentation
of the financial report in order to design audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal controls. An audit
also includes evaluating the appropriateness of
accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial
report.
AUB GROUP 2016 ANNUAL REPORT 97
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2016
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The information
is current as at 19 August 2016.
(a) Distribution of equity securities
Ordinary share capital
•
63,846,476 fully paid ordinary shares are held by 1,853 individual shareholders. All issued ordinary shares carry one vote per share
and carry the rights to dividends.
84,099 ordinary shares issued on exercise of options under the Senior Executive Option Plan are held in escrow in accordance with
the Plan.
Options
•
567,756 options are held by 11 individual option holders.
Options do not carry a right to vote.
The number of shareholders, by size of holding, in each class are:
1 – 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holding less than a marketable parcel
Fully paid
ordinary
shares
714
770
207
142
20
1,853
106
Options
-
-
3
7
1
11
-
98 AUB GROUP 2016 ANNUAL REPORT
(b) Substantial shareholders
Ordinary shareholders
QBE Insurance Group Limited
Challenger Limited
Bennelong Funds Management Group Pty Ltd
MFS Investment Management
Greencape Capital Pty Ltd
FMR LLC
BT Investment Management Ltd
Allianz Australia Insurance
(c) Twenty largest holders of quoted equity securities
Ordinary shareholders
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia Pty Ltd
Milton Corporation Limited
Masfen Securities Limited
HSBC Custody Nominees(Australia) Limited
Mirrabooka Investments Limited
BNP Paribas Noms (NZ) Ltd
Djerriwarrh Investments Limited
The Trust Company Superannuation Limited
RBC Investor Services Australia Nominees Pty Ltd
Mrs Gaeleen Enid Rouvray
Markey Investments Pty Ltd
SIB Holdings Pty Ltd
Gemnet Pty Ltd
Mr Stephen Spence Rouvray
Bond Street Custodians Limited
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2016
Date of Notice
Number
Percentage
Fully paid
20/12/11
8,902,942
31/07/15
7,205,209
17/03/15
4,351,246
09/06/16
4,321,380
31/07/15
4,110,118
19/04/16
3,533,988
06/05/16
3,290,658
27/08/07
3,324,279
13.90
11.28
6.80
6.80
6.40
5.50
5.20
5.20
Fully paid
Number
Percentage
17,395,039
14,759,548
10,025,447
6,097,497
1,614,685
1,152,709
1,044,795
747,096
632,021
557,907
374,015
365,003
361,500
303,055
236,723
148,709
127,441
126,404
125,359
119,951
27.25
23.12
15.70
9.55
2.53
1.81
1.64
1.17
0.99
0.87
0.57
0.57
0.57
0.47
0.37
0.23
0.20
0.20
0.20
0.19
AUB GROUP 2016 ANNUAL REPORT 99
DIVIDEND DETAILS
Dividend Details
Dividend
Interim*
Final**
Amount
Franking
Ex Date Record Date
Payment Date
12c
Fully Franked
08/04/16
11/04/16
29/04/16
28c
Fully Franked
07/10/16
10/10/16
31/10/16
* The Dividend Reinvestment Plan issue price for the interim dividend was $8.4638 based on a discount of 2.5%
**The Dividend Reinvestment Plan was suspended from 25/08/16
.
100 AUB GROUP 2016 ANNUAL REPORT
This annual report covers the consolidated entity comprising
AUB Group Limited and its subsidiaries. The Group’s
functional and presentation currency is AUD($).
A description of the Group’s operations and of its principal
activities is included in the operating and financial review
in the Directors’ report on pages 8-27.
Directors
R. A. Longes (retired 26 November 2015)
M. P. L. Searles (Chief Executive Officer)
R. J. Carless
D. C. Clarke (Chairman)
R. J. Low
P. A. Lahiff (appointed 1 October 2015)
Company Secretary (appointed 30 November 2015)
J. L. Coss
Annual General Meeting
The Annual General Meeting of AUB Group Limited will be
held at the Intercontinental Hotel, 117 Macquarie Street,
Sydney, NSW 2000 on Thursday 24th of November 2016 at
10.00am
Registered Office and Principal Place of Business
Level 10, 88 Phillip Street
Sydney, NSW 2000
Phone: +61 2 9935 2222
Share Register
Link Market Services Limited
Level 12
680 George Street
Sydney, NSW 2000
Phone: 1300 554 474
(Outside Australia + 61 2 8280 7100)
AUB Group Limited shares are listed on the
Australian Securities Exchange (ASX)
Auditors
Ernst & Young
200 George Street
Sydney, NSW 2000
CORPORATE INFORMATION
ABN 60000000715
AUB GROUP 2016 ANNUAL REPORT 101